Throughout English literature of the nineteenth century, people of moderate wealth invest money in “the funds” and receive a three or five percent return annually. The funds are, because of this, sometimes called “the three percents” or “the five percents”. Acquiring a sum which can be invested in the funds is sometimes an ultimate goal and sometimes a surprise redemption.

Oscar Wilde uses them in The Importance of Being Earnest, where they save Cecily Cardew from a respectable life in the country. They come up in Jane Eyre and in Vanity Fair. I most recently ran across them in New Grub Street, where inheritances are always measured by how much of a return they’ll bring if invested into the funds.

The period from 1873-1886 was a depression in Britain. This may have made guaranteed small interest rates very desirable. In a time of low inflation, the funds—as portrayed in literature—were a very reachable form of financial independence. In Gissing’s novel, a thousand pounds in the funds could theoretically provide a comfortable life for a writer of modest desires.

However, nobody seems to consider putting small, regular deposits into the funds so as to build to higher levels, despite, in novels such as New Grub Street, the apparent financial ability to do so. Jasper Milvain, over the five to ten year plan he developed, could certainly have cushioned his finances by putting small amounts into this deus-ex-machina-like resource. Why is it not even considered?

There appears to be very little information about the funds on the web, although this may be that it is difficult to search for such a generic term. I was able to find a few moderately useful references.

John H. Makin mentions the consols in Should Americans save more?

The combination of a powerful empire and the Industrial Revolution created a stock of wealth owned by the propertied classes that transformed Britain. The consol, a long-term liability of the British government paying an average of about 3 percent, displaced land as Britain’s primary asset.

In Surtees & money, Tim Congdon writes:

The most fundamental choice in mid-Victorian England was among the safety of “the funds” (i.e., government debt, particularly Consolidated stock or “Consols”), the relative safety of land and mortgages on land, and the riskiness of equities and other asset types. Broadly speaking, the yield on Consols was a stable, predictable, and reliable three percent. This was not much, but—in a society where long-run price stability was an established fact—it was a real return. Facey Romford sought his first employment as master of fox hounds in the Heaviside Hunt country. It had little industry or enterprise, but the people enjoyed a solid rural prosperity. In Surtees’s words, “they might be called a three percent sort of people in contradistinction to the raving capacity of modern cupidity.”

In Victorian Culture and History Professor Tamara Ketabgian mentions the funds with a passing reference to Victorian literature:

The “funds” was simply another term for the national debt, since it was generally being paid off with the revenues from various accounts or funds. As the debt was backed up by the government and didn’t involve the risks entailed in buying privately issued securities, the funds were a popular investment. In addition, they generally paid a perfectly respectable 5 percent. When Jane Eyre’s uncle dies, leaving her the money that finally gives her independence, her cousin informs her that “your money is vested in the English funds,” and in Vanity Fair, we are told that the selfish and disagreeable heiress Miss Crawley “preferred the security of the funds.” “The great rich Miss Crawley,” Becky Sharp calls her, “with seventy thousand pounds in the five per cents…”

I found little more about the funds on the web. One of the more tantalizing references was in Victorian Investments:

At its most basic level, the new scholarship on Victorian investments presented here helps explain concepts that are central to much Victorian writing. For those outside the history of economics and business, encountering references to the funds, life assurance bonuses, and limited liability—be they in Walter Bagehot or Anthony Trollope—can confound understanding.

Yes. However, other than a quote from Charles Dickens’s Dombey and Son there’s nothing else about funds, consols, or percents in that work.

My history books were even worse. Despite their apparent importance in English literature the funds rate no mention in books such as Goldwin Smith’s “A History of England”. I looked through chapters 28 through 31, covering the period from 1815 to 1900, and found nothing.

So I made a trip to the Los Angeles Central Library.

The workman and his piddling change

It isn’t just web historians who avoid the funds. I went through the English history section of the Los Angeles Public Library for that period, 942.074 to 942.081, and found no reference to it in the sources that seemed appropriate.

Gladstone, in an 1889 speech titled “The Workman and his Opportunities”, oddly avoided the whole thing. He exhorts the working man to save more because the English, in contrast to the thrifty French, do not save enough. He praises the Post Office Savings Banks, which, while they “give to the people only a low rate of interest” still do well by the working man. (The Post Office Savings Banks gave two and a half percent.)

He justifies the low interest rates by the higher costs of dealing in piddling small change, and then adds that “a man who has put his money into the Post Office Savings Bank is in no way prevented from getting better interest elsewhere when he can.”

