1902 Encyclopedia > Finance


In the 13th and 14th centuries, the words finare, finacio, and financia were employed, principally by writers in France, to denote those bargains by which the inde-finite liabilities of ancient tenures were commuted for fixed sums payable to the immediate lord of the tenant. It was at this time that the commutation became general, except when the service of the tenant was of a military or dignified character. Even here, however, a remarkable innovation was made at an early period in English social history, on which we shall comment presently. In course of time the word finance became nearly synonymous with the product of taxation, and the finances of a country (though the phrase is sometimes used to denote the aggregate revenues of those who are liable to taxation) are understood to be the ways and means by which the expenditures of government, imperial and local, are met. In the present article we shall deal with the history of finance only. Under the head of TAXATION, the reader will find an analysis of the economical theory, in accordance with which taxation is shown to be innocuous and equitable, or the reverse.

The most ancient forms of finance have always been taxes on produce. Such appear to have been the taxes of ancient Egypt; such were and still are the principal taxes of Turkey and Hindustan. Whatever may have been the character of the first agricultural settlement, the development of a central government has always been assisted by a theory that the true lordship of the soil is the property of the state or the ruler, on which the immediate occupant of the soil is dependent, and to which a portion of the produce is due. The conquests of Eome always involved a confiscation of the vanquished nation's land, and the re-grant of a portion of the confiscated estate on what we might call by analogy a base tenure. In the same way, when in the 10th and 11th centuries the Christianized Teutonic tribes of north-eastern Europe pressed on the heathen Slavs, the victory of the former was always followed by the establishment of a military and well-endowed church, on which a third of the conquered territory was generally settled, the vanquished race being permitted, though in a state of dependence, to occupy the residue. The settlement of iEgina and Eubcea by the Athenian lot-holders, to say nothing of more ancient occupancies, was of the same character. Here indeed the state distributed the ownership which it had acquired by its arms among its citizens, though doubtless it claimed military service from them as a garrison, and probably exacted a revenue which was similar in its nature to a rent.

The financial system of ancient states was, as a rule, exceedingly simple. The charges of government were few, except in the vast despotisms of Asia and Egypt, and later on in the great military republics of Carthage and Rome, where the revenues of the king and state were derived from tribute in money or kind from inferior or dependent districts and races. The district of the Aristotelian ideal city (Politics, vii. 10, 11) is to be divided into two portions, one the property of the state, out of the produce of which the charges of the national religion and the costs of the common tables are to be supplied, the other to be held in private ownership. The philosopher does not con-template the necessity of making provision for the ordinary charges of government. The magistrates were unpaid ; the army was a militia, serving at its own charges. When the Lacedaemonians undertook the command of the allies in the Peloponnesian war, they had no public revenue. Later on in their history, we are told by Aristotle that the public exchequer of the Lacedaemonians was ill managed, for most of the land of Laconia belonged to the Spartiats, and they assessed themselves.

The beginning of Athenian finance was a revenue derived from the silver mines in the promontory of Sunium, the ownership of which was, it seems, vested in the state. It was the practice of the Athenian Government to grant a perpetual lease of allotments in these mines, and to exact, moreover, a small percentage on the produce, reserving to itself a right of forfeiture and re-entry if the terms of the lease were infringed, or the produce rents were unpaid. With the proceeds of these mines the Athenians built their first navy, and with this navy they won the victory of Salamis, thus paving the way to their naval supremacy.

The next great source of Athenian revenue was the con-tribution from those protected states which failed to supply a proper naval contingent for the defence of the iEgean. Most of the Greek cities of Asia Minor and the islands owed their security from the attacks of the Phoenician navy, then dependent on Persia, to the vigorous and effective sea forces of the Athenian republic. It was cheaper for them to commute their contingent for a money payment, and the police of the sea became far more efficient when wielded by a single power, which had every interest in bringing its navy to the highest pitch of serviceableness. The Athenians contrived to economize, and, later on, to increase the contributions of those states whom they pro-tected. Considering that they had fully satisfied the terms of their own bargain if they thrust back the Persian despot, they concluded that they might fairly accumulate a surplus in the public treasury, and even expend a portion of their revenues in embellishing their city. We may be certain that the power which this revenue gave the Athenian republic was the chief cause of that jealous fear which precipitated the thirty years' war of the 5th century B.C., and which produced results as disastrous to the progress of mankind as a war of the same duration twenty centuries later did on the rapidly growing civilization of central Europe. So desperate and so penniless were the military rivals of Athens, overwhelming as their land forces were, that they even thought of appropriating the sacred treasures of Delphi, a proposal, in the 5th century before Christ, which was as shocking as it would have been in the 12th century after Christ to have suggested that the sacred vessels and shrines of the great churches and monasteries should be coined in order to pay the soldiers of the crusade.

The finance of antiquity derived a revenue from customs. These customs were, at least in Athens, an ad valorem duty of two per cent, as a war measure. Twelve years before the conclusion of the great thirty years' struggle, the Athenians levied a five per cent, ad valorem duty on their subject cities, though this was in substitution for the old contribution on account of the police of the seas. A poll tax was levied on foreign residents, perhaps on slaves; and it appears that, possibly as a measure of police, another poll tax was imposed on the inmates of disreputable houses.

The revenue, therefore, of that Greek state whose his-tory is best known to us was derived from the rent of pub-lic lands, especially the mines, from a composition paid by the allies in lieu of naval service, from very moderate customs duties, and from a few personal taxes. It must not, however, be imagined that the finance of antiquity was successful in the eyes of those who saw how inelastic it was. There is still extant a treatise by a very practical man. Xenophon, in the oldest work on finance, discusses the means by which the Athenian home revenue might be conveniently increased, and, like many other speculative thinkers, suggests projects which would have created far more mischief than they would have remedied. It will be obvious also that by far the most important item in Athenian finance, the contributions from the allies in lieu of personal service, was necessarily precarious, and that when the Athenian empire was finally broken up, the revenue of the state was gone, while the necessity of find-ing ways and means for the public defence was as urgent as ever.

This brings us to another aspect of Athenian finance, viz., the extraordinary taxes on property which the Government levied, and which the contributors paid apparently with the greatest readiness. These were the Aen-o-upywu, exceptional imposts with a view to defraying certain kinds of public expenditure; and property taxes assessed on a valuation, and graduated according to the means of the contributor.

The principal liturgies, as they are called from the Greek word quoted above (the word is suggestive of the process by which it was finally appropriated in the ecclesiastical vocabulary), were three in number, two religious and one secular. The tendency of a religion, like that of Greece, in which so much nature worship was contained, was to associate many of the acts of life with religious ceremonies, and, as culture progressed, with art. Thus the drama of antiquity arose from the worship of the wine god and the vintage, and the arts of sculpture and painting had originally a similar religious origin. The dramatist who succeeded in securing a representation of his composition had assigned to him a citizen whose wealth was sufficient to defray some of the charges of representation, as the instruction, maintenance, and dresses of the actors. A second and similarly religious service was the public games. Here again a considerable portion of the expenses incurred in the performance were imposed on wealthy persons. The third was the trierarchy, the equipment and command of a ship of war. The state supplied the ship, the trierarch its stores and tackling, and in some cases provisions and pay. In return the trierarch was captain of the ship. This arrangement is closely analogous to that financial arrangement in England by which, after the Revolution, local regiments were raised, clothed, and officered by wealthy men, who had in return the colonelcy of the regiment, and the right of appointing its subordinate officers.

The liability to these charges, distributed, as it seems, at the discretion of the Government, was a serious charge on the wealthy. Hence, when the state fell on evil days, and reverses had impoverished the Athenian people, persons were allowed to club together in order to supply these public functions. To abandon them would have been to incur the wrath of the gods, or imperil the safety of the state. The modern critics of Greek sentiment are amazed at the fact that only on the very eve of the great crisis in which the fate of Greece was finally determined, the battle of Chasronea, Athens reluctantly devoted the taxes which had hitherto been employed for ecclesiastical purposes to the pressing necessities of the public defence. The theoric fund was that portion of the revenues of the state which was assigned to those sacred purposes. It was distributed nominally among the spectators as the price of tickets for admission. It actually was paid over to the managers of those public buildings in which the ceremony was performed.

If the person on whom the duty of supplementing the charges of the state was imposed conceived that he was unfairly selected, or asserted that his means were inade-quate for the purpose, he was allowed to name another citizen to whom he could proffer an exchange of property. In this offer the other was bound to acquiesce, unless he con-sented to allow himself to be substituted for the individual on whom the duty was originally set. In short, the pos-session of property involved serious liabilities in Athens, though it seems that men of substance gloried in the satis-faction of these public charges, and completely conformed themselves to public opinion. Eor it will be found to be a fundamental law in successful finance that those imposts are always found to be most productive which are most in accord with public opinion, and that in the selection of a system of taxation it is not always possible to adopt that which is most expedient or even most just, but that which can be most readily enforced and is most willingly accorded.

But the most remarkable illustration of Athenian opinion in matters of finance is the regular property tax. In the costly services which have been sketched above, some compensation was afforded to the contributor by the position he occupied. The choragus was the chief official in rank at those religious ceremonies in which the drama was the highest act of worship; the chief of the gymnasts exercised authority over his staff of competitors in the public games, and was even empowered to compel parents to allow their children to take part in the contest. The man of substance on whom the state imposed the duty of equipping, manning, and provisioning a hull was captain of the vessel, and though he was liable to a due perform-ance of his service, and subject to an audit on the ter-mination of his year of office, he exercised full authority during his command, and might be, indeed was, rewarded for exceptional diligence and smartness during the period of his office.

The property tax was a contribution which did not make the tax payer conspicuous, and did not confer on him any distinction. The impost dates from the earliest records of the Athenian constitution. It was graduated, being a heavier percentage in the case of the richsr citizens than in that of the middle classes. It passed through several notable changes, always, however, in the same direction, the particulars of which are well given in Boeckh's Public Economy of Athens. But the principles of the assessment are very simple, though the process by which the result was finally arrived at is somewhat artificial.

The property of every Athenian citizen was assessed, whether it were movable or immovable, and the amount was entered in a public register. The assessment included ths value of slaves, manufactured goods, and raw materials. A register of the assessment was open for examination, and undoubtedly re-valuations were frequent. The state was informed as to the property which each citizen— and indeed every resident alien—possessed, and made this property the basis of direct taxation. It then pro-ceeded to divide all assessments into several schedules, assuming in each schedule a variable quantity, varying from a fifth to a tenth, as the taxable property of the individual. On this sum it levied a fixed rate. Thus, if a very wealthy man possessed an estate valued at 500 talents, i.e., nearly =£122,000, his taxable wealth was treated as £24,400, and a five per cent, tax, £1220, exacted from him; while the owner of property valued at 25 mime, i.e., about £101, 10s., the lowest sum apparently which was liable to property tax, found his property assessed for purposes of taxation at £10, 3s., and his property tax of five per cent, at a little over 10s.

In the budget speech which the great statesman of the Athenian empire delivered before the commencement of the Peloponnesian war, and of which Thucydides gives us the heads, we learn that the revenue of Athens from the contributions of her allies amounted on an average to 600 talents (¿£147,250) a year, and that there was an existing accumulation of treasure in coined silver amounting to a million and a half sterling, besides other immediate resources. It is to be regretted that the historian did not supply us with further particulars as to the finance of his country during the period of her greatest wealth and power. These resources, had Athens merely carried on a defensive warfare, would, as the statesman justly argued, have rendered the country not only unconquerable, but practi-cally invulnerable.

The high rate of interest, and the general insecurity of society, excluded the states of ancient Greece from having recourse to regular loans, though not from attempting to meet current exigencies by anticipations of revenue. Occasionally portions of the revenue were assigned to creditors; sometimes the public lands were granted for a term, during which the principal and interest might be repaid. Instances may even be found in which the state issued a currency of tokens, which fulfilled some of the functions of state paper in modern times. Another financial expedient, always followed by the most mischievous consequences, was occasionally adopted, the issue, namely, of a debased currency. But from this fraud Athens always kept herself free, not only inflicting the punishment of death on those who put base money into circulation (the criminal code of Athens having been generally very lenient), but abstaining in her deepest distress from the temptation of supplementing her revenues by the temporary issue of base money So studious was Athens of her reputation in this respect that, when she was the home of the fine arts, she continued to maintain the clumsy archaic type of her coinage, although the arts of die-sinking and coining were carried to perfection in states which were far less scrupulous.

The revenue of Rome in the earlier ages of the republic was derived from the lands of the state, payments in kind or money from subjects, from import and export duties, and a few taxes on products and articles of luxury. Partly as compensation for the loss of the national domain, partly as a means of checking discontent, the state, in the later ages of the republic and the beginning of the empire, undertook the maintenance of its poorer citizens, either by gratuitous distributions of corn, or by the sale of food at low fixed prices. Cicero calculates the charge incurred by the revenue in consequence of this expedient at one-fifth of the public expenditure. Augustus increased the charges of maintaining these state paupers till the cost amounted to more than half of what had been the revenue of republican Home. The emperor Vespasian declared (Suet., Vesp. 16) that the necessities of government in Borne required a sum of .£400,000,000 sterling, apparently after the destructive civil war which preceded the elevation of the Flavian family to the throne. But the manner in which the revenue of the Roman empire was collected was even more destructive than the crushing weight of the charge itself.

The collection of taxes in Rome, both under the republic and the early empire, was entrusted to contractors, who purchased by auction the right of levying the tax. The character of the Roman contractor is aptly illustrated by Livy, who narrates the frauds practised by those persons on the Roman treasury during the deepest distresses of the second Punic war, and the violence with which other contractors defended the interests of the order in general, and the convicts in particular. But after the Macedonian war, the Roman citizen was relieved from direct taxes, the weight of which fell on the provincials. Associations of wealthy men were formed, who could give security to the Government, and who, being protected by the Government, could practice what extortion they pleased on the provin-cials. The law, indeed, provided that such persons should be liable to prosecution for corrupt and illegal practices, but the law was far too weak to check the malpractices of the officials. It appears that the province was divided into districts, or dioceses, as they are called, a manager being appointed for each district, who was in regular correspond-ence with the chief of the office at Rome. The law recognized the guild of the publicans, who were indeed, by their agency, the centre of the Roman system of finance, and in many emergencies the parties with whom the state negotiated for an advance on the security of its revenues. But, on the other hand, it was said with too much truth that where the tax-gatherer appeared public law and private liberty vanished.

Taxes paid in kind were the tenth of corn and. the fifth of fruit. Such taxes were imposed in Sicily, in Africa, in Sardinia, and in Egypt. Spain was treated more generously, partly to compensate for the reputed unproductiveness of its soil, partly in all likelihood from fear of the high-spirited character of its inhabitants. In some cases, the contributor of the tithe had to carry his quota to the nearest port for shipment to Rome. The rest of the empire paid money taxes, partly from an assessment on the value of property, partly by what appears to be a poll tax, but was really an artificial estimate, under which several needy persons might be made to represent a unit, and on the other hand one wealthy person might be treated as many units. The assessment lasted for a definite period, which, in the age of Constantine at least, got the name of the Indiction. In the sense of a tax, this term is as old as Pliny, if indeed it cannot be carried back to the early empire.

