This article is taken from the June 2025 issue of The Critic. To get the full magazine why not subscribe? Right now we’re offering five issues for just £25.
In 2023 the Church Commissioners, as the managers of the endowment funds of the Church of England, announced the creation of a £100 million fund for “a programme of impact investment, research and engagement”, dedicated “to address some past wrongs by investing in a better future”.
The term “past wrongs” referred to an alleged association, effective between 1723 and 1739, of certain historic endowments of the Church (known as “Queen Anne’s Bounty”) with 18th-century transatlantic trading in enslaved people by the South Sea Company. The allegations were contained in a report commissioned by the Church Commissioners.
Their report maintained that this investment provided the Church with a large financial advantage at the expense of much human suffering, of which its then authorities are said to have been well aware (a statement entirely unsupported), and in which their evidently insouciant indifference, no less culpable than lamentable, rendered them complicit.
The sentiment and the intent appear entirely laudable. However, closer examination of the historical evidence casts doubt on the assumptions and claims upon which they relied.
Reappraisal began with an article followed by a letter from emeritus Professor Richard Dale of Southampton University published in the Church Times of 22 March and 5 April 2024 respectively. Professor Dale called upon the authors to withdraw the report on which the Church authorities were relying and to “apologise to the Church Commissioners for making false connections between the Bounty’s investments and the slave trade based on inadequate economic research”.
In issuing a dismissive response (Church Times, 14 June 2024) the Church Commissioners have appeared uncomprehending. Misled by misunderstandings evident throughout the report, they have not understood that the purchase of “South Sea annuities” constituted no investment in the South Sea Company at all. These were government annuities capitalised on historic government debt, the interest arising from which was paid not out of the profits made on any kind of overseas trade but solely out of the receipts of national taxation.
The government of the day merely used the South Sea Company’s offices in the City of London as an administrative agency by which transfers of ownership in the annuities were registered and payments of interest distributed. The company did indeed undertake some intercontinental trading, of which a minority component of about one-fourth effected the transport of African people from slavery in Africa to slavery in Spanish America. This, however, was pursued as largely a private venture on the part of the directors, undertaken to fulfil a 30-year contract wished upon the company by the British government. It involved the resources of neither the shareholders nor the annuitants.
Within the South Sea Company of that period there co-existed two entirely distinct, unequal and separate entities. As Dale observed, the Bounty Governors took knowing care to invest not in the company’s minor commercial component, which included the transatlantic transport of African slaves, but solely in the department, separate and publicly far more prominent, which dealt exclusively with the management of government debt.
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From its beginning in 1711 the South Sea Company was a dual enterprise, and the face it presented to the moneyed public was not that of a trading company but of a grandiose agency of the national Exchequer. It was set up by the government to absorb some £9.4 million of its interest-paying debt, owned mostly by private subscribers; by these the debt was to be surrendered into the company for conversion into company shares.
In substitution for the remittances formerly paid out as interest by the several debt-issuing departments of state, the Exchequer undertook to deposit annually into the company a vast sum of aggregated cash (the “Exchequer Annuity”), drawn on taxpayers’ money; from the start this exceeded £0.5 million each year and eventually (c.1721) reached over £1.7 million, before falling by c.1739 to somewhat over £1 million per annum. This remittance the company’s numerous clerical staff then distributed to the shareholders (over 21,000 by 1721) as their twice-yearly interest, fixed at a rate determined by Act of Parliament, initially at six per cent p.a. (five per cent after 1718).
Virtually every penny conveyed to the holders of the company’s shares (and, post-1723, also of the annuities which it administered) was thus supplied by the Exchequer out of taxpayers’ money and none by the company from profits made on any sort of trade. Moreover, confirming its status as an agency of government, the Exchequer paid for the South Sea Company’s office rent and the wages of its staff.
The company did undertake overseas trade, but this was an enterprise never capitalised and conducted other than wholly separately from the rest of its business and in a manner that happened to require no financial input from the shareholders.
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In 1711 the government understood that many debtholders needed an incentive to convert their perfectly valid instruments of debt into the shares of a company that was to deal, in effect, solely in the management of variable-interest savings accounts. Also conferred on the company, therefore, was a prospective set of full monopoly rights in bilateral British trade directly to and from potentially profitable markets in Spanish America.
The intention was that from time to time the regular remittances would be supplemented by a dividend of the profits arising from this trading (with possible benefit also to the value of the shares), so tendering to the debtholders an incentive to convert. It was from this prospect that the company took its name.
From the start, therefore, the government understood that two wholly individual and separate businesses were to be conducted under one roof: the greater component distributed each half-year large sums of public money as interest due on erstwhile government debt to investors in it, whilst the minor component conducted a foreign trade venture which became viable in 1713 upon the conclusion of Anglo-Spanish hostilities. Contrary to shareholders’ expectations, however, most of the company’s ships were to trade not directly each way across the Atlantic but were to undertake on the outward leg a great diversion to West Africa, there to purchase each year the equivalent of 4,800 adult male slaves for transport to the mines and plantations of Spanish America. This news was ill received by many and with good reason; in 1713 even the King of Spain acknowledged that the transport of unskilled labour from slavery in Africa to slavery in Spanish America (under the contract known as the Asiento de Negros) was not merely unprofitable but consistently loss-making.
