Economy 1793 – 1811 – part 1

This is a selection of articles concerning the British economy. It is extracted from the main text to facilitate examination. It is extraordinary that little England, with a population of under 10 millions at commencement of this period, was able to contend successfully with a country as large as France with a population of some 25 millions at that time. These articles indicate the method adopted.

Pitt mentioned to the House of Commons that a country should not use real money to fight a war. He withdrew value from the domestic economy, replacing it with credit notes of the Bank of England and the country banks. The British people should have been more attentive to this development but they were allured by the convenience of paper money and overlooked the dangers inherent in it. This enabled the Minister to keep an increased amount of the country’s gold and silver for political purposes.

In the conditions of war, the domestic economy could be somewhat isolated from the rest of the World and the values placed on bank-notes settled rather arbitrarily. The downside of paper money, the irresistible temptation to over-issue, was to become lucidly apparent towards the end of the war but could not be corrected until the return to peace.

Internationally, Pitt sought for the bullion of Asia and South America to pay his way. This was reflected in India in the growth of British exclusiveness, the end of fraternisation with native rulers, the extension of the India Company’s territory over the entire sub-continent in Wellesley’s administration and the assertion of government ownership of all land, thus providing a larger base from which to raise a revenue. Every conquered native prince contributed financially to the British war effort in Europe via the Company and that Indian contribution appears to have been in the order of £10 – 20 millions a year.

The gold dust of Sumatra, the Moluccas and the Celebes and the silver of China was assiduously collected by the British traders from India in return for opium and piecegoods (cotton in China). This gold dust and silver was the currencies of these countries and its removal by British traders caused them domestic economic inflation. After 1820, when there were no Indian export staples welcomed in the United Kingdom home market, the India Company focused exclusively on its opium sales to South East Asia and China and the flow of silver back to India and London became a torrent.[1]

In the Americas an immense smuggling operation via Jamaica into central America and via Trinidad into South America produced a river of bullion back to London. The great attraction of smuggling to the merchant is payment in silver or gold. This was exclusively available to Britain and somewhat to America but not to the other maritime countries of Europe whose merchant fleets and warships had been almost entirely captured by the Royal Navy.

In the middle of the first decade of the new century, the Portuguese House of Braganza abandoned their country and fled with most of the aristocracy to Brazil. At about the same time King Carlos of Spain abdicated and was succeeded by his son Ferdinand who then gave his country and its colonies to France, a transfer that was ratified by all the courts of Europe except St James and the Vatican. On these occurrences, Britain took over the government of Iberia and her subsequent receipt of South American silver increased with support to the independence movements in Venezuela, Colombia, Chile, Peru, etc., providing the necessary anarchic conditions. It was also the case, although a minor aspect of it, that Britain had long enjoyed a positive balance of payments with Portugal which had been consistently discharged in bullion from Portuguese colonies.

British dominion of the high seas permitted control of international trade; it permitted the carriage of bullion from Peru, Mexico and Asia to London, risk free except perils of the sea, and the receipt of wealth from prize-taking. British warships stood off all the commercial ports of Europe and seized any ships that had not paid British tax. Incrementally all European colonies were bought under British control and management, their annual harvests were sold on British account and the funds raised were held in London. These produced great contributions to the national economy. With the capture of the Dutch East India Company’s shipping fleet by the Royal Navy, the Netherlands was no longer able to return the goods of Java to their homelands and the East India Company’s armies from Madras and Calcutta soon invaded and occupied the island to close-out the Bostonian shipowners who had contracted with the Dutch to supply colonial goods under their neutral flag. Thereafter, with a British government in Jakarta, all the goods of Java and a large part of those from Sumatra were brought back to London to be taxed before resale to the rest of Europe. The tiny French Island of  the Mauritius strangely escaped this fate until the war was almost concluded. It was a centre of Royalist support and its survival appears to have derived from being a source of information and assistance to the India Company’s government at Calcutta.

Apart from getting a major and disproportionate share of global resources which grew the UK economy to a comparable size to France, Pitt also attended to the obverse – ensuring his enemy had less. This was achieved partly by a large-scale forgery business he authorised in London which employed 400 artists producing the French paper money called Assignats for distribution in Paris. The initiative was duplicated in Amsterdam and later in some of the Swiss Cantons.

State historians refer to these times as the Age of Enlightenment. The application of wind and steam power increased industrial production and gave rise to the idea of ‘progress.’ Progress meant the growth of the national economy giving a greater share of wealth to those with the connections and energy to seize it. Enlightenment = wealth. This chapter will reveal that a British Revolution occurred as a result of the French one. Pitt’s financial measures redirected the British economy (which had been changing from one based on land and agricultural production to one based on manufacturing), to a financial economy based on the bond market. He effectively started the devaluation of the great land-owners as the owners of the country and controllers of national policy and supplemented and finally replaced them with the holders of national debt, whose income in dividends and the capital appreciation derived from trade, both out-performed land as investments. It was the beginning of the new economy where the producers of goods ceased to obtain the major share of the value of their production which share transferred to the financial intermediaries who inserted themselves between producers and consumers. A revealing discussion of this phenomenon appears in an article on Surinam in the 9th February 1805 edition and a wistful backwards look at what we had left behind appears in a review of Urquhart’s ‘Turkey’ in which book that country’s economy is described – see the article in the Asia Economy chapter dated 13th October 1835.

That small coterie of bankers and stock-brokers who assumed the economic control of the country under Pitt numbered perhaps a hundred people or a few thousand people when adding their major client investors at the early stages of the process, and it was Pitt’s revolutionary act to increase these numbers by an order of magnitude by the simple expedient of requiring land-owners to sell their Land Tax for 3% consols and thus bring that revenue in support of the Sinking Fund to jointly underwrite the national debt. As a result of this initiative, which is well described in an article below dated 16th June 1798, the landowners joined the stockholders and, in a brief period, the number of account holders at the Bank of England leapt from a few thousands to 200,000. This single initiative, which appears to have originated with the bankers, inevitably set the country on the capitalist road from which it has never since been able to turn. An additional effect is noted by the Baron Auckland in a finely focused Address to the Lords in the 1st June 1799 edition. He noted that the aristocracy had been contributing disproportionately to the war effort because their land holdings are on display and cannot be hidden like mercantile profits. He then adverts to an Income Tax on the entire population as the proper remedy whereby ordinary people can be brought into substantial contribution. This speech is well worth reading. It should be noted that Auckland was commending a war tax on the people – it took a merchant-statesman (Peel) to turn that temporary wartime arrangement into the basic revenue-earner of the government in both war and peace.

By the end of the war the British national debt approximated £1 billion and it’s a nice question where all the money had gone. At that time the Pound exchanged for nearly 4 ounces of gold so the extent of this debt can be calculated in terms of value. The amounts paid in subsidies to European allies was tiny in comparison – a few tens of millions. Some substantial minority part may be attributable to discounting of British bills globally – everyone knew the Pound Sterling was not worth its domestic valuation and exchange of Bills for cash overseas commonly resulted in a 30% loss. Royal naval officers and crews were the main victims but were concurrently receiving windfall income from prize-taking – swings and roundabouts, as the ministry said. The other notional victim was the British international trader but he kept his specie offshore to retain its value.

The cost of supporting the guerrilla war in Spain and maintaining a British army there was later quantified by the British Treasury at £265 millions or £45 millions a year for the six years of our involvement. The figure is in an article below dated 6th November 1819. £45 millions is comparable with gross British annual revenue through the early years of war or over one third of the total debt at its conclusion. Obviously, if the Treasury’s figures were anything like correct (and it has to be said that there is no corroboration as no-one knew where the money sent to Spain went) the war in Iberia was a British ulcer and hardly warrants that description being applied to French involvement there. I should also note that accounting was rudimentary or non-existent. The modus operandi of those participating in spending government funds was often to keep no accounts.

On this matter I wish to briefly move off-topic to note two strange aspects of British imperial history. Firstly, all those historical fellows whom British schoolboys are taught to venerate – Wm Pitt, Robert Peel, the Duke of Wellington – appear to have acted in ways that merit censure if not severe criticism for some of the important things they did; secondly, there seems to be an element of role reversal in popular British histories. The Spanish ulcer is one; the adoption of democracy is another. It is clear that the British predilection for schooling based on Greek and Roman history and precedents caused us to base our views on democracy on the Athenian version, the mob rule form of the ideology, and it was this that we repudiated when we came to debate the new form of French government. The French and American Revolutions developed the concept of democracy in ways totally unlike the Athenians yet we chose to conflate the two because they were described by the same name and only later, when the liberal tendency of Europe manifested, did we allege we also were a democratic nation although that transition is still today (21st century) ‘a work in progress.’ The reader should refer to the Political Management chapter for further insights in this respect.

It appears that the preponderance of British future wealth (that the City loans represented) flowed via the sticky fingers of the political and administrative classes to the armed forces, both in their usual role and also as administrators and guards of all the world’s colonies. It was thus that public funds went to underwrite our government of all the world’s colonies whilst the benefit of the production in those places went to those banks and merchants who exploited the opportunity provided by our temporary rule.

At a deeper, more fully motivating, level in the ruling class psyche, was the ideological war. British economic policy was an enabling policy to satisfy a sufficient number of power centres to carry-out the ideological aims as represented by George III and the other Kings of Europe – the Randolphs, Bourbons, Hapsburgs, Romanoffs – and their ministers and nobles. It was a war between Kings and Republics or between Monarchy and Democracy, or, as Napoleon put it, “birth without merit and merit without birth.”

It has been noted elsewhere in this text that the Kings had evolved a stable and well-tolerated system by combining their temporal authority with the spiritual authority of the Pope who spoke for God. Thus the ruling class could assert its qualifications for administration in its knowledge of the civilisations of Rome and Greece and the precedents those civilisations evolved for this or that action. This system was well-tolerated and widely approved and continued down the hierarchy below the monarchies to the nobility whose role as land owners and controllers of towns and villages on their estates caused them to be minor Kings in their own right, with a measure of judicial and legislative authority.

Whilst Britain was encumbering her progeny with debt, France was able to use the wealth tied-up in the confiscated land-holdings of the church and aristocracy as a solid basis to paper money – the Assignats and Mandats. The British, Dutch and some Swiss Royalists (or more likely emigres temporarily resident in those countries) actively sought to derange the French paper currency by counterfeiting but the value underwriting the French paper issue was simply too substantial. A second string to attack the French economy was the employment by the Bourbons of hoodlums in the Departments who would loiter around the provincial offices and beat-up buyers of land that had formerly belonged to the church or aristocracy. This was reportedly ineffective in most of the departments. In any event, once Napoleon had staged his Coup d’Etat, France ceased its reliance on paper and paid cash, at least until Tilsit (according to Alexander Del Mar – ‘Money and Civilisation’).

This was Napoleon’s egregious crime. His revenue was largely based on Land Tax. The effect of these different approaches to war financing appear fundamental to an understanding of the Napoleonic War. France was relatively unencumbered with debt and able to quickly recover from war; England was hocked to the banks and, once peace occurred, would be obliged to continue paying some £40 millions annually to meet the interest charges on her loans. Even if England won the military war, she would certainly lose the peace.

The British economy was / is based on borrowing and inflation. Borrowing is done by securitizing all national assets. The notional value of those assets – lands, buildings, roads, bridges, ports, etc. – is the bankers’ security for loans. You will unlikely read it in the media that controls information today but two centuries ago the newspapers published calculations of national value – there is an article dated 11th May 1799 listing Pitt’s calculation of British national income. In the British system everything of value is hocked. The creditor banks are paid for their loans by an issue of interest-bearing government bonds. In this way the country is constantly using its credit to the limit of its ability and is restrained only by the adequacy of the revenue to pay the interest on government bonds, a matter that these days is assessed by Ratings Agencies. It enjoys the confidence of the banks because it has avoided defaulting on paying interest as a fundamental statement of financial policy. It is the dynamic of power between the representatives and the moneymen.

This system requires constant growth to maintain itself. Every year interest and dividends are paid out and at least that much in new investment must be re-invested to restore the previous year’s value. Whenever growth out-strips the value of goods and services produced, as in every boom, all asset prices rise. When the perception arises that assets are too expensive, the boom is ended by withdrawal of loans and is followed by a fall in asset values. These predictable rises and falls, generally amounting to a few percentage points of the entire economy, are an important source of profits for the stock-brokers and bankers who control the national economy. It has always been so and the key basis to such activities is control of the money supply, the banknote printing, and the availability of limited liability in case someone complains.

Inflation occurs whenever the money supply exceeds the needs of the national economy. As a general rule these days, the governments of western economies permit their central banks to over-issue up to 3% each year. This ensures that the value of money will halve every 23 years. The result is the appearance of salaries and house prices increasing each year. This makes people happy and manageable.

For an amusing discussion on the bankers’ addiction to, and dependence on, paper money for their illusory profits, see the Commons debate below in an article dated 26th June 1819.

In consideration of the economic system adopted in Britain, the frightful level of debt it produced and specifically the cost of its servicing, it thus became a fundamental part of British policy, once the war was concluded, to get every other country into the same boat, most particularly those that competed with her for a share of world trade – primarily France and America but also the Netherlands, Denmark, Iberia and Sweden. This was achieved by warfare, by unilateral quantification of reparations in respect of France and by the naive willingness of European Kings to borrow. It should be recalled that at that time a Europan kingdom was the personal property of its King which he might trade or encumber with debt or do any other thing. There is an estimate reported in the newspapers below that puts the extent of government borrowing throughout Europe by 1840, only twenty-odd years after the new system gained approval, at over $3,000 millions (84,000 tons of silver).

An additional difficulty affecting the British domestic economy related to printing too much money. There is an amusing discussion of the subject in an article datelined 8th September 1821 with Francis Baring MP adopting the now familiar view of the City capitalists.

Thus the Napoleonic War was a new form of total war in which it was insufficient to merely beat French armies to induce negotiations – the country had to be totally defeated and occupied, Cossacks unleashed on the people in the north east, and its government brought under British control to ensure reparations would be adequate to oblige Paris to follow the British lead into dependence on debt-based finance.

In fact the Kings of Europe were instantly enamoured of debt-finance and were soon heavily indebted. Their national banks had their capital issued on their national stock exchanges and were thus exposed to international capitalist influence. That was the end of the independent monarch and His former power flowed via his own national bank to its major shareholders. One article below refers to N M Rothschild’s group of companies shorting Bank of Vienna bonds to collapse their value and deter the Holy Roman Emperor from pursuing the policies of the Holy Alliance in Italy. Another dated 30th October 1819 refers to a similar operation against British shares. It was a sign of the times. Mercantile control of foreign policy was already evident in the British financial system.[2] With French independence compromised by reparations, and USA beaten into submission to British requirements by the War of 1812, there remained amongst the big economies only China exercising fiscal prudence. Her rulers had long held a policy of valuing internal tranquillity higher than external disorder. They almost willingly submitted in the Opium War(s) to preserve the natural order of things domestically.

There are two final aspects of British economic policy that need to be briefly mentioned.

The pre-eminently important thing about the national debt is that it placed the minister in the loving care of his bankers. Everyone knows the relationship between debtor and creditor. As Napoleon said “the hand that gives is above the hand that receives.” The political leadership thus found they had an unelected authority over them to whom the minister was enslaved.

This, of course, refers to the relationship between minister and contributors to government loans. So far as the Bank of England was concerned, their’s was a stonier path to tread. The first Bank Act of 1694 barred the Bank from lending money without the express approval of parliament. It was enacted to protect the Bank from unscrupulous officials. In fact various Governors had indulged ministers occasionally to a small extent – some costs of the War of American Independence were such occasions – and the Bank subsequently asked parliament for a Bill of Indemnity and for legal authority to continue payments to a limited extent. Pitt obtained Commons approval for the Indemnity and the power to lend without parliamentary approval but omitted any limit in the Act. Thereafter, he was enabled to take what he needed without reference to the representatives. As can be seen from his budget speeches, Pitt calculated his borrowing requirement before considering where the money was to come from. His drawings were a substantial cause of the Bank’s insolvency in 1797.

The second aspect is smuggling. It will be recalled that trade still exchanged value in those days. The paper currency was supposed to have a fixed value in respect of gold and silver. The inability of banks to restrict their note-issues to the appropriate level was widely recognized – they increased the issue, speculation ensued, a rise in prices occurred, then the bust. It has been happening repeatedly since paper money use extended to the people at large. A good many prudent people made their contracts requiring payment in paper or specie (coined money) at their option so the political willingness to maintain paper parity with gold and silver still existed in the period under review.

It was always the case that smuggled goods had to be paid for in gold or silver. The Iberians claimed to own South America and had serious penalties for other Europeans trading there. Nevertheless, all South American trade paid its returns in silver so it was inconceivable that Spain could keep the merchants of other nations out whatever penalties it devised. This was particularly true of the two nations that had merchant fleets and a willingness to trade in the West Indies, Caribbean and South America – Britain and the United States. A vibrant smuggling trade was carried out into Central America from Jamaica and into South America from Trinidad. British and American ships entered the ports directly to trade illegally. It has been well said and an eternal truism that “trade always finds a way.”

In Europe, Napoleon required the merchants to exercise self-restraint and not buy smuggled English goods for the brief period necessary to collapse the British economy and induce peace proposals. He failed because it turns-out that a merchant cannot exercise self-restraint, and certainly not when there is a British or American ship offshore offering all sorts of goodies at cheap prices. The merchant must be making profit continuously. He has to continuously employ and re-employ his capital. So smuggling became the most popular employment in the British Isles. Everyone was doing it and any suggestion it was dishonourable faded with its growth in popularity. It became patriotic. Pitt enacted the Convoy Act to permit him to take a revenue off smuggling – a charge of one half percent ad valorem was put on smuggled goods. Contraband carried in British-owned ships was then escorted through the naval blockades outside every major European port to destination. Businesses were incorporated in London and the manufacturing areas to sell the fake documentation of every countries’ Customs Office with the forged signatures of their Foreign Ministers. Brougham’s description of British trade to the Commons in an article dated 1st August 1812 is highly persuasive. Both smuggling and licensed trade were characterized by myriad frauds.

The slight local difficulty was in reasserting propriety once the war was over. Resulting from the adoption of a smuggling economy, the revenue from Customs and Excise had collapsed in every port. Only those commodities which were monopolised like Chinese tea, could be taxed as there was only one importer and one port of entry but mercantilism was under heavy City attack for the threat it posed to the new economy. During the war this did not matter much because the ministry was funding itself by debt. It was only afterwards on the return of peace that the government found it had lost the merchants’ willingness to pay Customs and Excise. The costs and ineffectiveness of coast guard are indicated in a Friend of China article dated 24th August 1843, copied from a London magazine. Peel, the merchant statesman, was the ideal person to make the subsequent deal with the City. It was packaged as “Free Trade” which sounds very convivial. “Free trade” meant the merchants would no longer be required to pay Customs or Excise on their trade and would be able to reduce prices or increase profits at their choice. Instead of their funding government by what were effectively consumption taxes, the people at large would pay the commensurate amount of tax from their wages. It will be remembered that Income Tax had  been introduced in the war but it was expressly said to be a war tax and would be repealed on the peace. Now the remembrance of its potential as a revenue-earner stirred the moneymen. To make it administratively irresistible to a ministry, the merchants later agreed to collect the tax “pay as you earn” on behalf of the government – win, win. And to ensure that the Minister did not return to a tax on trade, all ports were opened to foreign goods thus making regulation of imports and exports virtually impossible.