The finance of the Roman empire imposed a tax on the profits of trade, which seems to have been collected with great severity, and to have exposed those who were liable to it to strict scrutiny, and to degrading punishments in case of default. Capitation taxes were levied on cattle, on imports and exports, on slaves kept for the purpose of luxury, on auctions (1 per cent.), on sales in the public markets, analogous to the octroi in the French towns, on salt works, on emancipated slaves, and on successions in cases where the inheritance went by devise to strangers.

The Roman empire even anticipated the benevolences of the I Plantagenet and Stuart kings of England in the coronary-gold, -which was first received as a present on the occasion of a triumph, but afterwards exacted as a right on such occurrences as the emperor might choose to proclaim.

The distinction of Roman and provincial was merged in a common servitude under the edict of Caracalla, which conferred the Roman franchise upon all the subjects of the empire. The task of collecting and transmitting the taxes from the provinces to Rome, aud subsequently to Con-stantinople, wras imposed on the decurions, the senate of the colonies. These persons exercised what little authority was left to the local magistracy by the centralization and despotism of the empire, and were exempted from some of the more degrading punishments which were imposed on the mass of the people. But they bought their rank and privileges at a clear rate. They were liable, in case they failed to collect it, to the whole impost which was assessed on the locality whose affairs they administered. To escape from the dignity and responsibility of the decurion's office, without sinking into the condition of an unprotected citizen, was the object of numerous petitions to the emperor. The privilege was occasionally, sometimes lavishly, awarded as a matter of special favour. But the necessities of the public revenue demanded that enough decurions should be left for the purpose of meeting the burden of taxation. Hence, under the financial system of the later empire, the weight of fiscal charges fell with increasing severity on the middle classes, so that at last, when the military system of Rome collapsed, nothing remained to withstand the assaults of the barbarian invaders. One is struck at finding how small are the armies which subverted the Roman empire, and how easily they occupied Gaul, Spain, and northern Italy.

The fiscal and military system of the Roman empire caused the downfall of ancient civilization. The Roman army and the Roman exchequer were developments from a centralized despotism. The army exhausted the free growth of Italy, devoured the population of those most warlike races who were successively allowed to recruit the Roman legions; and when the subject races, from which new blood could be introduced into the forces, were thoroughly drained, the Government was forced to enlist soldiers from those foreign hordes who were already threatening, and were soon about to overthrow the empire. Civil society was simultaneously crushed by a prodigious weight of taxation, arbitrarily imposed, and rigorously exacted. Before the final collapse occurred, wide regions, once occupied by opulent and populous cities, were found to be destitute of inhabitants, and released from taxation on the plea that there was no population left from which to collect a revenue. Large tracts of Asia, southern Europe, and northern Africa have never recovered from the desolating effects which were induced on them by the fiscal and military policy of im-perial Rome, A great break occurred in the history of human progress. Social development was thrown back for centuries, and in some particulars has not even yet recovered the ground on which it stood in the first century before our present era. Not a few fragments, too, survive from that imperial system which was the downfall of ancient civilization, and which will remain an impediment to modern civilization until they are completely taken out of the societies in which they have been embedded.

The history and progress of modern finance may be best studied in English fiscal history. Some countries, as Holland, adopted expedients in finance long before other states understood or accepted them ; others, as France, have been informed by many acute authors of the means by which a sounder, fairer, and more productive fiscal system might be adopted in place of one which was ruinous, oppressive, and unproductive. But in England only theory and practice have gone on together,—not indeed simultaneously, for the English legislature has accepted scientific principles with hesitation and slowness, but pro-gressively, the result being a compromise, which is open indeed to serious criticism from the point of view of the economist, but is, under existing circumstances, of easy manipulation to the financier. Into the former of these we do not propose to enter; it will be treated under TAXATION ; but the latter can be presented from an historical point of view.

English finance is historically connected with the founda-tion and growth of the English exchequer. It is further divisible into two periods,—one in which almost the whole income of the sovereign, acting for the state, was derived from direct taxation; another in which a continually increasing revenue has been obtained from the indirect taxation of consumable articles. The dividing line in these two systems is the civil war of the 17th century; and it may be affirmed confidently that nothing but the emer-gencies of a great convulsion like that of the parliamentary war could have reconciled the English people to so total a change in the system of taxation as the adoption of the excise was. For more than a century after the compromise was effected, of which the perpetual or, as it was called at first, the hereditary excise was the outcome, the impost was detested. A generation has hardly passed away since offences against the excise have ceased to command public sympathy, and, despite the severity with which the law treated frauds on the revenue, have been looked on as venial acts, detection in which was rather thought unlucky than scandalous. We no doubt owe the change in public senti-ment, in accordance with which frauds on the excise are considered criminal, to the happy change in the fiscal policy of the country, under which taxes are imposed for the purposes of revenue only, and are no longer seen to be protective or partial.
The origin of the English exchequer is variously ascribed to William the Norman and his youngest son Henry I. It is certain that the great cadastre of Domesday Book, the terrier of inhabited England, was treated as the register of the exchequer, the authority of which, as a record of the crown's title to lands and services, and of the subjects' tenure, was held in the exchequer court to be conclusive. It is also certain that whatever arrangement may have been made by the first and third Norman kings, the system was suspended during the troubles of Stephen's reign, and that the exchequer was reconstructed by Henry II. It appears, too, that the machinery of the exchequer was perfected by a family of clerical financiers, who held at once high dignities in the church and confidential offices in the state ; that they were, and avowed themselves to be, eager advo-cates of regal rights ; and that they strove to extend, as far as possible, the liabilities and responsibilities of the subject towards the crown. They also found means by which the judicial powers of the crown, the protection which the powers of police wielded by the crown could afford to the subject, and even the validity of contracts were made the machinery for securing a revenue.

The Norman and Plantagenet kings were not only the overlords of all their subjects, and therefore interested in the escheat of their estates by failure of heirs, but by fai-th e largest landholders in the country. The royal estates were managed, at least in the 13th and 14th centuries, just as the estates of the nobles and gentry were. They were superintended by bailiffs, generally of very low social rank, and cultivated by customary and hired labour. The profits of the estate, as long as this system was continued, were paid into the exchequer by the bailiffs, and after the king ceased to cultivate land with his own stock and capital, the collectors of rents succeeded to similar duties with those of the more ancient bailiffs. The sheriffs collected the customary charges which were imposed on the counties, and the extraordinary receipts of the crown, making audit of their liabilities twice a year, and receiving a quittance when those liabilities were discharged. Care-ful search was made into the estates of deceased tenants of the crown, and the antiquary or genealogist has derived the largest amount of his information as to family and local history from the numerous and exact inquisitiones post mortem which were taken by the proper authorities. As certain offences involved a forfeiture, and as all offences might be condoned by the payment of mulcts, the atten-tion of the royal officials was stimulated to all such cases of misconduct, and except in matters of petty police, adjudicated in the manorial courts, the royal tribunals rapidly superseded private jurisdictions. In England these private jurisdictions disappear in the middle of the 14th century ; in Scotland they survived till they were abolished after the insurrection in 1745 ; in France they existed till the eve of the Eevolution. Nothing has tended so much to develop English nationality, and to consolidate the authority of the crown, as the royal tribunals, working through and for the machinery of the exchequer.

As the King's Bench dealt with pleas of the crown, when the king's peace was broken, and the exchequer hunted up and punished offences against the revenue, and through both agencies assisted the revenue, so a further source of royal income was derived from the fees levied for the administra-tion of justice between subject and subject. There are many forms of conveyance known to those who are curious in legal antiquities. But the court of Common Pleas competed against them, by recognizing a form of conveyance transacted in court, recorded, and thereupon protected by valid evidence of title. " No assurances," said Clarendon, when, in the full tide of revived loyalty, the cavaliers of the Restoration strove to reverse or make void disadvantageous or forced sales made by themselves during the course of the civil wars, " are equal in validity to titles created by fines," as these kinds of conveyances were called. " There is no precedent of their being vacated by judgment or Act of Parliament, or otherwise, without the consent of the parties." So conclusive was this form of conveyance, that when Viscount Purbeck surrendered his title to the king by the process of a fine, the Lords, though they protested against the act, did not venture on demanding that it should be void. This form of con-veyance also supplied a revenue to the crown. The exchequer, in short, was ubiquitous, constantly searching after means by which the finances of the crown could be recruited or enlarged, and sometimes offering very solid advantages to the subject in return for business of which the law courts, centred in the exchequer, took cognizance.

Besides these revenues, the crown derived an income from the corporations whose charters were granted in lieu of annual payments, and were renewed on further payments. Sometimes the accession of a new sovereign was made the ground for fresh demands on the re-grant of charters, and payment was always expected for the concession of new rights. All these receipts, from whatever sources derived, were entered in the annual registers, the great rolls of'the Pipe, a series of documents still preserved, and extending without break from early in the reign of Henry II. down to the reign of William IV., when offices, long obsolete, and already mere sinecures, were abolished. But for nearly seven centuries the financial history of England is con-tained in an unbroken series of public records, carefully made up from year to year, and as carefully audited. And as the receipts of the exchequer were exactly scheduled, so the payments were checked. No mere order, even of the sovereign, was valid for payment, unless it were counter-signed by some official—originally the treasurer—and therefore duly subjected to a formal examination.

It is reasonable to conclude that arbitrary taxation was, if not unknown, always unconstitutional in England. The strict definition of the crown's rights in relation to revenue, which Domesday Book defended, and which the exchequer interpreted, naturally suggests that the rights of the subject were equally acknowledged and intelligible. Hence it was a general opinion, pretty freely expressed when the administration was unpopular, that the king should live within that income, in ordinary times at least, which had, under good management, been found sufficient for the dignity of the crown and the good government of the kingdom. The risk of the crown's impoverishment, and the consequent necessity of grants from the subject, made the English people exceedingly hostile to favourites, _ and led parliaments to recommend or even insist on a resumption of grants. The improvidence of Henry III. led to the Barons' War. The worse improvidence of Henry VI.'s administration, when the crown was in abject penury, was a principal stimulant to the party of the duke of York. The last echo of this discontent was the dissatisfaction felt at the grants made by William III. to the Bentincks and the Keppels, grants which had to be revoked in part, and which were only confirmed in part by the adroit manner in which the Whigs proposed to extend the same resumption to the estates bestowed on the numerous illegitimate chil-dren of Charles II.

One financial expedient, however, adopted, as is sup-posed, at the instigation of Becket, and certainly introduced in the middle of the 12th century, had such lasting and peculiar effects on the fiscal and political system of the country that it should be explained. This was the commuta-tion of foreign military service for a fixed money payment.

The policy of Henry II. was to strengthen the revenue, and to make it the instrument of government. Beyond his immediate and obvious interests, the warning which he derived from the straits to which his great rival Louis VII. was constantly reduced was enough to make him eager to secure and perpetuate the means for carrying out his own designs. The expedient on which he hit led to three results, two of which had an overwhelming influence on the mediaeval history of England and of western Europe, while in the third was contained the solution of the greatest problem with which civilization has had to grapple, which ancient politics failed to grasp, but which is the great victory of modern politics. The commutation of foreign military service for a fixed money payment was, first, the cause why the Norman settler and the subject Englishman rapidly developed a common sentiment against the royal prerogative; was, secondly, the origin of that irresistible English army before which, till it was rivalled by the Swiss infantry, no feudal levy could hold its ground; and, thirdly, was the unwilling parent of representative government, of parliamentary control, and finally of scien-tific finance.

The king, under that system of reciprocal obligation between overlord and tenant which is called, somewhat loosely, feudalism, had a right to the military service of such among his subjects as held lands by military tenure. Sometimes, to be sure, as in France and Germany in the 11th and 12th centuries, the suzerain was not in a position to enforce the obligation; sometimes, as in the kingdom of Jerusalem, the obligation was rendered stringent by the necessity of defence against a common enemy. It would seem that the position of the English king and Norman duke was intermediate to the above. There was no doubt that he could call on his subjects in England to do battle on behalf of interests which were indisputably insular, his Norman subjects for such, interests as were indisputably continental. But it was not quite so clear that an English tenant was bound to defend the transmarine interests of the English king, or that a Norman, a Gascon, or Langue-doc tenant should be constrained to vindicate the English rights of a Norman duke. But there was so much to be said on behalf of the king's claim that a compromise was possible, and it was so much to the advantage of the English monarch that such a compromise should be made, that the bargain known as escuage or scutage was struck between the English king and his barons.

Military service rendered by a military tenant was a tax in kind. In 1158 Henry II. laid claim to the great fief of Toulouse in right of his wife. If this fief could be transmitted through females, his claim, according to the public law of the time, was good. But another family had been in possession for nearly a century, and it was plainly inexpedient to the French king that his dominions should be completely girdled round, from Flanders to the Alps, by the fiefs of the English king, who, by various titles, had inherited or claimed the whole seaboard of France. The recovery, therefore, of the fief of Toulouse was sure to be an arduous task, and in effect Henry did not achieve it. But by bargaining for a money payment instead of personal service he could supply himself with the most effective means towards the object aimed at. A feudal army was collected slowly, was destitute of solid organization, and was at once disbanded when the time of its service was passed. An enlisted army, paid and commanded by the sovereign, gathered by careful selection, and drilled with all the skill which the age possessed, was a far more efficient instrument of warfare.

The assize of arms under which the militia was enrolled defined the equipment of the national forces as precisely as those of Rome were defined under the so-called consti-tution of Servius. Each social order had its proper arms and place in the army. None but freemen were entitled to serve. But in the king's enlisted army a serf could be enrolled, and rise to knighthood and even to nobility. During the long wars of Edward III. many such persons of originally ignoble birth became distinguished captains. The royal army became, like the church, the road by which humble merit might be promoted to rank and affluence. Such an army was highly paid, well drilled, rapidly man-oeuvred, and prodigiously eif ective. Though small, it easily routed hosts many times greater in numbers than itself. The chivalry of France went down before the English footmen at Crecy, Poitiers, Agincourt, and Verneuil, as the Persian armies were destroyed at Granicus, Issus, and Arbela, and as the native forces of India were routed at Plassy or Assaye. It is true that these English victories were ultimately barren, because the victors were too few to hold the country which they conquered. But in action, as long as the army was true to its drill and discipline, it was irresistible, and could only be beaten or dislodged in detail. Perhaps it is not too much to say that the tradition of these exploits has had a permanent effect.

