1911 Encyclopædia Britannica/English Finance

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ENGLISH FINANCE. The history of the English fiscal system affords the best example known of continuous financial development, in respect both of institutions and methods. Though certain great periods of change can be readily noticed, yet from the time of the Norman. Conquest to the beginning of the 20th century the line of connection is substantially unbroken. Perhaps the most revolutionary changes occurred in the I7th century, as the outcome of the Civil War, and, later on, the revolution of 1688. But even in this case there was no real breach of continuity. It is, therefore, possible to trace the normal growth and expansion of British finance as one of the aspects of the nations history.

The primitive financial institutions of England centre round the kings household, or, in other words, the royal economy precedes the national one. Revenue dues collected by the kings agents, rents, or rather returns of produce, from land, and special levies for emergencies form the elements of the royal income, which gradually acquired greater regularity and consistency. There is, however, little or no evidence of any effective financial organization until we approach the 11th century. The influence exercised from Normandy, which so powerfully affected the English rulers at this time, tended towards the creation of records of revenue claims and also of a central treasury.

With the union of England and Normandy under the same head the idea of settled administrative methods was definitely fixed and became of special importance in the field of finance. The systematizing spirit, so characteristic of both the Norman and Angevin kings, produced the great institution of the exchequer with its judicial and administrative sides, and its elaborate forms of account and control. Even before this organization was developed the Domesday Survey (see Domesday Book)now iecognized as having a purely fiscal object (in Maitlands words a tax book, a geld book)shows the movement towards careful observation of the sources of revenue. It is clear that William I. initiated a policy which was followed by his successors, in. spite of the serious difficulties of the period of anarchy during Stephens nominal reign. The obscure question as to the real origin of the special contrivances employed by the exchequer is, strictly speaking, irrelevant to the financial inquirer, who may be content to hold that, granting the existence of some Old English analogies, the system, as it appears in the 12th century, was a peculiar product of the conceptions as to fiscal organization formed by Norman subtlety. It is the manner in which this institution held together and focused the revenues and expenditure of the kingdom that has to be considered. The picture presented by the Dialogue of the Exchequer (c. 1176) is that of a comprehensive system which secured the receipt of the royal income, and provided a thorough audit of the accounts by employing processes adapted to the circumstances of the time. It is, in fact, through the description. of financial institutions that it is possible to ascertain the forms of revenue possessed by the crown., ~rhe ingenuity expended on the administrative machinery of the exchequer had as its aim the increase of the kings resources, an object in which the official class of churchmen. and lawyers was deeply interested.

In order to understand the character of English finance in the middle ages it is absolutely essential to bear constantly in mind the identification of the king with the state. Though feudalism was, in one of its aspects, a powerful instrument for division of political authority, it, nevertheless, in the particular form in. which the Conqueror introduced it into England, enabled the fiscal rights of the crown to be established in a more definite shape than was possible under the older condition. For, in the first place, the actual property of the crown was more carefully administered as each royal manor came under the system of accounting. Again, the various claims or dues of the king took more decidedly the feudal type and received stricter legal definition. Further, the higher judicial organization assisted the expansion of court fees; while, above all, the increased authority of the state made the casual receipts (for such they were) from trade more profitable.

In a broad view the sources of revenue fall under the following heads:(i) The royal estates which were distributed over England, derived in part from the possessions of the old English kings, but increased by the confiscations that followed the events of the Conquerors reign, as well as by the doctrine that unowned land was the kings (terra regis). Over fourteen hundred manors appear in Domesday as royal property. The forests, placed under special laws, yielded little revenue, except in the form of penalties on offenders. The rural tenants, who at first paid their rents in produce, gradually commuted, them into money payments. As the royal demesne was favorable for -the growth of towns the rents derived from urban tenants became a valuable part of the yield from the demesne; this, later, took the shape of a payment from the town as a unit (the firma burgi), a method which secured to the burghers freedom from the exactions of the sheriff and which was purchased by special payments. (2) The feudal rights. These included the claim to military servi:e; the three regular aids and the payments of relief at succession to a fief, as also the profits on wardships and marriages. Escheats and forfeitures completed the list. The yield from this source varied with the power of the king and was kept within bounds by the resistance of the tenants as shown in the provisions of Magna Carta. (3) The administration of justice was a lucrative prerogative of the crown. Suitors had to pay for securing, the hearing of their cases in addition. to the fees for writs, and both amercements and compositions increased the receipts under this head. (4) Two special classes contributed to the royal exchequer. As a great deal of the wealth of the country was in the hands of the church the opportunities afforded by the vacancies of sees, abbacies and priories were utilized for the purpose of securing the profits of these offices during the time in. which there was no occupant; and this term was frequently prolonged by the kings action or inaction. The Jews, until their expulsion, were an even more profitable class to the revenue. Being under the absolute control of the crown, they could be taxed at pleasure, either by taking a percentage of their property (e.g. in. one case, one-fourth), or by levies for alleged offences. The existence of a separate exchequer for the Jews is an indication of their fiscal value. (5) Direct taxation formed an extraordinary or occasional head of revenue. The Danegeld was succeeded by the carucage, and the commutation of military service introduced the scutage, but these forms were of little immediate importance, though very significant for the future course of development. (6) Lastly come the dues claimed at the ports, which contain in germ the customs system of later times, though they rather resemble the harbour charges of modern ports and were very trivial in amount.

The history of the English financial system consists largely in the exhibition of the different fortunes of these several component parts of the exchequer receipts; for it must be remembered that the sheriff was bound to account to that tribunal for all that he should have received, and by this agency the local contributions passed into the kings possession for the service of the state. During the century and a half that lay between the Conquest and the granting of the Great Charter the account given. above holds good. The character of the ruler affected the vigour of the fiscal, as well as the general, administration. Henry I. and Henry II. secured much better results than. Stephen or John; but the collection of the rent and profits of the royal manors and the feudal and other dues continued as the mainstay of revenue. Indications of change are, however, to be found. Thus the substitution of the carucage or plough tax for the Danegeld marks an advance towards direct taxation of land through its produce, and the introduction of scutage is not only further evidence of the same tendency, but also a step in the development of money economy in place of the earlier natural economy or system of payments in kind. The special levies or tallages imposed at times of need on the towns in the kings demesne appear to have been. a doubtful exercise of the royal prerogative, but scientifically they belong to the same class as the Danegeld and scutage. Perhaps the most important advance made in this period is the beginning of taxation of movables, first applied in the Saladin tithe of 1189 and, later, expanded into a general system.

In the reign of John (1r991216) the loss of Normandy and the concession of the barons demands by the issue of Magna Carta rendered financial readjustmen.ts inevitable. During the long reign of Hen.ry III. the struggle to maintain. the privileges granted by the Charter acted on. the fiscal system by checking the arbitrary use of tallages, and as a consequence, encouraging the regular assessment of the tax on movables, which was becoming more prominent. The fruitful idea that it was necessary to obtain the consent of the payers of taxes before the imposition operated powerfully in favor of the establishment of bodies representing the several estates. It is through the reaction of constitutional on fiscal developnient that the transition from feudal to parliamentary taxation in. its earlier form is made.