Nevertheless, and not least for fear of the French, the agreement was made, and the South Sea Company was stuck with it for the 30 years of its duration. Thus, to the West African coastlands the company proceeded to ship European manufactures and textiles and (by barter) to obtain African slaves purchased from the local kings, merchant-nobility (cappashiers) and traders, for carriage to the Spanish Caribbean. There, protectionist animosities exercised by the Spanish authorities rendered this a consistently difficult task; indeed, during 1718-22 and 1727-29 there was no trade, the two countries being at war.
It was immaterial that this particular component of the company’s commerce produced no final profit because the core objective of its trading enterprise was not the transport of enslaved persons but the exploitation of commercial access into Buenos Aires, Panama City and five Spanish Caribbean ports never before open to British shipping, where the company might acquire bullion or goods for import and sale in London at an adequate final profit.
After numerous early vicissitudes, the small volume of the direct bilateral commerce, taken together with the product of the concluding leg of the trilateral trade, realised for the company’s subordinate trading department final profits that were modest but sufficient to allow this enterprise to pay for itself thenceforth, with no call made on the shareholders.
But these profits were never sufficiently large to be worth dividing amongst so great a number of shareholders, who were, in any case, receiving a good rate of interest on their savings from the government; indeed the company contrived after 1718 to preserve the rate of interest at the inaugural level of six per cent. This increment was financed not by trade, but from cash generated by sales of new shares authorised by statute; never were shareholders’ receipts tainted with any admixture of supplementary moneys generated as profit by the component within the company’s subordinate trading activity that was constituted of the commerce in slaves. No such distributable moneys ever materialised.
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In 1720 the “South Sea Bubble” burst. Coming in the wake of the directors’ ambitious expansions of the original scheme of conversion — in 1719 substantial and during 1720 immense (encompassing almost the whole of the national debt), all endorsed by the government and enshrined in Act of Parliament — the collapse was calamitous and resulted in necessary parliamentary rescue and in a rationalisation of the company’s structure. The bifurcation within its activities effective from the beginning was now formalised and enshrined in statute law.
The annuity capital was ring-fenced
The extravagances of the “Bubble” had left the company holding yet more paper instruments of government debt, enthusiastically handed in by their erstwhile owners for conversion into the shares which by 1723 had a face value totalling almost £34 million. This paper capital (on which the government was paying into the company for distribution to shareholders an Exchequer Annuity now of some £1.7 million per year) far exceeded any need the company might ever experience.
Parliament therefore decreed early in 1723 that £16,901,102 of the nominal capital (being one half of the £33,802,203 now accorded to the company) cease to take the form of ordinary shares and be transformed and converted into variable-interest perpetual annuities paying five per cent p.a. to 24 June 1727 and four per cent thereafter, amenable to transfer by successive owners but redeemable at any time after five years at the discretion of the government.
Naturally, the company’s distribution of the Exchequer Annuity continued pro rata at the per centage rates specified by Parliament just as before, half now as product of the annuities and half as product of the rump of unconverted shares. These shares still represented no resource available to the company for engagement as a “trading stock” because they were capitalised solely on the paper debt instruments submitted for conversion.
Thus, and crucially to the present claims made about complicity in slavery, the annuities so issued were divorced wholly and irrevocably from the company’s trading component. The purpose of the 1723 statute was identified as “for dividing [the company’s] whole Capital into Two equal Parts or Moieties and for converting One of the said Moieties into certain Annuities, for the Benefit of the Members and [as a process entirely separate] for settling the remaining Moiety in the said Company”. The former half was to be in its own right a “Joint Stock of South Sea annuities, to be quite exempt from concern with the Company’s debts, bonds, trade etc”.
Thus by no less a force than that of Act of Parliament the “South Sea annuities” were to be wholly dissociated from all and any of the company’s subordinate commercial activities; the annuity capital was ring-fenced. With perfect awareness of what they were doing, it was into these newly minted “South Sea annuities” that all but exclusively the Governors of Queen Anne’s Bounty elected thereafter to commit a substantial proportion of their cash resources.
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Meanwhile, constrained by the Asiento contract that prospectively it could not escape until its expiry in 1743, the company continued to hire shipping that conveyed to Spanish America thousands of slaves bought from their African owners and masters. Conducted by the directors without shareholder support as, in effect, their private business, it struggled in the face of Spanish intransigence. The directors’ weary advertisements of 1735 seeking some other company to relieve them of the now wholly unwanted Asiento went unanswered. Eventually, from 1737, the trade simply ground to a halt, and, upon the return of war in 1739, the books were effectively closed.
