William Pitt the Younger by Evans Eric J.;

Author:Evans, Eric J.;
Language: eng
Format: epub
Tags: ebook, book
Publisher: Routledge
Published: 2011-08-24T16:00:00+00:00

Financial cost

The war, of course, blew all of Pitt’s peacetime financial calculations (see Chapter 3) to smithereens. The national debt increased by about 80 per cent in the six years from 1792–8. The steady decline in the value of government stocks told of widespread investor anxiety as loans to the allies depleted reserves still further. For example, £4.6 million was loaned to Austria in 1795. Until 1797, Pitt levied no new taxes but the financial crisis of that year (which, along with the weary catalogue of defeats, threats of invasion and desertions by allies, brought him to the very brink of resignation) produced a change of approach. In February 1797 the government was forced to suspend cash payments by the Bank of England, forcing payments in ‘promissory notes’. In the same year, he trebled the so-called ‘assessed taxes’ on luxuries like servants and carriages.

When the immediate crisis was over, Pitt took the crucial decision to fund wartime expenditure more by direct taxation than by loans. By early 1798, debt repayment had ballooned to almost one-third of all government expenditure, an intolerable long-term position (Ehrman, III, 259). Pitt’s solution was to levy a new tax on income and to phase out the land tax, long hated by suspicious landowners who argued that ‘the moneyed interest’ had been unwarrantably advantaged by the tax system. Parliament was persuaded to sanction a 10 per cent (two shillings in the pound) tax on all income in excess of £200 a year from 1799, with lower rates from £60 to £200. It was the first ‘income tax’ in British history. The Morning Chronicle called it ‘a daring innovation in English finance’ (Ehrman, III, 262). It remained in force until 1816, though levied at lower rates from 1804–7, and it transformed the financial picture. It soon realised between £4 million and £5 million a year, and represented roughly 80 per cent of the value of all the new wartime taxes and about 28 per cent of all the extra money raised for the war in the years 1793–1815 (Dickinson, 1989, 183). That it brought in so much partly reflects the efficiency of the collection procedure. More importantly, it indicates the extent of wealth in British society available to be tapped over a long period to sustain the war effort. No other nation at the time could have levied so much or sustained such a draining conflict for such a time.

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