This history from newspapers is a peoples’ history. Some of what the British ministry was doing was unknown to the editors or only suspected by them. The ministry indeed made some agreements overseas to conceal its activities from the press as the Treaty of Paris concerning British policy towards South America shows (in the chapter of that name) but I believe a fairly plausible outline of what was really being done has been captured in these pages.

At the end of this chapter the reader will find a review of the opinions of the Privy Councillor Thomas Johnston on the activities of the gentlemen of the City of London in his 1930s book “The Financiers and the Nation.” These start with a long catalogue of frauds from an early stage in the debt-based system under William Pitt until the time of Johnston’s writing (shortly before WWII). He ends with his interesting and little known collection of proposals to remedy the commercial illegality that corrupts the British economy.

These considerations are of course my personal views and another reader might reach different conclusions.

Sat 8th Aug 1807

Sir Robert Walpole is fondly remembered for this rustic comment on the House of Commons:

“the country gentlemen, poor meek souls, come up every year to be sheared; they lie mute and patient whilst their fleeces are taken off, but if I touch a single bristle of the commercial interest, the whole sty is in uproar. Shearing the hog produces a great cry and little wool.”

Sat 10th July 1802

England became a serious trading nation after the Dutch occupation. She has since raised merchants to a level of importance they have never enjoyed before. Their vast wealth enables them to rival hereditary aristocrats and landowners. Their capital is somewhat more exposed than the landowner yet they enjoy a measure of prestige in our society. They have recently become educated and the illiterate merchant is now rare, even amongst shopkeepers. The chief objection to the merchants is their propensity for gambling. They speculate endlessly and long-established Houses are unpredictably destroyed as a result. Trade is of course risky but there are prudent and imprudent risks and the merchant makes his choices.

There are two items of national finance that commenced in 18th century and have contributed to our commercial prosperity – the national debt and the public funds.

The national debt is the sum of all those loans that successive ministries have borrowed at times of national emergency when the regular revenue of the government was inadequate.

The public funds are comprised of capital lent to government by Englishmen and foreigners to pay interest on the national debt. These loans are divided into shares, each bearing a known interest rate. They are readily transferable and rise and fall in value dependent on the availability of money and the confidence that investors have in the domestic economy.

Our ministers now believe the national debt has become too great to be repaid. Instead of paying it off, government prefers to pay interest on it and raise new loans when old loans expire. This regular transfer of tax revenue to investors inspires their confidence in and loyalty to government.[3] The price of government paper is generally predictable from the interest rate it pays, unless there is an increase or diminution in the national money supply. From a speculative viewpoint, the interest on government stock is paid certainly and timely; confidence is high and prices are firm, particularly in peace.

Formerly it was not so. Loans to government were made by groups of merchants who required both regular interest payments on the debt and special advantages. The monopolist East India Company, South Sea Company and Bank of England are of this type.

19th/20th January 1793

According to statistical information from Cadiz and Lisbon, the annual import of gold and silver into Spain from South America averages 5 million ounces (140 tons) of which one million is re-exported to England in return for our manufactures (we only buy wine, fruit and salt from Spain so the trade balance is in our favour).

Sat 20th April 1793

Pitt’s Bill for Reduction of the National Debt completed its fourth quarter of operation on 1st August 1792. £9,441,850 has been redeemed by the Sinking Fund by the following purchases – 5% consols £3,286,800; reduced 5% consols £2,896,200; Old South Sea paper £1,626,550, New South Sea paper £1,250,300 and South Sea 1791 debt £382,000 = £9,441,850.

About £¾ million was redeemed from increased revenue without recourse to new taxation. Ministers are sensible to the needs of the poor and determined to cultivate the arts of peace. The London Press Editors expect further substantial relief from taxes and from debt.[4]

Sat 8th June 1793

In a debate on the Aliens Bill in the Lords, Lansdowne notes businessmen say the country is flourishing but wealth rests on the issue of paper notes by country bankers which, he said, will become worthless the day war is declared.

Sat 17th Aug 1793

The Commons has approved a loan of £2,850,000 for the present emergency. The public revenue exceeds expenditure and the flourishing state of our naval power and commerce assure the bankers of repayment.

Sat 14th September 1793

The shipping has brought vague news to Bombay of a commercial crisis in England. Several mercantile houses have failed, their credit is suspended and the predictable knock-on effects will spread the problem. The cause is unidentified but may relate to the stoppage of trade with France.

Sat 21st Sept 1793

Thornton MP, the banker,[5] has informed the Commons that the difficulty in converting goods into money has obliged many City merchants to stop payment. He says all these troubled parties have goods of greater value than their debts – they are not really insolvent, just short of cash. They must have cash advances on their goods to avoid a commercial crisis.

Another London merchant has identified 8 houses that he says are on the brink of failure.

Gilbert Innes of the Royal Bank of Scotland (RBS) says his country is in distress and if no assistance is forthcoming there will be several great failures in Scotland. At present there are 7,000 – 8,000 Scottish manufacturers without orders. The RBS has assisted them to the full extent of its capital and is no longer able to discount those Bills of long date that the London houses send to their correspondents in Scotland. Many manufacturers lent money on Bonds that will become payable at Whitsun but there is no cash available until then.[6] The factories have large inventories of stock and all they need is an advance secured on their raw materials. The Scottish bankers have reduced the circulation of paper money which excess was a contributing cause of the crisis.

MacDowal, the MP for Glasgow, says both commercial houses and banks in that city are in distress due to the stagnation of credit and the absence of confidence. He also traced the problem to the provincial banks whose notes had been returned to them for gold in such quantities that they were no longer able to discount them. The manufacturers could not recover by selling goods because sale prices had fallen below cost. Their preferred recourse was to commence discharging employees. The Scottish workforce is composed of about 160,000 men, women and children.

The Select Committee reports that these difficulties result from speculation by individual merchants and by commercial houses. If the government is to assist them, it must have ample security. Relief would be given to deserving and solvent businesses. The Select Committee’s recommendations to the Commons are:

  • £5 million in Exchequer Bills be issued for relief of commerce (i.e. the substitution of British national credit for the credit of the country banks).
  • Interest to be 2½d per day per cent or £3 per annum
  • (The Pound Sterling was composed of 20 shillings each of 12 pence and represented as £.s.d. An entry 5/6 = 5 shillings and sixpence)
  • The Bills to be in the amounts £20, £50 and £100 payable in August, November and May.

20 honorary Commissioners will constitute a Board and carry out the operation. They will employ officers to select the businesses suitable for relief. Merchants with goods in Liverpool, Hull, Bristol and Glasgow will qualify for relief as well as those with goods in London.

An immediate issue of £1.5 millions is available to commerce and the balance may be drawn-down as necessary. Should a merchant fail to pay, the goods that secure his receipt of Exchequer Bills will be sold at public auction to indemnify the government. All payments made before May and all merchant receipts from sales will be kept in the Bank of England and re-issued if expedient.

Sat 21st Sept 1793

In spite of recent commercial failures, the ministry says England is prosperous. Notwithstanding the minister’s view, a Commercial Credit Bill has been moved in the Commons to support mercantile credit. Our merchants have bought rather more than they can sell now the French market is closed to them. As their transactions are done with bank finance, they are paying interest on unsellable goods.

The Bill contains a proposal to issue Treasury Bills for a proportion of the value of goods pledged by the merchants as security for repayment of the Bills. The existence and value of pledged goods is to be checked by Commissioners appointed under the Bill.

All popular attempts to disturb the general tranquillity have been defeated by the ministry’s Declaration of War. It has stilled dissent and patriotism is pervading the country. The troublemakers have fallen back on political reform as their watchword.

Sat 21st Sept 1793

A Bill has been introduced for the renewal of the India Company’s Charter on terms proposed by the Select Committee of the Commons which are satisfactory to the Company’s directors. No objections were raised in parliament.

Sat 12th Oct 1793

British politicians are endeavouring to succour commerce. It now appears our domestic financial crisis was primarily created by speculative excesses of the country banks and only partly due to the loss of market in France.

The ministry has drawn attention to the value of prizes being brought into the country’s ports since declaration of war.

This windfall income enriches not only the brave seamen involved but percolates through the whole country to enrich us all.

Sat 9th Nov 1793

The Commercial Credit Act is relieving businessmen of financial difficulty. The Commissioners have extended the protection of the Act to permit government loans to several Bills Agencies who have no goods as security.[7]

These Agencies trade in paper on the Royal Exchange. They are invited to participate in the government loans provided they give bonds for repayment, up to £100,000, whereupon they get the funding necessary to meet their acceptances.

The Committee for Commercial Affairs in Manchester has reassured its members that paying by 90-day Bills is acceptable so long as they pay interest.

Sat 16th Nov 1793

London papers: The late commercial failures are unconnected with the war with France but – like the failures of 1773, 1784 and 1788 – are due to excessive circulation of paper money.[8] The stoppage of trade with France played only a minor part; mainly it was due to speculation.

Sat 1st Mar 1794

$572,252 in gold and $18,000,000 in silver was coined in the capital city of Mexico last year (1792). This excludes both the money coined in Peru and the bullion sent to Spain in bars. The coin is remitted to every country of Europe that trades with Spain in settlement of their mercantile accounts.

It is the Spanish merchants of Mexico who conduct this trade and who have never, even in war, reneged on their agreements.

It is an unparalleled instance of national honour being maintained by private individuals.

Sat 29th March 1794

London news: 3% consols are at 75 which is considered very good for wartime.


The following article on the French social contract may appear to have been mis-filed and it certainly also appears in the Political Management chapter but is included here because it reveals the economic basis to British objections to the French Revolution – the British principles argument – as mentioned in the foot note.

Sat 24th May 1794

Summary of the Declaration of the Natural, Civil and Political Rights of Man. These are liberty, equality, security, property, the social guarantee and relief from oppression. These rights form the basis of the social compact and underpin the French Constitution:

  • Liberty is the ability to do anything that does not diminish the rights of others. It requires submission to law based on the general will. Whatever is not proscribed is allowed. Everyman can express his own thoughts and opinions. The Liberty of the Press cannot be limited. Every citizen is free in the exercise of his religion.
  • Equality is the enjoyment of all these rights by all citizens equally. The law must be equal whether it rewards or punishes, whether it protects o oppresses. All people have the right of access to all public places, employments and functions. Instead of preference there may only be talents and virtues.[9]
  • Property rights allow everyman to control his capital, revenue and industry. No type of commercial activity may be forbidden to him. Everyman may sell his services but no man may sell himself. No property may be taken from another without his consent. In cases of public necessity, full indemnity must be provided. Tax must be applied to the general utility and to supply public wants and to no other purpose. All citizens have a right to concur personally in the extent of their contributions.
  • Security is the protection of every citizen – of his life, property and rights. No-one may be arrested, detained, accused or tried except in conformity with law and in the prescribed forms. All other police action is null. Those promoting null police acts are themselves culpable. Citizens exposed to nugatory police acts may resist and offer force against force. Every citizen restrained by legal process must submit. The enforcement officers may use only such force as is necessary to achieve their ends. Every man is presumed innocent until found guilty. No law may be applied retrospectively. Punishments will be proportioned to the offence. They should benefit society.
  • Social Guarantee: Education is a right of all citizens. Public welfare is characteristic of society and the law determines its extent and application. The social guarantee of these rights rest on national sovereignty which is indivisible and inalienable. It resides in the whole population and every citizen has an equal right to concur in the exercise of it. No individual or group of individuals can arrogate sovereignty or authority without being formally delegated such powers. The social guarantee relies on the law precisely limiting the extent of public functions. The law assures the responsibility of all public functionaries. All citizens are bound to concur in this guarantee and to uphold the law whenever called upon to do so.
  • Relief from oppression: Men in society ought to have the means to resist oppression. Oppression is when the law violates the natural, civil or political rights listed above. Oppression is when the public functionaries violate law. Oppression is when arbitrary acts violate the rights of citizens. Resistance to oppression is legal and will be regulated by law.

The constitution may be revised by citizens.

One generation may not subject future generations to its laws.

All hereditary offices and functions are categorised as tyrannical.

Sat 21st June 1794

On 14th March the 3% consols were 67-7/8ths to 66-5/8ths; India bonds 17/- premium; Bank of England and India Company shares were not traded.

Sat 28th June 1794

London news:

Government expenditure for the present year is estimated at £11 millions. It will be raised from an issue of annuities (raised on securitised government debt) and the revenue on spirits, bricks & tiles, paper, glass and the new lawyers fee. Lawyers’ clerks will also have a stamp duty of £50 – £100 put on their employment contracts.

Sat 5th July 1794

A merchant bank in London has received a claim from its French correspondent to repay a £26,000 investment in British funds by one of its constituents. This is in pursuit of the recent Decree of the National Convention calling-in all French property in foreign hands.

Pitt has been apprised and says the bank should keep the money for the time being.

A retaliatory Bill presently passing through the Commons will legalise the retention of French property in cases like this. On its enactment, any payment of cash to French holders of British stock made after 1st Jan 1794 will be deemed treasonous. Any shipments of goods is also punishable. Receipt of a Bill of Exchange or Draft merits a forfeit of double the face value of the Bill under this new law.

Sat 12th July 1794

Chancellor Pitt has presented his budget. The votes and estimates have already been seen by MPs. He says the resources he requires are imperatively needed:

You have approved 85,000 men for the navy at last sessions and we are now within 10,000 men of that target.

Our army has been doubled from 30,000 to 60,000 men by the employment of 30,000 – 40,000 foreign mercenaries. We have increased the manpower of our Ordnance by 5,000 men. The whole amount of British force is now 250,000 men.

The effect on our expenditure has been considerable. It totals £19,940,000 of which £5,525,000 is for the navy, £6,340,000 for the army and £1,345,000 for the Ordnance.

We have also bought a large amount of foreign grain.

The deficiency of revenue has increased. The land tax is short £474,000, the malt tax is short £350,000 and the shortfall in reduction of national debt is £200,000.

Having established his spending requirement, Pitt addressed the means of funding it:[10]

He proposed to borrow the shortfall by issue of £5½ millions in Exchequer Bills, same as last year, which will be exchanged with Bank of England for Bills of Exchange (bank-notes).

He is averse to raising funds through the usual City bankers, who have ringed the ministry’s attempts at loans and demanded a percentage ‘discount’ for their assistance in issuing and selling loan paper. This had made the sale of government bonds to secure loans more expensive.

The India Company is donating £½ million to government although its resources are circumscribed this year. With other income, this led him to assess necessary borrowing at £11 million.

Pitt had negotiated with five smaller bankers and concluded a deal whereby for every £100 loaned he would give £100 of the 3% consols, currently worth £67.10.0 at market; plus £25 of the 4% consols, currently worth £21.0.0 and a long annuity of 11/5d at 20 years (1/8th of a year’s purchase) worth £11.9.9. The three totalled £99.19.9 and thus enabled the country to make an instant 3d profit on every £100 borrowed, so he said.

He proposed to cancel the tax on gloves[11] and the duties on births and burials. He proposed to increase taxes on alcohol. The French have prohibited the export of brandy and even smuggling is stopped. He proposed 1d on home distilled alcohol, 10d on brandy and 8d on rum. He expected this to produce £243,000. The second increase is on bricks 2/6d per mille and tiles at 6d per mille. The third increase is on stones 2/2d per ton and slate 10/- per ton. The next is on glass and paper.

Then there is the tax on prospective lawyers – £100 for the Articles of Indenture.

The gross income from land and malt will be £2,750,000; from agriculture (sugar imports, etc) £2,697,000; from the loan £11,000,000 and from Exchequer Bills £3,500,000 (nett). Interest on the loan would be £650,000 pa which would be met by the tax increases.

Fox objected to the tax on sugar but generally approved. Passed.

Sat 20th Sept 1794

London news:

  • Chancellor Pitt said he wanted to revise the terms for leases of Crown Lands. They were let at a low rent for 50 years. He wanted a better return and that required a 99 year term. Fox said they should be sold. Pitt preferred regulated management.
  • Pitt also said there was a balance of £230,000 brought forward from the 1793 account for use in 1794. The surplus derived mainly from unexpected revenue in the last quarter of 1793. It was one of the highest excesses ever recorded, even in peace time, he said, and evidenced that the British economy was doing well.

Sat 25th Oct 1794

Trade is recovering. The £1½ millions of share capital put up for sale by the India Company attracted £18 millions to East Indian trade last year.

Sat 8th Nov 1794

According to the Leiden Gazette of 24th June 1794 the British 3% consols, that barometer of public credit, stood at 70-5/8ths.

Sat 8th Nov 1794

The war has caused disruption of supplies to British manufacturers and merchants but the threat to our national prosperity is diminished by the capture of the French West Indian islands and the induction of Corsica into the British Empire, the productions of which countries will now come to us.[12]

Sat 31st Jan 1795

On 22nd July the returning West India fleet of 75 merchant vessels arrived at Portsmouth.

Sat 31st Jan 1795

3% consols are at 67½.

Sat 7th Feb 1795

A policy of insurance was passing around Lloyd’s coffee shop on 28th July 1794 drafted on behalf of Mr Angerstein, the banker, and soliciting underwriters. It insures the safety of Rotterdam until 1st March 1795 at a gross premium of 12 guineas per cent.

Sat 28th Feb 1795

About £100,000 in forged £10 and £20 bank-notes have been discovered at the Bank of England.

Sat 28th Feb 1795

3% consols were trading at 64 on 14th Oct 1794.

Sat 14th Mar 1795

Apart from the aim of changing the French government, there are important British commercial advantages from continuing war:

  • The manufacture of linen in the Netherlands has been disrupted by war. The linen supply from Russia is disrupted due to both the troubles in Poland and the uncertainty of navigation in the Baltic. Irish manufacturers are the beneficiaries. Their linen industry is expanding.
  • The destruction of the silk manufactories of Lyon has caused the re-opening of the old English silk manufacturing in London. The poor weavers of Spitalfields are again in full employment.
  • Its the same with woollen goods. The Dutch and Flemish manufacturers are deterred by war from operating and the demand has fallen entirely on English manufacturers.
  • Not only that but we now monopolise the trade in colonial productions – sugar, cotton, tea, indigo – which all come to London merchants before re-export. War is good for British business.

Sat 21st March 1795

The war in Europe is causing increased demand for English manufactures and is consequently producing an influx of wealth into the country.

The Hope family of Amsterdam, the great Dutch / Scottish bankers, has arrived in England bringing with them their movable property. Last August Hope & Co took out a policy with Lloyd’s to cover the transit from Holland to England of £1 million of jewels. The broker is getting a premium of 1 guinea per cent (A Guinea is a gold coin valued at 21/-. By indicating his premium in Guineas the broker expects payment in gold)

Sat 21st March 1795

A General Court Of the East India Company was held in East India House on 8th Oct 1794. Devaynes was chairman:

Lushington told the meeting, which was well attended, that the war is to maintain our property-rights system. Lushington was ready to contribute part of his own property to the contest.

Fitzgerald said the Company had become substantially more profitable and proposed it make a big interest-free loan to government.

Henchman said a loan to government would be better use of the money than the proposed new Courts of Justice at Bombay and Madras. He thought the Company should raise new regiments for the King. He proposed a committee of six shareholders (all lawyers) study the matter and report.

The barrister Randle Jackson said it was the Company’s financial support which, of itself, raised the Bank of England so high in public estimation. We can easily raise and maintain three new regiments right now.

