182 FINANCE 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 ,1,200,000, 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 4000 a year, anticipating its revenues, putting its securities into circulation, and assisting its credit at emerge nebs. It was, in point of fact, from the beginning a givat 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 50 in the case of a duke or duchess. The duty on births ranged from two shillings to 30, 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 7| per cent, per annum. These instruments of credit were put into circu lation in amounts from 5 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 5| millions annually. Of this amount, about 34 millions are obtained by indirect taxation, about 21f millions by direct taxation, 2 1 millions from the post office and the hearth money, and nearly 13^ 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