Almost at the opening of the age of parliamentary taxation one of the older sources of revenue ceased. The pressure of popular opinon forced Edward I. to decree the expulsion. of the Jews (1290), though he naturally desired to retain. such profitable subjects. It is, indeed, probable that, owing to the exactions practised on them, the Jewish usurers had become less serviceable to the exchequer; while it is certain that the general resources of the kingdom had so increased as to make their con.tribution relatively much smaller. The first effects of the representative influence in the fiscal domain are the abandonment of the tallages on towns and the decline of scutage as a: mode of levy. The tax on movables was framed in a more systematic way. Instead of distinct charges on different classes, or variations in. proportion of levy from one-fourth to one-fortieth, the policy of imposing a tax of one-tenth on the towns and one-fifteenth on the counties was adopted. Greater strictness in. assessment was sought by the appointment of commissioners for each county, supplied with special instructions as to taxable goods and exemptions. This method continued in force for the tax on movables from 1290 till 1334, though in some cases the proportions imposed on the towns and counties were varied (e.g. an eighth and a fifth were granted in 1297, and a tenth and a sixth in 1322). A more general influence was the growing national economy which led to greater activity on the part of the king as administrator, and which also increased the need of the state for revenue. Though the doctrine that The king should live of his own was generally accepted as a constitutional maxim, the force of events was making it obsolete. From being an infrequent and uncertain kind of taxation the direct tax on movables, which was practically absorbing the older forms, became usual and regular. Under medieval conditions the collection of a general property tax (for such, in fact, was the nature of the tenth and fifteenth) presented serious difficulties. Each locality gained by keeping its assessment down to the lowest point, while the borough authorities were naturally not eager to enforce the charge on their fellow-citizens. England in the 14th century was not ripe for a system that has been found hard to make effective in more advanced societies. Hence, from 1334 onward, the method of apportionment was employed, i.e. the tenth and fifteenth was taken as affording a definite sum measured by the yield on the ancient valuation. As this gave, in the aggregate, between 38,000 and 39,000, the tenth and fifteenth became for the future practically a fiscal expression for a sum of about 39,000; the total to be divided or apportioned between the several counties, cities and boroughs according to their former payments. This settlement, which remained in force for centuries and affected all the later direct taxes, had the great advantages of certainty and adaptability. The inhabitants of any particular town knew their total liability and could distribute it amongst themselves in the manner most convenient to them. From theroyal standpoint also the arrangement was satisfactory, for the tenth and fifteenth could be multiplied (e.g. in 1352 three tenths and fifteenths werevoted for three years), and supplied a stable revenue for the service of the kingdom. To the parliament the power of regulating the policy of the crown by the bestowal or refusal of grants was naturally agreeable. Thus, all sections of the nation united in support of the system established in 1334, just before the opening of the Hundred Years War, in connection with which it was particularly serviceable.

Akin to the tax that has just been described, at least in its nature as a direct impost, is the poll or capitation tax. Financial pressure at the close of Edward III.s reign (1377) led to the adoption of a tax of fourpence per head on all persons in the kingdom (mendicants and persons under fourteen years being excepted). This tallage of groats, which seems to be derived by analogy from the hearth money for Peters pence, was followed by the graduated poll taxes of 1379 and 1380. In the former the scale ranged from ten marks (~6: 13:4) imposed on the royal dukes and the viscounts, through six marks on earls, bishops and abbots, and three on barons, down to the groat Or fourpence payable by all persons over sixteen years of age. Such a form of taxation approximatedas Adam Smith sawto an income tax, but it proved to be unproductive, only half of the estimated yield of 50,000 being obtained. The tax of 1380 varied within narrower limits; from twenty shillings to fourpence (or sixty groats to three), with, the proviso that the strong should aid the weak. But this particular tax is chiefly memorable as the occasionwhatever may have been the real causesof the great Peasants Revolt of 1381. This unlucky association. sealed the fate of the poll tax as a fiscal expedient. It was abandoned, with one exception, for nearly three hundred years; and its occasional employment in the 17th century did not result in its permanent revival. Apart from special circumstances it is plain that the tenth and fifteenth was better suited than the poll tax for the purpose of English finance. The machinery for collection was ready to hand for the former, while special agents had to gather the latter, even from the poorest classes. In fact, the episode of the poll taxes may be regarded as an attempt fortunately unsuccessfulto relieve the propertied classes at the expense of the peasants and poorer burghers. Failure in this respect helped in the maintenance of the settlement of direct taxation devised in 1334.

Parallel with the evolution of direct taxation, but decidedly lagging behind, is the progress of indirect taxation. As already mentioned, the right of levying dues on goods entering or leaving English ports belonged from very early times to the king. Whether this power was, in its origin., due to the protection afforded to traders and thus a kind of insurance, or the result of the royal prerogative of pre-emption is immaterial for finance. What is established is that the prisage of wine or levy of one cask in ten, and the taking of one-tenth or one-fifteenth of other commodities was in force. Attempts to impose additional dues were forbidden by an important article (41) of the Great Charter which recognized the ancient and just customs. One of the earliest effects of parliamentary influence is manifested in the establishment of duties on wool, woolfells and leather by Edward Is first parliament. After some efforts by the king to gather increased duties, the Confirmation of the Charters (1297) Jorbade any increases on the amounts fixed in 1275, ~vhich were henceforth known as the ancient custQms. Another attempt was made to obtain a higher scale of duties by arrangement with the merchants. The foreign traders consented to the royal proposals, which comprised duties on wine, wool, hides and wax, as well as a general tax of 13/4% on all imports and exports. Thus, in addition to the old customs of half a mark (6s. 8d.) per sack of wool and on each three hundred woolfells, and one mark (f 35.4d.) per last or load of leather, the foreign merchants paid an extra duty (or surtax) of 50% and also 2S. on the tun. of wine the so-called butlerage. The privileges granted in the Carta Mercatoria (1303) were probably the consideration for accepting these enhanced dues. The English merchants, however, for the tii~ie, successfully resisted the application in their case of the higher charges, and consequently remained under the old prisage of wine. In spite of parliamentary opposition, on the ground that they amounted to an infringement of the Great Charter, the new customs were maintained in force. After being suspended in 1311 they were revived in 1322, confirmed by royal authority in 1328, and finally sanctioned by parliament in the Statute of the Staple (1353). They became a part of the permanent crown revenue from the ports, and, with the old customs, were the basis for further development.

Just as the old direct taxes were first supplemented by, and then absorbed in, the general taxation of movables, so the customs, in the strict sense, were followed by the subsidies or parliamentary grants. One great source of English wealth in the I4th century was the export of the peculiarly fine wool of the country, and the political circumstances of Edward III.s time suggested the manipulation of the trade in this commodity for purposes of policy as well as revenue. Sometimes, in order to influence the towns of Flanders, the export of wool was absolutely prohibited; at others, export duties of varying amounts were imposed on wool, skins and leather. In the early years of the reign these arrangements were settled by agreement with the merchants. The subsidies of this class began in 1340 and henceforward were frequently granted, though complaints were very often made. Thus, in 1348 the Commons objected to the subsidy of an export duty of 2 per sack on wool on the ground that it was really a tax on the landowners, who received a lower price for their wool in consequence of the duty. Bargains between the king and the merchants were forbidden, and this species of taxation was brought under parliamentary control by statutes passed in 1362 and 1371. Along with the special duties on wool there was an increase of the imposts on wine and general goods. By agreement with the merchants a charge of 25, per tun on wine and 23/4% on goods was levied in 1347. Between 1371 and 1376 these dues were established as parliamentary grants under the names of Tunnage and Poundage, leaving the older dues intact.

One class or estate occupied a peculiar position. The clergy still claimed the privilege of self-taxation, and therefore it was convocation, not parliament, that voted the tenths imposed on clerical property. In some instances much heavier charges (e.g. in 1296 one-third) were decreed by the king, but the taxation of the clergy declined in productiveness during the I4th century. By the close of the reign of Richard II. the results of the transition from feudalism to a parliamentary constitution were practically complete. In. respect to finance the most important of these were: (1) The disappearance or reduction to unimportance of the feudal dues. The fact that this change occurred at, relatively speaking, so early a date is of special significance for English development. (2) The royal demesne, though it had not suffered the losses that the grants of later times inflicted on it, had also lost some of its value as a source of revenue. (3) In compensation the direct taxation of property had become a ready means of supplying the growing requirements of the administration, and the mode of levy had been reduced to a well-recognized form, unsatisfactory experimentssuch as the poll taxbeing withdrawn. (4) The growth of import and export duties through the old and new customs and the subsidies furnished a large part of the requisite funds. In fact, in the course of a little over three hundred years the constituent parts of the public income had, without any violent change, been completely altered in relative value and in organization.