Francis Baring said giving money to government is of doubtful propriety – last year we had to go to parliament to do it and it is possible Government will have to forego the £500,000 we gave then. The deficiencies must be carried forward year after year.[13]

Princep proposed the company pay only 8% dividend to the shareholders per annum and give the balance from the increase they were allowed (10½% – 8% = 2½%) to government.

David Scott said the Company was actually short of cash (the new profits from Tippoo’s lands in Malabar are still documentary – see the Asia chapter) but it has not yet started to borrow any of the money that it is allowed to borrow.

Twining thought involving lawyers at this stage derogated from the spirit of the offer. He wanted to raise three regiments first and see how to pay for them afterwards. Serjeant Watson agreed. He said the shareholders could be induced to instantly subscribe an indemnification, as in 1780 when the court had voted three warships to government.[14]

Bentley was for raising new money by a bond issue.

The Lord Mayor wanted an instant decision. Any delay and we might be too late to raise men to defend India House and the Company’s warehouses, which he was sure would be amongst the first objects of destruction in any invasion. Serjeant Watson’s proposal (for three regiments) was then voted and passed unanimously.

Sat 11th April 1795

A General Meeting of Shareholders of the India Company has been held to discuss and approve the Directors’ proposed donation to the nation. Either the Company will pay £500,000 cash or raise three new regiments for the government free of charge:

Shareholder Collins of Salisbury said that public patriotism should not be the instrument of private injustice. He said the war is ruinous and unfortunate. He thought any donation to government would hazard the dividend and encourage ministers to keep fighting. He asked the Directors to state clearly if the Company could afford the donation. He noted those shareholders who are peers and great men had not commented publicly on the proceedings. Collins resented Pitt’s party requisitioning private property for its own ends.

Lushington said he was independent of Pitt’s ministry. He had proposed the donation as he thought the Company’s and country’s interests were the same as the ministry’s. He had proved his zealous concern for the Company by the volume of work he had done at Charter renewal. He had amended his proposal in light of lawyer Randle Jackson’s comments and he moved that the amended Address be sent to the King. Jackson Barvis seconded.

Serjeants Adair and Rous (both lawyers) thought the Address illegal. The Attorney General and Solicitor General withheld their legal opinions out of delicacy.

Sir Francis Baring was opposed to mixing partisan politics with commerce. He thought, regardless of legality, the donation was insupportable as the Company’s finances were inadequate. The effect of this proposal must be a fall in the stock price. He said the King could legally grant the Company authority to raise only 2,000 men in time of war. The Company’s army officers in India were discontented by the proposal. The officers appointed to the three proposed regiments would ultimately return to India and compete for rank with men who had spent their whole lives there. If the Company sought to increase taxes on its imports to India to pay for the donated force, it risked its markets by encouraging smuggling. He thought Directors should act in accordance with the wishes of the shareholders, many of whom were clearly opposed to this measure.

Serjeant Watson disagreed with everything Baring had said. This was not a matter of party or politics. The French system of government was a threat to the Company. He agreed war was ruinous but thought, as we need to preserve what we have, that England has no alternative but to try and prevail. We have to pay whatever it costs to achieve that result. It may be illegal but co-operation with the minister is fundamentally important and this is what Lushington is saying. And Watson warned the attendees that if they refused the donation, it might contribute to the death of the Company.

The barrister, Jones Adair, said he opposed the donation and he had all along been frank and straightforward in his reasons. He was not trying to influence people by clever advocacy.[15] Adair thought it very appropriate for the Company to give some evidence of its loyalty to the King and love of the Constitution but it should strictly follow the law. The declinations of both the Attorney General and Solicitor General to give opinions was the clearest indication of the Company’s legal position. Adair opposed putting the Directors in the position of evading the law and perhaps having to defend themselves against shareholders in Court.

Serjeant Watson said the Address was prospective. It says what we wish to do not what we will do. The King is not obliged to accept it.

Director David Scott said the nit-picking legal points were trifling. He thought the company was in fine shape and substantially profitable. The fluctuations in share price recently had been due to the stock-brokers manipulating the market – there was no real concern for the Company’s profitability. Some country friends had written to him asking what effect the donation would have on the dividend and he had replied in writing that he had no doubt the dividend would only increase in his lifetime. As regards the morale of the Company’s army officers, Cornwallis had long been finalising an arrangement with government which would completely satisfy them.

Francis Baring insisted the donation was a partisan political initiative, unsuitable for a commercial house to be involved in. Randle Jackson insisted it was not. Ultimately Lushington proposed the Directors raise the three regiments and present the Address to the King. Baring wished personally to be excepted from the decision.

Sat 25th April 1795

The torrent of wealth fleeing from the Netherlands to London, and the improved prospects for peace, have caused 3% consols in London to rise 2%.[16]

Saturday, 13th June 1795

George III has commended the legislature that war be prosecuted with greater vigour. The ministry has secured a war loan of £24 millions. Pitt proposes to pay Prussia and Austria £6 millions each for a quota of troops for the coming season.

Extraordinary edition, Tues 16th June 1795

A £24 million loan was approved in the Commons and was immediately fully subscribed by 12th December by several City bankers on terms satisfactory to the ministry.

Extraordinary edition, Tues 16th June 1795

The War Loan, 16th December 1794:

It is formally £18 millions for Britain (including £6 millions for Prussia if she can be persuaded to continue the fight) plus another £6 millions for the Austrian Emperor, totally £24 millions. The dividends on the Emperor’s share and the annuities are to be guaranteed by parliament but not the Prussian subsidy in view of the loan history.

For each £400 subscribed the bankers get 3% consols worth £300 at market; 4% consols with a market value of £100 and £1.5s.6d in long annuities. For the Imperial subscription, the bankers get 3% consols worth £83.6.8d plus £5 annually for 25 years.

If MPs do not approve the Austrian loan, only £18 millions will be borrowed, for every £300 of which the bankers get 3% Consols on £100, 4%s on $33.6.8d and 12/6d in long annuities (the published figures are incorrect). The bankers making this agreement with Pitt are:

M/s B & A Goldsmid, Boyd Benfield & Co, Abraham Robarts & Co (part of Walter Boyd’s consortium and a brother-in-law of George Tierney), Peter Thelluson (Huguenot, Director of Bank of England), Thelluson Brothers Co, George Ward, E P Solomons, Rawson Aislabie. These eight preferred bankers have many of the famous banking names in their lists of sub-contractors – Smith Payne Smith & Co, Sir Richard Carr Glynn, Joseph Dennison and others.[17]

Sat 27th June 1795

The Company’s London sales commenced in January. The auctions were not proceeding well until Swiss orders on French account pushed-up prices 10%. The French are obliged to send specie to all the neutral ports to obtain those necessaries that they do not produce at home – sugar, coffee, cotton, tobacco.

Surat cotton started at 11d per pound then, with receipt of the continental orders, improved to 13d. Some fine qualities even sold at 14d.

Sat 27th June 1795

The Commons have debated the supplies required by the King for war. Pitt was absent from the chamber. Sheridan criticised Pitt for his absence and for negotiating the £6 million loan for Austria without parliamentary approval. Steele said the loan was in the form of a subsidiary treaty which Pitt had agreed but would not be ratified until the Commons has approved it. Fox thought it bad. Francis said the loan had not been raised by competitive bid; Pitt had intentionally kept the public away from it.[18] Sheridan insisted Pitt come to the House and explain his acts. The loans history with Prussia required any new loan be rigorously examined. Pitt soon arrived.

He recalled the House had agreed to grant the supply to the King but the amount had not been fixed. He had offered the Emperor a loan sufficient to pay the troops he would contribute to the joint effort. He expected to get the Emperor’s agreement and he had no doubt that the Emperor would perform. Discussions with the money-men were tentative and provisional and only a conditional agreement had been reached. Parliament is not yet bound by such an agreement.

Fox was not satisfied. Some MPs are corruptly involved in the loan, he said. He feared that the stock price of the Consols securing the loan would fluctuate and injure those patriotic members of the public who invested in government paper. He suspected the price of the funds might vary between the time of the loan agreement and the time of parliamentary approval,[19] and he suspected impropriety.

Pitt said he wished to separate the guarantee that the country would have to give under the Austrian loan from the budget he was shortly to present. He would be ready to debate the loan on 21st once he had assured himself that the services being purchased from Austria were appropriate to the war aims of England. This was why he had started negotiations earlier this year. Pitt was confident that the stock price would be firm and the investors’ return better than if the loan were raised under a peace at this time. Peace normally enhances stock values but a peace today would distress them, he thought.

Pitt would not make peace with France under its present government. He would watch and see how they performed. The best option would be a restoration of the French monarchy – he could make peace with a Bourbon King.

Fox thought that any operations with the Austrians would not be compatible with the vigorous prosecution of the war that had been agreed. He proposed instead an increased navy. Many agreed. The motion was put, the supply approved and the amendments negatived.

Sat 25th July 1795

The Commons has continued to debate the loan to Austria. Fox said the Emperor’s credit is bad. He came to the City for funds, offered his hereditary lands (the Kingdom of Hungary) and 7½% premium and got no takers. The bankers of the City are prudent men. Why had he not sought to raise funds through his own Bank of Vienna? Now Pitt says ‘the City did not accept, but I will’. Not only that, but he is giving Austria better terms – a discount of 2½% on the cost of funds.[20]

Fox thought all Europe would come for our money. Prussia we might query but Spain would be interested and would soon be queuing ‘cap in hand’.

He recalled Prussian soldiers had mutinied in Belgium rather than serve under British officers. He thought the Austrians might be the same. The Duke of York is convinced that no impression can be made on the French by land forces.

Fox reiterated that if the money was spent on the navy it would give a much better return. The Emperor’s request for a loan is suspicious and doubtful. He is involving us in his future problems not us involving him in our present one.

Sat 11th July 1795

Pitt’s budget proposals for 1795 contain an imaginative item – a tax of one guinea a year on powdered heads, male or female.

Tues 27th Oct 1795 – Extraordinary

The British parliament has enacted an authority for the India Company to charter ships built in British colonies to carry home the annual trade (formerly the Company was confined to the use of British-built ships to support the ship-building and repairing industry in the Thames).

The financial world of the City of London is doing well. 3% Consols were 68 and India stock has reached 200.

Sat 12th Dec 1795

The Select Committee (members unidentified) considering the relief of Grenada and St Vincents has reported that the owners and managers of British plantations in those islands were necessarily absent at harvest time in 1794 and their crops, their buildings, etc., had all been destroyed by the slaves.[21]

Most of this year’s production was lost and next year’s would be reduced. The Committee calculated that the loss of remittances plus the costs of restoring the plantations was £600,000 – 700,000 from each island = £1.2 to £1.4 millions.

The West Indian planters had as usual pledged their income from the crop to pay-off their City bank creditors. Without this year’s income, their problem has become our problem. They needed £1.2 – £1.4 millions to pay-off the banks and maintain their credit.

The banks at present have plenty of money but they are only lending for 2-3 months and then to selected creditors with the best security. The banks would not provide the requested relief which the petitioners consequently sought from the people.

The Select Committee recommended relief for the banks.

Sat 26th Dec 1795

According to Calcutta papers the Company has been permitted to ship Bengal grain to London duty free in whatever ships are available. The offer requires departure Indian port before 30th April 1796. The irresistible temptation to speculators in India is the linked permission on the return leg to bring back British merchandise of any type (except war materiel).

Since 1790 wheat in England has been worth an average 45/- to 50/- per 70 lb bushel but in July 1795 the price had risen to 80/- (triggering the exception in the Corn Laws). At the same time the London price of rice, which had averaged 15/- – 16/- per cwt (112 lbs), rose to 38/- per cwt.

Sat 26th Dec 1795

Government loan paper in London is rising. In July the 3% consols were 71½ and India stock was 202. There is uncertainty why stocks are rising. Brokers variously attribute it to an inflow of funds from Europe, to our recent naval victories, to the impending safe arrival of the East India fleet, to the disturbed state of the continent pursuant on the war and, contrarily, to the prospect of peace.

Sat 16th Jan 1796

The military war in Europe has gone badly but the commercial war in the colonies is progressing satisfactorily. A fleet of 300 merchantmen has arrived at London in July 1795 from West Indies bringing sugar, coffee, etc. The India and China fleets have also safely arrived in the Channel. England now engrosses the preponderance of colonial productions and brings it to London to be taxed before export to the rest of the world.

Sat 11th June 1796

Monday 7th December 1795 – George III has advised the House of Commons that he intends to apply his share of the nett proceeds of the sale of the Dutch prizes to the British public service (the fleet which the Stadtholder brought with him to England which is considered as a droit of the crown). Pitt has drafted a ‘thank you note’ to the King for House of Commons approval.[22]

Pitt presented his financial forecasts to the House of Commons the same day. He said it was difficult to make estimates early in the session that are sufficiently clear to enable members to apprise their constituents of the amount of tax we require from them. However he did not want to delay as prospective French bankruptcy allowed for the possibility of peace. He thought if Britain could fight for another year, we would prevail.

The ordinary expenses of the navy are £3.7 millions a year; repairs are £1.3 millions; 10,000 extra seamen this year costs £757,000 = £7 millions.

The army costs £6.1 millions. Last year we allowed £1 million too much for foreign troops. The émigrés only cost us £427,000. Extraordinary items totalled £2.6 millions. Money (promised subsidies of £350,000) for the treaty with Sardinia had not yet been voted. The army will cost £6 millions this year and will be a saving of £1.3 millions on last year.

The ordnance costs £1.7 millions. Miscellaneous expenses (money given to the French émigré clergy, costs of the prosecutors at Warren Hasting’s trial, secret service money) were £360,000 which exceeded the estimate by £150,000 due to increased amount of douceurs payable.

Government replaced £3.5 millions of the total of £6 millions in Exchequer Bills. An additional £200,000 was earmarked for reduction of the National Debt.

Last year he asked for a loan of £18 millions. The figure was increased because the repayment of a loan due from the Company was known to be less than expected. Taxes produced £19 millions. £400,000 should have been paid to the Emperor’s General in the Low Countries but actually £550,000 was required. This formed part of the deficiencies which totalled £2.3 millions.

The funds available for next year will be £27.7 millions excluding £2 millions of Exchequer Bills. The land and malt taxes will provide £2.5 millions; Exchequer Bills £200,000; annual interest receivable on the Consolidated Fund is £220,000. The revenue at beginning of last year was £14 millions which is more than we actually raised during the year. Permanent charges are £11 millions.

The Dutch prizes had been taken before war was declared against the Netherlands. The seizures were therefore not prizes but droits of the Crown. The King kindly permits the nett value to be applied to the public service. Nevertheless, it is government’s intention to reward the prize-takers. There should be a balance of about £1 million which will increase the Sinking Fund to £3.595 millions.

£1 million was voted last year for this year’s expenses. Interest payable on loans was £1.8 millions. This interest secured a fund to fight the war for a whole year if necessary. The navy debt had greatly increased due primarily to increased cost of transports hired for troop movements.[23] It exceeded the estimate last year by £1.5 millions. Chartering the Company’s ships for King’s service on the West Indian expedition had cost £2.5 millions in 1795 but would not occur again.

Extraordinaries connected with the campaigns in the low country would not be repeated. This year extraordinaries will be about £2 millions. Bounties payable to merchants for the import of grain would be about £1 million. Thus extraordinaries would be less than £5 millions this year.

The lottery produced a profit of £300,000 a year. British colonists in America (the loyalists) had formerly received some part of the lottery profits but they would get no more.

In sum the estimated expenses (in £ millions) for the coming year are:



Army extraordinaries


Exchequer Bills

Deficiency of grants

Émigré army

Sardinian subsidy

Debt to Austrian General

Grain bounty


Sinking Fund

















Sat 11th June 1796

Pitt has negotiated a loan of £18 million at 4⅔% interest. He reserves one percent to the Sinking Fund. That will produce £1.1 millions to the Sinking Fund annually.

Several new taxes will be applied and old ones increased – to Estates on death of the owner; rates assessments will be increased 10%; a new tax on all horses and a double tax on horses kept solely for recreation; increased tax on tobacco, salt and printed cottons; the grain bounties would be reduced as would the allowed drawback on re-export of sugar.

The Estate duty is copied from Holland. It will start at 1 – 2% on all legacies depending on the nature of the relationship between the parties. Residuary legacies will be between 2-4% between first cousins or 4-6% between strangers – it all depends on the relationship.

Pitt’s calculated value of British landed property is £25 millions (some zeroes missing here?); its annual rental value at 28 years purchase is £760 millions;[25] personal property is valued at £600 millions; the total is £1.3 billion. The value of legacies should be £32.5 millions on which the tax collected will be £300,000.

A general 10% increase in rates will produce £140,000.

Horses for fun are already taxed 10/- each a year. In future anyone with six or more will pay double. Owners of the 1,000,000 working horses will pay 2/- per annum on each. Farmers have had a very profitable year and can well afford it. Together with the double tax, this will produce over £300,000.

Tobacco tax will be increased 4d per pound producing £170,000. Tax on printed cottons will rise from 3½d per yard to 6d producing £135,000. The salt tax is worth £32,000 (NB – this should probably be £320,000). A cut in the drawback allowed on sugar exports will save £180,000. The total of new taxes will be over £1 million.

Sat 11th June 1796

Morgan, the banker, has petitioned parliament for access to government loans business. Pitt said he has not yet paid-off last year’s loan and could not expose those lenders to unqualified competition. He declined to open the market.

Extraordinary, Sun 7th Aug 1796

The Laurel has arrived at Bombay from Basra with despatches for government dated up to 19th April. She has continental newspapers to 12th April and London papers to 26th March.[26]

The India Company has agreed to supply government with 3,000 seamen at 35 guineas per head.

Sat 20th Aug 1796

A Legacy Bill has been introduced by Pitt. Every bequest of £20+ is subject to a tax of 2% – 6% depending on the relationship between the parties.

Sat 20th Aug 1796

Letter from London – The capture of the Dutch colonies and our assumption of a monopoly control of the pepper, sugar, indigo, cotton and spice trades has opened new business opportunities in India and will enrich the Company’s sales in London next year. London has become the entrepot for all Europe.

Cotton from West Indies has been in short supply recently due to the slave revolt. The Company has been selling its finest Surat (the Ahmood cotton) for 20d per lb. The inferior qualities are also selling satisfactorily at 16 – 18d per lb. Pepper is oversupplied in London and has fallen to 14d per lb. Sugar likewise is down at 60/- per cwt. The Company’s recent sale of Indian saltpetre at 95/- per cwt was very cheap but the price is now recovering. Indigo is oversupplied for inferior qualities which are selling at 2/- to 3/- per lb. The good quality is holding up at 9/6d. The Company has such huge supplies it dominates the indigo market. Bengal piecegoods are unchanged except muslins which are in demand.

The Company has chartered an extra 40 ships this year and will take more – shipping is the only thing limiting its trading opportunities.

Sat 3rd Sept 1796

London, 29th March – The shortage of money for commerce and industry in London that became apparent in mid February has been attributed to activities on the Stock Exchange. A group of speculators stimulated prices by repeated daily purchases and the funds were driven up substantially. These speculators are all involved in foreign trade and operate on its security.[27] They pay interest equivalent to annual rates of 20 – 30% on the loans they raise for stock investment. The banks are delighted at the good returns and prefer to loan to the speculators than to the real producers of wealth who offer only the market rate of interest. The money available to genuine business is consequently reduced as banks increasingly divert their surplus funds into the Royal Exchange. The distress of mercantile credit has consequently extended through the economy.