But he doesn’t mention the funds as an option. There was no index in the book so Gladstone may mention them in other speeches. But I scanned through the most likely titles and found nothing.

What I eventually found at the library, I found in the Business section. Besides being hard for a non-economist to understand, these sources still tended to mention the consols only in passing, and without reference to how people used them and what kind of people used them.

How did the funds start? The three percents were apparently started by Henry Pelham, British prime minister in 1751, who, according to Roy Davies and Glyn Davies, replaced “a whole series of annuities by a single 3% consolidated stock or consols.” According to Mary Poovey in The Financial System in Nineteenth-Century Britain (2003):

In 1749, the government consolidated most of its borrowings into a single loan, for which it paid a fixed rate of 3 percent annual interest. (p. 13)

This “funded debt” became known as “the funds”. The funds were not a protected principal. They were a promise of interest, not of the original investment. The principal could, and did, fluctuate.

Poovey’s book included an 1876 article from Fraser’s Magazine (n.s. 14, July 1876, p. 84-103) titled “Stockbroking and the Stock Exchange”, that mentioned the consolidated funds in passing:

Our own Consols are a perpetual form of bond, for instance. They do not specify dates of repayment, but only contain a promise to give so much per cent. to the holders. (Fraser’s, from Poovey, p. 152)

Widows, clergymen, and daughters

Who used them? In The widow, the clergyman and the reckless, Janette Rutterford and Josephine Maltby suggest that wealthy unmarried women preferred the funds, quoting Disraeli as saying “there is nothing like the sweet simplicity of the three per Cents”. They later characterize the male investor as investing for their daughters: “It was recognised that ‘the funds’ were the securities in which gentlemen invested for the benefit of their lovely daughters.”

Punch, in 1845, characterized the British investor as “sick and tired of the three per cents”. Punch was a satire magazine, so what that means is uncertain, but Philip Moore says it meant that British investors “were losing a fortune in their pursuit of enhanced yields in the farthest-flung corners of the Empire and beyond”.

It takes money to make money

As our novelists tell us, it takes money to make money. And sometimes, it takes knowledge to make knowledge. A friend of a friend handed me the title of a book that sounded perfect: The Novelist and Mammon. I headed down to the library to pick it up, and found, next to it, Women Writing About Money.

This is what I was looking for, I thought. But, no. The Novelist and Mammon was a fascinating read, but barely touched on the Funds. Mostly it was about the stock bubbles and speculation frenzies of the nineteenth century. Talking about the joint-stock banks and how they are not “found among the stuff of dramatic or sensational fiction”, Russell wrote:

The same may be said of the savings banks, encouraged by Parliament in the 1780s to foster thrift among the poorer classes, whose modest savings were invested by boards of honorary trustees, usually in 4 per cent Government stock.

And it is true, I suppose, that the Funds never figure as the main plot. They’re always in the background, or brought in at the end.

In Women Writing About Money Edward Copeland touched more closely on the Funds. They were in the background of most women’s fiction, “amongst the prime ingredients in the cup of human happiness”, wrote Jane West. Copeland writes that in “contemporary women’s fiction” of that time,

Any lump sum is automatically calculated by the contemporary novel-reader for its annual, spendable income. A simple formula suffices: the amount of a lump sum inheritance multiplied by 5 percent, the annual yield a heroine can expect from the investment of that sum in the 5 percent government funds. An heiress with an inheritance of £10,000, as any reader would know, would possess an income of £500 a year. An heiress like Miss Grey in Sense and Sensibility, with £50,000 as an inheritance, has an income of £2,500 a year.

Not just women made this calculation in novels. Jasper Milvain thinks in exactly this manner of his potential incomes and marriage prospects.

Copeland puts these numbers in perspective by describing the kind of life a woman might expect at incomes ranging from £25 to £5,000. At £200 per year, a person of “modest expectations” might live independently, though it was a “very narrow income”, and £400 could “support a household with two servants”.

These all compared to the £25 a year income of the “laboring poor”. Towards the end of the book, Copeland even runs a comparison on the income of novelists, and what they would get if they had invested their lifetime earnings in the five-percent funds. (p. 194, and if you’re interested in women’s fiction of the 1800s, you’ll really enjoy this book).

But other than this, neither of these books talk much about the funds. They appear to have been so ever-present that the novel-reader “automatically” calculates lump sums in terms of what they get in the funds, but no one otherwise seems to care.