The period of the Lancastrian kings, extending over twothirds of the 15th century (1399-1471), is noticeable for various experiments in the system of direct taxation. The standard tax the tenth and fifteenth failed to suit the changed con-. ditions. In consequence of the decay of some of the towns allowances had to be made to them, amounting to over 15% (~6ooo), which, with other deductions, lowered the yield from a tenth and fifteenth to 31,000. As a supplement a land tax, affecting only the large owners, was voted at the rate of 5% in 1404, and repeated with wider scope, but at the lower rate of 13/4%, lU 1411. A house tax made its appearance in 1428. Taxes on knights fees and other freeholds were also tried, while in 455 and 450 the graduated income tax was employed. The minimum rate, 23/4%, applied to incomes under 100 (or under 20 in the tax of 1450), and rose to 10% on the higher incomes. These devices are evidence of the demand for larger revenue, and also of the increasing unfitness of the existing direct taxation. It may be added that they indicate a disposition to adopt foreign models, particularly the methods of taxation in use in France and Italy. As to indirect taxation the receipts seem at first to have declined, and the subsidies were only granted for fixed terms (the victory of Agincourt gained a life grant to Henry V.). After the establishment of Edward IV. On the throne, the idea of a tenth, in the literal sense, was taken up and voted (1472) by the two houses as a special military provision; but it failed to bring in therequired revenue, and the kixig had to fall back on grants of the old-established form. Extra taxes on aliens were levied under both Lancastrian and Yorkist rulers with little profit. The most original contribution of Edward IV. to fiscal policy was the benevolence or payment by wealthy subjects of sums requested by the king. Voluntary in form, these payments were, in fact, compulsory, and became in later times one of the great grievances against which parliament had to struggle.

Broader issues in finance marked the course of the Tudol period, and these were connected with the general history of the time. The era of national monarchies had arrived, necessitating the maintenance of greater military and naval forces, as well as more costly machinery of administration. External policy was affected by the set of ideas that developed into mercantilism (see MERCANTILE SYSTEM); but so also was fiscal policy. Finance reflected the actions of the personal rule that was the characteristic of the 16th century. Within the period, however, some, decided contrasts are to be found. Prudence, carried to parsimony with Henry VII., is followed by lavish prodigality in the case of Henry VIII. Elizabeth, again, presents in her reign a very different financial policy from that of either her father or her grandfather. The desire for a vigorous foreign policy, the hope of encouraging native industry, and the sentiment of retaliation against the trade regulations of other countries are found to interfere with the aimstrictly followed in earlier timesof obtaining the largest possible yield. All the different parts of the public economy were regarded as existing only in order to be utilized for the furtherance of national power. It is this more complex character in policy, coupled with the new influences, that the discovery of America, the Renaissance and the Reformation brought into operation, which gives special interest to the financial problems of the ifith century.

Taking in order the great heads of public income placed at the disposal of the sovereign, it appears that the first head of the old receiptsthe crown landshad been from time to time diminished by grants to the kings relatives and favorites, but had also gained through resumptions and forfeitures. On the whole, the loss and gain down to the close of the z4th century was probably balanced. The revenue was, however, inelastic, and declined in relative importance. It has been said that it was in the i5th century that the great impoverishment of the crown estate began. The Lancastrian kings (especially Henry VI.) lost most of the lands attached to the crown through pressure of expenditure and the wholesale plunder of officials.

Though the civil wars of the 15th century brought in many forfeited estates the grants of Edward IV. kept down the increase; But the chief opportunity for aggrandizement was afforded by the dissolution of the monasteries and gilds under Henry VIII. The great mass of property that passed into the royal possession in this way was in part assigned to nobles and officials, while most of the remainder was distributed in the reigns of his children. The dwindling importance of the public revenue from land and rent charges is as noticeable under the Tudors as in earlier times. In like manner the feudal dues had fallen into a very subordinate place notwithstanding the attempts made on particular occasions to enforce them with greater rigour. The force of personal monarchy exercised by the Tudors, depending as it did on popular support, tended to encourage the collection of dues which had a legal ground in preference to taxation of the community. Of similar character was the employment of the old right of purveyance (qv.), in restraint of which a series of statutes had been passed.

Whatever possibilities of obtaining some additional revenue from the crown lands or prerogative rights may have existed in the 16th century, and these were slight, all the political and social conditions tended more and more to make the need of taxation as the principal financial resource imperative. Amongst the cases of increased calls for funds to maintain the machinery of state, the rise of prices, due to increased supplies of the precious metals, must be included as one of the chief, and its effect extends into the 17th century. It was under this influence that the old forms of revenue became less profitable and that fresh developments were necessitated.

Direct taxation still retained in one of its branches the pattern set in the reign of Edward III. Tenths and fifteenths continued to be voted, and for some time all attempts to introduce new methods failed. In 1488 a military grant framed on the model of the abortive tax of 1472 yielded only a little over onethird of the estimate (~27,ooo out of 75,000), and the unsatisfactory result prevented further experiments on the part of Henry VII. The foreign policy of Henry VIII.particularly his French expeditionwith its attendant outlay, accounts for the graduated capitation tax of 1513, which was even less in accordancewith anticipation than the tax of 1488 (it yielded only So,ooo instead of 16o,ooo). But these failures cleared the way for a more effective form of direct impost, which appeared in the subsidy or general tax on land and goods. The first case of this tax (1514) was a modest one21/2%; it, however, soon took on a typical form, so that the subsidy came to mean a charge of 4S. in the pound on land and 2s. 8d. in the pound on goods, a scale evidently devised with reference to the older tenth and fifteenth, which was henceforth put in a subordinate position, The subsidy became the established mode of grant under both Tudors and Stuarts, though by degrees it underwent a change similar to that experienced by its predecessor. The taxing statutes made elaborate provisions for the assessment and collection of the tax in order to secure a full return. Old habits proved too strong and the subsidy slipped into the same kind of groove as that of the fifteenth and tenth, and became, in practice, a grant of a sum of money of about the same amount as the yield of the last preceding subsidy (Dowell). The consequence was that each subsidy came, in the middle of the 16th century, to be a sum of foo,ooo, and at its close only 80,000. The parallel vote of the clergy in convocation (which after 1533 had to be confirmed in parliament) amounted to 20,000. The usual parliamentary proceeding was to vote so many tenths and fifteenths and so many subsidies, e.g. Elizabeths first parliament voted her two fifteenths and tenths and a subsidy, or, taking the usual values, 160,000. At times of crisis such as the arrival of the Armada the votes were enlarged by granting more tenths and fifteenths and subsidies. The history of the subsidy is instructive as to the tendencies of direct taxation. in all countries. The assessment becomes inelastic and approximates to a fixed sum. As the subsidy follows the course of the later medieval taxation, so it is the undesigned model of the later land and property tax.

In the history of the port duties under the Tudors the first point for notice is the life grant to each of the sovereigns of the subsidies on wool, hides and leather, together with tunnage at 3S. and poundage at 5%; thus, with the hereditary customs, supplying a considerable revenue for the crowns use. No better indication of the increased power and popularity of the monarchy could be found. The contrast with the suspicious and grudging attitude of the Plantagenet and Lancastrian parliaments is significant of the change in national sentiment. A duty on maimsey (1490) had a retaliatory rather than a fiscal aim, being directed against the Venetians who had imposed restrictions on English trade. In several later cases wine became liable to extra duties, chiefly applied to French trade in further pursuance of the policy of retaliation. Restrictions on import and export as well as the hostile measures against foreign merchants were matters of economic pdlicy rather than finance, but they had the indirect effect of increasing the control exercised at the ports. The loss of Calais (1558) dislocated the system of the staple and cut off one centre of customs revenue; and it was also probably the cause of an important change in the mode of valuing goods for duty. For the declaration on oath of the merchant a fixed valuation was substituted and set forth in a book of rates, the first of its class (1558). Following this reform came more stringent regulations against smuggling and fraud on the part of officials. All through the Tudor period the cost of collection was unduly high. For the first six years of Elizabeth it has been estimated at one-sixth of the gross receipts.