These speculators seem to know a secret – whether there is really a prospect of early peace.

A committee of London merchants met at the London Tavern on 5th April to discuss this funding difficulty. They agreed to interview Pitt. The committee comprises Alderman Lushington, Alderman Anderson, the merchants Inglis and Saunderson, and the bankers Boyd and Angerstein. The subsequent interview with Pitt lasted 90 minutes.

They say the greatly extended national trade and the reduced availability of bank paper has made all normal business more difficult. They attribute the present constriction of the money-go-round to the daily limit the Bank of England has placed on the amount of money it sets aside for discounting Bills. It has narrowed its discounts generally to the proportion of 5% of the Bills sent in, even when the security underlying the Bills is unquestionable.[28]

The committee suggested a paper currency, like the French, should be issued for a limited time (less than one year), under the sanction of parliament and controlled by 25 Commissioners. The paper money should be payable at sight or bear interest as the holder prefers. They think this will relieve the Bank of its temporary shortage. Having made their proposal, the meeting was mainly spent discussing the state of the public credit (which was secret and not reported) and we only know that Pitt said he would consider their request. The committee told Pitt it was high time he interfered to accommodate trade.

Extraordinary, Sun 7th Aug 1796

London 12th April – Money has been very plentiful until this last two months when it became scarce. Our experience has been that each time the continuance of war is in doubt, money becomes scarce.

The French government has determined not to make peace without retaining her new defensible frontiers.

Wheat in London has fallen from 120/- to 66/- per quarter (28 lbs). This will cause the speculative suppliers of wheat and rice from India to lose hugely.

Sat 10th Sept 1796

Pitt has agreed another loan with the City bankers for £7½ millions.

Sat 24th Sept 1796

London – The complaints of the merchants against Pitt’s tax on calicoes have been heard. He has abandoned the proposed tax to preserve the merchants’ businesses. He will instead raise a tax on ownership of dogs and the use of carriages on turnpikes. These taxes both target the wealthy.

A parliamentary committee has been formed to check why money has become so scarce. The Bank of England has inadequate supply of bullion to instantly meet all the Bills being presented. The Committee has interviewed Pitt and agreed to call a general meeting of London merchants to glean their views. The tentative proposal is to issue paper money, à la France, redeemable at 6 months Sight with interest, or for cash instantly without interest. It will pay £1.18.0d per £100 in interest for the six months (3¾%). By setting the validity at 6 months, the new notes will not contravene the terms of the Bank Charter Act. If the merchants are agreeable, the new money could be issued very soon.

Sat 15th Oct 1796

Pitt said he had received advice on the present disposition of the French Directorate. The recent reductions of resources we apply to the war will hint at the nature of the opinions received. He would now reveal the true position of British finances to console our people and confound our enemies.

He had been obliged to cancel the proposed tax on cotton goods, which would have produced £135,000, as it entailed hardship on the merchants. The amount will be raised from an alternative tax on dogs which would produce £100,000 and by tightening enforcement of the tax on wearing hats which had initially produced £100,000 and now produced £6,000. This amendment will increase collections from wearers of hats to £40,000.

He also spoke of the increased costs of war and the means of funding it.

The extra ‘extraordinaries’ of the army this year were £1.3 millions. The House had already voted £2.5 millions for ‘extraordinaries’ and it should suffice.

Annual interest on the navy debt is £1.64 millions. The debt was £10.35 million at end 1795 and is reportedly £6.7 millions now. The big debt in 1795 was due to the costs of many East India Company ships that were chartered to the Royal Navy that year as transports for our expedition to West Indies. It will increase because extra expenses are foreseeable. The delay of the West Indian expedition cost £1.5 millions. These combined had added £4 millions to the navy debt to which interest would apply.

The City bankers require him to take some £3.5 millions of paper money out of the market to support public credit or they will add 2½% on the interest payments they require.

In the last budget, annual interest to service the national debt was estimated at £19 millions but only £18 millions had been needed. He would leave the extra million Pounds with the Bank of England for commercial use to mitigate any distress due to the deflationary requirements of government creditors.

The last budget contained £1 million for bounties payable to people bringing shipments of grain (paid largely to the India Company). Now there is plenty of grain in England and a good harvest is expected – the planned national reserve of one million quarters (1 Quarter = 28 lbs) of grain was no longer necessary; 300,000 quarters will be adequate. Most of it will come from the stores taken in prize during our recent acquisitions of Dutch Eastern colonies. Our commercial fortunes will be assured if we can retain these acquisitions in the peace.[29] The bounty of £1 per quarter of grain imported actually might be totally withdrawn as the India Company would raise the necessary money from public participation in its revenues.[30] He therefore retracted his request for the entire amount voted.

The Bank of England has £500,000 in Exchequer Bills. It would prefer to have cash. Government will provide the Bank with £500,000 in cash and £7 millions of Exchequer and other Bills for sale in the market.

Pitt noted this part of his budget was connected with the national cash shortage. The cause might relate to the large subsidies paid in specie to Europe.

He explained to MPs the difference between funded and unfunded debt and their effects on general credit. He said funded debt was based on the inactive capital of the nation at large and its use had no deleterious effects whereas unfunded debt related solely to London and the capital market there. It was secured on a new asset – the value of ships and goods overseas and balances held by British merchants outside the country. This is exposed to fluctuations, speculation and general variations in credit. It was the excessive use of unfunded debt that had created the recent cash shortages by creating opportunities overseas to buy our gold / silver on the cheap.[31] This disabled the Bank from supplying credit at the usual rates of interest. By reducing unfunded and increasing funded debt by £7½ millions the difficulty would be overcome, he said. The additional interest payable on this arrangement would be £575,000 annually.

He expected £300,000 annual profits from the national lottery but he would need more to cover expenses. He suggested a further duty on wine of £20 per ton or 6d per bottle. A new tax usually causes a decrease in consumption of the article taxed but we made a similar increase in the wine tax last year and 30,000 tons were still imported which is an increase over prior years. It seems we can squeeze wine drinkers more. The additional tax will apply to new imports as well as wine already in stock.

Every £100 of the new loan will be comprised of:

£120 of 3% consols now valued at 67

£ 25 of 3% reduced consols now at 66

£ 9. 5s 6d of long annuities at 18½ years purchase


£ 80. 8s 0d

£ 16.10s 0d

£ 9. 1s 9d

£101.19s 9d

A discount of £4.14.0 will be allowed as a further sweetener to the banks.

So without giving up the option of a £3 million loan to the Emperor, we can also, “at a time when popular hopes for peace have been dashed by France,” raise a loan at a bonus of only £3. 6s 9d per cent. This reveals the very high level of credit that England has with the bankers.

Another proof of our secure finances is the state of public taxes which since the war have been £2.8 millions annually.

He had not included the national lottery profits or duties on public participation in the India Company’s investments which should produce £300,000 and £500,000 each.

Another expense was the increase of British exports. Loans for exports were ‘money in the bank’ but it took a little time for the profits to return to London. He noted that the interest rate on government borrowing was 1% less than in the previous war.

In forming a view of French prospects, Pitt thought that the French government had made two errors – they relied on the scarcity of food here which they assumed to be a permanent problem and they relied on the cash shortage which they confused with a shortage of credit. Pitt noted that the Mandats were already at an 82% discount to face value and he thought that better indicated the relative financial positions of the contending governments.

Charles Grey said the army was being paid in Exchequer Bills sent to the Colonels of regiments and they were incurring great losses on this mode of payment.

He noted that a new tax had been added in every year of Pitt’s ministry.

Fox said the mandats may have greatly depreciated but he had heard the minister saying not long ago that the assignats were an intolerable burden for France and the legislators had solved that problem, so he would keep his own counsel regarding the prospects of the mandats. The ministry repeatedly says France is on her last gasp but she continues to defeat us.

Fox noted Britain also had difficulties. The grain price is only now reducing but all other necessaries remain expensive. The war loan had not been raised competitively. Government is far in arrears on its day-to-day payments. The increase in our commerce which the minister mentioned, is a regular feature of all our recent wars, most particularly the American war.

Alderman Newnham complained that the new loan had been made by private treaty (he represents the City). He disliked Boyd getting a share when several respectable City gentlemen wanted a bit too.[32]

Pitt said he knew the people subscribing to the loan had particularly pressing reasons for doing so. It would have destroyed them if he had placed the loan elsewhere.

Sat 15th Oct 1796

Paris, La Critique – The ability of England to keep all Europe agitated derives from her possession of India. War is supported by specie. England obtains greater wealth from India than even Spain gets from Peru.

A secretary of Mr Hastings told me (the La Critique Editor) the British East India Company remits an average £13.75 millions annually from India to London. This enables the British ministry to buy food and subsidise armies.

It is inadequate for France to build new fleets to overthrow this Colossus unless we sail to Calcutta. That is the place to strike.

Sat 5th Nov 1796

The House of Commons debated the Dog Tax on 25th April:

The ministry itself uses dogs to maintain civil order. Now thousands of these animals will be killed by owners who cannot afford to pay. This Bill would disseminate violence amongst our people. Given the famine, surplus dogs will conceivably be eaten. What other ally would we treat in this way.

Pitt said a dog was a voluntary and luxurious expenditure, admirably suitable for taxing. It was not his intention to reduce the number of dogs but to increase the revenue. The annual tax would be 3/- on single dogs and 5/- on owners of more than one.

Wed 30th Nov 1796 Extraordinary

The 3% consols were 59 – 60 on 23rd August.

Sat 27th Jan 1798

The King’s Bench decision in Smith v Shepherd increases shipowners’ liabilities for losses at sea. Pitt had promised the shipowners’ lobby to move a Bill in the Commons to redress shipowners’ concerns and restore their former less-onerous liability but the King prorogued parliament early and the shipowners were left to act on their own.

They have met in the London Tavern and agreed to amend their Bills of Lading, which already provide a defence of ‘perils of the seas’ against cargo claims, and agreed to unilaterally enlarge this to ‘all and every dangers and accidents of the seas and of navigation of whatever kind’.

Sat 27th Jan 1798

The Company’s extraordinary bullion remittances to London to relieve the shortages at the Bank of England have left India short of cash too. It is a rare course of action for a commercial company:

The Company’s debt paper: Buy Sell
12% notes par 8% discount
3% notes 12% disc 14% disc
Company Bonds 14% disc 14.8% disc
6% notes 19% disc 19.8% disc

Sat 27th Jan 1798

The King has approved the new dies for minting gold guineas and half-guineas. They are dated 1797. A coinage of £150,000 will be minted immediately for delivery to Bank of England in October.

Sat 17th Feb 1798

Letter to the Governor-General of India from the Company’s Directors, 9th May 1797:

The 5% duty we charge on all types of gold imported to India is cancelled with immediate effect.

Sun 11th March 1798 Extraordinary

The 3% consols on 10th Nov were trading at 49. The 5% government annuities are 72. Bank of England shares were 119.[33]

Sat 21st April 1798

British finances – All government loan stock is valued very lowly by the market and another public loan without capitalist support will depress prices further.

Nevertheless, Pitt has to meet the high cost of current services (although the reductions in our navy and army establishments will themselves cause a saving).

It is rumoured the ‘assessed’ taxes (on houses, horses, carriages, servants, watches and dogs) are to be increased to produce £7 millions of new income. New taxes producing another £1.0 – 1.2 millions will be introduced. These new taxes will continue for three years and provide government with sufficient income to pay interest on a new loan and satisfy the bankers.

Wed 2nd May 1798 Extraordinary

Stock report, late December:

Bank stock 116 (the Bank of England and the India Company are both highly profitable, the former due to the increased issue of debt securities, Exchequer Bills and paper money in circulation, the latter due to its monopoly trade (on Mocha coffee, Malabar pepper and China tea), increased territorial revenue and the new monopolies on the spice trade – cloves, nutmeg, cinnamon.

3% consols are at 49; 4% consols 59; 5% 73.

Wed 2nd May 1798 Extraordinary

The Pearl (Spence) left Basra on 14th April and has arrived here with European news to Christmas 1797:

Pitt has produced a budget to the Committee of Ways and Means on 2nd December. He needs £24.5 millions for the year. He says we are fighting for our religion, our laws and our style of government – it is a struggle for existence not for indemnity. He called for uncommon sacrifices. To pay this immense cost he has £0.75 million in the Consolidated Fund, £2.75 million from the land and malt taxes (up £600,000 from last year), £3.0 million in Exchequer Bills,[34] £12.0 million from the new loan and £7.0 million in increased taxation.

The opposition remains in secession and no debate is occurring – the minister simply proposes and the county and borough members give their assent.[35]

Pitt reiterated that his plan was to prevent a great accumulation of present debt overwhelming the country today by extending the funding system to burden posterity tomorrow. He noted France was attacking our funding system[36] – this is not the time to hugely increase the national debt; it would play into French hands by reducing the value of British bonds causing bondholders to sustain losses. The most Pitt can raise in the capital market is £12 millions but he reminded the Committee “to not forget the ‘sinking fund’ which will return the country to as good a state as ever.”

He had considered an immediate call on the income of every individual but concluded it was improper and impracticable.

He had solved the cash shortfall by effectively doubling the assessed taxes which are paid by the heads of some 800,000 families responsible for about 4 million people. His arrangement excluded some 500,000 – 600,000 families (3 million poor people) from contribution – people paying 3/- or less per year in tax.

For the others a graduated approach is used. People who only paid tax on a house, windows, one dog and one watch would pay 50% more; those who paid other taxes on horses, carriages and servants would pay treble rate. The highest increase was for people formerly paying £50+ who would now pay £200+. By catching those whose incomes are higher, he is taxing the already rich and hopefully focusing tax on those who are profiting from the war.

Anyone earning less than £60 a year would be exempt. Higher incomes were placed on a graduated scale up to 10% of income. To deter evasion, the payer would make his declaration of assets on Oath before Commissioners and his statement might be investigated.

Recently the government had requisitioned horses for the militia cavalry and a great number of people had evaded the requisition. These were precisely the people he would be taxing more heavily now to induce their better toleration of the imposts. For the present he proposed to indulge their former evasion.

He concluded that all these onerous taxes were temporary until France was defeated. They would pay the interest on the loans as well as the annual contribution to the Sinking Fund – “£16 millions of the national debt will be redeemed in a few years” he said.

Nicholls said the taxes were unjust and Pitt’s supposed negotiation for peace had not been sincere. He said the Lords had acquired undue influence over MPs (through ownership of an increased number of electoral constituencies owned by the newly elevated Lords).

Tierney, Plommer and Hobhouse all agreed.

Pierrepont suggested the Royal Family be asked to contribute.

Col Wood suggested a 1% tax on property would produce £20 millions and was a better alternative to income tax.

The Secretary at War and M/s Elliot and Mackworth both supported Pitt. The House then voted 214 / 15 in favour of the budget.[37]

Sat 5th May 1798

Pitt’s budget – I will introduce a novelty that has not been used for a century. The navy estimates were £3 millions short last year. Servicing this is costing the country £250,000 in extra interest (8+%). Half the shortfall will be borrowed next year; the other half will be left to float in the market in Sight Bills of 90 days. This should avoid a heavy discount. This year the navy will cost £12.7 million.

The army will cost £10 millions this year. Extraordinaries for 1797 were £1.3 million which he hoped to reduce as forces were incrementally trimmed in foreign settlements and at home. There will be great savings from having no allies to fund. Extraordinaries this year should be £2.5 million. The new barracks cost £400,000 which is included in the £10 millions for the army.[38]

The entire war effort – navy, army, ordnance and miscellaneous services – will cost £24.5 millions, £6.7 millions more than last year.

Sat 19th May 1798

The shareholders of the Bank of England held a meeting in November 1797. Mr Raikes the Governor said he and the Deputy Governor had held a meeting with Pitt. He wished to present a statement of account.

Cash, bullion and ‘other securities’

Due from Government

Less :

outstanding notes

other demands

Nett balance, excluding Govt Stock

£17 millions

£  4 millions


£  7 millions

£  6 millions

£  3.8 millions

Raikes said Pitt agreed, due to ‘the urgency of politics’, to extend the exemption from making settlements in gold for a further period. Nevertheless, the Bank was ready to settle all demands in specie whenever called upon to do so.

It was unanimously agreed to advance the land and malt tax collections of £2.75 millions to government.

Shareholder Hoare complained of the inconvenience due to scarcity of silver. He was informed that a new coinage was under consideration.

Another shareholder proposed the Directors’ salaries be increased. Raikes declined the proposal for the present.

Sat 26th May 1798

The shortage of specie in England which caused the Bank of England to cease payments is being addressed by the power centres close to government.

As a part of its own contribution to mitigate national embarrassment, the India Company’s Public Department has issued the following declaration on 18th October 1797:

We wish to encourage people to send silver from India to China and buy Bills on us there. We have ordered the Select Committee at Canton to fix the exchange rate on one year Sight Bills at 5/6d per ‘old head’ (King Charles) Spanish dollar for the next two seasons. We prefer people to buy 2 year Bills and will pay 5/10½d per dollar for those investments.

This will reduce the amount of silver the Company itself has to pay to China for tea and stimulate Indian exporters to ship Indian goods to China and convert the proceeds of their sale into Company Bills.[39]

Sat 16th June 1798

The City bankers require Pitt to improve the security on the national loans – in spite of ‘Sinking Fund’ purchases, the fall in the market value of Consols has continued and triggered their concern. The bankers require more assets be pledged to continue their support. Pitt has come to the House with a proposal, apparently originating with the bankers, to sell the Land Tax proceeds to buy a portion of the 3% consols. In this way he will have both the Land Tax and the Sinking Fund underpinning the market for government paper. He will offer the tax to individual land-owners themselves first. If they choose not to redeem their tax liability, it will be offered publicly.[40] The landowner will have a right of redemption after a certain term.

The Land Tax produces about £2 millions annually. Pitt proposes to sell the tax at 40 years purchase and receive 3% consols at market rate (now down to 50% of face value) from the buyers. The interest on £80 millions (£2 million x 40 years) invested in 3%s will produce £2.4 millions annually. That is a 20% gain. In addition, the value of the Consols underlying the bankers’ loans to the ministry will inevitably improve with the increased investment.

From the landowner’s perspective, suppose he has an estate that produces £2,000 in rent each year, the 5% Land Tax is £100 and his nett income is £1,900. The amount of 3% consols he must deliver at 40 years purchase is £4,000. If he buys now it is half price so, for a payment of £2,000 today, he redeems his tax liability in twenty years, assuming the price of consols remains the same.

If, in order to pay for the stock, he sold £100 of his income annually he would still have the balance of £1,900 and he would likely get 30 years purchase for the small portion of rents that he sells which would produce £3,000. As he has (for the time being) only paid £2,000 for the Consols he makes a profit of £1,000.

(A series of calculations are made by Pitt to show the House the effect of a rising market price for Consols on the landowner. They suggest that buying-in at a market price as high as 75 for the 3%s still provides the landowner with a profit). The government gets more, the landowner gets more – win win.

Pitt intends to withhold these £80 millions of Consols from the market in the sure expectation that the remainder will rise in value.

Sat 23rd June 1798

The shareholders of the Bank of England held a meeting on 7th February to consider the proposal of nine of their number (any nine shareholders may call a meeting) for them, as a Corporation, to make donations to the public service.

S Thornton, the Deputy Governor, chaired the meeting.