Again, the commutation first adopted in 1158 united the two races, Norman and English, in a common policy. In accordance with the spirit of the time the bargain was a record and a precedent. If it strengthened the king's military power, it weakened his civil power. The feudal chieftain might not be unwilling to undertake a campaign from which he might get plunder or glory, or the solid advantages of successful and appreciated service. But it was another thing to find the funds from which others might be hired, and drilled, and win these advantages. The military tenant began to criticize the sovereign's policy in undertaking foreign wars, and to demur to his demands for escuage. His natural ally against the power of the crown was the free peasant. In little more than half a century after the bargain which Becket made with the military tenants of the crown, the whole nation, church-men, nobles, burghers, and peasants, were united against John and his mercenaries, forced the Great Charter from him, and despite the anathemas of the most powerful pope which ever sat at Rome, insisted that the Charter should be maintained. The history of no European nation supplies a parallel to the events of 1215. It will be found also that this common purj>ose influenced the minds of all ranks of Englishmen, till, under the unhappy reign of Henry VI., the feuds of the nobles made havoc of English liberty for a century and a half. But it was during the period of national resistance to the excesses of prerogative, i.e., during the 13th, 14th, and the first half of the 15th century, that those precedents were created which served the parliamentary opposition of the 17th century to such good purpose.

In the third place, the commutation of personal service was the true cause of parliamentary representation. It is known that the earliest traces of representation are to be found in those elections of county knights who were appointed to assess the contributions for extraordinary necessities which the irregular councils or assemblies of the earlier Plantageuet kings had conceded. From local or county assessments to a national or general assessment, based on uniform principles, was only a step. At first there was no need that any but the country districts should be dealt with in this fashion. The resources and liabili-ties of the towns were well known, and the king could treat directly with the borough authorities. These rela-tions of the crown to the chartered boroughs is the explanation of those anomalous franchises which character-ised so many of the boroughs before the Reform Act of 1832. At last, in 1265, Simon de Montfort summoned the representatives of the boroughs as well as the counties, avowedly for the purpose of obtaining their adhesion to his policy, and the precedent was copied thirty years later by Edward I.

How the parliament gradually, through its control over the supply of funds for the extraordinary necessities of the crown, undertook the cognizance and remedy of abuses, assumed legislative functions, affirmed its own privileges, debated political questions, changed or determined the succession to the crown, extended or narrowed the franchises of the electors, and criticized the royal administration and expenditure, is matter of familiar history. The origin of the English parliament was peculiar, as its place in modern European history was unique, till, at the conclusion of the 18th century, other countries began to imitate the forms and traditions of the English constitution, and at last a free parliament has become a symbol and condition of constitutional government.

It has been stated that finance, during the Plantagenet and Tudor dynasties, consisted mainly in the occasional imposition of direct taxes. The crown made known its necessities, and the parliament declared the amount of sup-ply. At a period which is not settled, the right or duty of originating supply became vested in the lower chamber. It is probable that this great privilege, to which the House of Commons owes its ascendency, but which was formally conceded only in the reign of Charles II., was partly due to the willingness of the Lords to throw on the lower chamber the odium or danger of refusing or cutting down the demands of the crown, partly to the original character of parliamentary representation,—the fact, namely, that it was called into being for the purpose of assessment. In course of time, the House of Commons assumed the right of giving validity to the grants of the clergy in their Con-vocations, a right which they angrily affirmed in the first session of the Long Parliament. Here, again, it is probable that the clergy had, at some period which cannot be now defined, attempted to protect themselves against the heavy demands of the king by putting their grants under the sanction of the popular chamber.

The direct taxes of the Plantagenet and Tudor times were percentages on the annual value of lands and tenements, property taxes strictly so called on personal estate, and percentages on ecclesiastical revenues. The first two were granted by the secular, the last by the clerical parliament. Very_ early in the history of English finance, the district from which the tax was raised was assessed, and the assess-ment was made a permanent valuation. It seems that this was even done with the tax on personalty. The town, for instance, from which the tax was collected was set down at a fixed sum, and the sum thus fixed was raised rateably by the local authorities. Hence in the time of _James I. the subsidies and fifteenths, as the direct taxes on real and personal property were called, produced less than they did mors than three centuries before, though the money of the Stuart sovereign contained only one third of the specie which was coined in pieces bearing the same name in the 1.3th century, and prices had risen owing to the increasing cheapness with which silver was obtained. It is likely that the motive for maintaining the same assessment was that parliament might exactly understand the amount of the burden, and the extent of the aid given to the king. The taxing rolls in which the amounts levied are set down exist by thousands in the national archives, and might be made the material for illustrating the social condition and opulence of mediaeval England. Similarly the value of benefices was assessed and remained constant, the tax levied being a percentage on the nominal value as entered on the books of the pope or the king.

The tax levied on the clergy was always a higher per-centage than that imposed on the laity. It was reasonably argued that a tax on tithes was a lighter burden than a tax on products or annual value, since the tithe-owner had contributed neither in labour nor capital to his share in the produce. Hence Edward I. demanded, in 1296, an enormous percentage—a third—on the revenues of the clergy. The clergy had procured a bull from Boniface VIII., under which they were forbidden to pay taxes to lay persons. That this bull was obtained at their solicita-tion seems manifest, since the crown was in want of money for carrying on war with Philip the Fair, with whom the pope was at constant feud, and against whom he would be likely to support any enemy. The attitude which Edward instantly assumed towards the clergy, the success which attended his policy, and the serious diminution in their privileges and prestige which followed from the expedient so unluckily adopted, are matters of familiar history. From the time of Edward there are only faint and occasional signs of that clerical independence which had exhibited such vigour in earlier times. During the 15th century the clergy had ceased to be a separate power in the state, though they exercised a great conservative influence in the obscure politics of the Lancastrian and Yorkist period.

Sometimes the king received taxes in kind, especially in wool, the principal export of English produce. It appears that sheep-feeding was almost confined to England, pro-bably because the peace was better kept in England than elsewhere, and destitution was nearly unknown. Hence it was possible to put a heavy export duty on the produce, or, what was the same in effect, to sell it at a much higher price than it was purchased at, by assuming a temporary monopoly of the article. Such an expedient was adopted by Edward I. in 1297, and several times over by Edward III. The importance of English wool to the Flemish manufactures was so great, and the trade was so easily manipulated by the English Government, that, from the time of Edward I. till that of Henry VII., i.e., during two centuries, the political sympathies of the Flemish were easily secured on the side of England through the agency of commercial intercourse. When Margaret of Burgundy gave a refuge to the Yorkist exiles, and sent forth pretenders to disturb the throne of Henry Tudor, the negotiation of a commercial treaty with Flanders, the Intercursus Magnus, formed an effectual bar to her intrigues.

The direct taxes of the period before us were doled out sparingly and grudgingly. Sometimes, as in the minority of Kichard II., they were appropriated, to use a modern phrase, by the hands of a body of commissioners appointed for the purpose. On the occasion referred to, Sir Richard Whittington was one of the persons selected to see that the moneys granted were duly applied to the war with France. It may also be stated that munitions for the defence of Cherbourg, saltpetre and sulphur, were sold to the Govern-ment of this time by Sir William Walworth, well known in history as the slayer of Wat Tyler, the leader of the Kentish insurgents in the peasants' war. It is almost superfluous to say, that supply was granted on the condition that the grievances were redressed. In the early part of the 15th century, when it was seen that the officials of the court evaded the redress of that which the Commons prayed for and paid for, the practice became general of drawing up petitions in the form of bills, and thus of making the redress of grievances the basis of a legislative act.

It is a common-place with historians to assert that the right of the crown to purveyance, i.e., to provisions and labour, purchased at market rates, or distrained for royal works, was a serious grievance in the Middle Ages. There is no evidence that it was so. The present writer has read many thousands of mediaeval accounts, and has rarely found that the forced purchases of the crown were treated as a wrong. Sometimes a great courtier, such as was the younger Despencer in the reign of Edward II., usurped a right which belonged to the crown, and injured the proprietor. But, as a rule, the crown paid its way honestly during the Plantagenet period. It was especially in the reign of the first two Stuarts that the grievance of purveyance was felt. But the discontent was due to the fact that the crown had determined on paying for supplies at the old rates of value which prevailed before the currency was changed and prices had risen. Such a system put on the county, through the justices at quarter sessions, the cost of the difference between nominal and market rates; and the crown, when the supplies were not forthcoming from the county, purchased on its own account, and forced the county to pay extravagant, perhaps factitious, prices for that which it had failed to purvey. An additional cause of discontent was found in the fact that, though purveyance was claimable only while the king was in the district, the Stuart kings demanded the contribution when the court was in London, or at any rate at some distance from the locality which was charged, and often overcharged for default.

In the 14th century a practice of making voluntary gifts to the crown began. Stories are told of Pole and Whittington having made presents or loans to the king, and of the latter having cancelled the king's debts at a banquet which he gave to his sovereign. In the 15th century the voluntary gifts of rich men were modified into a system of begging, under the name of a benevolence. It is probable that the extreme poverty of the crown during the latter years of Henry VI .'s reign, and the growth of partisan spirit among the nobles and gentry of this time, may have led to the practice becoming common. At any rate the custom became general during the twenty-five years of Yorkist ascendency. That it was exceedingly unpopular is shown by an Act of Eichard Ill's single parliament, in which benevoleuces were declared illegal. The successors of the usurper pretended to treat this statute as inoperative since it was enacted during an illegal government. Henry VII. and his successors constantly supplemented their revenues by benevolences. Chancellor Morton's fork, by which parsimonious and expensive opulence were equally invited to aid the king's necessities,—the one out of savings, the other out of expenditure,—is well known. The practice continued down to the eve of the Long Parliament, if indeed it can be said to have ceased, as far as the Eoyalist party was concerned, before the final collapse of Charles I.'s fortunes at Naseby. It was a commonplace with the courtiers of the day that the king might, if he wished, take the subject's wealth without asking leave. On the other hand, they who refused professed that they were restrained from giving by the anathemas of the Great Charter, by which those were denounced who violated any of the provisions which the Great Charter contained, and notably that by which common assent must be accorded to taxation. Anticipations of revenue by loans were common. The foolish project of Henry III., which was set on foot in order to secure the throne of Sicily for his second son, more accurately in order to enable the pope to crush the reigning members of the house of Swabia, loaded the king with debt, and, forcing him to consult his nobles as to the means of liquidating his obligations, gave an occasion for Simon de Montfort's abortive political and financial reforms. The long wars of Edward III. compelled him to make loans, and ultimately to repudiate his debts; and we are told that his bankruptcy brought down some of the most opulent financial houses in Florence. Henry VIII., who squandered the enormous treasure which his father had accumulated, and afterwards the great personal estates of the church, and finally its lands,—reputed, and perhaps with reason, to have been, in the wealthiest age of its existence, one-third of the fertile land in the kingdom,—constantly incurred large debts, from which he was relieved by his obsequious parliaments. Charles and his son incurred debts which were never paid, and Macaulay does not misstate the case when he says that public debt was not incurred for the first time at the Revolution; what did happen was the satisfaction of the obligation to pay the interest and, if possible, the principal.

One of the financial expedients of the Middle Ages, and indeed of much later times, was a depreciation of the cur-rency by means of issues which, nominally of the same value with an older issue, were intrinsically below it. This is not the place in which one might point out how disastrous and suicidal a policy it is to tamper with the currency, how mischievously the forces of Government are employed when they undertake this kind of fraud, and how enduring are the calamities which result from so great a political crime. Not a little of the stability and progress of Eng-land has been due to the fact that dishonesty on the part of Government in dealing falsely with the currency has been a very rare offence,—has, indeed, been committed only within a short but continuous period. The evil, however, which the action caused to England, even for so short a time, was so great that it reduced this country from the position of a first-rate to that of a third-rate power in Europe for more than a century.
At the close of the 13th century, the pound sterling con-tained what its name imported, a pound weight of silver, of 11 '2 fineness,—the penny, which was the commonest coin, containing the 240th part of a pound. Between this period and the first quarter of the 16th century, the penny was reduced to one-third of its ancient weight. But there is reason to believe, from direct and indirect evidence, that it was the practice to pay by weight and not by tale. It is inconceivable that the crown would, for the sake of a temporary gain, have sacrificed the fixed or quit rents, which constituted, after the beginning of the 15th century, the greater part of the revenues raised from crown lands and regalian rights. Besides, the evidence of prices is con-clusive as to the alternatives that the value of silver must either have quadrupled in the 15th century, or that pay-ments must have been made by weight, for during three-fourths of the 15th century the prices of the necessaries of life are much lower than they are in the 14th. During the whole of this period, however, the coinage was kept to its customary standard of fineness, and therefore no un-certainty was induced upon pecuniary transactions.

In 1543 Henry VIII. commenced an issue of base coin. At first the alloy was only one-sixth of the silver ; but in 1545 a second issue was put into circulation, in which the alloy was one-half, and in 1546 a third issue only contained one-third of silver. Henry died on January 28, 1547. The guardians of his son continued the practice during the first five years of his reign, coining money in 1547 which was only one-third fine, in 1549 of one-half fineness, and in 1551 of only one-fourth fineness. An attempt was made at the conclusion of this reign to issue a coinage of genuine quality, but as the base money continued in circula-tion, the attempt was futile. Mary was anxious to restore the ancient standard, but found it impossible to do so. Elizabeth called in her father's and brother's base money at a low fixed rate, which gave her a considerable profit, and put into circulation money of the old character and quality. This was effected in 1560, so that England suffered from the evils of a base currency for seventeen years. The effect was disastrous in the highest degree, for it impoverished the nation, and for a long time disabled it from filling that place in Europe which it had occupied for centuries before.

Among the sources of the royal revenue, the ancient customs of tonnage and poundage occupied an incon-siderable place. These were dues levied upon exports and imports, and seem to have been yielded from the earliest times. They are justified on the ground that the sovereign was under the obligation of maintaining the police of the narrow seas. Attempts of a more or less successful kind were made for the purpose of securing this part of the revenue by limiting exports and imports to certain towns, and particularly by fixing the market of exports in particular localities, known as towns of the staple. Thus, for a long time, Calais was by law the sole market of English wool, and the West of England tin was sold at Bodmin and some other Cornish towns. Towards the latter end of the 16th century the growth of foreign trade was rapid and considerable. But the old dues on exports and imports, which had been granted to the crown on the occasion of each accession from the 15th century, were small and inelastic. An attempt was therefore made to revise them, and in 1608 Cecil, James I.'s minister, drew up a new book of rates.

It is well known that these new taxes, for the imposition of which many plausible reasons were alleged, were the commencement of that quarrel between king and parliament which culminated in the civil war. The law courts decided in favour of the crown, and it does not appear that at this time the special scandal of the Stuart government,—the practice, namely, of displacing such judges as gave deci-sions on points of constitutional law or public justice that were distasteful to the sovereign,-—had commenced. But, on the other hand, it was seen clearly enough that, if the crown could, at its own discretion, impose what taxes it pleased on trade, the checks which parliament might impose on the administration would be annihilated. In point of fact, the Book of Rates haa very much this effect. Practically there was no parliament between 1610 and 1621, for the parliament of 1611 was dissolved without passing a bill or making a grant. But in the latter part of this period, owing to the skill and energy of Cranfield, the first of English financiers, the king was relieved from his debts, and put in possession of a revenue which was independent of parliamentary supply under ordinary circumstances. The election of 1621 was simply due to the outbreak of the Thirty Years' War, and the disastrous condition to which the king's son-in-law was reduced.