Just as in the 14th century the subsidy had followed the old and new customs, so in the r6th the impositions levied by royal prerogative formed a supplement to the parliamentary subsidy; but the principal employment of this expedient occurs in the next century. Another significant indication of the future course of indirect taxation was furnished by the grants of monopolies to inventors, producers and traders. These privileges, when they affected important commodities, operated in the same way as taxes farmed out to collectors, and, though the profit to the crown was small, they enhanced prices and excited discontent. The wisdom of Elizabeth (or her ministers) was shown in the promise of redress after the hostile debate of 1601.

From one point of view it may fairly be said that the great struggle of the Stuart kings with the parliament centred round financial issues- It is, at all events, beyond dispute that questions of taxation were the chosen ground of conflict. Taking the period from the accession of James I. to the opening of the Civil War (16o342) it appears that the legal basis of indirect taxation was tested for the port duties in the Great Case of Impositions (known as Bates case, see BATES, JOHN), while that of direct taxation was considered in the even more famous Ship Money case (for ever associated with the name of Hampden). In parliament the debates deal with impositions, monopolies, the grounds for voting subsidies, and the proper application of the funds granted; in fact, with nearly all the financial questions of the time. Notwithstanding these difficulties and disputes the financial system shows evident signs of expansion and adaptation to the needs of the state.

The direct grants of the parliaments of James I. far exceeded those of earlier periods (in. 1606 SiX fifteenths and tenths, three lay and four clerical subsidies), but the efforts to extend the other sources of revenue by the exercise of the prerogative naturally reacted on this spirit of liberality. The last fifteenth and tenth was voted in 1624, from which date this old-established form disappears, and the subsidy alone is used. In spite of Charles I.s high-handed policy five subsidies were voted after the Petition of Right had been accepted, and even the Long Parliament made similar grants. Almost at the outbreak of the Civil War it also gave the king a graduated capitation tax. Other modes of direct taxation were used without parliamentary sanction. The collection of the antiquated feudal dues was enforced through the special courts (particularly the Star Chamber) with a rigour long unknown; James had tried the French device of a tariff of honors. Both kings employed th~ benevolence until the Petition of Right made such a levy illegal. But by far the most serious innovation was the collection of the ship money, a course forced on Charles by his determination not to meet the representatives of the nation. The writs embodied the ultimate expression of the ingenuity of the kings advisers in the invention of means to enable him to rule without a parliament. The first writs secured over 100,000, and were followed by five further issues (1634-1639) bringing in an average return of 200,000 or about three lay subsidies. Like the benevolence, the ship money was declared to be illegal (1641).

The contest respecting monopolies, settled by Elizabeths withdrawal, was revived under James I., and had to be finally closed by the Statute of Monopolies (1624), declaring such grants to be utterly void. Certain exceptions (as in the caseof the soapboilers) permitted the raising of revenue by what *as in fact a rudimentary excise, and plans for a general excise were discussed, especially as a substitute for the feudal dues, though they were not reduced to practice. In the earlier 17th century the customs show a steady increase. From 127,000 in 1604 they rose to nearly 500,000 in 1641. This fourfold increase was due in part to the growth of English trade, but it was also influenced by the adoption of new Books of rates in 1608 and 1635, fixing higher valuations, and by the inclusion of new commodities with definite duties. Wine, currants (the subject of controversy in Bates case) and tobacco are particularly noticeable. Sugar also appears as a contributory. An interesting development was the adoption on a larger scale of the farming system, an evident imitation from France. A distinction was made between the great, the petty and the sugar farms, and opportunities for gain were afforded to the officials. On the constitutional side the life grant of subsidies, made in accordance with Tudor usage to James, was temporarily withheld from Charles, a restriction which his own overbearing policy led the parliament to maintain. Practically, the whole customs revenue between 1628 and 1640 was raised by the use of the prerogative without any parliamentary sanction. The Tunnage and Poundage Act of 1641 pronounced definitely against the legality of any extra parliamentary customs and thus closed another of the const.itutional problems of finance.

In the progress from the Conquest to the c~risis of the Great Rebellion there is noticeable a practically complete shifting of the classes of revenue. The king had ceased to live of his own; the royal demesne and the prerogative rights included in feudalism had become very subordinate. The direct taxation of property and income, and the indirect taxation on imported or exported commodities became the principal forms of receipt.

In the long course of English financial history the nearest approach to the new departure and an abandonment of old devices is found at the time of the Civil War and Commonwealth. The actual outlines of the now existing system made their appearances, while the older portions of the revenueparticularly the survivals of feudalismare eliminated. Thus the Civil War and the Interregnum (164260) may be regarded as marking a watershed in the financial history of the country. At the beginning of the struggle both sides had to rely on voluntary contributions. Plate and ornaments were melted down and useful commodities were furnished by the adherents of the king and by those of the parliament. As holding possession of London and the central organization the parliament voted subsidies and a poll tax. Such imports could hardly be levied with success and new forms became necessary. The direct taxation took the shape of a monthly assessment which was fixed from time to time, and which was collected under strict regulations, in marked contrast to the lax management of the former subsidies. As the amount for each district was fixed, the systematic collection secured the more equitable adjustment of the burden of the tax as regards the various taxpayers without hardship to the community. In spite of its origin, the assessment was the model for later taxation of property. The yield of this tax exceeding for the whole period 32,000,000is a proof of its importance. Minor contrivances, e.g. the weekly meal tax, in- dicate the financial difficulties of the parliament, but are otherwise unimportant. Owing to its control of the sea and the principal ports the parliament was able to command the customs revenue; and in this case also it remodelled the duties, abolishing the wool subsidy and readjusting the general customs by a new book of rates. A more extensive tariff was adopted in 1656, and various restrictions in harmony with the mercantilist ideas of the time were enforced. Thus French wines, silk and wool were excluded from 1649 to 1656. Far more revolutionary in its effects was the introduction of the excise or inland duties on goodsa step which Elizabeth, James I. and Charles I. had hesitated to take. Beginning (1643) with duties on ale, beer and spirits, it was soon extended to meat, salt and various textiles. Meat and domestic salt were relieved in 1647, and the taxation became definitely established under the administration of commissioners appointed for the purpose. Powers to let out the collection to farmers were granted, and a bid for both excise and customs amounted in 1657 to 1,100,000. Confiscations of church lands and those belonging to royalists, feudal charges and special collections helped to make up the total of 83,000,000 raised during the nineteen years of this revolutionary period. Another mark of change was the removal of the exchequer to Oxford, leaving, however, the real fiscal machinery at the disposal of the committees that directed the affairs of the parliament. Under Cromwell the exchequer was re-established (1654) in a form suited for the changes in the finances, the office of treasurer being placed in the hands of commissioners.

A complete reconstruction of the revenue system became necessary at the Restoration. The feudal tenures and dues, with the prerogative rights of purveyance and pre-emption, which had been abolished by order of the parliament, could not be restored. Their removal was confirmed, and the new revenues that had been developed were resorted to as a substitute. Careful inquiry showed that just before the Civil War the kings annual revenue had reached nearly 900,000. The needs of the restored monarchy were estimated at 1,200,000 per annum, and the loyal spirit of the commons provided sources of revenue deemed sufficient for this amount. An hereditary excise on beer and ale was voted as a compensation for the loss of the feudal dues, and temporary excises on spirits, vinegar, coffee, chocolate and tea were added. All differences of old and new customs and subsidies had disappeared under the Commonwealth. The general or great statute (1660) provided a scale of duties5% on imports and exports, with special duties on wines and woollen clothsaccompanied by a new book of rates. A house tax, levied after the Fiench pattern, on each hearth, was introduced in 1662 and became established. Poll taxes were used as an extraordinary resource, as were the last subsidies, voted in 1663, and then for ever abandoned. Licences on retailers and fees on law proceedings were further aids to the revenue, which, in the later years of Charles II. and in the short reign of his successor, was with difficulty kept up to the level of the increasing expenditure. The Commonwealth assessments were revived on several occasions, and indirect taxation was made more rigorous by the imposition of extra duties on brandy, tobacco and sugar, as also on French linens and silks. A very important development was the placing of the customs (1670) and the excise (1683) in the hands of special commissiontrs, instead of the system of farming them out to private collectors. The approach to modern conditions is further evidenced by the greater care in the administration. Amongst expert officials Dudley North (qv.), as commissioner of customs, was the most distinguished. In this period, too, the beginning of the public debt as in the appropriation of the bankers deposits may be found.