Shareholder Foster doubted the authority of the owners to vote any money for any purpose in their corporate capacity. He said the Bank owned nothing as a corporation – it was all client money except that proportion of the profits that was the property of individual shareholders. As the profits were regularly distributed to the shareholders, little remained to donate to government.

M/s Sansum and Durant agreed.

The Chairman said he had not foreseen this objection. The Legal Counsel of the Bank had not been called to attend but Solicitor Kaye was present and his view was sought. Kaye said the Bank possessed all its property in its corporate capacity which it could spend however it liked, just as the East India Company did. Kaye then read part of the Bank’s Charter which authorised the holding of quarterly courts upon the requisition of any nine shareholders. These courts were vested with power to manage the Bank’s affairs. He concluded that the present meeting, having been legally called, was empowered to dispose of the Bank’s property. He added his personal opinion that the present state of public affairs made it important that the Bank ‘do its bit’ for the country.

Director Bosanquet said that legal opinion supported a majority of the shareholders assembled in a General Court. They owned the Bank and might dispose of the Bank’s surplus as they thought fit. Any absentees would be bound by the majority decision.

H Smith said the state of the country required vigorous measures. The French intend the utter destruction of British commerce. We have seen the fate of the Netherlands – the loss of her independence and the destruction of her trade. Venice had been deprived of most of her hinterland and her commerce will indubitably shrink. This is the way France deals with her neighbours and she did not particularly dislike the Dutch or Venetians whilst she hates England. He said the question was not a mere matter of law – it was whether the shareholders should surrender part of their property to preserve the country. He thought that they should.

Alderman Lushington agreed with Bosanquet. He said we are not contending on whether this Constitution is better than that Constitution but whether in three month’s time we will have any Constitution at all. He conjured the other shareholders not to be misled by legal niceties but to recognise the imperative need for great exertions. The King has given a fine example in his personal contribution of £20,000 to the City Fund. This did not come from the Civil List but from his personal allowance of £60,000 a year which he disburses as rewards for national service – the King has donated 33% of his income to the cause.

Thornton said the Governor of the Bank had received instructions from the King concerning the donation of £20,000 and it was true that the King had only £60,000 a year as personal allowance but his donation had in fact come from the Civil List. He added that the Governor understood there was no other source of income to the King in this or any other country.

Hunter proposed a donation of £200,000 be made by the Bank. On hearing this other shareholders called ‘£300,000’ and ‘£500,000’. Kemble congratulated the shareholders on their patriotism and adduced examples of widespread popular support for a subscription.

Thornton proposed the motion be amended by deleting ‘corporate capacity’ (i.e. from the Shareholders directly) and it was passed unanimously. The owners then voted to empower the Governor and Deputy Governor to donate £200,000 as the Bank’s voluntary contribution to the war effort.

Sat 14th July 1798

A clerk at the Bank of England named Roworth has been arrested for forgery. He was taken from his office to a private house and examined the whole day by the Judge Sir William Addington.

Bank Director Giles is assisting Addington in the enquiry. The suspicion of forgery arose when a huge Bill was drawn on Bowles Beachcroft & Co (Adamson’s bankers) with their acceptance of it forged on the face. It fell due on 13th March but an application was received on 12th for the Bank to accept it. It was the early application that alerted the Bank.

Roworth is said to be a friend of Adamson who is already arrested and of Kavannah who has absconded. Adamson is a trader dealing mainly in printed cloth made in Manchester. He has a large warehouse at 17 Cateaton Street containing a stock of £20,000, ownership of which has now been signed-over to Trustees to disburse to claimants under the forgeries.

Adamson formerly traded in partnership as Adamson & Wilkinson & Co. Wilkinson has also been arrested and questioned.

Adamson was brought to the private house where Roworth was being held and a vast number of merchants who had bought Bills from him were called in. He indicated which Bills were genuine and which were forged. The forged Bills were issued at Manchester and signed by people who are unknown to the parties on whom the Bills are drawn and by whom they appear to have been accepted. He has made a full confession and identifies Wilkinson as the prime mover. He says only he, Wilkinson, Roworth and Kavannah were involved. They started nine months ago and have continued without interruption until now.

The full extent of their fraudulent income is unknown but the City is concerned, particularly as the Bank Directors say they cannot distinguish the good Bills from the bad and have thrown out the whole. Some of the disputed Bills are drawn on the following Houses – Bowles Beachcroft & Co, Marsh Reeve & Co, Hudson & Barber, M/s Slacks, Spooner & Co, M/s Kesteven and M/s Edward Gibson.

Many of the £2 notes (that Pitt has put into circulation to somewhat relieve the Bank’s incapacity) are known to be forged and the mercantile class are suspicious of them. Some specimens have been examined at the Bank and the clerks cannot perceive the forgery.

Joseph Larkin, who was arrested at end March for passing a forged £2 note, is condemned to death at the Lancaster Assizes. He says the small notes are easy to forge; the only security feature is a watermark which he copied with a woodblock. He has circulated about £200 of the £1 and £2 notes. The forgery of small notes is astonishingly popular in England, in spite of the capital penalty on conviction, because it is so easy.

Sat 14th July 1798

Mr Barratt of 72 Cheapside, a wholesaler of Manchester goods, has been arrested for forging Bills on Stanfield & Co of Watling Street, another trader in Manchester goods. Stanfield has three bad Bills. Barratt asked the Lord Mayor to attend him and made a confession to that officer.

A Bills book in Barratt’s office revealed several firms around the country had been writing to him to take-up their Bills or face arrest, however these Bills had since been paid and appeared to merely evidence a cashflow difficulty.

It is feared that a considerable number of spurious Bills, purportedly drawn in Guernsey, America and elsewhere, and accepted by an army of non-existent persons, were directed to be paid at 24 Old Change, the office of Kavannah.

Barratt was taken to prison but, as the gaoler was unlocking the gate, he escaped. An immediate cry of ‘stop thief’ was raised by the prison officers but Barratt’s voice was the loudest as he raced down Walbrook, waving his arms and chasing an imaginary thief until he was lost from sight.

Sat 4th Aug 1798

Pitt has negotiated a £17 million loan with a consortium of bankers comprised of M/s Boyd, Curtis, Goldsmid, Solomons and Ward. He is offering £200 (face value) of the 3% consols and a few long annuities to a total market value of £99.10.9¼d for every £100 cash. The discount is not disclosed.

The bankers were enticed by the potential of the 3%s to increase in value in view of the plan to redeem the Land Tax with their purchase. The loan will be received in monthly tranches of 10 – 15% over the eight months commencing 30th April. 3% Consols were trading at date of the loan at 48½.

Sat 14th July 1798

London, 15th March – Pitt is wooing the merchants. He has proposed a tax of 2½% on all imports and exports. In return for their agreement, the government will provide frequent and regular convoys which will reduce their insurance costs to mere ‘perils of the sea’.

One clause in the proposed legislation is intended to prevent any single ship that separates from the convoy from discharging its cargo before the rest of the convoy arrives.

Sat 8th Sept 1798

House of Commons, 25th April – Pitt said the war supplies of £25 million he had sought four months ago had been inadequate and he now needed £28.5 millions. The extra money was for the navy which needed 10,000 more seamen costing a million and for the army which needed the rest for civil defence. He thought he might need a further £2 millions later in the year.

The extra ‘assessed taxes’ would only produce 1½ times their amount in former years (about half the expected product) but the voluntary contributions had produced £1.5 millions and that sum was increasing. He also expected his innovation of an export / import tax to fund convoying would be popular and productive. The costs of this would be passed on by the merchants mainly to foreigners as the recipients of British trade. He thought this could be worth £1.5 millions a year. Interest on war debt was £7.3 millions annually, he said.

The revenue for the year ended April 1798 was £18.6 millions. The increased ‘assessed taxes’ in 1798 / 99 would produce £2.9 millions for the full year. The tax imposed in 1796 on legacies would bring another £100,000. The new duties on wines had decreased consumption in that market but he thought it was in expectation of their removal which he informed the House was not in prospect. This year wine-drinkers should resume tippling bringing an extra £400,000 and making the revenue £23.2 millions. Pitt had not included money expected from the India Company or the national lottery. The latter was worth a nett £200,000.

He proposed a new loan of £17 millions (of which £2 millions is for the costs of subduing Ireland). The ‘assessed taxes’ were pledged for £8 millions and interest on the balance of £7 millions will be paid from new taxes (Ireland will fund its own garrison costs – the proportion 2/17ths becomes a standard Irish contribution). The Navy Debt of £6.5 millions remained unfunded (interest is added to principal year after year) and could not be diminished until the end of war.

British capitalists had been reassured by the sale of the Land Tax and the extent of voluntary contributions. They had agreed to 0.4% less interest on the new loan comparative to the last one. They continue to require that their loans be secured on all national assets.

The new taxes to fund interest on the balance of loan not covered by the ‘assessed taxes,’ would be found in 5/- a bushel extra tax on salt which would double the current take (£9.10.0d per ton) and bring another £½ million into the Treasury. The average family uses half a bushel of salt (4 gallons) a year – it was readily affordable.

The balance still required would be funded by an extra 5% duty on those India Company teas costing more than 2/6d per pound. He had discovered that small tax increases had a disproportionate effect on smuggling, which was already the fastest-growing industry in the country, but the bulk of the tea import is under the Company’s control and readily taxable. The extra tea tax would produce another £100,000.

Finally, he thought a tax on armorial bearings would be easy to collect. The principle to be applied was the same as the Game Certificates whereby hunters bought a licence to kill wild animals. Whoever puts Armorial Bearings on his house, carriage, seal or crockery etc., would pay 10/6d a year for the privilege. In 1660 there had been 9,000 families entitled to a coat of arms. Since then an extra 1,800 had obtained the right. Numerous families shared a coat of arms and each family would pay for each display. He thought about 60,000 heads of families would be caught. He estimated there were 12,000 carriages in the country that had coats of arms painted on them. Based on this and extending it to other common family artefacts, he assessed the product at £150,000. Altogether these new taxes would produce about £760,000 and cover the extra interest payable on the balance of the new loan.

Sir M W Ridley complained that the extra salt tax equated with half the manufacturer’s profit. Pitt said ‘pass it on to the consumer.’ Sir Wm Pulteney said salt is essential for life, it should not be taxed at all (everyone salts food for storage through the winter). Pitt said eventually he would substitute a commutation tax for the gabelle but he needed the money now.

Mr S Thornton said an import / export tax would fall disproportionately on the India Company which is also required to collect a proposed extra duty on tea. As the Company’s ships were armed and had shown themselves capable of self-defence, the impost was unreasonable. Pitt said ‘that’s unfortunate’.

Tierney thought Pitt’s expectations were optimistic – the salt tax would cause irritation. It would be better to tax coats of arms more heavily and make an extra charge on those affecting the use of coronets.

He wanted to know whether Pitt was proposing to continue to pay the dividends on the Imperial annuities (the money lent to Austria) as the Emperor had apparently never intended to perform his obligations under those subsidies – ‘are these to become a permanent tax on this country?’ He also queried the deficiency in grants of £680,000 and wondered what it was.

Pitt said the costs of the Imperial Annuities were under discussion with the Emperor. The deficiency in grants was partly arrears of Malt and Land taxes, and the rest was the balance of the sum given to the merchants of Grenada to alleviate commercial distress, which had not been drawn down.[41]

Jolliffe asked to see the amended army estimates which, after some discussion, were tabled.

Sat 15th Dec 1798

House of Commons, 25th June – wheeled carts are to be taxed at the same rate as a one horse chaise (4 guineas a year). The only ground for exception is if they are solely used as farm carts.

Mon 31st Dec 1798 Extraordinary

London – On 4th September the 3% consols were up to 50. The news from Alexandria (Nelson’s victory) had not then arrived.

Mon 31st Dec 1798 Extraordinary

The King has settled a pension of £750 a year on Mrs Herries and her daughters. Her husband (Sir Robert Herries, a trader in Virginia tobacco to the continent) was formerly one of the richest City merchants with a vibrant business in France, Spain and Holland which was destroyed by the war.

Some friends offered him £100,000 by subscription but he said it was inadequate to pay off all his creditors. He chose bankruptcy and died.

Sat 23rd Feb 1799

Pitt has disclosed details of an Income Tax. It is a war tax and he says it will be taken off once peace resumes. It starts on incomes of £60 which pay 10/-. An income of £100 a year pays £2.10.0d; £200 pays 10%. It catches mainly merchants and professional men who will pay this tax based on their nett profits.

Sat 2nd March 1799

On 6th October 1798, the Irish House of Commons voted £1 million to the King’s Exchequer for defence this year, to be raised on credit by sale of Treasury Bills and / or debentures. Everyone willing to pay £61 will get a £100 debenture paying 5% pa.

Mon 11th March 1799 Extraordinary

The London papers report that in late October / early November 1798, 1,100 new accounts in the 3% consols were opened at the Bank of England. The new account holders are farmers and other new investors of all descriptions. This was genuine new money, not the buying and selling of the difference that the jobbers engage in.

The City capitalists construe the significance of these new accounts as evidence that Pitt’s sale of the Land Tax will be advantageous. By linking the security of land to the uncertainty of government debt, Pitt has improved our national credit with the bankers.

On 8th Nov the price of the 3%s had risen to 58. Landowners are attracted by the ministry’s permission to use Consols to defray their liability for Land Tax.

Sat 16th March 1799

The committee collecting the voluntary contributions has, in the course of its duty, discovered and deplored the extent of tax evasion being practised by the people generally. They say that if the donors were acting lawfully they should not have all this surplus wealth.

The committee has requested an immediate tax on all property, proportionate to the means of the owners. This is beyond its brief and it satisfied itself with sending a recommendation to that effect to Pitt.

The Commissioners for redeeming the National Debt commenced buying in the market on 2nd November. Their purchases of Consols will consolidate the advances in the prices of British loan stock that has followed the Land Tax redemption. They have £900,000 to spend. It is astonishing to see how well London has done financially compared to Paris.

Pitt will need to borrow only about £6 millions for this year’s expenses.

Sat 23rd March 1799

London news – Pitt is garnering support for the sale of all the tithes of the Ecclesiastical Benefices in the same way he sold the Land Tax (to invest the proceeds in the 3%s, drive up their market value and increase the value of national assets on which he borrows money). Pitt’s idea is to give the Anglican clergy a perpetual annual salary equivalent to the tithes. (In the British system the clergy taxed the farmers with tithes; in the French system the clergy owned the land and employed the farmers until their lands were confiscated by the revolution.)

Tithes are deeply resented by tenant-farmers as they are assessed on both harvests and farm improvements. This has long been readily apparent from the better sale prices of land that is tithe-free.

The effect of Pitt’s plans is to increase British ownership of government debt by enabling the landowners, who are overwhelmingly British, to buy. The measures thus cushion our funds from direct interference by the French (although France can and does influence the Sterling exchange rate at Hamburg and elsewhere).

Sun 5th May 1799 Extraordinary

The total amount of national income (from rents on land and buildings, tithes, trade, professions, transport, etc.) is estimated at £102 millions a year. Pitt needs over £29 millions for government expenditure in 1799 of which £28 millions is war supplies. He will borrow £11 million.

North borrowed £11 million in 1782 for the American war but he acted from a much smaller economic base. Britain Inc., is now a bigger business.

Sat 11th May 1799

Repayment of the British National Debt:

The 49th quarterly repayment of nearly £1 million was made at end October 1798 by the Commissioners for the Sinking Fund and financed the purchase of £1.9 million of 3% consols.

Since the commencement of the program, the government has paid £26.6 million and received what is now £35.1 million face value of the 3%s.

Sat 11th May 1799

Pitt presented a mini-budget in early Dec 1798. He wants £29.3 millions for 1799, almost entirely for war expenses. He has made an approximate calculation of British annual income at £102 millions. Here is the breakdown:




Mines / Canals

House rentals


Colonial goods

Foreign trade

Domestic trade





£ 20 million

£ 6 million

£ 4 million

£ 3 million

£ 5 million

£ 2 million

£ 5 million

£ 12 million

£ 18 million

£ 10 million

£ 5 million

£ 12 million

£102 million

This calculation is preparatory to enacting an income tax to provide an extra £10 millions of revenue. He plans to tax any income over £60 pa. There is a sliding scale up to £200 and 10% flat-rate thereafter. It will apply to every Briton on all his world-wide income. No tax is proposed on the proceeds of prize-taking.

Sat 18th May 1799

Pit and the Governor & Deputy Governor of the Bank of England invited five separate groups of financiers to Downing Street on 3rd December to discuss the ministry’s loan requirements. M/s Giles, Angerstein, Boldero, Grote, Mills, Dorrein, Goldsmid, Currie, Ward, Shewell, Everett, Boyd, E P Solomons, Devaynes and some other City notables were amongst the groups.

They represented 1/ the Committee of Bankers, 2/ the owners of the Stock Exchange and three private groups – 3/ Robart, Goldsmid and E P Solomons; 4/ Giles and 5/ Boyd, Angerstein and Devaynes.

Pitt told them he would be seeking for £14 millions for Britain and £2 millions for Ireland in the course of 1799 (10% in December, 30% in January and 60% in February). In that last-named month he would seek for another loan of £11 million for England and £2 millions for Ireland. He might additionally need £2½ millions by either Exchequer Bills or a funded loan for the public service. He also planned to renew ‘the customary quantity’ of £3½ millions in Exchequer Bills during the year.

Pitt told the capitalists he resented their concertedly lowering the market price of British stock before each new loan and noted that on this occasion the redemption of Land Tax to 3% consols had worked against them.

The bankers asked if he would want any other funds in the year. He mentioned the proposed Income Tax which had not yet been approved by parliament. If he did not get Commons approval, he would need to borrow more, or the balance of its expected product, from the bankers.

He said he also planned to allow delayed payment of import duty by permitting bonded warehouses where imports might be stored duty-free until either imported or re-exported. This would delay the usual extent of Customs receipts and might cause a temporary shortfall.

The capitalists made their proposals on 7th December. The Committee of Bankers (M/s Boldero, Grote, Mills and Dorrien) won the £13 millions loan. They will exchange £100 in specie for £100 (face value) of 3% Consols plus £87.9.6d of the 3% reduced Consols. Giles was the next cheapest; the Jewish bid was most expensive. The 3% consols were trading at 53 and the ‘Reduced 3%s’ at 53½ yesterday.

Sat 18th May 1799

An account of British taxes collected in 1798 in Pounds with a breakdown of the retrospective additions made each year since war commenced:

Customs, Excise and Stamps













1793 extra duties

1794 “

1795 “

1796 “

1797 “

1798 “











Sat 1st June 1799

House of Lords, 8th January – Baron Auckland’s (William Eden, PMG) speech (heavily edited) on the national revenue:

Suffolk has told you he believes the costs of war should be met during the course of war by a fair and equal tax. That tax is the Income Tax. We could not have introduced it earlier because the people actually supported French principles and might not have paid to crush them. We had to declare war and suppress their erroneous view with appeals to patriotism first. Only when that had been achieved and after a shocking and awful example of our determination had been given them in the vigorous suppression of the Irish, was it possible to make use of the peoples’ new respect for our power by requiring their income in contribution to its maintenance.

We knew the time was right because they commenced forming associations amongst themselves for the purpose of raising voluntary subscriptions for the war – obviously they had sufficient money and were willing to part with it. They were also aware of the contempt that France felt for us – they could not go back. Additionally, the increased pay for soldiers and sailors and the windfall profits from prize-taking and plundering were percolating through the economy. The ability of government to maintain its revenue was failing and smuggling had become the foremost occupation in the land. Overseas war had become fun and profitable. Everyone could see that Pitt was using domestic revenue to influence governments all over Europe – it was the style of the times and the people want theirs too. The £2 million collected from voluntary subscriptions indicated the way ahead for war financing.