Another expedient by which the crown strove to in-crease its fiscal receipts was the grant of monopolies. It seems that the creation of a trading company, and the accord of special privileges to those who founded a market in those regions which were opened up to trade by the discovery of the Cape passage and the New World, was deemed to be incontestably the province of the crown. The houses of parliament could not have ventured on criticizing the action of a chartered company, much less have pretended to define its privileges. Now the papal see had granted to Spain the whole of the New World, or at least such parts of it as were in any way inviting, and had made a similar grant to Portugal of the district which lay on the road to India. By the death of Cardinal Henry in 1580, the succession of Portugal passed to Philip II., who thus united under one rule the West and the East. But the Dutch were now engaged in the War of Inde-pendence, and were_ assisted by the English, though war had not actually broken out between England and Spain. The war came at last, and the Eastern possessions of Spain were obviously the most convenient spot in which the power of Spain might be attacked. There was every reason, then, in according trade privileges to a company which had to contend against the power of Spain, to build forts and factories in which trade could be secured and extended, and to deal discreetly with rivals who were associated with Protestant England by a common European interest, but were sooner or later to come into collision in more distant regions. The massacre of Amtoyna was the beginning of those differences which culminated in the wars with Holland during the protectorate and after the mon-archy was restored. On December 31,1600, the first East India Company was created by charter. So far was the revenue from being the better for this charter that the queen granted the company an exemption from customs duties for the first four of their voyages.

From the undisputed powrer of granting charters for the monopoly of foreign trade there was only a step to the grant of monopolies to the home trade, though of course always on the plea that the monopoly was really a control which it was in the public interest to exercise. It is well known that, when these monopolies caused discontent, Elizabeth graciously cancelled them. They were renewed by James, were again the subject of remonstrance, and were abandoned by the king with so little conciliation that the surrender of the practice gave no great ground for gratitude. The other fiscal expedients which James adopted were the creation of a new title which was conferred by purchase, the sale of peerages, and the rigorous exaction of feudal rights. In the parliament of 1610 an attempt was made to cancel these rights by commuting them for a fixed payment, which, if the scheme had been accepted, would have taken the form of a quit rent on all estates held on military service by tenants of the crown. But the scheme failed, probably as much from a disinclination on the part of the parliament to aid the prerogative by granting the king a fixed revenue, as from any dispute over the amount of the commutation. The whole subject has been ably and judiciously treated by Mr Gardiner, whose conscientious and painstaking histories of the earlier Stuart period are of the utmost value to the student of finance and politics.

Hitherto, the history of English finance has been that of the process by which the Government attempted, with more or less success, to derive a revenue from direct taxa-tion. Cecil and James I. discovered that a fruitful source of increased revenue was to be found in the customs and a new book of rates, and the Commons as clearly saw that in this fiscal expedient lay the whole issue of the debate between parliamentary control and the royal preroga-tive. The struggle began with the accession of Charles. The independence and privileges of parliament, the desire to obtain certain guarantees for that kind of church government which represented the dominant feeling of most Englishmen, were the objects of those who constituted the parliamentary opposition to the court; but the machinery by which these results were to be effected was finance. No one can understand the politics of the first fifteen years of Charles I.'s reign who does not detect that the parliament intended to bring the king to terms by stinting the revenue. The struggle began with the first parliament of Charles. The parliamentary leaders imagined that they had won the victory when they secured the Petition of Right. The king interpreted that concession in another way, and was supported by legal advice in the view which he took. During the long interval between the third and fifth parlia--ments of Charles, the king tried every expedient by which to raise a revenue. Clarendon's statement that the country was peculiarly prosperous between 1629 and 1640 is undoubtedly correct. But the country determined not to let Charles have his way, and the resistance to his financial expedients was only the prelude to those measures which the Long Parliament at once adopted when it met.

During the period which intervened between the dis-missal of the third and the summons of the fourth parlia-ment, Charles adopted various fiscal expedients in order to fill up the deficiency of his finances. They were all, except the rates levied on imports and exports, forms of direct taxa-tion. Such were the compositions in lieu of knighthood, the annual payments made by chartered monopolies, the resumption of lands which were said to be encroachments on the royal forests, the fines of the Star Chamber, and in particular the fine of ¿670,000 imposed on the city of London, and lastly ship-money.

In the earliest times, the maritime towns, and especially the ports in the south-east of England, were liable to be charged with the duty of the national defence at sea. The privileges of the Cinque Ports were connected with this duty of defence, and it appears that the sailors of these ports needed very little persuasion to undertake a duty in which privateering differed little from piracy. Sometimes these irregular forces did good service. The victory of the Cinque Ports over Eustace the Monk in 1216 had even more important results than the battle of Lincoln. The navy of Philip of Valois was annihilated at the battle of Sluys by the same kind of force, and Edward III. was freed from rivalry on sea. In later times the piratical ventures of Hawkins and Drake had royal patronage, and it is said that some of the families who purchased titles from James I.—notably the Riches—had gained their wealth by expe-dients very similar to those which were familiar to the Algerines, and that their expeditions were as equivocal as those of the Mediterranean pirates. Not a few men who had won their wealth as buccaneers spent a calm and respectable old age in England. There was no hardship felt in the demand occasionally made by the crown, that the seaboard towns and counties must defend the realm at sea.

The first writs of ship-money in 1634 were levied on the maritime counties only. The second and third of 1635 and 1636 were imposed on the inland counties as well, the judges affirming, at first privately, and afterwards, on Hampden's appeal, by a majority, that the crown could levy the tax at its discretion and without the consent of parliament. It seems that the tax yielded about ¿£200,000, though it is said that after the judgment in Hampden's case, the payments were more reluctant and irregular than they were before the judges affirmed the legality of the impost.

The civil war broke out in the autumn of 1642. The king was better off for soldiers, the parliament better off for money, and in the end the possession of adequate funds supplied the means by which the single advantage which the king possessed was neutralized. These were afforded by the new forces which Cromwell drilled effectively and paid highly. Not only was London, always in the interest of parliament, richer than all the towns in England put together; not only was the eastern district of England untouched by the war; but Norfolk was by far the most wealthy and populous district in England, as Yorkshire and Lancashire were the poorest and least populous. The resources, therefore, from which the parliament could pro-cure its means were ample and easily obtained,

In 1643 the parliament imposed an excise on beer and ale within all the counties which acknowledged their authority, They also levied a heavy tax on tobacco and wine, and on other articles of consumption. The project was denounced by the king as an act of unheard-of oppres-sion, but was soon imitated in the royalist district by the parliament which sat at Oxford, though, after it had made this grant, it did not meet again. In 1646 the par-liament abolished the old feudal dues, turning all tenures into common socage. It is said that between the outbreak of the civil war and the year 1647 the parliament raised more than forty millions in the counties which they governed. Among other expedients, the Protector in 1656 established a general post office. According to the theory advocated by the crown lawyers at the Restoration, that all acts of the parliament from the date of the rupture with the king in the summer of 1642 were void, the old feudal liabilities were revived with the monarchy, and also, by implication, the royal privilege of purveyance. But as the country had been quit of these liabilities for fourteen years, the revival was felt to be an intolerable burden, and by 12 Charles II, cap. 12 they were extinguished. In common justice this emancipation should have been compensated according to the bargain nearly completed in 1610, which was known as "the great contract," by a land tax specially levied on lands which had hitherto been subject to feudal dues, and such an arrangement was proposed. But the cavalier party, now in the ascendant, contrived by a bare majority to carry a measure by which the king obtained the hereditary excise in lieu of his feudal dues, duties being imposed on beer, cider, perry, mead, spirits, coffee, tea, sherbet, and chocolate. Parliament also gave the king the old tonnage and poundage for life.

The excise was an expedient borrowed from the Dutch. In the long War of Independence, the people of Holland were constrained to make great loans, and to pledge their revenues to pay interest on these loans. The debt was almost all held in the country, and to meet the charges the Dutch financiers imposed taxes on all articles of consump-tion, whether necessaries or luxuries, on commercial transactions, on births, marriages, and deaths, on succes-sions and legacies. A Dutchman in the 17th century was taxed from the cradle to the grave, and the expedients of the Dutch financiers formed for a long time a series of precedents from which other countries borrowed largely. In effect Holland was the source of modern finance, and proved how taxation, though apparently of crushing weight, could be easily endured, if it were counterbalanced by industry and thrift. In point of fact, only a few years after the disastrous war with the English Commonwealth (a war w7aged quite as much for the political reason that the Dutch democracy, always inclined to the House of Orange, which was connected by marriage with the Stuarts, favoured the English exiles, and insulted or even murdered the English envoys, as from motives of commercial rivalry), the state of Holland contrived to reduce the interest on its debt of nearly fourteen millions sterling from five to four per cent, by the threat of paying off the principal. In the same period this state established, for the first time, a genuine sinking fund, by which, principal and interest being paid together, the debt of fourteen millions was to be com-pletely extinguished in twenty-one years. The rate of interest in England at this time was eight per cent.

During the reign of Charles II. the English nation increased greatly in opulence, especially through its foreign trade. But its internal trade and industry suffered severely by the appropriation in 1672 of the goldsmiths' loans. The goldsmiths of London, who during the civil war had undertaken the office of bankers to the London merchants, and took in money at call, or at short notice on rates of interest, had lent these deposits to Charles, in anticipation of revenue, to the amount of more than a million and a quarter, at eight per cent. At the instigation of the Lord High Treasurer Clifford, the king suspended the payment of interest on this loan, for one year only, as he said. But the obligation was never acknowledged, and in 1701, nearly thirty years after the exchequer was shut up, the bankers' debt was treated as a national debt, on which three per cent, interest was to be paid, but which might be redeemed on the payment of a moiety of the principal. It is the oldest portion of the English public debt. In 1720 it became part of the South Sea stock.

Finance became a science in England at the Revolution. The immediate effect of the deposition of James was an alliance between England, Germany, Spain, and Holland, and a declaration of war against France. The war lasted for rather more than eight years, and was concluded by the peace of Ryswick. Now the founders of the English Revolution were determined that for the future the crown should be dependent for its supplies on the pleasure of parliament, and especially that its foreign policy should be held in check by the control of supply. There was the greater reason for this policy at the moment, for it was quite understood that the expulsion of James implied war with France, and that such a war, carried on as it would be by the vigour and determination of William, must be prolonged and costly. In 1688 the revenue was derived from (1) tonnage and poundage, (2) the hereditary excise granted in lieu of the old feudal incidents, (3) the profits of the post office, (4) the hearth money, a house tax, and (5) the grants made in the parliament of 1685 for eight years. The income derived from these sources has been variously computed at two millions to two and a half millions, and the receipts from the excise and customs were steadily increasing. William was under the impression that this great revenue was vested at once in him by the change of the succession,—a view which was supported by several Whig lawyers, who urged that, as long as the late king lived, these duties were payable, but that they were to be enjoyed by his successor. But the political Whigs thought differently. They determined, and they carried without opposition, that a fixed revenue should be settled on the crown during time of peace, that this revenue should be divided into two portions, one for the household and the civil expenditure, the other for the public defence and other analogous charges. It is true that they must have contemplated the immediate contingency of war, and have known that the sum at which they fixed the revenue would be wholly inadequate for the emergencies which would arise; but they were affirming a principle which should be permanent, while the contingency to be dealt with was temporary. It appears that the attitude taken by the parliament gave deep and lasting offence to William, and that the distrust and dislike which marked the relations of crown and parliament during this reign, and prepared the reaction under Anne, had no other origin than the settle-ment of the revenue by the convention parliament.

The parliament further determined, once for all, to affirm a principle, occasionally acted on in past times, and funda-mental to the concession of extraordinary grants, by which all supplies, other than the civil list and the hereditary estate of the crown, should be strictly appropriated to the objects for which they were granted. The demands of the crown in the Middle Ages were generally for public objects, in which the whole community was reputed to be interested, though sometimes, in accordance with the theory of the age, they were acknowledgments for favours received, petitions granted, or pardons allowed. They were therefore ordinarily granted to the exchequer, and no limit was put on the objects for which they were to be expended. But, as we have stated above, appropriations were made in the minority of Richard II. and of Henry VI., in the last year of James I., and pretty frequently after the Restoration, greatly to the disgust of some among the courtiers, who conceived that the prerogative of the crown was dangerously invaded, if Charles were disabled from diverting parliamentary grants from special objects to those which the king might be pleased to select. But from the Revolution the Appropriation Act has always denounced severe penalties on any minister of state, or head of department, who converts supply voted from one branch of the service into any other direction. The trial of Lord Melville, in 1806, illustrates the manner in which a parliament, otherwise disposed to trust implicitly in the Government, resented the apparent breach of a fundamental principle in English finance.

The settlement of the revenue on William and Mary left the parliament in the possession of a surplus of £800,000, the difference between the grants made to James and the sums actually settled on the crown. But £200,000 of this was immediately remitted by the abolition of the hearth tax or chimney money. The nation had also incurred a debt to the Dutch of £600,000, which was repaid at once. To meet these charges, a sum of rather more than £400,000 was voted, to be raised by monthly instalments, and as a security for borrowing £370,000 at six per cent, in order to meet immediate requirements. The expedient of anticipating revenue by loans at short dates was very ancient, and is indeed obvious. At first, the Government of the Revolution, feeling its way cautiously, raised loans on short periods, at high rates of interest, and pledged particular taxes for the payment of the principal and interest. These taxes were—new excise duties, i.e., taxes on consumption ; a monthly assessment, i.e., a direct tax on income ; and a quarterly poll tax, which of course was graduated. A resolution was, moreover, passed by the House of Commons, by which it was proposed to lower the salaries of all offices under the crown to £500 a year maximum, with the exception of certain cases. It took no effect, and was indeed a mere expression of dissatisfaction at the enormous gains of official statesmen. Nothing tended to lower political morality during the latter part of the 17th and the whole of the 18th centuries so much as the enormous perquisites which officials enjoyed.

In 1693 a loan was raised on the basis of a tontine. This expedient was familiar to Italian financiers, and was probably suggested by the life loans of the papal Curia.