The Revolution of 1688 may be regarded both on its constitutional and financial sides as the completion of the work of the Long Parliament. In the latter respect its chief effects were:

(I) the transfer of the administration of the finances from th~ kings nominees to officials under parliamentary control, (2) the consequent application of the revenue to the purposes designated by parliamentary appropriation, (3) the rapid expansion of the various kinds of revenue, particularly the indirect taxes, (4) the rise and growth of the national debt, combined with the creation of an effective banking system. The greater part of the 18th century was occupied with the working out of these results.

The government of William III. had to face the expenses of a great war and to allay discontent at home. As a preliminary step to the necessary settlement of the revenue a return was prepared, showing the tax receipts at over 1,800,000 and the peace expenditure at about 1,100,000. Parliament accepted the view that 1,200,000 per annum would suffice for the ordinary requirements of the kingdom. It, further, introduced the system of the Civil List and assigned oo,ooo for the fixed payments placed under that head, leaving the remainder to be appropriated for the other needs of the state. As the hearth money had proved to be a very unpopular charge, it was, in spite of its yield (~x7o,ooo), given up. The temporary excise duties were voted for their majesties lives and the customs for a limited term. These branches of revenue were altogether insufficient to meet the pressure of the war outlay, and in consequence new heads of taxationor old ones revivedcame into use. A series of poll and capitation taxes were imposed between. 1689 and 1698, but were after that date abandoned for the same reason as that for the repeal of the hearth money. The monthly assessment was tried in. I688; then came an income tax followed by twelve months assessments in. 1690 and 1691. The way was thus prepared for the property tax of 1692, imposing a rate of 45. in the pound on real estate, offices and personal property. The old difficulties of securing returns made the tax chiefly one on land. It was under the name of the land tax that it was generally known. The 45. rate brought in 1,922,712, a return which declined in the following years. To meet this a fixed quota of nearly half a million (a Is. rate) was adopted in 1697, the amount to be apportioned in specified sums to the several counties and towns. The framework of the tax remained without substantial change till 1798, the time of Pitts redemption scheme. In 1696 houses were taxed 2S. each, with higher rates for extra windows. The beginning of the window tax, licences on pedlars, and a temporary tax on the stocks of companies complete the imposts of this kind. Stamp dutiesimitated from Hollandwere adopted in 1694 and extended in 1698: they mark the beginnings of the modern duties on transactions and the death duties. Large additions were made to the excise. Breweries and distilleries were placed under charge, and such important commodities as salt, coal, malt, leather and glass were included in the list of taxable articles, but the two last mentioned were soon relieved for the time. The customs rates were also increased. In 1698 the general 5% duty was raised by the new subsidy to 10%. French goods became liable to surtaxes, first of 25%, afterwards of 50%; those of other countries had to pay similar charges of smaller amount. Spirits, wines, tea and coffee were taxed at special rates. How great was the expansion of the fiscal system may be best realized from the fact that during the comparatively short reign of William III. (1689-1702) the land tax produced 19,20o,000, the customs 13,296,000, and the excise 13,650,000, or altogether 46,000,000. In the last year of the reign, the opening one of the 18th century, the returns from these taxes respectively were: land tax (at 2s.), 990,000, customs 1,540,000, excise 986,000, or a total exceeding three and a half millions. The removal of the regular export duties in respect of (a) domestic woollen manufactures, (b) corn, was the only alleviation of taxation, and in both cases it was due to special reasons of policy.

Quite as remarkable as the growth of revenue is the sudden appearance of the use of public loans. In earlier periods a ruler had accumulated treasure (Henry VII. left 1,800,000) or had pledged his jewels or the customs or occasionally the persons of his friends for the payment of his borrowings. Edward III.s dealings with the Florentine bankers are well known; but it was only after the Revolution that the two conditions essential for a permanent public debt were realized, viz.: (I) the responsibility of the government to the people, and (2) an effective market for floating capital. At the close of the war in 1697 a debt of 21,500,000 had been incurred, over 16,000,000 of which remained due at William III.s death. Connected with the public debt is the foundation of the Bank of England (see BANKS AND BANKING), which more and more became the agent for dealing with the state revenue and expenditure; though the exchequer continued to exist until 1834 as a real, even if antiquated institution.

Thus it is clear that by the end of the 17th century the new influences which date from the Civil War had brought into being all the elements of the modern financial system. Expenditure, revenue, borrowing to meet deficiencies are all, in a sense, developed into their present-day form. Increase in amount and some refinements in procedure, combined with improved views of public policy, are the only changes that occur later on.

Regarded broadly, the 18th and 19th centuries exhibit several distinct periods with definite financial aspects. In the ninety years from the death of William III. (1702) to the outbreak of the Revolutionary War with France (1793) there are four serious wars, covering nearly thirty-five years. There is the long peace administration of Walpole, and there are the shorter intervals of rest following each of the contests. From the beginning of the war with the French Republic to the year of Waterloo there is a nearly unbroken war time of over twenty years. The forty years peace is closed by the Crimean War (185456); and another forty years of peace ends with the South African War (1899-1902). During this time the older mercantilism passes into protectionism; and this, again, gives way before the gradual adoption of the free trade policy. At each time of war, taxation (particularly in the indirect form) and debt increase. Financial reform is connected with the maintenance of peace. Among the great financial ministers Walpole, ,the younger Pitt, Peel and Gladstone are conspicuous; while Huskissons services in the kindred field of economic policy deserve special notice in their financial bearing.

By taking the several great heads of revenue in order it is comparatively easy to understand the nature of the progress made in subsequent years. (I) The land tax, established on a definite basis in 1692, was the great 18th century form of direct taxation. Varying in rate from Is. (as in 1731) to 4S. (as in most war years), it was converted by Pitt in 1798 into a redeemable charge on the lands of each parish, and by this process has sunk from the amount of 1,911,000 in 1798 to 730,000 in 1907-1908.

The great increase in other heads had impaired the value of the land tax as a fiscal support. (2) Parallel with the movement of the land tax but showing much more rapid growth was the excise of the 18th century. Most of the articles of common consumption were permanently taxed. Soap, salt, candles and leather are described by Adam Smith as taxed, and that taxation is unreservedly condemned by him. In 1739 the excise duties brought in 3,000,000. By 1792 they had risen to 10,000,000.

Their continued expansion was due both to the wider area covered and to the increased consuming power of the country.

(3) The customs were equally serviceable, and in their case the increased duties were even. more considerable. The general 10% of 1698 became 15% in 1704, a fourth 5% was imposed in 1748, and in 1759 the general duties were raised to 25%. Coincidently with this general extension of the customs duties special articles such as tea were subjected to increased duties. The American War of Independence brought about a further general increase of 10%, together with special extra duties oi~ tobacco and sugar. In 1784 the customs revenue came to over 3,000,000. Two circumstances account for this slower growth.

(I) The extreme rigour of the duties and prohibitions, aimed chiefly against French trade; and (2) the absence of care in estimating the point of maximum productiveness for each duty. Swifts famous saying that in the arithmetic of the customs two and two sometimes, made only one is well exemplified in England at this time. The smuggler did a great deal of the foreign trade of the country. Efforts at reform were not, however, altogether wanting. Walpole succeeded in carrying several useful adjustments. He abolished the general duties on exports and also several of those on imported raw materials such as silk, beaver, indigo and colonial timber. His most ambitious scheme that for the warehousing of wine and tobacco in order to relieve exporters~failed, in consequence of the popular belief that it was the forerunner of a general excise. Walpoles treatment of the land tax, which he kept down to the lowest figure (Is.), and his earlier funding plan deserve notice. His determination to preserve peace assisted his fiscal reforms. Pitts administration from 1783 to 1792 marks another great period of improvement. The consolidation of the customs laws (1787), the reduction of the tea duty to nearly one-tenth of its former amount, the conclusion of a liberal commercial treaty with France, and the attempted trade arrangement with Ireland, tend to show that Pitt would have anticipated many of the free trade measures of later years if it had been his lot to enjoy ten more years of peaceful administration. One of the financial problems which excited the interest and even the alarm of the students of public affairs was the rapid increase of the public debt. Each war caused a great addition to the burden; the intervals of peace showed very little diminution in it. From sixteen millions in 1702, the debt rose to ~53,00o,o00 at the treaty of IJtrecht (1713). In 1748 it reached 78,000,000, at the close of the Seven Years War it was 137,000,000, and when the American colonies had established their independence it exceeded 238,000,000. Apprehensions of national bankruptcy led to the adoption of the device of a sinking fund, and in this case Pitts usual sagacity seems to have failed him. The influence of R. Prices theory induced the policy of assigning specialsums for debt reduction, without regard to the fundamental condition of maintaining a real surplus.