People with land were particularly targeted under the old ‘assessed taxes’ – that is inter alia us Lords. We necessarily had to substitute a more equitable system so more of the population was brought into the net and the burden was shared.

We found our destruction of the trade of Europe led to our own assumption of it and all goods now come to London to be taxed before being shipped or smuggled off to Europe and America. This increased our Customs receipts in spite of widespread smuggling. For example, the Customs revenue in 1798 alone showed a 20% increase over 1797. This shows that war can be profitable.[42]

France on the other hand has to take the money and treasures of her neighbours to finance her quest for secure borders. That gives her a predatory reputation which we publish widely. If we had not opposed France, she would by now have reduced all Europe to a democracy.

The Income Tax will produce £10 millions; the convoy tax £2 millions. That compares with £7½ millions in war taxes last year. We have protected the value of our Bonds by applying the Land Tax to their purchase and this also ensures that Sterling maintains its value internationally.

If we did not tax incomes but raised another loan I am told the best rate we could have got, with 3% consols at 50% of face value, was 6% and there would have been 2% more for the redemption of the capital created – at least an 8% charge on whatever we could borrow. Instead we can now charge the people 10% and incur no extra debt at all.

Sat 1st June 1799

The following item of British financial news was reported on the continent:

21 banking houses in London have contracted with Pitt to lend £3 millions. They say their terms are patriotic and uncommercial.

Sat 8th June 1799

British Trade (£ Mlns):

Imports Exports Re-exports
1790 19.13 14.92 5.20
1791 19.67 16.81 5.92
1792 19.66 18.33 6.57
1793 18.70 13.89 6.50
1794 22.29 16.72 10.02
1795 21.86 16.53 10.79
1796 22.75 19.10 11.42
1797 21.01 17.27 11.95


Editions of the Bombay Courier for the second half of 1799 and all 1800 are missing from the British Library collection. This embraces the period of Napoleon’s Coup d’Etat and the end of the previous administration’s assignat and mandat printing scam. The French government was bankrupt, the army was unpaid, taxes were not collectible and it appeared Pitt’s expectation of bringing France to her knees financially was about to be realised. Napoleon contrarily instituted a cash basis to government expenditure and advised his ministers that he would never return to a policy based on irredeemable paper.[43]


Tues 20th Jan 1801 Extraordinary

Lt General Sir James Pulteney has arrived at Tenerife on HMS Renown with his army. The naval force is under Admiral John Borlase Warren. The Spanish are thought to off-load their South American treasure here and only bring it to Cadiz for Madrid when it is safe to do so. We need to check.

Tues 20th Jan 1801 Extraordinary

A good harvest is being taken-in this year in England but speculators are withholding supplies from the markets in spite of the best efforts of the magistrates. Every necessary of life is affected by speculation.

Sat 28th Feb 1801

The Commercial Commissioners for the City of London have asked the Attorney General Sir John Mitford about the Income Tax.

They wish to know, if people have property and income in India, is it just the income remitted to London that is taxable.

The AG says the global income of Englishmen is taxable, wherever they receive it.

The only exception is in Case No 17 of the Schedule to 39th George III, Cap 22 which has hitherto only applied to West Indian planters (whereby you can deduct debts due from income). The annual income from foreign securities (e.g. India Company Promissory Notes) is settled by Case No 19 which allows for ‘deeming’ based on last year’s income. This increases income to the prospective sum deemed due, not necessarily the sum received.

The Commissioners asked how the Attorney General would deal with the person who did not reveal his foreign income or part of it. He said the Tax Commissioners use their discretion. They obtain the best information they can. The Attorney General said if it was generally supposed that a tax payer had foreign income, he would be questioned under Oath and taxed on it.[44]

Sat 18th April 1801

The Food Committee has reported to the Commons. It says the scarcity of food in England is due to the war. It is agreed in the City that our harvest has been subjected to speculation but our merchants say it is not them but foreign capitalists.

Pitt’s response has been to offer bounties to grain importers. This year’s bounty is greater than last year and will be popular with traders. The 1800 harvest in America and on the German plains has been good and in normal circumstances there should be no shortage but the interruption of trade due to war and speculation in restricted national markets is creating the scarcity.

Rice is an excellent grain and there are plentiful supplies in America and East Indies that we can import. The American supply will start arriving at their ports in December and shipments of the new crop will be here by January. The ministry has got the India Company’s agreement to extend grain imports to individual traders in the East (the previous bounty was monopolised by the Company) but Asian supply will not arrive until next (1801) summer.

The committee does not routinely recommend reliance on imports. It recommends economy:

  • By preventing grain supply to distilleries we will save ¼ million quarters (28 lbs) of barley this year. The prohibition on the use of wheat to make starch will save about 40,000 quarters. These measures will provide some relief. The wisest course is to impress on the people the need for temporary economy of grain use. The committee recommends both Houses ask the King to proclaim the need for economy. The magistrates and clergy should publish it throughout the kingdom.
  • A large part of the populace is already on Parish relief but we should stop giving out money which the poor use to buy bread and use the funds ourselves to buy alternative foodstuffs that are more abundant. We should distribute these alternatives to the poor.
  • Legislation should be passed enabling government, through the magistrates, to pay the poor relief partly in food. The needy may not get so much wheat but they will get more of some other grain because, as its less popular, it is comparatively cheaper. This requisite change in eating habits will in turn reduce the market for wheat and help to bring its price down.

The committee is persuaded that these measures, if vigorously adopted, will suffice to tide us over.

Sat 2nd May 1801

Bombay Government advertisement, 27th April:

The House of Commons has enacted that for every hundred-weight (cwt) of rice that a merchant exports before 1st September 1801 from India to England for public sale, he will receive a bounty of the balance under £1.12.0d per cwt.[45]

For this purpose the Company will licence private ships coming to India from London for the trade. They may take advantage of the trading permission that was previously announced to bring British exports to India. Ships coming from London under this permission must clear the rice from Customs at port of departure before 1st January 1802. All ships must make a direct voyage with no stopping en route. The ships must load 75% capacity with rice. The balance, if any, must be those goods which private traders are permitted to ship. Quality must be best cargo rice or better. Quality has to be approved by the Company’s inspectors.

The Company will loan shipowners the cost of rice, if they like, and provide 90 day Bills on London for repayment at 2/6d per Sicca Rupee. Company funds are also available for imports from London. All the goods arriving either in India or London are to be sold at the Company’s own auctions at those ports. The usual 3% fee that the Company charges for warehousing and administration will be waived for rice shipments.

If there is no rice in the market, the ships may carry other permitted goods including gruff goods.

Shipowners answering this advertisement will have to covenant with the Company for performance. If foreign ships from foreign settlements in Asia bring rice to London it will also be acceptable provided it passes the Company’s quality check.

The price of wheat in England has risen from 75/- per sack to 120/- per sack whereas rice has risen from 23/- per cwt to 46/- per cwt. With government paying 32/- per cwt it still represents a saving to the British consumer and a handsome profit to importers.

Sat 13th June 1801

The 3% consols were 55½ at 6th March.

Sat 13th June 1801

On 17th February Pitt asked the Commons for £42,197,000 for this year’s expenses. The next day he itemised the budget.

The navy needs £15.8 million this year for increased ships and manning. The army needs £9.6 million plus £2.5 million for extraordinaries. The garrison in Ireland will cost £3.8 million. Ordnance needed £1.9 million and Miscellaneous Expenses would be £2.8 millions.

Now all of Europe is against us there will be no subsidies to pay. Pitt will get Ireland to pay 2/17th of the total (£4.2 million) as the cost of British protection, plus its share of the civil list at £¼ million. The debts Ireland incurred in her recent rebellion are not Britain’s concern.[46]

Pitt regretted that the Income Tax which was expected to produce £7 millions per annum had only produced £6 millions in each of the first two years. He had thought the product would increase but people saw it as a war tax and resented the foreseeable need for it to continue after the peace. Nevertheless, the extra income had improved the security on our loans and procured better terms for us. There was also a deficiency in the malt tax (due to the activities of private breweries and distilleries). Altogether revenue was nearly £2 millions less than expected. He was still unable to pay the money promised to British residents on the islands of Grenada and St Vincent’s this year.[47] He needed £6.6 million to fund a new issue of Exchequer Bills – that increased the total budget to £42.2 million.

Ways & Means – the good news is the huge increase in imports and exports which have brought in an extra £1.25 million in Customs receipts but otherwise things are not good. He will have to borrow £25.5 million to pay his way. He thanked the City capitalists for their continued support in difficult times and warned them that British defeat in war would cause the overturn of our property laws and diminish their fortunes. They had consequently agreed to accept government paper at the market price. They got no extraordinary profit except the discount of 3.6% on the loan. He said the other terms were equally attractive and Pitt averred that government had not borrowed so cheaply since the opening years of the American War.

Customs & Excise – An additional duty on tea was necessary. Our import is now 22 million pounds per annum, nearly a fourfold increase on the 6 million imported at the time of the Commutation Tax. I will only tax the higher qualities so the burden falls on those who can pay (no point in destroying the market as we did in America). The extra tax is a further 10% ad valorem on those teas costing more than 2/6d per pound. Other taxes on timber, paper and calicoes are proposed. The best quality pepper is now a monopoly of the Company by virtue of its conquest of Malabar. Pitt will tax pepper in and out of British ports. An extra tax on horses was mentioned. The stamp duty and postage will be increased. The overall revenue increase expected from all these sources is £1.8 millions.

He had thought to raise the balance within the country but it was a huge amount and few people would now support it so it had to be a loan.[48]

Sat 25th July 1801

The House of Commons resolved itself into a Committee of Ways and Means on 18th February to consider the budget.

M A Taylor disputed Pitt’s assertion that the country was prosperous. He referred to our formerly opulent manufacturing districts where the poor rates had become so substantial that everyone was distressed. He thought the Commons might vote whatever supplies it wished but the people were increasingly unable to pay. People are not invariably paying their national taxes as so many of them had a prior claim on their capital to pay Poor Rates.

The Poor Rate never appeared in the budget. It had tripled since the start of the war and he provided the following indicative statistics:


West Ardley, Yorks





Stanley & Rentith


£ 176

£ 108

£ 273


£ 166

£ 455


£ 465

£ 334





He also gave examples showing Poor Rates in recent months had increased faster than appeared in the table. He had a considerable body of similar information from all over the country and he asked, if the war continues, how are these to be paid. At present the factory-owners and shopkeepers are barely able to keep up Poor Rate payments. They will soon be supplicants themselves and only the aristocracy and the City merchants will be left with capital to fund the government’s needs.

Pitt said Taylor’s argument was that an increase in Poor Rate payments was not compatible with an increase in national prosperity. He himself thought the enhancement of Poor Rates was connected with the failed harvest of last year. He reiterated that manufacturers are making handsome profits.

Hobhouse disagreed. He related the increased Poor Rates directly to war. He agreed that the increase of British exports in consequence of war appeared to suggest prosperity but thought, as all exports were shipped through ports far from the manufacturing districts (mainly London), that the profits were largely falling to intermediaries.[49]

Sir James Parnell, one of the new Irish members, noted that the contribution due from Ireland had decreased. “Last year Ireland paid £5.6 millions, this year we are asked to pay £4.334 millions. Are Pitt’s figures reliable,” he asked? Pitt reminded Parnell that Ireland also had to pay the interest on her National Debt and Sinking Fund as well as on a loan of £2.5 millions, all of which increased her contribution this year to £6.536 millions. The budget was then approved.[50]

Sat 25th July 1801

London capitalists waited on Pitt on 15th February to enquire if he had any news from Hamburg. When he said ‘no’, they submitted their bids for the latest government loan.

The loan is for £28 millions and the stock created to fund it is £35,000,000 of 3% consols and £14,105,000 of 3% Reduced consols. The bids were:

Robarts, Curtis, Goldsmid and Co

Sir Francis Baring, Battye & Co

Mark Sprott & Co

Smith Payne & Co

Newnham and the United Bankers



£53. 0.0d

£55. 0.0d

£57. 0.0d

The two lowest bids were accepted and the offerors made performance bonds, agreeing to pay a deposit of 10% into the Bank of England before 20th February.

The bankers get £175.15.0d of 3% stock for every £100 loaned, an effective rate of interest of 5¼%. The discount for prompt payment will be about £3. 7.6d per cent so, at today’s closing price of 3% consols, the market value to the bankers for every £100 invested will be:

£125. 0.0d of 3% consols at 56

£ 50.15.0d of 3% reduced at 56½

Total with Discount £3. 7.6d

£ 70. 0.0

£ 28.13.6d

£102. 1.0d

Pitt says its not a bad deal for the country.

Sat 31st Oct 1801

House of Commons, 17th June:

Tierney proposed a motion concerning the national finances. He is concerned to know how much government income is locked-up in public debt. He said the funded national debt was now about £500 millions and the unfunded debt is about £21 millions (last year it was £9 millions). He thought the increase in unfunded debt, in a year when £45 millions was added to funded debt, was excessive. He said the new debt that the ministry had contracted in the war had added £16 millions to the national expenditure in annual interest payments. He noted that tax collections appeared to be falling – the product of the permanent taxes this year was £1.5 million less than last year.

He said the total value of imports and exports this year is £90 millions and that trade must maintain that level in order to produce the necessary customs receipts to fund the debt. The amount of expenditure over the coming year was expected to be £70 millions.

Recalling that the peacetime military establishment in 1791 had cost £16.8 millions, he estimated the future peacetime establishment would now cost £29 millions. He would not move the repeal of the income tax but he thought it was a dangerous and impolitic tax on the country gentlemen (whose assets are on public view and whose income could thus be easily estimated) whilst the merchants (whose accounts are confidential and shrouded in commercial obscurity) were hardly touched by it although their incomes and profits have increased many times. He supposed that commercial profits on £90 millions of international trade could not have been less than £9 millions on which the income tax was £900,000 but only £200,000 had been collected from merchants throughout the entire country (0.2% of sales) – they have been able to evade at least 70% of their liabilities although they are the main beneficiaries of war (through increased trade, monopoly profits and the national loans business).

Lushington defended the merchants. Much of the trade is done by foreigners, he said, and most of our own merchants use bank capital to finance their activities for which they are already taxed for interest payments, commonly of about 5% a year, so their final profit on Tierney’s figures is shared half-half with the bankers.[51]

Addington said the total funded public debt on 1st February 1801 was £484,365,474. The figure includes £27.2 millions due from the Austrian Emperor and Ireland. The total unfunded debt (demands unpaid, Navy Debt and Exchequer Bills unprovided for) is £21 million.

Imports in 1792 were worth £19.7 millions; in 1800 £29.9 millions. British exports in 1792 were £18.3 millions (the five prior years average £14.7 millions) and in 1800 £24.4 millions (five year average £20 millions). Re-exports in 1792 was £6.6 millions and in 1800 £17.2 millions.

British expenses for 1801 are £69 millions of which £29 millions is being borrowed. If we continue to borrow to meet current expenditure, it can only be on increasingly onerous terms but our procedure of selling the Land Tax and investing the proceeds in 3% Consols had raised the value of that stock from 47 to 60 and kept the City capitalists happy whilst concurrently cushioning landowners from the full effects of the Land Tax.

Tierney said Addington is right that traders are prospering but that is a temporary phenomenon caused by war. Once the neighbours stop fighting and start competing for trade, our share will diminish to its former size. Then the means we have to pay-off our immense debt will be reduced.

The bounties on grain (particularly rice, an occasional Company export from Asia to England) cost about £1.3 millions a year. That is an expense that Addington has not mentioned, he noted.

Tierney identified the Income Tax as the prime means whereby hawkish ministers had been enabled to continue the war.

Sat 14th Nov 1801

Addington’s new British ministry has published the loans made by England to her continental allies in the war (in Pounds Sterling):

Prussia 1794

Sardinia 1793 – 96

Austria 1795 – 97

Portugal 1797 – 98

Russia 1799

Austria, Bavaria etc
















12.6 millions

The disclosed total is about 2½% of British national debt. The list excludes funding provided to the Bourbons and the French clergy. It is a nice question where all the money has gone.

Sat 28th Nov 1801

A committee of the Commons has been investigating the high retail price of grain and has voluntarily (almost uniquely in British political history) grasped the nettle of speculation.[52]

It has reported that the London Corn Exchange was established about 40-50 years ago to provide accommodation to grain factors. The corn factors are supposed to be distinct from corn merchants but in fact many of them trade in grain on their own accounts.

The Corn Exchange Building belongs to the factors personally. They have divided its value into 80 shares which they own individually. The shareholders appoint a committee of three trustees to manage the market.

There are 72 stands in the Exchange, 64 of which are used by factors to exhibit their samples of grain. The other 8 stands are reserved for the Kentish hoy-men.

The Committee of Three exercises no control over the market. The stands are not supposed to be leased but in fact huge payments are made to obtain their use. As a general rule, the possession of a stand is essential to make sales although there are occasional visitors to the Exchange Building with samples in their pockets which they display furtively in dark corners.

There is no requirement on traders to exhibit all their qualities of grain – they just display what they like. The factors who trade as merchants on their own accounts take advantage of the frequent ‘ups’ and ‘downs’ in the market. There is a species of jobber active on the Exchange who assists factors in buying and selling. The jobbers are particularly entrenched in the oats market.

The Exchange Building is too small to accommodate all the factors. This permits a small number to monopolise the business. As the factors own the building themselves, although there is a cut-out in its management by the Committee of Three, there is clear evidence that this small group monopolises the grain trade.

The Parliamentary committee believes the marketing of grain needs independent regulation. The Corn Exchange does not have regular opening and closing hours on market days. British law naturally encourages the buying and selling of corn for profit.

Our system supposedly stimulates competition to reduce prices whereas these factors have subverted competition. The market needs reliable newspaper reports of harvests, imports, exports and available quantities of each quality and type. We probably need to bond the factors as well.

The factors are an important element in the high prices of grains. It is not the poor harvest that is entirely to blame – they just adopt whatever excuse appears plausible to jointly indulge their manipulative habits.

Sat 28th Nov 1801

The British government is prosecuting Robert Owen and William Marsdell for fraud on the Navy. The Attorney General says naval fraud costs the country £500,000 a year. The Defendants are coppersmiths of Houndsditch.

They received a letter from Henry Paul, a remand prisoner at Maidstone, asking for funds to bribe the Jury to secure his acquittal. Paul has already been tried twice for bribing naval staff but each time he has been acquitted. The prosecution thought his acquittals resulted from further bribery and had charged him a third time. This new prosecution elicited the letter to the instant defendants which the prosecution relied upon to indicate their state of mind.

The direct evidence was given by Charles Motley, an Inspector of Naval Stores at Portsmouth. He visited the Defendants’ warehouse in London and found 1,400 lbs of copper sheathing and copper bolts with the government’s arrow mark stamped on them. Many of the arrow marks had been hammered and filed in an attempt to remove them. It is illegal for unlicensed people to possess government naval stores. These stores were traceable through the marks and had been sent from Portsmouth to the naval yard at Chatham in March 1801. They were marked to show the date of receipt as government has had purity problems with copper and required a six year warranty of fitness of sellers. The stores had turned up in the merchants’ warehouse in April 1801. An intermediary named Howard, a common carrier of Deptford, had already been arrested by Stores Inspector Motley.