By this latter date, the company had distributed in over 50 regular instalments some £35 million as government interest to the many thousands of holders of its nominal annuities and shares. This was delivered to a constituency that now, as remarked by a 1737 commentator, consisted mostly of the most risk-averse of savers: “Widows, Orphans under Trust, single Women and those never educated in any Trade or Business or who are past it”. In discharge of this role the company dutifully continued until its dissolution and winding-up in 1854-5.
That the Governors of Queen Anne’s Bounty obtained some considerable volume of the annuities administered by the South Sea Company is not in doubt; indeed, they took steps to enter upon acquisition as soon as these became available. These steps began with an initial acquisition of company shares; that this was made “at par” (as recorded in the report) permits the date of purchase to be established as 6 April 1723 (for a variety of reasons the year cannot have been the report’s somewhat querulous indication of 1720).
In no respect did the annuities behave like company shares
By this date the creation of the annuities by parliamentary division of the company stock was imminent, though not yet activated; a pre-emptive purchase of shares enabled the Governors both to benefit from an impending share distribution and to enjoy priority in the acquisition of a tranche of annuities. Thus, on 6 April 1723 they purchased ordinary shares to a face value of £13,907, at a total cost (including charges) of £14,818. By a free share distribution of 6.25 per cent effected by the company on 12 April this stock was augmented to £14,776. Of this, on 24 June half (£7,388) was duly reconstituted as government annuities, whilst the other half remained as company shares.
Thereafter the Governors acquired only annuities, and, by 1739, they had accumulated both “Old” Annuities of 1723 and “New” Annuities of 1733 to a total face value of £191,762. On these the charity received interest at five per cent p.a. up to 1727, at four per cent until 1733, and at three per cent thereafter, all supplied out of the Exchequer Annuity of taxpayers’ money.
The rump of company shares yet remaining to the Governors (which delivered interest, as always before, not from any profits of trade but exclusively out of the Exchequer Annuity) was treated by them as a by-product of that inaugural transaction. By the end of 1730 they had been wholly disposed of, presumably for replacement by annuities as these came onto the secondary market.
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By the Bounty’s Governors these purchases of “South Sea annuities” cannot have been perceived as any other than a highly responsible investment in unencumbered government debt, guaranteed by the government and Parliament and safer than the Bank of England. In no respect whatever did these transactions constitute an investment in any aspect of the South Sea Company; even less could the Governors have been so mistaken as to imagine that their purchase of these annuities carried association with any component of the company’s commerce.
Their investment was in government debt, and, to contemporaries, the difference was manifest. Indeed, perceiving the very real distinction between those who in 1711 had converted government debt into shares of the company and those (such as the Bounty Governors) who from 1723 made acquisition of “South Sea” annuities, a commentator of 1729 noted how the latter “came in as Creditors to the Publick only and are upon a very different Foot from Those, Who first, knowingly, became Members of Companies upon a Trading Bottom”.
The sole function played by the South Sea Company in the administration of these annuities was to serve as a neutral intermediary, a conduit through which the Exchequer remitted interest to the holders of paper instruments still (albeit now at one remove) representing government debt. There could have been no confusion; in no respect did these annuities behave like company shares. The rate of interest payable was set not by the South Sea Company but by the government of the day.
The rate was put into effect not by virtue of any company decree but by Act of Parliament, and only by Act of Parliament could it be changed. When in due course shares and annuities were bought in, it was by the government that this was undertaken (as redemption of its debt) and not by the company.
Meanwhile, as regards the report’s remarks upon the receipt by the Bounty’s Governors of donations and bequests of money somehow tainted by association with commerce in slaves, these at present are no more than unfounded surmise and unsupported assertion, to which no response can legitimately be made until by further study each individually is either proved or negated. (The sole name actually mentioned is that of the Bristol philanthropist Edward Colston, an enigmatic figure as yet sorely under-researched and little understood.)
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The conclusions to be drawn cannot be over-stressed. The holdings of the Bounty’s Governors were not conventional shares in the South Sea Company but perpetual annuities introduced in 1723 by the government of the day under Act of Parliament. These annuities were capitalised on instruments of historic government debt, and no annuitants had any reason to imagine that the role of their deposits was anything other than support of the government’s ongoing financing of this debt. In no sense were they “investments in the slave trade”.
Payments of interest were sourced exclusively from taxpayers’ money. Profit recorded by any aspect of the company’s trading was not distributed to shareholders or annuitants but was kept within the company. The only contribution of the South Sea Company consisted of its acting as a convenient administrative intermediary between the Exchequer and the annuitants in the distribution of the biannual payments of interest. The only difference between the “South Sea annuities” and other contemporary government annuities lay in the manner in which the interest was collected from, and transfers were registered at, South Sea House instead of the Bank of England (as the government’s broker).
The suffering caused by the slave trade is not in dispute. The issue here is different; it is that of culpability. Through its historical misunderstanding, the Church Commissioners’ report entirely misdirects its allegations; it should be quietly discarded.
As observed by Prof. Dale, today’s Commissioners can rest assured that their predecessors’ holdings of “South Sea annuities” were in no way tainted with reprehensibility or blame, and, in this respect, neither they, nor the Church of England at large, have anything for which to make either apology or amends.