The revolutionary and Napoleonic wars mark an important stage in English finance. The national resources were strained to the utmost, and the whip and spur of taxation was used on all classes of the community. In the earlier years of the struggle the expedient of borrowing enabled the government to avoid the more oppressive forms of charge; but as time went on every possible expedient was brought into play. One class of taxes had been organized during peacethe assessed taxes on houses, carriages, servants; horses, plate, &c. These duties were raised by several steps of 10% each until, in 1798, their total charge was increased threefold (for richer persons four- or fivefold) under the plan of a triple assessment. The comparative failure of this scheme (which did not bring in the estimated yield of 4,500,000) prepared the way for the most important development of the tax systemthe introduction of the incometax in 1798. Though a development of the triple assessment, the income-tax was also connected with the permanent settlement of the land tax as a redeemable charge. It is possible to trace the progress of direct taxation from the scutage of Norman days through the tenth and fifteenth, the Tudor subsidies, the Commonwealth monthly assessments, and the 18th century land tax, to the income-tax as applied by Pitt, and, after an interval of disuse, revived by Peel (1842). The immediate yield of the income-tax was rather less than was expected (~6,ooo,ooo out of 7,500,000); but by alteration of the mode of assessment from that of a general declaration to returns under the several schedules, the tax became, first at ~%, afterwards at to%, the most valuable part of the revenue. In 1815 it contributed 22% of the total receipts (ie. 14,600,000 out of 67,000,000). If employed at the beginning of the war, it would probably have obviated most of the financial difficulties of the government. The window tax, which continued all through the 18th century, had been supplemented in the American War by a tax on inhabited houses (one of Adam Smiths many suggestions), a group to which the assessment taxes werenaturally joined. During the 18th century the probate duty had been gradually raised, and in 1780 the legacy duty was introduced; but these charges were moderate in character and did not affect land. Though the direct and quasi-direct taxes had been so largely increased, their growth was eclipsed by that of the excise and customs. With each succeeding year of war new articles for duties were detected and the rates of old taxes raised. The maxim, said to have guided the financiers of another countryWherever you see an object, tax it would fairly express the guiding policy of the English system of the early ~9th century. Eatables, liquors, the materials of industry, manufactures, and the transactions of commerce had in nearly all their forms to paytoll. To take examples:salt paid Iss. per bushel; sugar 30s. per cwt.; beer ios. per barrel (with 4S. 5d. per bushel on malt and a duty on hops); tea 96% ad valorem. Timber, cotton, raw silk, hemp and bar iron were taxed, so were leather,; soap, glass, candles, paper and starch. In spite of the need of revenue, many of the customs duties were framed on the protective system and thereby gave little returns; e.g. the import duty on salt in I8I~ produced 547, as against 1,616,124 from excise; pill-boxes brought in i8s. jod., saltpetre 2d., with id. for the war duties~ The course of the war taxation was marked by varied experiments. Duties were raised, lowered, raised again, or given some new form in the effort to find additional revenue. Some duties, e.g. that on gloves, were abandoned as unproductive; but the conclusion is irresistible that the financial system suffered from over-complication and absence of principle. In the period of his peace administration Pitt was prepared to follow the teaching of The Wealth of Nations. The strain of a gigantic war forced him and his successors to.employ whatever heads of taxation were likely to bring in fun.ds without violating popular prejudices. Along with taxation, debt increased. For the first ten years the addition to it averaged 27,000,ooc per annum, bringing the total to over soo,00o,000. By~ the close of the war period in 1815 the total reached over 875,000,000, or a somewhat smaller annual increasea result due to the adoption of more effective tax forms, and particularly the income tax. The progress of English trade was another contributing agency towards securing higher revenue. The import of articles such as tea advanced with the growing population; so that~the tea duty of 96% yielded in 1815 no less than 3,591,000. It is, however, true tha,t by the year just mentioned the tax system had reached its limit. Further extension (except by direct confiscation of property) was hardly possible. The war closed victoriously at the moment when its prolongation seemed unendurable.

A particular aspect of the English financial system is its relation to the organization of the finance of territories connected with the English crown. The exchequer may be plausibly held to have been derived from Normandy, and wherever territory came under English rule the methods familiar at home seem to have been adopted. With the loss of the French possessions the older cases of the kind disappeared. Ireland, however, had its own exchequer, and Scotland remained a distinct kingdom. The 18th century introduced a remarkable change. One of the aims of the union with Scotland was to secure freedom of commerce throughout Great Britain, and the two revenue systems were amalgamated. Scotland was assigned a very moderate share of the land tax (under one-fortieth), and was exempted from certain stamp duties. The attempt to apply selected forms of taxationcustom duties (1764), stamp duties (1765), and finally the effort to collect the tea duty (1773)to the American colonies are indications of a movement towards what would now be called imperialist finance. The complete plan of federation for the British empire, outlined by Adam Smith, is avowedly actuated by financial considerations. Notwithstanding the failure of this movement in the case of the colonies, the close of the century saw it successful in respect to Ireland, though separate financial departments were retained till after the close of the Napoleonic War and some fiscal differences still remain. By the consolidation of the English and Irish exchequers and the passage from war to peace, the years between 181S and 1820 may be said to mark a distinct step in the financial development of the country. The connected change in the Bank of England by the resumption of specie payments supports this view. Moreover, the political conditions in their influence on finance were undergoing a revolution. The landed interest, though powerful at the moment, had henceforth to face the rivalry of the wealthy manufacturing communities of the north of England, and it may be added that the influence of theoretic discussion was likely to be felt in the treatment of the financial policy of the nation. Canons as to the proper system of administration, taxation and borrowing come to be noticed by statesmen and officials.