Sat 13th Feb 1802

The British National Debt was £228 million in 1793; £248 million in 1794; £266 million in 1795; £310 million in 1796 and £376 million in 1797.

The Commissioners for Reducing the National Debt bought-in about £32 millions by February 1800 and another £12 millions since, totally £45 millions. Pitt said in February 1801 that the debt bought-in was £56 millions, which seems on the high side. This buying-in is due to the Sinking Fund. It was invented in 1716 but given-up; it was revived in 1738 by Sir John Barnard. Voltaire described the Sinking Fund as “a means of borrowing the peoples’ money without becoming indebted.” It works because it provides liquidity to the market in government stock enabling investors to buy and sell whenever they wish. The prosperity of our commerce and our strong government revenue ensures that shareholders are more often buyers than sellers.

The Sinking Fund has provided £25 millions in 7 years of total war. We have added £100 millions to the national debt and subsidised our allies for years but we remain more prosperous than our allies at the end.

Sat 20th Feb 1802

The price of provisions in England has halved as a result of the peace. Peace has defeated the speculators. A quartern loaf was 1/6d at the end of the war and is now 8d. It is the same in continental Europe. It shows how some people were making their money.

Sat 6th March 1802

The new liberal Whig ministry’s Plan of Finance (which has Pitt’s fingerprints all over it) is a means of avoiding a further loan to settle the arrears of government expenditure. It is intended to redeem the old and new 5% consols; to commence the gradual redemption of the 4% consols, and ultimately to concentrate government borrowing on the 3% and 3% reduced consols. Two main proposals are made:

  • The remaining part of the Land Tax, that has not already been sold, is to be offered for sale by Commissioners appointed for that purpose, who will assess values. Purchasers will have to pay a deposit initially and settle the balance at fixed dates. A liberal discount will be given for prompt payment. When full payment has been received an abatement of what was due at first instalment will be refunded.
    The ministry values the balance of Land Tax on offer at £40 millions of 3% consols (face value).
    Landowners must buy this offer as none would wish his Land Tax to fall under the control of another. Additionally, every purchaser will receive all the advantages of a freeholder.
  • A second element in the realisation of national assets is the sale by lottery of all Crown Lands on which no individual claim has been established. The lottery tickets will cost £100 each and two out of three will win. Prizes will be between 5 – 500 acres. The tickets will indicate only the district in which the land is to come from. The good odds on acquiring a large tract of land for £100 will attract many investors. The longer term effects will predictably ease the shortages of arable commodities as few winners are likely to leave their land fallow.[53]
    The ministry expects the sales to be well attended. When that is confirmed, it plans to extend the concept to Ireland.

A third source from which government expects to obtain a greater revenue is in India, where Wellesley’s government has assumed an incontestable superiority over the Grand Mughal and his supporters.

There is general agreement amongst City bankers that the government will be successful in avoiding its need for loans this coming year.

Wed 10th March 1802 Extraordinary

The Committee of Holders of Exchequer Bills has met Pitt at Downing Street to notify their acceptance of the agreed terms for their loan of £8.5 millions. For each £100 of principal, the creditors receive:

25 3% consols @ 68½

25 3% reduced consols @ 67½

25 new 5%s @ 99

50 4%s @ 84¼

18 long annuities @ 19½


£ 17. 1.10½

£ 16.16.10

£ 24.15. 0

£ 42. 7. 6

£ 1.14. 4

£102.15. 7

The creditors have the option of subscribing a further £50 for every £100 to redeem £2.4 millions of Exchequer Bills remaining unsold in the Bank of England. 25% of the loan is to be paid as deposit when leaving the Bills for payment at the Treasury, 25% on 18th December and the balance on 15th January.

The result of this deal is that £10.625 million of new government stock is created. The interest payable on each £100 is totally £4.16. 9d and the long annuity for 59 years will cost £7,437.16. 0d per annum.

Sat 27th March 1802

The current scarcity of grain in England has caused the Bombay Courier Editor to review Maitland’s History of London and detail previous famines:

  • In 1438 wheat rose to £1. 6. 8d per quarter (28 lbs) after a devastating storm hit the country at harvest time. Many people ate fern roots and ivy berries that year.
  • In 1497 another dearth of grain pushed its price to £1 a quarter. Two years later the price had dropped to 4/- per quarter.
  • In 1587 the supply collapsed and prices rose to £3. 4. 0 per quarter in London and up to a Pound more in the counties.
  • In 1596 another violent storm affected most of the country at harvest time and wheat was sold in London at £4 per quarter and rye & oatmeal at £2. 8. 0.
  • In 1597 the famine continued and wheat rose to £5. 4. 0; rye to £3.12. 0 – severe distress was experienced in the cities that year.
  • In 1649 another dearth pushed prices of wheat to £4 per qtr; malt £2. 2. 0
  • In 1650 wheat remained high at £3.16. 0 and in 1652 it was £3.13. 4 dropping the following year to £1.15. 6 with malt at £1. 8. 0.[54]

When Frederick the Great was King of Prussia, that country experienced a rise in grain prices due to speculators withholding supply. The King issued a Proclamation offering a reward (over the actual price) to whoever delivered the greatest quantity of grain into the Royal Granaries. This excited and divided the monopolists. The winner of the King’s prize, after receipt of the loot, was publicly hanged as a national rogue. The other monopolists then feared the King and brought their supply to market.

According to evidence given to a Parliamentary Committee, British exports of grain from 1707 to 1777 were valued at £36,760,425 or £524,000 a year. After that year we stopped exporting grain.[55] Our imports from 1767 – 1800 totalled £27,250,616 at prices of £3 – £5 per quarter (annual average £826,000)

In the last 27 years there have been 1,180 Enclosure Bills passed by parliament for the privatisation of common land. These new lands are fertile and have increased our annual production of grain faster than the population has increased, but we have no surplus and our exports have virtually ceased.

Sat 3rd April 1802

An opinion on England by Citizen Hauterive:

The English are a persevering and industrious people. They bring goods to London from all over the world. In peacetime London is the first market of Europe; in war time it is the first market of the entire planet.

This single advantage gives England the ability to organise her credit so that the credit of all other nations is subordinate to hers.

By financing every foreign and British merchant who exports from London, she ties them to her by debt and credit. She not only controls the supply of all the items of foreign trade but fixes their values too. She creates scarcity or abundance as befits her merchant class by controlling the means of distribution by sea. In this way she gets all the foreign nations to contribute wealth to her and share her cost burden.

Sat 3rd April 1802

London editorial promoting eternal war:

The French Revolution has altered the established forms of European society but has made relatively little change in the situations of England and France. Smollet’s History of England, published during the Seven Years War in 1760, notes at Vol 5, Page 374 that:

“War, which naturally impedes the traffic of other nations, has opened new sources to the merchants of Great Britain. The superiority of her naval power has crushed the navigation of France, her great rival in commerce, so that she now supplies, on her own terms, all those foreign markets in which, in time of peace, she was undersold by that dangerous competitor.”

Thus her trade was augmented to a surprising pitch and this augmentation alone enabled her to maintain the war at such an enormous expense. As this advantage will cease when the French are at liberty to re-establish their commerce, and prosecute it without molestation, it would be in the interest of Great Britain to be at continual variance with that neighbour, provided the contest could be limited to the operation of a sea war in which England would always be invincible and victorious.

Sat 8th May 1802

Seven groups of City capitalists have approached the Chancellor of the Exchequer to indicate their wish to subscribe to the next national loan. It is expected to be for £20 millions.

Sat 22nd May 1802

The British government’s import / export figures for the last few years show the immense increase in British trade due to war.

Since the passage of Pitt’s Convoy Act, we have had a new source of good information to compile trade statistics. It is more accurate than the Customs records as all goods must be declared for Convoy Tax, even those that attract no other government impost.

The Convoy Tax records reveal British exports exceeded £83 millions in both of the years 1798 and 1799. There has also been a huge increase in the numbers of our seamen and the tonnage of our merchant shipping fleet.

Sat 22nd May 1802

The coinage of gold in the London Mint is reported for the five years from Michaelmas 1796 (end September) to Michaelmas 1800 as follows:

Lbs of gold used Value of coin
1796 3,480 £ 162,603
1797 42,810 £2,000,297
1798 63,510 £2,967,505
1799 9,630 £ 449,961
1800 4,065 £ 189,937

Sat 12th June 1802

The House of Commons has debated the Income Tax, which was introduced as a war tax. Pitt says government is still considering the matter and he cannot say anything just now but he thinks it will have to continue for a few years more. Britain has fought using future national income and the loans funding our efforts are secured on all national property inter alia the Income Tax. The capitalists therefore require it to continue.

It will be reduced as the expenses of government decrease with the peace. Pitt gave no pledge that the tax would be repealed and was merely providing sufficient information to avoid MPs proposing motions on the subject until government had made precise calculations.

Sat 7th Aug 1802

Income Tax receipts for 1800 / 01 were £4.7 millions from the Commissioners for General Purposes; £1.2 millions from the Commercial Commissioners on general trade and £400,000 from other commercial sources. Deduct the costs of collection at £163,000 (2.6% of gross) and refunds in respect of children at £371,000 and the nett product was £5.7 millions.

Sat 7th Aug 1802

The King-in-Council (a law-making forum under the King’s Prerogative) has ordered that an embargo be placed on the export of saltpetre, gunpowder, arms & ammunition, copper bars and sheeting and lignum vitae.[56] These are all fundamentally important naval and military stores.

Sat 14th Aug 1802

Our national debt, according to Pitt’s budget, is much smaller than is generally believed. He says it is represented by:

Stock created for loans

Funding of Exchequer Bills

Loans for repeal of Income Tax






Interest on these loans will be £3,163,161.

He proposes to pay the interest by increasing the tax on beer and its ingredients. This will produce £2 millions and returns the price of a pot of porter to 4½d which is what is was before the recent unilateral reduction by the brewers.

Another million will come from the repeal of the old Assessed Taxes and their replacement by similar taxes on a sliding scale which overall will be 30% more than hitherto.

The fourth million will come from the tax introduced in the war to fund the costs of naval escorts (convoying the merchant ships). This has transmuted into a new additional duty on all imports and exports. The ad valorem basis is replaced by a schedule of 500 items on which a fixed duty irrespective of value will be payable. Overall the export duty will slightly decrease and the import duty will slightly increase from £3 to an average £3.12.0 per hundred Pounds. It should be well-tolerated as the cost of freight and insurance will decrease in peacetime to offset the increase.

These £4 millions will pay the interest on a national debt of c. £100 million.

The objectionable tax on agricultural carts and horses is removed from the Assessed Taxes but a new impost is created – a 10/- annual charge on every shop assistant and journeyman residing in the house of his employer. This is to close a loophole in the tax on servants who have increasingly been represented as shop assistants and the like.

Sat 14th Aug 1802

Pitt’s budget requires a revenue of £24.6 millions. Most of it is accounted for by £7.7 millions each for the navy and army. It includes £600,000 for extraordinaries. The ordnance gets £1 million.

Corn bounties (the incentive for merchants importing grain – mainly the Company’s Indian rice) costs £1.6 millions. Exchequer Bills, as noted above, will cost £3 millions and interest on Exchequer Bills and the discount on the loan equals £1.6 millions. He also needs a million to pay-off the debt on the Civil List. Out of these £24.6 millions, £1.8 millions is for Ireland.

This budget will pay the army and navy for five months. Pitt wants to retrench the armed forces and is only waiting receipt of the ratified peace treaty with France to do so. He will estimate the costs of the forces for the remaining seven months once that document is to hand.

He has raised a loan of £25 millions (with a discount to the bankers of 4%).

The loan will provide government with £100 cash for every £135 of debt (£65 in 3% consols, £60 in other 3% stock and £10 in deferred stock) but the overall interest rate is only 3¾%. The loan includes the issue of some deferred stock on which interest payments will commence in 1808 (the issue of new stock for the loan will total £30.3 millions face value). The loan agreement is based on a value of 75¾ for the 3% consols which is above the present market rate of 74. The deferred stock is expected to trade at 58½. Pitt described the package as auspicious and satisfactory. It shows the confidence of the City capitalists in the stability and credit of the British economy.

He expects to need approximately £12 millions more for the remaining 7 months.

As regards the repeal of the Income Tax it will be difficult to forego such a large source of revenue but it was introduced as a war tax and we are now nearly at peace. To replace it Pitt will increase the tax on malt, hops and beer producing an overall tax of 5/11d per barrel of beer. Pitt expects this to be well tolerated as the brewers reduced the price of a barrel at the beginning of the year from 40/- to 35/- and he is merely taking the amount the brewers no longer wanted. He is aware of the growing practice of the people to brew their own beer. The Malt and Land Taxes should produce £2.7 million. Altogether it should be just enough.

He wanted to abolish the salt tax as well but it is too big to forego.

3% consols at end March were c. 70. The American 8%s were 113, French Tiers Consolidé are 57 francs.

Sat 14th Aug 1802

Pitt has mentioned the Sinking Fund in his budget. This is the great national sheet anchor. He believes he can accelerate the reduction of debt.

In 1786 it was enacted that £1 million of revenue be annually invested in the Stock Exchange in reduction of the national debt. Commissioners were appointed to invest this fund and receive all interest. It was to continue until the value of the fund reached £4 millions when parliament was to consider if it should continue or be used to reduce annual taxation.

The fund under the Commissioners is now £2.5 millions and the outstanding debt has risen to £199 millions.

In 1792 it was enacted that 1% of every loan be applied to the retirement of that specific loan and, once achieved, parliament was to consider to what use the 1% could be put in future. This second Sinking Fund is now worth £3.2 million and the outstanding loans to which it applies total £212 million.

Pitt wants to consolidate the two Sinking Funds which he thinks will allow quicker reduction of outstanding debt. He says he can pay-off £500 millions of debt in 45 years.[57]

Sat 4th Sept 1802

Pitt has asked the House of Commons to extend the suspension of payments by Bank of England. Addington said that after 4-5 years of difficulty, the restriction had been beneficial and people exchanged paper as though it was valuable.

It is universally recognised as more convenient than specie. As a result the credit of the bank has remained unimpaired.

Sat 4th Sept 1802

House of Commons debate 16th April on the National Debt:

Pitt said he had not completed the accounts itemising a means for the redemption of the National Debt but hoped to send them to MPs before the recess.

He was proud of the arrangement in 1786 to reduce and redeem the National Debt. That plan effectively consolidated the debt which facilitated its redemption – it put all national debt into one great fund, the 3% consols.

The Act of 1792 required parliament to provide for repayment of each debt at the time each new loan was contracted. A new Sinking Fund was created to fund this new debt. Both Sinking Funds together now total £5.667 million.

The legislation requires that the first Sinking Fund be allowed to increase to £4 millions before being put at the disposal of parliament whereupon the annual (2nd) 1% Sinking Fund will cease. Pitt estimated that the entire national debt secured on the 3% consols would be paid-off in 48 years and the new debt secured by the new Sinking Fund would be paid-off in 47 years.

The present annual produce of permanent taxes is £30 millions and the Debt stood at £488 millions.

Little debate ensued. Instead it was agreed to form a committee once Pitt had provided the accounts.

Wed 20th Oct 1802 Extraordinary

The VOC (The Dutch East India Company) has lost the Vriedenbourg on the French coast. She was one of very few ships the VOC has been able to send East this year and her loss will be a crippling blow. The Dutch government recently suspended the construction of new VOC ships for Asian trade. It is expected to make an announcement shortly and British merchants fear it will open Asian trade to private Dutch merchants. In recent months the Dutch have declared free trade with most of their ex-colonies. These expected trade-opening measures will threaten our control of Asian commerce with Europe.[58]

Sat 30th Oct 1802

Vansittart has published revenue figures for the 1st quarter of 1802 (with 1801 figures for comparison) to establish that British trade is growing and the need for new taxes has abated:

1801 1802
Imports 2,027,726 1,977,517
Customs value of exports 5,105,106 5,365,118
Declared* value of exports 7,416,416 8,343,961
Re-exports 1,109,608 1,782,067

* Declarations under the Convoy Act for assessment of the Navy’s fee.

On these figures, England imports approximately £2 millions per quarter whilst exports and re-exports are up to £10 millions. Pitt says they are not complete figures but illustrative of the trend. He notes the depression in prices of American and West Indian produce, and the great number of Bills in West Indian trade that have been protested, but overall he says he detects a rising demand for British goods.

There was an increase in merchant shipping tonnage too. 598 ships (159,275 tons) entered and cleared London in 1801 and 758 ships (167,933 tons) in 1802.

(In a later edition, the Bombay Courier Editor notes that the 2nd quarter of 1802 did not maintain the 10% increase noted in Vansittart’s chosen quarters.)

Sat 30th Oct 1802

The Chancellor of the Exchequer said he would be vigilant in the tea duties. He recognised the risk of smuggling but if smugglers again became so bold as to build depots and warehouses on the south coast for their trade he might re-introduce the Act of 1784 (reducing the duty) to cause them to lose money.

Sat 13th Nov 1802

The West India Dock Bill has passed the House of Commons but is expected to encounter difficulties in House of Lords. It abolishes all public holidays for dock workers except Christmas Day, Good Friday and Sundays.

Neither the workers nor the bench of bishops will like that.

Sat 27th Nov 1802

The expression in vogue amongst City of London merchants to describe unexplained wealth is ‘estates in Tipperary’.

Sat 18th Dec 1802

The war took away some 60,000 men from the Birmingham area. They have now returned with the peace and manufacturers are eager to employ them and start trade with France as soon as the Commercial Treaty is concluded.

The factories have a reasonable level of existing orders from America and Germany and some business from Spain. Some factories are already employing extra workers.

Japanning is the most prosperous industry at present.

Glass manufacturers are also recovering well but iron and brass foundries are still in the doldrums.

Sat 25th Dec 1802

The French Revolutionary War has been decidedly beneficial to England:

  • Our commerce, unimpeded by European competition, has spread all over the globe.
  • The destruction of the Banks of Venice, Genoa, Amsterdam and the Monti in Rome has given London an exclusive role in European finance such as has never occurred before. It has made our government funds seem more attractive to investors than they really are.

Wed 6th April 1803 Extraordinary

The depression in the price of British funds has been attributed by Sir John Sinclair to the £20 millions of London capital recently exported to buy grain.

Sat 16th April 1803

Capt William Codling, who attempted to mislead underwriters into believing that his ship had sunk, has been found guilty of fraud and sentenced to be hanged. From Newgate Prison he was driven around the City in a cart with a rope fastened round his neck.

After the merchants lining the route had abused him he was taken to the Docks at Wapping and killed. The river was full of boats with spectators. He ceased twitching after just 2-3 minutes but remained suspended for the due period.

He was then cut down and his friends took away the body by boat.

Sat 14th May 1803

The Chancellor of the Exchequer has presented his budget. We have raised new loans of £97 millions that require annual interest payments of £3.1 millions. £56 millions of the new loans are secured on the Income Tax receipts.

Imports are much the same as last year but exports have surged £8 millions to nearly £50 millions a year. The statistics for trade through the port of London show our merchant ships are now more numerous whilst the numbers of visiting foreign merchantmen are halved.

Sat 18th June 1803

The suspension of payments by the Bank of England has been extended again. When it first started it was expected to depress the price of funds but actually it seems to have had no effect at all.