It combined a limited security with the charms of survivor-ship,—a kind of lottery which is very often found to be attractive, unless, as is generally the case, the tontine is employed as a speculation by those who put selected lives into the loan. Tontines have been employed by English financiers as a means for raising money up to the begin-ning of the present century. On this occasion, when a million was advanced on the security of additional excises to be levied on beer and ale, interest was paid to all subscribers at the rate of ten per cent, for seven and a half years, after which date £70,000 per annum was to be divided among the survivors, till the number was reduced to seven, when the annuity of each was to revert to the public on his decease. In order to stimulate the operation of this loan, persons were allowed to nominate lives at ten per cent, on the capital invested on each life. Although the latter offer was equivalent to selling annuities at less than half their value, the loan was raised with difficulty. But the capital expedient of 1693 was the imposition of the land tax. Willing as the parliament was to extend the area of indirect taxation, it was impossible that landed estates should be allowed to go untaxed, especially as, within half a century, nearly all taxation had been derived from the contributions of land and property, and, as it was remembered that the emancipation of the military tenancies was effected at the expense of the general public. But the Government did not venture on departing from the old principle under which the subsidies were collected, that of making certain local authorities responsible for the assessment, or rather of relieving them of all virtual responsibility. The tax was fixed at four shillings in the pound on the profits of land and personal estate, the latter being taken at six per cent. But from the very beginning the assessment was unequal. Ic is said that those districts which were favourable to the principles of the Revolution assessed themselves fully and fairly, but that those in which Jacobite views were in the ascendant greatly understated their liabilities. It appears, too, that the assessment of personal estate was soon lost sight of, or rather merged in an aggregate local charge. In point of fact, no revaluation was made. Hence the estimated rental of agricultural estates remained unaltered, and the assessment of the towns, which was also taken as a fixed quantity, was imposed on the owners of property, the capital of the townsfolk and traders being merged in the value of the premises. For example, if the assessment of a town was £1000 in 1693, this sum including both items in the land tax, the same assessment was charged whenever the full land tax was imposed. But the inhabitants of the town had the right of redistributing the fixed assessment on the property contained in the town, as the value of individual holdings was increased or diminished by the outlay of the owners, or the depreciation of the premises. The land taxes, therefore, in the county districts became virtually a secured rent payable to the crown; in the towns it became a tax on improvements, though the amount was not considerable enough to discourage improvement. It was Adam Smith's opinion that in his time there were districts in which the land tax was half what it professed to be, an impost of four shillings in the pound on rents. Since the great increase in the rent of land, owing to the great improvements which have been made in the art of agriculture, the land tax is nowhere heavy, and in some districts is trivial.

Taxes on the rent of land, or on its value as property to be rented, constitute a far larger percentage in the budget of foreign countries than they do in England. In the reign of William and Mary it is true that the land tax, where it was fairly assessed, was a very considerable impost, and the country gentlemen easily fell in with the pacific projects of Walpole, when he coupled them with the fact of a reduced land tax, and a prospect that the tax would be abrogated altogether. But as, owing to the increasing value of land, and the growth of the system of indirect taxation (the principal expedient of English financiers during the 18th and the first half of the 19th century), the land tax became absolutely and relatively a decreasing charge, taxes on the rent of land ceased to be an important element in the national budget. Adam Smith informs us that in Prussia the land tax on secular estates was from 20 to 25 per cent, of the revenue, on ecclesiastical 40 to 45. In some European countries lands held by a noble tenure were taxed at a slightly higher rate than those held by a base tenure. In France, on the other hand, lands held by a noble tenure and the lands of the clergy were exempt from land tax, while the burden of direct taxation fell exclusively on those held by a base tenure. The inequality of this system, its injury to the revenue, and the still greater wrong which it inflicted on those who were liable to the tax, were constantly commented on by those French writers who made finance their study, and par-ticularly by the Economists, whose peculiar views on the nature of taxation were an exaggeration of what contained a serious and important truth. But the interests which profited by the inequality were too strong for any reform. They were at last sacrificed by a revolution, much of the-bitterness and ferocity which accompanied the change having been unquestionably due to the sense of injustice felt at the extreme unfairness of the feudal taille.

The next expedient was that of borrowing money on lotteries. There are instances of state lotteries before the Revolution. One was drawn in 1568, with the object of improving the harbours; another was held in 1612 and subsequent years, for the benefit of the Virginian colonists. But the parliament of 1620 presented these lotteries as a grievance, and they were discontinued by an order in council. In these later lotteries the Government found it impossible to dispose of the tickets except by granting at the same time annuities at exorbitant rates of interest. In course of time, when the English people became more inclined to speculation, lotteries became a profitable means of raising money, though they had such disastrous effects on public morality that they were ultimately discontinued. In the year 1693 loans were raised on the security of stamp duties, now introduced for the first time, and on the tonnage of ships. The charter of the Bank of England was granted at the same time in exchange for a loan of £61,200,000, the security of the loan being generally the assignment of one half the additional excise duties. These duties were now imposed without any limit of time. Hitherto indirect taxes had been granted for fixed periods. The negotiations which led to the foundation of the Bank of England contemplated a permanent debt and a permanent fund from which the interest of the debt was to be paid.

The relations of the Bank of England to the finance of the country are as important as the effects which it had upon trade,—in the early part of its career were far more important, for the private bankers were already fulfilling many of the functions of commercial banking. But the Bank of England was from the first the banker of the Government, managing its revenue,—for which it received on its foundation £64000 a year,—anticipating its revenues, putting its securities into circulation, and assisting its credit at emergencies. It was, in point of fact, from the beginning a great department of state, and so obvious and, to the public opinion of the time, so dangerous were its powers, that provision was taken in the Act by which it was constituted, that if it advanced to the Government any moneys on the credit of the public revenue without the authority of parliament, it should forfeit treble the sum which it had so advanced. Moreover, the Bank of England, by virtue of its financial power, became a great political institution, existing by and for the principles of the Revolution; and to it much more than to the public debt may be applied the statement of Bolingbroke that, while the taxes necessary for the expenditure of the eight years' war might have been met by taxation within the year, the Government of the Revolution preferred to incur debt, because the holders of the public securities were thereby interested in the maintenance of the new settlement.

A singular tax was imposed in the year 1694, that on marriages, births, and burials, on bachelors and widowers. These taxes were graduated, rising from four shillings on the burial of the humblest person to £650 in the case of a duke or duchess. The duty on births ranged from two shillings to £630, on marriages from two and sixpence to £50, on bachelors and widowers from a shilling a year to £12. 10s. In the same year taxes were imposed on glass, stone and earthenware, coals and culm. In the next year the currency was reformed, the Government conceiving it expedient that the cost of restoring the clipped and ham-mered money should be borne by the nation.

During the period in which the old money was being called in, and the new coinage struck and issued, the country was in the direst distress. But the fertile genius of Montagu, now chancellor of the exchequer, invented exchequer bills. Long ago, exchequer tallies, i.e., certi-ficates of indebtedness on the part of the exchequer, had been in circulation, or at any rate been negotiated. But the first exchequer bills—these did not bear interest—were virtually a Government paper based on the security of the revenue, and intended to be a temporary substitute for the currency, now deficient, but in course of restoration and extension. They came at a critical time, and supplied an urgent want. Thus they were an immediate success. They helped to sustain mercantile credit, they lightened the burden of pressing charges on the revenue, they supplemented the weakness of the currency, and they thenceforward formed part of the machinery of English finance. The second issue of exchequer bills bore interest at 5d. per cent, per diem, i.e., a little over 1\ per cent, per. annum. These instruments of credit were put into circu-lation in amounts from £65 upwards. Exchequer bills survived a risk which has been fatal to similar instruments, for in 1698 it was discovered that an extensive forgery of them had been perpetrated, for which some few persons were punished, though the greater criminals escaped. In 1696 the malt tax was first imposed. During the reign of William the whole amount of receipts for revenue was a little over 72 millions, i.e., rather more than 5J millions annually. Of this amount, about 34rr millions were obtained by indirect taxation, about 21 millions by direct taxation, 2-J millions from the post office and the hearth money, and nearly 13J millions remained as debt. The expenditure was about 45 millions on the public service, nearly 9 millions on the civil list, and rather more than 18 millions on various objects, including repayment of debt.

In forty years, then, the English financiers had found out how elastic and fertile indirect taxation is. We shall see in the course of a century and a half how they used their discovery, and improved on it. Hitherto most of the indirect taxes had been imposed temporarily; the policy on which the country was about to enter necessitated their perpetual imposition. Thus, for example, the malt tax, having been a temporary tax in the eight years' war, was revived and made a permanent tax at the beginning of the war of the Spanish succession. The principal sources, however, of the extraordinary revenue needed for this war were customs and excise, land taxes, stamps, and similar duties, and loans. The amount of debt contracted during the period was a little in excess over that obtained by the land tax, the land tax being ress than two-thirds of that obtained by indirect taxation. The form in which the loans were raised was annuities on lives or on terms of years, granted on disadvantageous conditions, lotteries, and the funding of floating debt. The latter operation was in part undertaken by the Bank of England, which thus con-siderably enlarged its capital. The rate of interest was about 6 per cent., and it appears that the form in which the loans were contracted was the best method after all in which the Government could borrow.

A still larger operation was attempted by Harley in 1710. A new company was formed, which was to take the unfunded debt, amounting to more than 19 millions, to receive 6 per cent, on the sum, with ¿£8000 a year for expenses of management, and in consideration of having performed this financial operation for the Government, was to be invested with the sole privilege of trading to the South Seas. This was the origin of that famous company which ten years afterwards obtained so scandalous a notoriety. In 1715 the aggregate fund was established. Numerous taxes had been made perpetual, and the Act creating this fund directed that the proceeds of these taxes, with the surplus of other revenues, and all other public money, should be brought into the exchequer as a collective quantity. But by this time the whole revenue of the country, with the exception of the annual land and malt taxes, had been pledged to the various loans contracted during the two wars which followed on the Revolution. An attempt was made to lighten the burden of the debt in another direction of finance, i.e., by diminishing the rate of interest.

Shortly after the peace of Utrecht the rate of interest began to fall, and continued to decline till it became pos-sible to make use of the fact for the purpose of effecting a considerable reduction in the annual charge of the debt. An attempt was therefore made in 1717 to obtain a small loan at 4 per cent. The project was premature as yet; only a trifling sum was subscribed, and at last it became necessary to raise the rate to 5 per cent. But in order to consolidate parliamentary credit, the Government of the day created three new funds in addition to the aggregate fund of 1715. These are called the South Sea fund, the general fund, and the sinktng fund. The aggregate fund was the guarantee under which the Bank of England consented to accept 5 instead of 6 per cent, on their capital, and to circulate exchequer bills at a very low rate of interest. The South Sea fund was the security afforded by the perpetual duties appropriated to the South Sea Company at the foundation of that corporation, the interest in this case being reduced also from 6 to 5 per cent. In order to pay off such public creditors as were unwilling to submit to the reduction, the two companies agreed to advance 4| millions at 5 per cent., and certain taxes granted heretofore for terms of years were now made perpetual, under the name of the general fund. By these finaucial operations a saving of more than ¿£300,000 a year was effected. The sinking fund consisted of the surpluses derived from the several other funds, which were to be employed for the extinction of debt, and for no other purpose whatever. The policy of these arrangements, particularly the latter, was soon approved by a considerable rise in the value of stocks. Thus, for example, South Sea stock, which was worth lOOf at Ladyday, rose by Michael-mas to 111J. In the same year, too, the first vote of credit was taken, in expectation of a threatened invasion by Charles XII. of Sweden. The vote was indeed strongly resisted, and as the majority by which it passed was very slender, Townsend, Walpole, Methuen, and Pulteney were put out of office or resigned. In 1719 the surplus of the three funds referred to above, amounting to over ¿£400,000, was applied to the reduction of debt.

In 1720 the celebrated South Sea scheme was projected. It gives some colour to the opinion of those who hold that commercial and financial follies are epidemic, that a scheme far more disastrous in its effects than the South Sea bubble was put into shape the year before in France, when Law floated the Mississippi Company. In the month of November 1719 the nominal value of the stock of the French company was 18,000 millions sterling, a sum which the statists of the age reckoned at 180 times more than all the currencies of Europe put together. Both projects were trading companies, and in both companies the grant of trade privileges was made the occasion for negotiating terms with the public creditor through the agency of the company. The immediate object of the negotiations entered into with the South Sea Company was the reduction of what were called the irredeemable annuities, created for long terms of years during the wars of William III. and Anne. It is probable that the proposals of the company would have been, to judge from the success with which the conversion of the various stocks in 1710 was effected, financially satis-factory. But unluckily the other great financial corpora-tion, the Bank of England, bid against the South Sea Company, and in this rivalry the latter offered terms, which were finally accepted, under which the company contem-plated the purchase of the whole national debt, to be repre-sented by a total capital of 43J millions, for which they were to receive interest at 5 per cent. The magnitude of the operation, the difficulty sure to arise when attempts were made to obtain bona fide subscriptions for the large amount which would be required in order to complete the bargain, and the reaction certain to ensue as soon as ever a check was given to the operation, were lost sight of. It was not perhaps so remarkable, when it is mentioned that the very manner of the negotiation between the company and the Government pushed up the price of the original stock much beyond its natural value, a rise which the directors of the company were not slow to take advantage of, and that the stocks of other companies which could offer no exceptional prospects of profit were raised to nearly as absurd a price as that of the South Sea. The directors of the company took advantage of the fictitious price which the stock had reached, and created shares at or near the market value of their stock. As the fever of speculation reached its height, the directors exalted the price of their shares, and it seems even contemplated an issue of stock at the price of ten times its nominal amount. By midsummer the advanced prices of all public stocks are said to have reached a market value of 500 millions. Before the books of the company closed on June 22, the directors had negotiated for all the irredeemable debts of the Government. On August 12th they dealt with the redeemable debts, amounting to nearly 14£ millions, at the price of 800. When parliament met in December, the price of South Sea stocks had fallen to 200. In the interval, however, the directors declared a dividend of 30 per cent, at Christmas, and pledged themselves to a dividend of 50 per cent, for the next twelve years. This might perhaps have been pos-sible had the subscribers made good their payments, had the directors been able to place all their stock at the nominal prices, and if all their loans were repaid. But the payment would only have been temporary, and both principal and finally interest would have speedily been lost to the shareholders.

The issue to the nation was that the South Sea stock was fixed at nearly 34 millions; that this was divided into moieties, one half to be the trading stock of the company, the other to be a fund stock on which dividends should be paid ; and that the rate of interest payable by the Govern-ment on the whole should be 5 per cent, till June 2, 1727, J when it should be reduced to 4 percent. The nation suffered considerable temporary loss, for the capital of the debt, instead of being reduced, was increased by three millions, and the temporary annuities were converted into a perpetual stock. But, on the other hand, the state secured a reduc-tion of interest within six years, and could, if the state of the money market proved favourable, reduce their rate of interest at an earlier date, or if the revenue exceeded the expenditure could bring the machinery of the sinking fund into operation. In 1727 three-fifths of the public debt was South Sea stock. In 1724 the rate of interest had fallen so much that the bank, on a revision of its bargain with the Government, agreed to accept 4 per cent, instead of 5 on its new stock, the old rate of 6 per cent, remaining on its original stock.
In 1726 it was found possible to borrow at 3 per cent., and a small stock was raised at this rate. In 1727 the land tax, which had been at two shillings for five years, was raised to four. Those customs and excise duties which had now been made permanent, and were reckoned on an average at 30 per cent, of the value of duty-paying and excisable articles, now yielded, with the malt tax, about four and a half millions, or twice as much as the land tax at four shillings in the pound. In 1732-3 the land tax was reduced to a shilling in the pound in order to conciliate the landed interest, the salt taxes were reimposed, and the deficiencies of the revenue were made up from the receipts of the sinking fund, which now amounted to more than a million annually, and by which reductions were made from time to time in the public debt to the amount of more than six millions in the twelve years between 1727 and 1739. As Walpole had been designated the father of the sinking fund, his policy was severely, perhaps sincerely, criticized by the opposition. But while it was certain that the ministers could count on a great majority for the financial scheme which he proposed, it was not equally certain that he could reckon on support except by reducing the land tax, an impost which was sensibly felt by the landowners, and was correspondingly distasteful. The land tax re-mained at two shillings in the pound from 1733 to 1739. In other words, direct taxation remained odious, and indirect taxation became familiar.