These influences may be followed out in their working by observing the chief lines of adjustment and modification that followed the conclusion of peace. Relieved from the extraordinary outlay of the preceding years, the government felt bound to propose reductions. With commendable prudence it was resolved to retain the income-tax at 5% (one-half of the former rate), and to join with this reduction the removal of some war duties on malt and spirits. Popular feeling against direct taxation was so strong that the income-tax had to be surrendered in toto, a course which seriously embarrassed the finances of the following years. For over twenty-five years the income-tax remained in abeyance, to the great detriment of the revenue system. Its revival by Peel (1842), intended as a temporary expedient, proved its services as a permanent tax: it has continued and expanded considerably since. Both the excise and customs at the close of the war were marked by some of the worst defects of a vicious kind of taxation. The former had the evil effect of restricting the progress of industry and hampering ihvention. The raw materials and the auxiliary substances of industry were in many cases raised in price. The duties on salt and glass specially illustrated the bad results of the excise. New processes were hindered and routine made compulsory. The customs duties were still more restrictive of trade; as they practically excluded foreign manufactures, and were both costly and in many instances unproductive of revenue. As G. R. Porter has shown, the really profitable customs taxes were few in number. Less than a score of articles contributed more than nineteen-twentieths of the revenue from import duties. The duties on transactions, levied chiefly by stamps, were ill-graded and lacking in comprehensiveness. From the standpoint of equity the ground for criticism was equally plain. The great weight of taxation fell on the poorer classes. The owners of land dscaped giving any return for the property that they held undet the state, and other persons were not taxed in proportion to their abilities, which had been long recognized as the proper criteriom The grievance as to distribution has been modified, if not removed, by the great development of (1) the income-tax, (2) the death or inheritance duties. Beginning at the rate of 7d. per pound (1842-1854), the income-tax was raised to IS. 4d. for the Crimean War, and then continued at varying rates~ reduced to 2d. in 1874, it rose to 5d., then in 1894 to 8d., and by 1909 appeared to be fixed as a minimum at Is., or 5% on income from property. The yield per penny on the has risen almost uninterruptedly. From 710,000 in 1842, it now exceeds f 2,800,000, though the exemptions and abatements are much more extensive. In fact, all incomes of 3 per week are absolutely free (~16o per annum is the precise exemption limit), and an income of 400 derived from personal exertion pays less than 51/2d. per pound, or 2~ %. The great productiveness of the tax is equally remarkable. From 5,600,000 in 1843 (with a rate of 7d.) the return rose to f32,380,000 in 1907-1908, having been at the maximum of 38,800,000 in 1902-1903, with a tax rate of 63/4%. The income-tax thus supplies about one-fifth of the total revenue, or one-fourth of that obtained by taxation. Several fundamental questions of finance are connected with the taxation of income and have been dealt with by English practice. Small incomes claim lenient treatment; and, as mentioned above, this leniency means in England complete freedom. Again, earned incomes appear to represent lower ability to pay than unearned ones. Long refused on practical grounds (as by Gladstone and Lowe), the concession of an abatement of 25% on earned incomes of 2000 and under was granted in 1907. The question whether savings should be exempt from taxation as income has (with the exception of life insurance premiums) been decided in the negative. Allowances for depreciation and cost of repairs are partially recognized. Far more important than these special problems is the general one of increased tax rates on large incomes. Up to 1908-1909 the tax above the abatement limit of 700 remained strictly proportional; but opinion showed a decided tendency in favor of extra rates or a super tax on incomes above an assigned amount (e.g. 5000), and this was included in the budget of 1909-1910 (see Income-Tax).

In close relation with the income-tax is the estate duty, with its adjuncts of Legacy and Succession Duties. After Pitts failure to carry the succession duty in I 796, no change was made till Gladstones introduction in 1853 of a duty on land and settled property parallel to the legacy duty on free personality. Apart from certain minor alterations, the really vital change was the extension in 1894 of the old Probate Duty into a comprehensive impost (entitled the Estate Duty) applicable to all the possessions of a deceased person. This Inheritance Tax to give it its scientific titleoperates as a complementary property tax, and is thus an addition to the contribution from incomes derived from large properties. By graduation the charges on large estates in 1908-1909 (before the proposal for further increase in 1909 1910) came to 10% on 1,000,oc~0, and reached the maximum of 15% at 3,500,000. From the several forms of the Inheritance Taxes the national revenue gained 14,500,000, with 41/2 millions as a supplementary yield for local finance. The immense expansion of direct taxation is evident on comparing 1840 with 1908. In the former year the Probate and legacy duties brought in about one million; the other direct taxes; even including the House duty, did not raise the total to 3,000,000. In 1908 the direct taxation of property and income supplied 51,500,000, or one-third of the total receipts as against less than one-twentieth in 1840.

But though this wider employment of direct taxationa characteristic of European finance generallyreduced the relative position of the taxation of commodities, there was a growth in the absolute amount obtained from this category of duties. There were also considerable alterations, the result of changes in the views respecting fiscal policy. At the close of the Great War the excise duties were at first retained, and even in some cases increased. After some years reforms began. The following articles amongst others were freed from charge:

salt (1825); leather and candles (1830); glass (1845); soap (1853); and paper (1860). The guiding principles were: (I) the removal of raw materials from the list of goods liable to excise, (2) the limitation of the excise to a small number of productive articles, with (3) the placing of the greater part (practically nearly the whole) of this form of taxation on alcoholic drinks. Apart from breweries and distilleries, the excise had little field for its work. The large revenue of 35,700,000 lfl 1907-1908 was derived one-half from spirits (~I7,7oo,o00), over one-third from beer, while most Of the remainder was obtained from business taxation in the form of licences, the raising of which was one of the features of the budget in 1909. As a feeder of the revenue the excise might be regarded as, equal to the income-tax, but less to be relied on in times of depression. Valuable as were the reforms of the excise after 1820, they were insignificant as compared with the changes in the customs. The particular circumstances of English political life have led to perhaps undue etnphasis being placed on this particular branch of financial development. Between 1820 and 1860 the customs system was transformed from a highly complicated arrangement of duties, pressing with severity on nearly all foreign imports, into a simple and easily understood set of charges on certain specially selected commodities. All favors or preferences to home or colonial producers disappeared. Expressed in. financial terms, all duties were imposed for revenue only, and estimated in reference to their productiveness. An assimilation between the excise and customs rates necessarily followed. The stages of the development under the guidance of (1) Huskisson, (2) Peel, and (3) Gladstone are commonly regarded as part of the movement for Free Trade; but the financial working of the alteration is understood only by remembering that the duties removed by tens or by hundreds were quite trivial in yield, and did not involve any serious loss to the revenue. Perhaps the most remarkable feature of the English customs of the I9th century was the steadiness of the receipts. In spite of trade depressions,

discussion was likely to be felt in the treatment of the financial policy of the nation. Canons as to the proper system of administration, taxation and borrowing come to be noticed by statesmen and officials.

These influences may be followed out in their working by observing the chief lines of adjustment and modification that followed the conclusion of peace. Relieved from the extraordinary outlay of the preceding years, the government felt bound to propose reductions. With commendable prudence it was resolved to retain the income-tax at 5% (one-half of the former rate), and to join with this reduction the removal of some war duties on malt and spirits. Popular feeling against direct taxation was so strong that the income-tax had to be surrendered in toto, a course which seriously embarrassed the finances of the following years. For over twenty-five years the income-tax remained in abeyance, to the great detriment of the revenue system. Its revival by Peel (1842), intended as a temporary expedient, proved its services as a permanent tax: it has continued and expanded considerably since. Both the excise and customs at the close of the war were marked by some of the worst defects of a vicious kind of taxation. The former had the evil effect of restricting the progress of industry and hampering ihvention. The raw materials and the auxiliary substances of industry were in many cases raised in price. The duties on salt and glass specially illustrated the bad results of the excise. New processes were hindered and routine made compulsory. The customs duties were still more restrictive of trade; as they practically excluded foreign manufactures, and were both costly and in many instances unproductive of revenue. As G. R. Porter has shown, the really profitable customs taxes were few in number. Less than a score of articles contributed more than nineteen-twentieths of the revenue from import duties. The duties on transactions, levied chiefly by stamps, were ill-graded and lacking in comprehensiveness. From the standpoint of equity the ground for criticism was equally plain. The great weight of taxation fell on the poorer classes. The owners of land dscaped giving any return for the property that they held undet the state, and other persons were not taxed in proportion to their abilities, which had been long recognized as the proper criteriom The grievance as to distribution has been modified, if not removed, by the great development of (1) the income-tax, (2) the death or inheritance duties. Beginning at the rate of 7d. per pound (1842-1854), the income-tax was raised to IS. 4d. for the Crimean War, and then continued at varying rates~ reduced to 2d. in 1874, it rose to 5d., then in 1894 to 8d., and by 1909 appeared to be fixed as a minimum at Is., or 5% on income from property. The yield per penny on the has risen almost uninterruptedly. From 710,000 in 1842, it now exceeds f 2,800,000, though the exemptions and abatements are much more extensive. In fact, all incomes of 3 per week are absolutely free (~16o per annum is the precise exemption limit), and an income of 400 derived from personal exertion pays less than 51/2d. per pound, or 2~ %. The great productiveness of the tax is equally remarkable. From 5,600,000 in 1843 (with a rate of 7d.) the return rose to f32,380,000 in 1907-1908, having been at the maximum of 38,800,000 in 1902-1903, with a tax rate of 63/4%. The income-tax thus supplies about one-fifth of the total revenue, or one-fourth of that obtained by taxation. Several fundamental questions of finance are connected with the taxation of income and have been dealt with by English practice. Small incomes claim lenient treatment; and, as mentioned above, this leniency means in England complete freedom. Again, earned incomes appear to represent lower ability to pay than unearned ones. Long refused on practical grounds (as by Gladstone and Lowe), the concession of an abatement of 25% on earned incomes of 2000 and under was granted in 1907. The question whether savings should be exempt from taxation as income has (with the exception of life insurance premiums) been decided in the negative. Allowances for depreciation and cost of repairs are partially recognized. Far more important than these special problems is the general one of increased tax rates on large incomes. Up to 1908-1909 the tax above the abatement limit of 700 remained strictly proportional; but opinion showed a decided tendency in favor of extra rates or a super tax on incomes above an assigned amount (e.g. 5000), and this was included in the budget of 1909-1910 (see INcoarE-Tax).