In 1737 the rate of interest on public securities was less than 3 per cent, for the 3 per cent, stocks were worth 107 in June. This is at about the middle of that remarkable series of years in which the prices of grain were singularly low, a set of facts which is characteristic also of the first half of the 15th century. The cheapness was undoubtedly due in great measure to a succession of abundant harvests, and to the rapid growth of agricultural skill. But it is also to be ascribed in some degree to the increasing dearness of the precious metals, especially silver, and it is likely, for economical reasons which would not be in place to allege here, that a period in which the precious metals are dear will be accompanied by persistently low rates of interest. It is manifest that, at the present time, gold is rapidly increasing in value, and that a low rate of interest has accompanied this fact, as it will in all likelihood continue. The House of Commons resolved, in view of the high prices to which public securities had risen, that the rate of interest on all Government stocks which were redeemable should be reduced to 3 per cent. A bill was brought forward embodying this resolution, and was read twice, but lost in the course of the session. It appears that the plan was frustrated in deference to the monied interest. That it caused some alarm to the holders of redeemable stocks is proved by the fact that, when the three per cents, stood at £105, 3s. 8d., the four per cents, were at £113 only.

There is one incident in the history of Walpole's financial projects which must be referred to. In 1733 this minister brought forward his famous excise scheme. The payment of customs duties by the importers was obligatory on the landing of such articles as were liable to the tax, or the importer, if he desired delay, was compelled to enter into a bond with sufficient securities for the payment of the impost. The inconveniences of the system were obvious. If the importer were in narrow circumstances, he was fre-quently obliged to realize the value of his goods by immediate sales, when the market price was low already, and was thus deprived of one advantage which is charac-teristic of capital, that it enables the possessor of it to wait for favourable markets. It inflicted the maximum loss on the consumer, to whom the tax was of course transferred, and a minimum advantage to the Government; for of course the trader's profit was derived from capital advanced for payment of duty, estimated by the time intervening between the importation and the sale. It tended towards limiting competition in foreign products, for the wealthier merchants had nearly a monopoly of sale in articles on which considerable customs duties were charged, owing to the necessity of finding the tax at once. A further assist-ance was given to such merchants by the rule under which the importer who paid his tax promptly was allowed a bonus of 10 per cent, on the amount of the tax. It opened the way for frauds on the revenue, for it encouraged smuggling, and assisted the dishonest exporter of foreign produce in obtaining a fraudulent drawback. It checked the carrying trade, narrowed consumption, and impaired the revenue.

The reform which Walpole contemplated was to extend to foreign products imported into Great Britain that system which was already practised with such articles as were liable to the internal duties of excise, i.e., to permit the storage of foreign goods in bonded warehouses on the payment of a trifling landing duty. Thus tobacco—the experiment was to be tried with tobacco and wine at first—was liable to 6 Jd. per pound. Walpole proposed to reduce the tax to 4fd., to levy fd. on importation and deposit in the ware-house, the import duty being payable as part of the hereditary excise, but being repaid on exportation, and to delay the payment of the 4d. till such time as the owner of the goods might wish to dispose of it to the dealer for home consumption. In this way WTalpole contemplated that a great ease would be afforded to the fair trader, and that frauds on the revenue—an invariable source of loss to the honest merchant—would be obviated. It is clear that Walpole anticipated that the revenue would gain all from the check to smuggling and factitious drawbacks which it lost in reducing the duty.

It was unfortunate for Walpole's project that he brought it forward at a time when he had, in deference to the clamour of the landed interest, reduced the land tax to a shilling in the pound, and suspended the operation of the sinking fund. It is true that the plan was not wrecked on these issues, though they must have been present to the minds of many among those who resisted it. It was in vain that Walpole most accurately predicted, as the result of his reform, " that it would make London a free port, and by consequence the market of the world." The great merchants, who had a monopoly of importation; the smugglers who, in that age of corruption, found means to make themselves a parliamentary power ; the public, which loathed the excise as an inquisitorial system, begun in the old days of Cromwell's military usurpation, continued in order to sustain the foreign policy which the Government of the Revolution had prosecuted, aud extended in order to enrich foreign favourites and to bribe the servants of the state ; and the patriots, as the opposition called themselves, eager to use every chance against Walpole, even when he was in the right, because they had so pertinaciously asserted that he was always in the wrong,—united to defeat the project. Walpole's life was threatened in the streets, and, what he feared more, his majority was imperilled in the House. The warehousing scheme was abandoned, and not revived till 1803. The elder Pitt, when, being in the ascendant, he could afford to criticize his own conduct, said that he regretted nothing so much as his opposition to Walpole's excise. It is singular that the principal works on commerce and finance which were published before the adoption of the bonded warehouses system pass over Walpole's plan in silence.

The public debt was increased between 1739 and 1748, the date of the peace of Aix-la-Chapelle, by about 28 millions, the interest on this sum being principally provided by duties on spirits, though during the whole period the land tax was put at 4s. In 1750 it was reduced to 3s. But the old customs and excises were continued and increased. In 1731 a duty of 20s. a gallon had been imposed on gin, with a view to cheeking its use. It is well known that this prohibitory duty led to extensive smuggling, and to illicit distillation on a large scale. Hence in 1743, when the Government was on the look-out for means, it was proposed to repeal the Act of 1731, and impose remunerative duties in the place of the prohibitive tax. The proposal was resisted on grounds of health and morals, but was carried.

Early in 1750 the plan suggested in Walpole's time of reducing the rate of interest on public securities, with the option of receiving the principal, was revived, as the three per cents, had been above par in the autumn of 1746. The amount to be treated in this way was nearly 58 millions. The holders of the stock were offered 4 per cent, for 1750, 3| till the end of 1757, and 3 afterwards. In the course of the year the terms were, except for about 3^ millions, agreed to. In the next year the consolidated stock was first formed by merging nine separate loans into a common 3 per cent, fund, and subsequently other stocks were consolidated in the same manner. The project was not only highly successful, but the new three per cents, rose in June of the same year to 106 J. In 1753-4 the land tax was reduced to 2s. In 1755, when the Seven Years' War was imminent, the land tax was raised to 4s., at which sum it continued, except in 1767, 1768, 1769, 1770, 1772, 1773, 1774, 1775, till 1798, when, being made perpetual, the ceremony of its being granted annually was abandoned. During the Seven Years' War and onwards, it became the practice of English financiers to invite loans upon one of three principles. They either offered such a variable sum of three per cent, annuities as represented the difference between the value of this security and the same amount actually lent, as, for example, ¿£120 stock for £100 borrowed ; or a fixed amount of stock for a variable percentage, as ¿£100 stock for (say) ¿£80 lent; or gave ¿£100 stock, and a variable sum in long or life annuities, as (say) =£100 stock and 22s. 6d. per cent, per ¿£100 subscribed for ninety-nine years. The loans raised during the Seven Years' War were far in excess of any that had been negotiated before. That, for instance, of 1760 was twelve millions, and the same sum was raised in the next year. When the peace of Paris was signed in February 1763, the nominal capital of the English funded debt was in amount nearly double that which had been incurred up to the treaty of Aix-la-Chapelle.

The loser in the Seven Years' War was France. It was prostrated, was stripped of its colonies, and wholly im-poverished. No war in the world's history had such im-portant results on the remote future as this has had. From this time France ceased to be a colonizing nation, and England occupied its place, as well as extended the settle-ments which it had already founded. At the beginning of the Seven Years' War, France was the determined rival of England in the East, and had occupied the south and north of the English plantations in the West. At the conclusion of the Seven Years' War, it had lost both its colonial centres. By this loss it was also deprived of one among those outlets for discontent which have been so serviceable to the Governments of Western Europe. Emigration does not relieve a country of its population so much as it does of its dissatisfied and disaffected members. The destruction of French colonial enterprise had no little indirect effect on the passions of the Revolution. The supremacy of England in the northern part of the New World led the Protestant inhabitants of Ireland, bowed dowm and im-poverished by the oppressive revenue laws of England, to emigrate westwards, and so give at home an opportunity for the Irish Catholics to reassert themselves, and for the Americans to strengthen or recruit themselves in the War of Independence. Again, the charges of the Seven Years' War were so great that the British parliament tried to help itself by taxing the colonies; the colonies met this project, after various acts of resistance, by the Declaration of Independence; the war of American independence found an ally in France, which was eager to blot out the memories of the Seven Years' War ; the reaction of repub-lican America on monarchical France aided those theories which developed the French Revolution. On the Revolu-tion followed the Empire ; the Empire induced the reaction of the Holy Alliance ; from this came the western rising of 1830, the general rising of 1848, and ultimately the doctrine of modern European politics, that, namely, of the nationalities.

We are concerned, however, with the financial conse-quences of the Seven Years' War. It was in no slight degree provoked by the hostility of the French and English settlers in America, and it had been carried on at an enormous expense. The result was to secure the ascendency of the English race on the American continent. It ap-peared to deserve the gratitude and the sacrifices of the colonists. There is little doubt that the inhabitants of the plantations would have recognized these facts, and have responded according to their means to an appeal made to them by the ministry. In an evil hour the ministry attempted to impose taxes on them by the authority of the English parliament. No one, not even the colonists them-selves, doubted that the English parliament could enact laws for the colonies, could regulate their trade, could dictate the course of their industry, and thus as effectually bring them within the financial arrangements of the British empire as though it collected a revenue from them. In fact the colonial system was really a department of finance, though its details were defended on those mercantile principles which Adam Smith expounded and refuted. The imposition of the Stamp Act was resented on political principles, and was resented successfully. Passed in 1765, it was repealed in 1766, though at the same time the House of Commons passed an Act asserting, in the broadest manner, the right of the English parliament to tax its dependencies. The Americans answered by refusing to consume British goods. As is well known, the ultimate cause of the revolt of the colonies was the despatch of the East India Company's tea ships to Boston, the tax on tea imposed on the colonists being nominally retained in order to serve the interests of the company, whose finances were seriously affected at the time, but really in order to affirm the right, on which king, ministry, and parliament insisted, of taxing the colonies through the machinery of the English House of Commons.

From the outbreak of the War of American Independence the land tax was annually granted at 4s. in the pound, though of course on the old assessment. It formed the basis on which an annual issue of two millions in exchequer bills was made. But the residue of the means from which the interest on the annual increment of debt was payable was derived from taxes on consumption and stamps, i.e., from indirect sources. The actual debt created during the American war was nearly 97J millions. The sum received from loans was 75J millions, and the annual sum needed for the interest on this debt was a little over 4 millions. In 1786 Pitt, after inviting the attention of parliament to the magnitude of the debt, and the necessity for reducing it, proposed to revive and make permanent the machinery of a sinking fund. The minister had taken counsel with Dr Price, who for some years previously had been lamenting the downfall of Walpole's sinking fund, and urging that by borrowing at simple interest great accumulations might be formed at compound interest, and that thereby the debt would be ultimately extinguished. Pitt's proposal was that the exchequer should pay a million annually in quarterly instalments to six eminent persons, who should invest the sum in the purchase of stock, and that this payment should have precedence over any other issues of the exchequer, except the interest on the debt. He intended that the interest on this fund should accumulate with the annual receipts, and he calculated that in twenty-eight years the fund, with accumulated interest, would yield an annual surplus of four millions. When this sum was reached, the interest was to be at the disposal of parliament.

An amendment was proposed on Pitt's proposal by Fox, to the effect that when at any future time a loan was pro-posed, say of six millions, the commissioners, if they had sufficient funds at their disposal, might purchase a sixth of the stock. It was accepted by Pitt, and formed the process by which, during the great Continental war, the commissioners of the sinking fund continued to lend their balances and the annual sum which they received from the Government to the state, thus piling up an imaginary obligation of the nation to itself, which seemed to extinguish public debt, but which would certainly be treated as a fiction, as indeed came to be the case, when the great war was over. The efficiency of the sinking fund consisted entirely in the extent to which, by requiring an income which should be in excess of expenditure, it necessarily diminished debt. Its delusiveness arose from the fact that the actual funds which it had accumulated were actually invaded under the pressure of war-taxation and expenditure, and that its nominal continuance was accompanied by the creation of a fictitious loan, the process of which was burdened by the expenses of an office. Other schemes were adopted subsequently, more or less similar to the old sinking funds, in later times, to which we shall allude presently.

For a short time before 1793, when England began her longest and costliest war, the English funds rose greatly in value, chiefly, it is said, because they were con-ceived to be the safest investment which could be found for those who were flying from the Continent in dread of actual or prospective violence. But immediately on the outbreak of hostilities with France the country was put to the severest straits. In the year 1793 a serious com-mercial panic occurred, accompanied with an unparalleled number of bankruptcies. Loans of enormous amounts were raised as the war went on; the current expenses of Government were met by credits on the bank; and at last, on February 27,1797, the Privy Council ordered the Bank of England to suspend cash payments. For twenty-three years afterwards the suspension was continued.

Up to 1796 the additional burdens which were imposed to meet the interest on loans and to defray some of the annual charges of the war were raised almost entirely from indirect taxation on consumption, sometimes on production, but not on property. But in this year Pitt proposed to levy duties on the succession to real and personal estate. Knowing that his budget would meet with hostile criticism, he determined to divide his bill, and impose the projected tax on real and personal estate by separate enactments. The tax on personalty was accepted with very little re-monstrance, though a few solid objections were urged against the measure. But the country party strongly resented the proposed tax on real estate. They absented themselves from the House, and nearly left Pitt in a minority. The minister felt that he must give way to them, and postponed his bill for granting duties on realty in succession for three months, thus virtually abandoning the project. The discrepancy, therefore, between the liabilities of real and personal estate, when they become the subject of devise or succession, has never been remedied. It is true that an attempt was made by Lord Lauderdale to suspend the operation of the Act which had been passed, till such time as the anomaly might be rectified. But he was ruled to be out of order, on the ground that no bill after it has been passed can be repealed or modified in the same session. Like many similar Acts, the legacy duty was tentative, and the rates of tax were progressively raised according to the proximity of blood in which the legatee or heir stood to the testator or ancestor. In order to compel the making of wills, and to obviate the risk that persons might avoid a testamentary disposition with a view to escape the legacy duties, exceptional probate duty was imposed on those estates which were administered without a will.