In close relation with the income-tax is the estate duty, with its adjuncts of Legacy and Succession Duties. After Pitts failure to carry the succession duty in I 796, no change was made till Gladstones introduction in 1853 of a duty on land and settled property parallel to the legacy duty on free personality. Apart from certain minor alterations, the really vital change was the extension in 1894 of the old Probate Duty into a comprehensive impost (entitled the Estate Duty) applicable to all the possessions of a deceased person. This Inheritance Tax to give it its scientific titleoperates as a complementary property tax, and is thus an addition to the contribution from incomes derived from large properties. By graduation the charges on large estates in 1908-1909 (before the proposal for further increase in 1909 1910) came to 10% on 1,000,oc~0, and reached the maximum of 15% at 3,500,000. From the several forms of the Inheritance Taxes the national revenue gained 14,500,000, with 41/2 millions as a supplementary yield for local finance. The immense expansion of direct taxation is evident on comparing 1840 with 1908. In the former year the Probate and legacy duties brought in about one million; the other direct taxes; even including the House duty, did not raise the total to 3,000,000. In 1908 the direct taxation of property and income supplied 51,500,000, or one-third of the total receipts as against less than one-twentieth in 1840.

But though this wider employment of direct taxationa characteristic of European finance generallyreduced the relative position of the taxation of commodities, there was a growth in the absolute amount obtained from this category of duties. There were also considerable alterations, the result of changes in the views respecting fiscal policy. At the close of the Great War the excise duties were at first retained, and even in some cases increased. After some years reforms began. The following articles amongst others were freed from charge:

salt (1825); leather and candles (1830); glass (1845); soap (1853); and paper (1860). The guiding principles were: (I) the removal of raw materials from the list of goods liable to excise, (2) the limitation of the excise to a small number of productive articles, with (3) the placing of the greater part (practically nearly the whole) of this form of taxation on alcoholic drinks. Apart from breweries and distilleries, the excise had little field for its work. The large revenue of 35,700,000 lfl 1907-1908 was derived one-half from spirits (~I7,7oo,o00), over one-third from beer, while most Of the remainder was obtained from business taxation in the form of licences, the raising of which was one of the features of the budget in 1909. As a feeder of the revenue the excise might be regarded as, equal to the income-tax, but less to be relied on in times of depression. Valuable as were the reforms of the excise after 1820, they were insignificant as compared with the changes in the customs. The particular circumstances of English political life have led to perhaps undue etnphasis being placed on this particular branch of financial development. Between 1820 and 1860 the customs system was transformed from a highly complicated arrangement of duties, pressing with severity on nearly all foreign imports, into a simple and easily understood set of charges on certain specially selected commodities. All favors or preferences to home or colonial producers disappeared. Expressed in. financial terms, all duties were imposed for revenue only, and estimated in reference to their productiveness. An assimilation between the excise and customs rates necessarily followed. The stages of the development under the guidance of (1) Huskisson, (2) Peel, and (3) Gladstone are commonly regarded as part of the movement for Free Trade; but the financial working of the alteration is understood only by remembering that the duties removed by tens or by hundreds were quite trivial in yield, and did not involve any serious loss to the revenue. Perhaps the most remarkable feature of the English customs of the I9th century was the steadiness of the receipts. In spite of trade depressions, commercial crises and sweeping changes in rates, the annual revenue in the period 1815-1900 only varied between 19,000,000 and 24,000,000; though, on balance, duties amounting to 30,000,000 were remitted. The potential resources of this branch of revenue were made evident in the rapid rise of the yield by the new taxation imposed for the South African War (1899-1902). In consequence of this increase the customs became equal to the excise in return, and, combined, they collected over 60,000,000 annually from the consumption of commodities. They accordingly afforded a counterpoise to the burden put on income and property, or, more accurately speaking, they obtained due, or somewhat more than due, contribution from the smaller incomes, particularly those of the working class.

The exemption of raw materials and food; the absence of duties on imported, as on home manufactures; the selection of a small number of articles for duty; the rather rigorous treatment of spirits and tobacco, were the salient marks of the English fiscal system which grew up in the i9th century. The part of the system most criticised was the very narrow list of dutiable articles. Why, it was asked, should a choice be made of certain objects for the purpose of imposing heavy taxation on them? The answer has been that they were taken as typical of consumption in general and were easily supervised for taxation. Moreover, the sumptuary element is introduced by the policy of putting exceptionally heavy duties on spirits and tobacco, with lighter charges on the less expensive wines and beers. Facility of collection and distribution of taxation over a larger class appear to be the grounds for the inclusion of the tea and coffee duties, which are further supported by the need for obtaining a contribution of, roughly speaking, over half the tax revenue by duties on commodities. The last consideration led, at the beginning of the 20th century, to the sugar tax and the temporary duties on imported corn and exported coal.

As a support to the great divisions of income-tax, Death Duties, Excise and Customs, the stamps, fees and miscellaneous taxes are of decided service. A return of 9,000,000 was secured by stamp duties.

In recent years the so-called non-tax revenue largely increased, owing to the extension of the postal and telegraphic services. The real gain is not so great, as out of gross receipts of 22,000,000 over 17,500,000 is absorbed in expenses, while the carriage of ordinary letters seems to be the only profitable part of these services. Crown lands and rights (such as vintage charges) are of even less financial value.

One cardinal principle of the greatest English finance ministers has been the avoidance of deficits or undue surpluses. Gladstones inheritance of doctrine from Peel was to estimate expenditure liberally, to estimate revenue carefully, to make each year pay its own expenses, and to take care that your charge is not greater than your income. This method of treatment requires that taxation shall be productive in yield, and that it shall be so elastic as to admit of expansion, a function specially assigned to the income-tax. It may also be said to involve due care in the treatment of the national resources. The reaction of ill-chosen taxes on industry is a hindrance to their productiveness and their growth.

Authorities.—The constitutional historians—Stubbs, Gneist, Hallam—deal with the legal and constitutional aspects of finance. Special financial histories are: Sir J. Sinclair, History of the Phblic Revenue of the British Empire (3 vols., 3rd ed., London, 1803); S. Dowell, History of Taxation and Taxes in England (4 vols., 2nd ed., London, 1888); Schanz, Englische Handeispolitik (2 vols., Leipzig, 1881), and I-I. Hall, History of the Customs Revenue of England (2 vols., London, 1885), are valuable for the earlier periods. W. Cunningham, Growth of English Industry and Commerce (2 vols., Cambridge, 1903-1907); H. 0. Meredith, Eco,wmic History of England (London, 1908), devote sections to finance. A. Smith, Wealth of Nations (1776), Tooke and Newmarch, History of Prices (6 vols., London, 1837-1856), give financial details. G. R. Porter, Progress of the Nation (3rd ed., London, 1851); Sir S. Northcote, Twenty Years of Financial Policy (London, 1862); S. Buxton, Finance and Politics (2 vofs., London, 1888); J. R. McCulloch, Taxation and Funding (3rd ed., London, 1863); W. M. J. Williams, The Kings Revenue (London, 1908), for I9th-ce~ntury finance.

(C. F. B)