Apart from the manifest inequality of a tax which omitted to charge succession duty upon real estate, especially at a time in which the value of such estate was rapidly rising, objections were alleged against the tax on the ground that it was likely to inflict inconvenience or injury in the case of persons engaged in trade by the com-pulsory exposure of their circumstances, and because it was sure to breed discontent. More subtle was the objection taken by Lord Lauderdale, and afterwards by Mr Bicardo, on the ground thatit was a tax on capital, and therefore injurious to the development of wealth. The answer to this objection is, however, simple. It is impossible for a Government to tax that which cannot be saved, but must be consumed in order that industry may be continuous. Now that which may be saved is either consumed in superfluities, and therefore may be made the subject of direct or indirect taxation, as the case may be, or is saved and employed as capital, or accumulated as reserve. In other words, not only is it not true that capital should not be taxed, but it is true that nothing but that which is or may be capital can be taxed.

More valid than this objection to legacy duties is that which can be alleged from the fact that, under existing circumstances, it is easy for the wealthy to evade the tax by a donatio inter vivos. The attempt to evade duties or liabilities on successions is a very old practice in England. One of the earliest, after the Great Charter perhaps the earliest, written law in English history, the Statute of Marlebridge, is intended to defeat attempts to evade feudal dues by such donations. There can be no doubt that similar practices prevail at present. Nor can they be pre-vented until voluntary gifts and transfers are registered, published, and rendered traceable at last to the officers of the revenue, who might have powers to visit with penalties in addition to ordinary duties all conveyances and transfers made at such a date previous to the death of the donor as would indicate that the gift could reasonably be interpreted to imply an intention of evading legacy duty. But at the same time it cannot be stated too often that, first, it is not always the best system of taxation which must be adopted, but the best possible system, since communities require to be habituated to a new tax; and, next, that any unfairness in the imposition of taxation is sure to suggest evasion. A financier must be just, if he wishes the taxpayer to be honest. There are three offences against the revenue, looked on as very differently culpable, but all stimulated by financial error or injustice. The first is that just alluded to, a gift of property during the life of the donor with a _view to evade the legacy duties. This fraud is thought scarcely culpable, though it will be obvious that it is much more easy for the wealthy to practise it than for those who are in narrow or moderate circumstances. The second is the evasion of the charges imposed on earnings by the so-called property tax, but which is cf course no property tax at all, since large masses of property are exempted from its operation, and incomes which are no sense property are taxed at the same rate as those which issue from property. The third, now considered as merely vulgar larceny, is smuggling. A generation ago public sympathy was strongly with the smuggler. The change in this opinion is intelligible and instructive. The greater part of English taxation of an indirect kind was imposed for political purposes, or to serve private interests, up to the time when Sir Robert Peel, nearly forty years ago, began seriously to reform the tariff. In course of time, he and those who succeeded to his policy have adopted and carried out the principles that protection must be abandoned, that finance must not be manipulated in order to suit poli-tical antipathies, and that taxation must be imposed for revenue purposes only. The progress of these principles has extinguished the trade of the smuggler. For a long time even economists argued that the smuggler was the practical critic of a vicious system of finance. It may be predicted with some confidence that, when a just property tax is im-posed instead of an unfair income tax, public opinion will enforce a morality which it does not require at present, and will assist the Government in enforcing that morality by penalties and by compulsory publicity; and that similarly when real estate is made liable to the same duties as are imposed on personalty, the disposition to evade the duties will be checked, and that machinery of Government which detects and chastises fraud will be strengthened and enforced.

The disasters which followed on the outbreak of the great Continental war, the enormous cost at which the war was carried on, and the demand for money in order to meet current charges, produced serious effects on the currency. A considerable exaltation took place in the value of gold, and as gold had become the chief currency of England, its exportation was under the circumstances inevitable. In 1794 the Bank of England possessed in cash and bullion over 8 millions. In February 1797 the stock of treasure had sunk to lh millions. The Government had overdrawn its account with the Bank on February 25, 1797, to the amount of nearly 10 millions, and was demanding further advances. It is true that no real alarm was felt for the ultimate solvency of the Bank, but considerable and just alarm was entertained as to the convertibility of the notes. Hence the Government, on February 27, 1797, ordered the Bank of England to suspend cash payments and shortly afterwards authorized the issue of notes below five pounds.

In November 1797 Mr Pitt introduced what he called a new and solid system of finance. The scheme was after-wards explained to consist in a triple assessment, i.e., a trebling of all the assessed taxes imposed cr> individuals, with a limitation, however, that such a tax should not exceed the tenth of the taxpayer's income. It was estimated that this tax would yield 7 millions, but the result was disappointing. From the first it was exceedingly unpopular. It was felt to be unequal, and to press with peculiar severity on those whose avocations constrained them to contribute to those assessments which the Government im-posed, and perhaps necessarily, without much consideration for those who had to pay them. At the same time the poor escaped the tax, for according to Pitt's budget speech, the assessed taxes were leviable on between 700,000 and 800,000 householders, and yielded £2,700,000, though the contributions of 400,000 of these householders did not amount to more than £6150,000.

The triple assessment lasted only a year. It was pro-bably intended only to be preparatory for the income tax, which was imposed in 1798. Indeed, if the expenditure of the war was to be met by any other resource than loans, it was necessary to discover some tax which should reach all classes who could be made to contribute to the necessities of the exchequer. Now it was plain that, had the assessed taxes been ever so productive,—the amount actually received from them was only two-thirds of their estimated yield,—they are more or less optional in character, and could therefore be evaded. The income tax, according to Lord Stanhope, had often been urged on Pitt, and especially by Bishop Watson. It began as a graduated percentage, if the income of the taxpayer was between £660 and £65 a year—it was not imposed on those rated below that sum— the tax was to be a 120th part of the income, and the proportion gradually rose to a 10 per cent, tax on incomes of £200 and upwards. Pitt estimated the produce of the tax at 10 millions ; it actually yielded only 7. It was imposed as a war tax, to cease at a declaration of peace. But Pitt immediately pledged it to a loan, and in 1801 3 millions of its annual produce was thus appropriated to irredeemable debt. The remission of the tax then rendered it necessary that new taxes should be imposed, and such was the course actually adopted after the short-lived peace of Amiens.

The income tax was criticized by Lord Holland on grounds very familiar to us in the later times, namely, that it visited incomes " derived from permanent and disposable capital, those arising from precarious and temporary pos-sessions, and those from labour, talents, and industry at the same rate, and was therefore unjust, unequal, and impolitic." It was also argued that the term property tax was a misnomer,—that property was often not visited by the tax at all, and that what was not property was mulcted. It was alleged that to require the disclosure of one's circum-stances was contrary to the prejudices and customs of Englishmen, was unconstitutional, and a serious injury to commerce and trade, since merchants, it was alleged, would often find it convenient to sacrifice more than a tenth of their income rather than permit the publication of their affairs, and, lastly, that it was a violation of public faith with the stockholder, whose dividends were mulcted, by the intervention of that very Government which was pledged to pay him an irredeemable annuity, of one tenth of his just due. But no objection seems to have been alleged, on the one hand, against the graduated character of the tax, nor, on the other, against the low limit on which the full amount was exacted.

At the remission of the income tax imposts to the amount of 38-|- millions a year were paid, this sum being double the amount raised in 1793. With the exception of the perpetual land tax, a little over 2 millions, and every year becoming more disproportionate to the rising value of land, almost the whole of this amount was raised on consump-tion, i.e., from indirect sources. Rents rose rapidly, under the joint operation of high prices and deficient crops, Profits increased, owing partly to the legitimate growth of manufacturing industry,—for the inventions of Hargreaves, Arkwright, and Watt were beginning to produce their effects,— partly to the enormous expenditure of Government, and to the subsidies and loans which were lavished on the

Continental powers and expended in the purchase of British manufactures. But the condition of the working classes became deplorable. Mr Porter has proved with minute exactness that the real burden of the long and exhausting Continental war was, as far as England is concerned, mainly sustained by labour.

In 1803 the income tax, under the name of a property tax, was reimposed. The sources of income were dis-tinguished and put into five schedules named A, B, C, D, E,—being respectively lands, tenements, mines, &c. ; occupancies or tenancies; shares, annuities, and dividends ; profits and gains in professions and callings; and public offices of profit and pensions. On all but the second a tax of a shilling in the pound was levied, but on the second ninepence only in England and sixpence in Scotland. Incomes below £60 a year were exempt from the tax, and, following the analogy in some degree of the first income tax, a reduction of the rate was made in incomes increas-ing by £10 a year up to £150, beginning at three-pence in the pound tax up to elevenpence, the largest remission being made on the largest income. But it will be observed that, as in the first income tax, the quantity payable increased with the income, so in this system the deduction increased with the receipts of the taxpayer, though it ceased at a low amount of income. Furthermore, some consideration was shown to those who had families. Those householders who had more than two children were allowed, on incomes between £60 and £400, a reduction in the rate of 4 per cent, for each child; those between £400 and £1000, 3 per cent, those between £1000 and £5000, 2 per cent; those who had £5100 and upwards, 1 per cent, for each child.

In 1805 25 per cent, was added to the income tax, and in 1807 it was raised to two shillings in the pound on incomes in schedules A, C, D, and E, and to eighteen-pence in England and a shilling in Scotland on the annual rental of tenancies under schedule B. The limit of exemp-tion was lowered to £50, and an abatement of a shilling in the pound was allowed on all incomes between £50 and £150 a year. Labourers and artisans whose earnings were less than thirty shillings a week were exempted from the tax, but it does not appear that the deductions in the case of children were allowed, as in the Act of 1803. The war income tax was levied up to April 5, 1816, when it expired, and despite the efforts of Castlereagh and others who urged its continuance, parliament refused to sanction the impost any longer.

The rejection of the income tax as a means of revenue in 1816 necessitated, at the winding up of the costly Con-tinental war, the imposition of indirect taxes upon most processes of production and all of consumption, for the corn laws and customs duties on foreign imports of food exalted indirectly the value of home produce. Industry was checked at its source. Food, the raw material of labour, was rendered scarce, while the farmer, who conceived that the maintenance of the corn laws was his only hope of profit, and the sole power by which he could pay his rent, was mocked by violent fluctuations of prices, and was equally ruined by plenty and by scarcity.

The first hint given that the progress of the nation was impossible until its fiscal system was revised, was the formation and presentation of the Merchants' Petition. This remarkable document was drawn up by Mr Tooke, who has narrated, in the last volume of his History of Prices, the circumstances under which it was composed, signed, and presented to the House of Commons. It was not presented in the House of Lords, for Tooke had resolved on committing the document to the hands of Lord Lansdowne. But those who had signed the petition objected to this nobleman, on the ground of his Whig principles, and the framer of the petition would not give way. The petition was presented to the House of Commons by Mr Baring, afterwards Lord Ashburton, and was debated. The Government, that of Lord Liverpool, expressed its agreement in the principles which the petition avowed,—those, in short, of free trade,—and admitted that these principles were not only abstractedly correct, but ought to be adopted at once if one were making a beginning, but declined to agree to the inference that they could be adopted in a country where trade and commerce were and had been for so long a time based on artificial restrictions. The protected interests, however, signified pretty clearly that they would not allow themselves to be molested. But the Government granted a committee of inquiry on foreign trade, and with this committee commences the movement which six-and-twenty years later culminated in the practical adoption of free trade principles and in the abolition of the com laws. Such a result was only a question of time, when Lord Liverpool could say in May 1820 :—" We have risen to our present greatness under a different system than that of free and unrestricted trade. Some suppose that we have risen in consequence of that system. Others, of whom I am one, believe that we have risen in spite of that system. It is utterly impossible, with our debt and taxation, even if they were but half their amount, that we can suddenly adopt the system of free trade." Lord Liverpool probably knew that, as Swift had said, " in the arithmetic of the custom-house, two and two do not always make four;" but he was not alive to the enormous fertility of thatsystem of finance which, substituting low for high duties, with some exceptions, and invariably avoiding such fiscal changes as hinder the progress of industry, leaves the widest opportunities for production, exchange, and consumption. Lord Liverpool added that though he supported the corn law of 1815 as a measure of justice to the agricultural interest, he was of opinion that had the bill not passed at that time, it should not have been passed at all. It may be observed, so much was trade hampered at this time by legislation the primary object of which was to extract a revenue at all costs and hazards, that there were more than 1500 custom-house acts relating to the entry, export, aud custody of goods.

The committee of the Commons continued its sittings through three sessions, and presented four reports on the subject of foreign trade, accompanied by abundant evidence. The committee of the Lords sat for two sessions, and presented two reports. The necessity for admitting the principles of free trade was felt and expressed by the com-mittee ; but so much alarm was excited among protected interests, even by the recognition of the abstract propriety of free exchange, that the committee felt it necessary to strongly disclaim any sympathy with sudden change, and to calm frightened imaginations by declaring that the greatest prudence and circumspection must precede any project, and accompany any measure of reform. The first thing, however, which people recognized was that great additional taxation did not add but in a very small degree to the income of the exchequer. This was the effect of the financial statement of 1819, which Tooke justly characterizes as the last thoroughly vicious project accepted by the House. In 1823 Mr Vansittart retired from office, and during the next five years, when Mr Huskisson was at the Board of Trade, great and notable modifications were made in the customs and excise, for taxes amounting in the aggregate to £8,340,000 were remitted, the experiment being attended by a manifest elasticity in the revenue. The enormous aggregate of custom-house statutes was con-solidated into eleven, by the labours of Mr Deacon Hume. Between 1827 and 1841 further reforms, though not on so considerable a scale, were made, the most important of which was the abandonment of the excise on beer in 1830, and that on printed cottons in 1831. It is an apt illustra-tion of the effect induced by such duties as this, that within a very short time the price of cottons fell below the amount (3|d. a yard) which was levied under the old excise. But, on the whole, little was done for a systematic financial reform during the period which elapsed between the death of Mr Huskisson and the defeat of the Melbourne administration. One change of great importance was made in the adoption of Mr Rowland Hill's plan of the penny postage. This scheme involved the immediate sacrifice of revenue to the amount of a million and a quarter, but it gave a considerable impetus to trade, and rendered the discussion of those further fiscal reforms which were effected by Sir Robert Peel easy, perhaps possible.

Sir Robert Peel's ministry was formed in September 1841, and had before it a task of no common magnitude. For five years the average deficiency of the revenue, according to Sir Stafford Northcote's statement, had averaged a million and a half, the year in which Sir Robert Peel took office having been characterized by the largest deficiency. The cause of this was that the revenue had fallen short of the estimates ; in other words, the financial system of the country was fundamentally vicious. The reforms which Sir Robert Peel immediately determined to bring about were greatly assisted by the information obtained from Mr Joseph Hume's report of 1840, which stated " that the tariff contained 1150 different rates of duty chargeable on imported articles, besides others imposed on all unenu-merated articles; that there was no principle in the finance of the country, some duties being levied for the sake of revenue, some for that of protection; that serious detriment to the home consumer ensued from the differential duties in favour of the colonies; and that of 862 articles chargeable with duty 147 paid no duty at all, while 17 articles sup-plied 94 per cent, of the revenue, 29 others 4 per cent, more, so that 816 articles yielded no more than 2 per cent, of the revenue, though the imposition of the customs duties was a serious hindrance to trade and manufactures."

In drawing up his budget of 1842, Peel had three ex-pedients before him. One was to adjust the corn laws, so as to make them press less heavily on the consuming and manufacturing classes; the second, to reform the tariff; the third, to obviate the constant deficit in the revenue. The first was undoubtedly the most pressing. The depres-sion of trade and manufactures in 1842 was so serious, and the remedy in a repeal or great reduction of the taxes on food was so obvious to all rational persons, that the measure was in the highest degree expedient. But Peel could not as yet venture upon it; the mere proposal to levy a foreign fixed duty on corn had more than anything else contributed to the downfall of the Whigs in 1841, and the measure was postponed till it was yielded to famine and agitation by an angry and disappointed faction.

Sir Stafford Northcote, in discussing the fact why the Whigs were the freetraders and the Tories the protectionists in 1842-46, says he sees no particular reason why this phenomenon should have been exhibited, judging from the antecedents of the two historical parties, and he inclines to believe that the Whigs were discredited in the eyes of their opponents by their associations with the Radical party. But the solution of the question is not far to seek. The reforms of Mr Huskisson applied solely to commerce and manufactures, to colonial interests, and to some local industries. Most of those who represented such interests were alive to the fact that protection was no longer neces-sary for them, or that it was inexpedient that the consumers of colonial produce should be exceptionally taxed in order to give a subvention to colonial planters and their agents. The majority which supported Peel would have been on the whole indifferent to such financial reforms as simply affected manufactures and foreign trade. As consumers, they were benefited by the cheapening of such produce ; as producers themselves, they had wit enough to discern that the general prosperity of the country improved the market of the agriculturist. But when it came to be a question whether the artificial prices which the sliding scale was supposed to bestow on farmers and landowners should be abandoned, they were convinced that their interests were being sacrificed ; and though they constantly tried to alarm the public with the bugbear of dependence on foreign supply, they frequently admitted that the struggle on their part was to maintain the existing level of their rents. In the 18th century, especially in its earlier half, the country gentlemen would have had no difficulty in accepting free trade, provided they could escape the land tax, for the produce of the country was on an average in excess of its wants; in the first half of the 19th century, they were firmly convinced that all their interests were bound up in the sliding scale, and it must be admitted that the Ricardian theory of rent, now become popular, gave them certain grave scientific reasons for the belief which they entertained.

The estimates which Sir Robert Peel formed suggested that, if the House would accept his new system of finance, he should be in the possession of a surplus of £1,800,000, The greater part of this sum he proposed to devote to the remission of taxation, the particulars of which may be found in the works of Sir Stafford Northcote, of Mr Tooke, and Mr M'Culloch. The estimates, partly from some singular oversights of Sir Robert Peel, partly from the fact that the distress of the country was too serious to be cured by trifling remedies, were a failure, for the receipts of the exchequer, notwithstanding the new taxes which Peel imposed, were two millions less than he anticipated. The process by which the minister sought to put the finances of the country on a sound basis, and to provide a surplus in future years, was the income tax,—an impost which had been decisively rejected in 1816, but was now reimposed for five years at 7d. in the pound. The character of this tax of 1842 varied a little from the old tax of 1803, 1805, and 1808. The limit of exemption was fixed at £150 a year, the old schedules were retained, but the farming classes were specially favoured. The rate previously levied on these persons had been three-fourths of the tax imposed on those who are comprised in the other schedules. In 1842 it was made one-half. The income tax was not extended to Ireland, but a higher tax was put on Irish spirits, and on the whole the Irish and English stamp duties were equalized.

The question has been raised, whether, in case the corn laws had been at once repealed, it would have been necessary to impose the income tax. It is probable that the answer should be in the negative. But apart from the difficulties in the way of a measure which would certainly at this time, as it did four years afterwards, have roused the most angry feelings, it may be safely stated that Peel's proper business was to establish a surplus, and to effect this in the surest way possible. He could not have suc-ceeded in imposing a just property tax, for such a tax would have been nearly as unpopular among his supporters as a repeal of the corn laws. He therefore imposed an income tax, and though the scheme was criticized adversely, both in the Commons and the Lords, it was carried by over-whelming majorities in both Houses, the arguments against the tax being summed up with great precision in the pro-tests of Lords Radnor and Western. The income tax has since always figured in the budget, and it cannot be denied that, whatever objections may be alleged against its equity, it secured the end which Peel had before him, and has more than once been of great service in supplying the defi-ciencies of revenue due to an increased expenditure.

In 1843 and 1844 a few remissions of customs duties were effected. But the effect of the tariff reforms was now visible. The excess of income over expenditure in the first year was 2 millions, in the second 6-J millions. The wheat crop of 1843 was an average, that of 1844 was abundant; the price was low, and the imports of foreign corn nearly ceased. In consequence, Peel was enabled to bring forward his most considerable measure of tariff re-form. He remitted no less than 3J millions in the customs, and more than a million in the excise. The effect was an increase of income over expenditure of nearly 2| millions. In 1846 the remission was three-quarters of a million, but there was again a surplus of 2f millions. In the same year the repeal of the corn laws was effected, and a modification was made in the sugar duties, followed in 1848 by an equalization of these duties. A little later and the Navigation Acts were repealed; and, finally, the last fragment of protection was extinguished in the abolition of the differential duties on foreign timber. The detailed history of these changes is best given in the last three volumes of Mr Tooke's History of Prices, and in the annual summaries of the Economist newspaper, compiled by Mr Newmarch, who was the coadjutor of Mr Tooke in the last three volumes of the history referred to. The process by which the new system of finance was established is de-scribed and illustrated by Sir Stafford Northcote in his Tiventy Tears of Financial Policy.

The principles of modern English finance are—(1) to impose as high a duty as is consistent with the prosperity of the revenue on such articles of voluntary consumption as may be dispensed with and may be taken in'excess;—of these the most notable are alcoholic liquors and tobacco; (2) to abandon taxation on all articles which are used for manufacture or food, the last tax of the latter kind which has been extinguished being that on sugar; (3) to levy the lowest duties possible, consistent with revenue purposes, on articles of voluntary consumption and wholly innocent use, of which the best type is tea;—such are the customs and excise, the only trades now under the control of the inland revenue officers being those of the maltster, the brewer, and the distiller; (4) to attempt the collection of as large a revenue as possible at the lowest possible rates on transactions by the mechanism of stamp duties; (5) to simplify the assessed taxes, some of which indeed, as the house duty, are objectionable, and some of which have been perhaps imprudently remitted; and (6) to make use of the income tax as a supplementary means of raising a revenue when the expenditure is notably in excess of the income. Nothing, indeed, is simpler than the function of the chancellor of the exchequer, if he is resolved not to modify the established sources of the revenue or readjust its parts. All that is needed is to impose an additional income tax, or to remit a portion of that which has been imposed.

It will be seen, however, that the continuity of the present system of British finance depends upon a continuity in the habits of the people. The revenue derived from alcoholic liquors and tobacco amounts annually to about 42 millions. That which is supplied from articles of voluntary consumption, the use of which is wholly innocent, is about 4J millions, the principal contribution to this head coming from tea. Purely direct taxation—the land, house, and income tax on the one hand (the last-named at 3d. in the pound), and stamps, probate, and legacy duties on the other —yield nearly equal sums, a little short of 8 millions each. The post office, which is sui generis, i.e., a payment for a special service rendered, supplies a further gross sum of 7 millions. The security, then, of the English revenue depends on the extent to which the habits of consuming alcoholic liquors and tobacco are permanent. The con-sumption of the former is threatened by a powerful and apparently growing organization and agitation, and it can hardly be doubted that, should those who demand that the control of the traffic in alcoholic liquors ought to be trans-ferred from the present licensing bodies to a direct popular vote be successful, the dimensions of the trade would be curtailed and the revenue diminished. One cannot other-wise account for the alarm which is felt by those interested in the success of the trade at the activity of their critics, and the process by which the advocates of restraint believe that they can compass their ends. It is possible, also, that in the future the poorer classes, whose consumption is the cause of so large a revenue, may imitate the temperance or moderation of those who are better off, and whose habits are to all appearance in marked contrast to those of their pro-genitors two or three generations ago. Should such a change ensue, it is not easy to determine what would be the direction taken by the financiers of the future; for though there are some obvious sources of taxation, particularly real estate devised or inherited, and property specially so called, yet the receipts from these sources would necessarily be limited, and there is nothing more difficult, as we have attempted to show, than the task of familiarizing a people with a new impost.

We need not be surprised that such a difficulty is felt and must be encountered when the financier attempts new expedients; for, apart from the natural dissatisfaction with which a new tax is paid, and the resistance which powerful interests may make and have made to such im-posts, such as we have seen to have been successful when Pitt attempted to levy an equal charge on the succession to personal and real estate, a tax may make a serious difference to values, or may interfere fatally with an industry. Thus there can be no doubt that the exemptions with which land is favoured in the devolution of real estate is a cause why the rate of return to the purchase money of land is so low. Fixed charges will, of course, in the long run make no difference to the rate of interest derived from investments in land, though they would diminish the value to the vendor. Thus the value of land in France is as high or nearly as high as it is in England, and is much higher in Belgium, though in both countries there is a heavy land tax. But freedom from an accidental tax, a tax which cannot be computed beforehand, is a direct advantage to the vendor, and in the case of land would add to the number of years' purchase at which the land is sold.

The taxes which have been laid on industry and con-sumption, apart from the reckless manner in which they were imposed, were felt far more severely in their first incidence than they were when they became familiar. There is a convenient and suggestive example of the manner in which such taxes affect industry in a matter of recent experience. Apart from the question whether Mr Lowe's abortive match tax was in itself a judicious impost,— a question which, it may be affirmed, most persons would answer in the negative,—it became plain, when the pro-posal was made, that two results would follow from its adoption. It would seriously curtail the employment of a very large class of very ill-paid labourers, and thereupon induce great distress on those who were already very poor, and it would ultimately transfer the industry to those countries where no excise is levied on the manufacture. Already, although matches are bulky in proportion to their value, and are conveyed from the place of their origin to the market of consumption at very high rates, owing to the dangerous character of the goods, the competition of a place so distant as JSnkoping in Sweden against the English manufacturer is so sharp as to lower materially the profits of the home producer, and to make it necessary that the manufacture should be carried on by low-priced labour. It is almost certain that, had the scheme of taxing matches been adopted, the supply of these articles would have rapidly been limited to foreign producers, or it would have been necessary to have established, simultaneously with the impost, a really protective duty on the foreign article.

Manufactures, indeed, unless they are wholly ruined by taxation, or at least confined to domestic supply, can be and are made to accommodate themselves to circumstances. The amount of capital employed in supplying the taxed commodity diminishes with the demand, competition between capitalists slackens, and in due time the rate of profit in the particular industry reaches its old level. But the process is undoubtedly accompanied by loss to both capitalist and labourer, as well as followed by an enhance-ment of price to the consumer, together with a still more serious depression of foreign trade, however fully the duties levied are allowed on export. In illustration of the effect which an erroneous system of finance induces on industry, nothing can be more instructive than the history of the revenue in the few years preceding Peel's adminis-tration of 1841; the effect of the reform in the tariff which that minister adopted; and the loss which ensued from postponing the full effect of these reforms owing to the hesitation which Peel showed in abolishing the corn laws, which could have been much better repealed in 1843 than in 1846.

It is said, and has been said for the last century, that it is inexpedient to tax capital. To this we have already given the answer. A Government can tax nothing but capital, actual or potential. For all wealth is of two kinds. The first is that which is absolutely necessary for the con-tinuity of industry, and which cannot be taxed without destroying that industry. There can be no tax on necessary consumption. The second is that which can be saved, which is in part saved, in part consumed unproductive!)'. This product of labour can be and can alone be taxed. The English system of finance attempts to levy taxation on a part of this, either directly on revenue, though it might be levied with advantage on the wealth itself, instead of or concurrently with the revenue derived from the wealth, or indirectly on consumption. Nor does the taxation of capital diminish capital. It merely changes its direction. The tax may be expended unwisely, even mischievously. But it undoubtedly calls labour into activity, and may therefore give wider employment than it would if left in the hands of those who are now mulcted of a portion of what they might have saved or spent. It may even increase capital by increasing economy in expenditure, and inducing those who are taxed to fill up the void in their own resources which the tax has created. The expenditure of the Dutch in the palmy days of their finance was enormous; the taxation to which the people submitted was searching to an extent and minuteness which has had no parallel since ; but, notwithstanding the prodigious sacri-fices which the people made, they accumulated capital so rapidly by reason of parsimony, that those who watched the financial condition of the republic made all sorts of guesses as to what could be the reason why enormous taxation was accompanied by a singularly low rate of interest, and at last some persons, absurdly enough, asserted that the taxa-tion was itself the cause of the low rate.

Apart from imperial finance, the wealth of this country is liable to other levies imposed for local purposes, Most local taxation is direct, and imposed on occupation. Some, however, is indirect, and levied on consumption. Again, some local taxation is imposed in satisfaction of a local duty, some in consideration of a local service. Thus the duty on coals consumed within a particular radius from St Paul's cathedral, originally, we are told, imposed in order to meet some of the losses incurred by the great fire of London, is a tax on consumption, analogous to the octroi dutiss imposed in Continental towns. The county and borough rates imposed for the maintenance of roads and of police, rates levied for the use of gas and water, are pay-ments intended to be the equivalents of public service, and capable, with greater or less exactness, of being apportioned to the amount of benefit received by the taxpayer. Of late years some large towns have made use of their local needs for the purpose of creating capital on the security of rates, and of deriving some of the profits of a joint-stock company from the sale of gas and water, with a view to lightening other local burdens of a more general kind. Under proper safeguards, such a form of local finance is beneficial and to be encouraged. It bears a close analogy to the Government service of the post office.

Local finance has followed in one particular the precedent supplied it by the central Government, in anticipating ite revenue by loans. Most of these loans, however, are terminable, i.e., provision is made for repayment of principal as well as interest. The amount of these loans is in excess of 100 millions, and is likely to increase. But most of the increased charge is to be put down to the head of remunerative outlay, there being, as we have stated, an increased disposition'—indeed from necessity— on the part of local authorities to undertake the satisfac-tion of public services, or the supply of public conveniences. The aggregate annual expenditure of the United Kingdom for local and imperial taxation, including loans, is now about 125 millions.

The authorities relied on for this article are principally—for ancient history, Boeckh's Public Economy of Athens, and JJureau de la Malle, Économie politique des Romains; and for modern times— Macpherson's Dictionary of Commerce; Grellier's History of the National Debt ; Porter's Progress of the Nation ; Sir Stafford Northcote's Twenty Years of Financial Policy ; The Statutes at Large, in the edition commencing from the first volume printed by Bertliollet for Henry VIII. and continued in the same form to the present time ; Hansard's Parliamentary Debates, &c. (J.E.T.B.)

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