Sat 2nd July 1803

The legislature of the Batavian Republic (Netherlands) has made cinnamon a free commodity for importation – they need a new source of supply to maintain their trade with the German states where cinnamon is always in demand. The VOC can no longer monopolise its supply. A duty of 1% ad valorem is enacted to ensure as well as may be that most supply comes to Amsterdam.

They have prohibited the import of woollen cloth for domestic sale. It may be carried through the Netherlands for sale elsewhere but not sold at home.

Sat 16th July 1803

The Treaty of Amiens contains a clause requiring France to settle the outstanding interest due on that part of its debt paper in the ownership of Englishmen. The amount is large because there were many British investors in the French funds at the beginning of war (a good many, probably a majority of them, bought French bonds while serving the Company in India – a suspicious activity for Company employees).

The investors have formed a committee and met this Spring in London to elect officers – William Lushington, James Sibbald, Sir Elijah Impey, Saunders and others. They have advised their claims to Hawkesbury.

Their claims rest on three considerations:

1/ the assurances of the French government, when attracting foreign investors, that their investments would not be restricted as French investors are;

2/ the clause in the commercial treaty of 1786 allowing 12 months for the nationals of each country to remove their property from the other in event of war, and

3/ the 14th article of Amiens banning sequestration of funds and revenues after the definitive treaty was signed.

Hawkesbury seemed not entirely supportive. He thought the rights of British creditors should be the same as Austrians and Prussians. He thought the relevant provision in the 1786 treaty was nullified by our passage of the Aliens Bill. He noted that the Amiens treaty term was in respect of property in use and not property sequestered, upon which payments had already been suspended. He however appeared to have some ideas on how the claims might be better presented.

The creditors have selected Impey, who is thought to be the major single holder, as their representative to negotiate with the French government and agree a plan for recovery of the outstandings. Hawkesbury has allowed him to operate from a room in the British Embassy in Paris.[59]

Sat 16th July 1803

A London newspaper has commented on the Moniteur’s article predicting the British national debt will cripple this country in the long run:

The French clearly do not understand the connection between debt and revenue. When you can afford to pay the interest, debt is not a burden. Its like the weight of atmosphere pressing on the surface of the planet, of which we are unaware and to which we are all inured, the London Editor says.

Sat 16th July 1803

A French military force has arrived at the Dutch frontier to disrupt the widespread smuggling of English goods into France. It seems the Dutch are unable or unwilling to control smuggling. Our main smuggling distribution centre is Bergen op Zoom and it is feared the French will garrison the town.

Sat 16th July 1803

The smuggler Johnson, who recently escaped from the Fleet Prison, has arrived at Flushing, the usual discharge port for goods smuggled via Netherlands into Europe.

He told the British community there that its unnecessary for the authorities in London to pursue him as he will be returning regularly to England in future. He is a great supporter of British exports.

Sat 30th July 1803

The Dutch have recognised that our retention of Ceylon gives us the cinnamon trade. It is the major export commodity of the island. The Dutch have reduced import duty on cinnamon at Amsterdam to 1% ad valorem. There is a big market in the German states which the Dutch wish to supply and, although they have to pay our price, so does everyone else so the low duty should ensure they remain competitive.

Sat 30th July 1803

The English people have well tolerated the substitution of paper credit notes for gold and silver money. Originally there were only £20 notes that were so valuable they were irrelevant to every day life and were only held by wholesale merchants. Then came £10 and £5 notes, still huge sums for the common people to be involved in, but now we have £1 and £2 notes and these are getting all around the country.

The issue of £5+ notes and £2 or lesser notes is shown below according to Bank of England figures. They are all ‘payable’ at 7 days Sight. They exclude the issue of the country banks:


Aug 1802

Feb 1803

£2 or less notes



£5 or more notes



Sat 6th August 1803

French funds continue to rise in value quite quickly. It is the prospect of the peace dividend that supports France. The French 5%s were 51½ a week ago but are now (12th April 1803) 55¼. Paris is giving a better return on investment than London – that has excited the capitalists at the Royal Exchange.

Sat 6th August 1803 (and subsequent editions)

The case of Robert Aslett:

Mr Bish, the National Lottery operator at the Bank of England, has reported a fraud. He has a side-line lending his capital short-term on the security of government loan stock, Omnium, Exchequer Bills and the like.[60] He loaned a friend a few thousand Pounds on the security of some Exchequer Bills but on examining the security more closely he recognised he had seen the Bills before and he remembered the Bank had bought-up them to withdraw them from circulation.

He went to the tellers to confirm that the notes had been withdrawn and had not been re-issued. He was told it was not the Bank’s practise to re-issue notes that had been bought-in – they bought-in notes to remove them from circulation. He then showed the Bills to a Director. They together checked the record and they were shown as having been received by Mr Aslett, the confidential assistant (and nephew) of Abraham Newlands, Governor and Chief Cashier of the Bank.

Aslett is formally the Assistant Cashier of the Bank. He is expected to succeed Newlands as Chief Cashier on the latter’s imminent retirement. He was interviewed by two Bank Directors but told them nothing. Other Bank clerks suspect a total defalcation of £350,000 in recycled Bills.

Mr Aslett is a bachelor living in modest accommodation. He has some small lead mining interests in Wales but no trace of this enormous sum is yet available. Mr Aslett earns about £3,000 a year from his job and has himself four bank accounts, each in a different bank. He lives modestly on some £500 a year. One of his bankers had honoured his cheque to £80,000 the same day the fraud was discovered. Mr Aslett is known to be a speculator in the market at Change Alley and it is supposed he may have been a victim of the unexpected recent fall in British funds, which may have precipitated his difficulties. He has many powerful friends and is not imprisoned. It appears he is trying to make a deal. He seems very relaxed and calm.

He was subsequently arrested for defalcation and the Directors interviewed him at the Mansion House. The Directors had discovered that Templeman, the Bank’s principal broker, said he had lodged a discharged Bill in the Bank for cancellation and a few weeks later the identical Bill was presented to him for payment. Since then the Cashier has been accused of having £300,000 of Exchequer Bills in his possession. Instead of cancelling them he has apparently found a way of recycling them.

In the Sat 7th Jan 1804 edition is a further report:

Aslett’s trial took place at the Old Bailey on 8th July 1803. He is on trial for his life on a charge of embezzlement of government securities (embezzlement was made a capital offence under George II). He was an employee of the Bank of England for 25 years and had risen to command the department dealing with the sale of Exchequer Bills in which the Bank dealt almost exclusively with the Goldsmid Brothers and Mr Templeman. Exchequer Bills business is managed by maintaining a tally of the value of Bills bought and sold in order to preserve a balance. Aslett was also responsible to tell the Directors when to buy – they then authorised payment. He would then enter the transaction in a Bought Book and placed the Bill in a strong box in the custody of the Chief Cashier. Occasionally the quantity of Bills transacted was large in which case the physical volume of the Bills required they be stored by the Cashier in a room called the Parlour, where they were available for examination by Directors from time to time. In those examinations the Bills were compared with the relevant accounting entries. They were then placed in a closet with three locks on the door. This closet required the presence of at least two (but usually three) Directors to open (old Abraham Newlands, who is the Bank’s Chairman, had keys to two locks). No-one was supposed to enter the closet except Directors.

These old Bills might be reissued if urgently needed, in which case they were sent to the Treasury. It was thus possible for a Bill that had been negotiated once, to be negotiated again and, indeed, it was one of Aslett’s duties to arrange transfers between Bank and Treasury.

On 26th February Aslett was required to make a transfer of £700,000 in old Bills. Using that opportunity, he took an extra £200,000+ of Bills from the closet and kept them in his desk. No-one went again to the closet until 9th April (six weeks).

In the interim, Mr Bish deposited his Lottery receipts with the Bank and Aslett gave him old Bills as security and to give him a return of 6% on his deposit. Later Bish saw the Bills were reissues which he thought unique. He went to Abraham Newlands who said it was impossible. Aslett, as Newlands PA, was also asked and he said the same. He added that the old Bills had never been returned to the Bank. As Bish had received them of Aslett he asked to see the account. Aslett produced the Bought Book and left the two of them to study it. The account showed the Bills had been previously negotiated and should have been in the closet. Either Aslett or one of the Directors must be involved in the theft.

The prosecution alleged that on 16th March Aslett applied to Bish, whose main employment is as a stockbroker, to buy £50,000 of government paper on the Exchange. Bish asked for security. Aslett offered Bills to cover Bish for up to a 6% loss on the intended purchases. Bish agreed and Aslett deposited the old Bills with him. The business then went ahead. When the validity of the Bills was questioned, Aslett said inter alia that he was buying the Consols for a Director of a Merchant Bank in the City.

Meanwhile stock-taking in the closet had revealed other missing Bills which were then found to have been given to M/s Chambers, Orton and van Summer as security for other purchases. Furthermore after the shortfall was detected, Aslett’s desk was searched and £15,000 of old Exchequer Bills was found.

The Bank had accepted these Bills in return for funding the government. The arrangement commenced in 1793 when an Act of Parliament raised £5 millions by printing Exchequer Bills. The Auditor of the Exchequer was empowered by that Act to issue and sign those Bills. In 1799 that Auditor was Jennings and he continued as Auditor after the validity of the parliamentary Act had expired. Jennings signed all the Bills after that time and still does so (‘but the Exchequer is not on trial here’, said the prosecutor).

The Bills involved in Aslett’s scam were all signed by Jennings after his statutory authority had expired. April 1803 was a time of national importance – the ministry was recommencing war with France – and the Directors were reluctant to publish the embezzlement in case the money market was destabilised. Counsel for each side agreed to a postponement. Since then parliament has fortuitously passed a law retrospectively making legal all the Bills signed by Jennings. That enabled the present criminal case to proceed. The prosecution placed its case in the hands of the Judges to determine if these papers were really Exchequer Bills and, if so, to punish Aslett.

The defence said the Bills were not Bills and parliament’s passage of remedial legislation proved the fact. People may for years have thought them valuable securities but they were just paper until the remedial law. That law post-dated the supposed offence. The Jury was directed to acquit.

The same difficulty arose on the other indictments (each Bill is subject to a separate indictment) and they likewise failed.

As Aslett was leaving the Court, the prosecution requested his remand. They said Bank Directors had a personal liability to make good the deficiency on their accounts and they would now pursue their remedy for civil debt. Aslett was remanded by the Judge.

A further report is in the Sat 21st April 1804 edition:

Aslett, who has been imprisoned for debt since his acquittal, is entitled to an opinion of the 12 Judges on his case. A majority of nine have replied that he was guilty of stealing paper from the Bank which has been valued at £1.19.0d and for that he is liable to transportation. The other three thought he was not guilty of any offence known to them.[61]

Sat 27th August 1803

Stock Jobbing fraud: A fake letter from Foreign Secretary Hawkesbury to the Lord Mayor was delivered to the Mansion House saying the quarrel with France had been patched-up. It had Hawkesbury’s seal on it. The delivery man was booted and spurred and said he came from the Foreign Office.

The Mayor posted a copy on his notice board outside the Mansion House and sent another copy to Lloyd’s while he went himself to the Stock Exchange to report the news. The 3% consols immediately rose 5% to 71 and a spirit of ineffable joy and expectation spread through the City. About an hour after receipt of the notification, the Mayor wrote to Hawkesbury to congratulate him.

Before this response had been delivered, Goldsmid arrived at the Mansion House, looked at the letter and declared it must be a forgery – he knew no messenger had arrived from Paris that morning. The seal was genuine but on close examination it had been detached from its original letter and glued onto the fake one.

It was shortly after noon that a clerk of the Treasury delivered a note from Vansittart to the Lord Mayor confirming the letter was a forgery. The 3%’s immediately fell to 63 before recovering to 64 (the price of the previous close). The committee of the Stock Exchange met and cancelled all trades done that morning and the Exchange was closed at 2 pm. The accounts of the brokers are to be inspected but ‘a small group’ has refused to co-operate.

The Lord Mayor has offered a £500 reward for information. He supposes the forgery originated amongst the stockbrokers. The Bank, which buys stock on behalf of the Sinking Fund, initially refused to pay more than 64 for its morning purchases but finally agreed to pay 69½. Transactions done for cash will stand but all the time bargains (wholly speculative) will likely be cancelled.

Wed 5th Oct 1803 Extraordinary

Merchants at Cadiz have reported that since the Peace of Amiens, Spain has imported 46,242,980 Piastres of silver from South America, mostly from Vera Cruz and Montevideo. The Piastre is worth about 5 Francs (45 gr. of silver – i.e. a total import for the few months of 2,000+ tonnes).[62]

Sat 15th Oct 1803

The 3% consols were trading at 57 / 58 on 24th May.

Sat 22nd Oct 1803

Letter from Cadiz in late May reports the arrival of the Spanish warship St Julien from Vera Cruz with 2,682,118 ounces of silver, 3,000 quintals of brass and some cochineal.[63]

Sat 3rd Dec 1803

The costs of colonial produce on the Amsterdam market has risen 15% in the first few weeks of renewed war.

Sat 10th Dec 1803

Lord Auckland has told the House of Lords on 3rd April that the value of British exports last year was £48½ million Pounds. This is an astonishing achievement by the merchants.

Sat 10th Dec 1803

Extracts from Le Moniteur, copied from Mercure de France:

The British reputation in Europe is that she reserves the profits of war to herself whilst sharing the sacrifice and cost with her allies. The British ministry responds that it has generously funded the continental allies. It is however a fact that all the continental powers have been impoverished by war whilst England alone has profited from it.[64]

That profitability explains the Grenvillites’ readiness to fight again. The bankers of London can hardly conceive how the governments of other countries can refrain from war.[65] British trade figures have grown through the war and everyone has to pay London for colonial production. The Europeans necessarily chose to buy in London for the cheap British manufactures so the city has become a one-stop shop, like a latter-day Carthage ……..

……. Fox’s speech says it all: “Numerous people are ardent for renewed war. This animates the commercial men in all the commercial towns, but most particularly in London. I hope the hearts of English merchants glow with generosity and patriotism. They would not sacrifice the happiness of the people for profit from government contracts or other means of self-enrichment. If I am wrong, I should wish for the return of one of the ancient heroes. If we are doomed to fight this war to satisfy greed, I should rather fight for the romantic notions of Alexander than to swell the coffers of a merchant.”

Pitt introduced England to commercial war. He did not always get his way. His spats with Windham are instructional. Windham is one of those romantics who worships the glory of war[66] whereas Pitt was solely concerned with the economic possibilities. It was Windham who revealed some telling details about the brief peace. He said:

“Since the conclusion of the preliminary peace agreement, France has fitted out 13 warships (6 capital ships and 7 frigates) and over 10,000 tons of Baltic hemp have been sent to France in British ships by British merchants.

“The expedition to Santo Domingo was fitted-out in record time.

“A new expedition is now fitting-out in Dutch ports. France has no money. It is British capital that funds these expeditions.”

That is why Addington’s ministry could not complain about them.[67]

Sat 24th Dec 1803

The Report of the Admiralty Commissioners into naval abuses recounts the conduct of the naval storekeeper Smith at Jamaica who kept the premiums on Bills of Exchange for himself. London Bills were in high demand in late 1790s to remit silver proceeds of South American trade to London. Smith was removed from office in 1795 and replaced by Mr Dick who regrettably continued the same practice. The abuse continued from January 1793 – December 1800. During that period the naval storekeepers at Jamaica issued Navy Bills to raise cash from local merchants.

The premium was generally about 10% in view of the strong demand. The total amount drawn (face value of the Bills) in the eight years was £536,258 so public funds of about £53,626 have been fraudulently abstracted.

It was not only in their cash-raising ventures that M/s Smith and Dick were criticised. Their purchases of naval stores were thought to be unwise. They generally paid very considerably more than the market rate. The Commissioners estimate they overpaid something like $135,000 to the merchant suppliers over the same eight years.

Sat 14th Jan 1804

The Chancellor of the Exchequer met with the bankers on 11th June to discuss the loan that government requires. The five groups of attending capitalists represented the Committee of Bankers, the Committee of the Stock Exchange, Robarts Goldsmid & Co, Esdaile & Co and Sir Francis Baring Battye & Co.

The minister said he wanted a loan of £12 millions. He would raise £10 millions of war taxes within the year. Together they are sufficient for the first year of renewed fighting. He offered £80 of the 3% consols and £80 of the 3% reduced Consols for every £100 subscribed (at their closing price of 58½). The bankers have two days to make their proposals. The Chancellor of the Exchequer expects payment in tranches between now and November and offers the usual discount for prompt payment.

The security he offers to the bankers is as follows:

  • The first war tax is 5% on all income from all types of property. This Income Tax will, for the first time, be applied to dividends from the funds. It will also raise 5% on all income derived from industry. A sliding scale for small incomes under £150, similar to the previous Income Tax scale, will be used to obtain contributions from small businessmen.
    The interrogatory system will be again used to establish income. People displaying disproportionate wealth will be questioned on Oath by Commissioners and required to reveal details of their income.
    Landowners are to pay 5% extra Land Tax; Land occupiers (tenants, who pay the tithes) will pay 4% extra.
  • The second war tax is a surcharge on all the present revenue of the country – customs, excise, stamps and all luxuries (carriages, horses, servants, houses, windows, dogs, tea, coffee, sugar and all sorts of booze) – which will all pay an increased tax of c. 30% and will be applied from beginning of 1803. It will double the take under these heads.

The bankers actually bid on the long annuities which they agreed to receive at 6/5d. At 17 years purchase, that is £5.12.10d. Allowing for the discount, the total cost to the country will be £101.6.6d so the bonus they get is £1.6.6d and the interest the country pays to service the loan will be £5.2.2d%. No quantification of the discount is published.

Pitt says the terms evidence the confidence that the capitalists have in our prospects. They are not only prepared to finance the country but at a very reasonable rate. The loan will create an additional £32 millions of stock upon which interest payments will amount to £4.8 million a year.

“I propose to start a Receipt Tax. Every receipt will carry a stamp of between 2d – 5/0d and this will produce £220,000” said Pitt

This system will convince France that she cannot ruin our finances by protracted war.[68] It will convince the other European powers that there is no danger in associating themselves with us – our resources are solid and extensive.

The Chancellor of the Exchequer said the war justifies the taxes. We have been forced to war because we are not allowed to remain at peace. Whilst we are reluctant warriors we are vigorous borrowers. ‘Our people willingly make sacrifices for the honour and independence of our country’, he said.

Sat 28th Jan 1804

General Gascoigne told the House of Commons that the country had acted for five hundred years on a policy of taxing imports at London less than imports at other ports. The duty on Port wine at London was 8/- a ton but was £3.10.0 at outports. He thought they should be equalised. Rejected.[69]

Gascoigne also mentioned the varying levels of duty on indigo. Indian indigo paid £10.5.0 while West Indies paid £12.6.0. Vansittart said Indian indigo was subject to another additional 2½% charge which levelled the duties. He said as a general rule it was government policy to tax West Indies less than India (in consideration of the Company’s monopoly).

Sat 4th Feb 1804

The bounties paid on grain shipments to England during the last shortage (largely paid to the Company for Indian rice) totalled £524,000.

Sat 4th Feb 1804

Discussions between the Board of Control and the India Company, concerning the latter’s accounts and the balance due to government, have resulted in the agreement of the Company to pay £1 million full and final.

The navy, army and ordnance will cost £22 millions this year. The Civil List will cost £1,191,907. Ireland, now it is united with Britain, will pay its usual share of 2/17ths of both items.

Parliament has approved the issue of £4 millions of Exchequer Bills but the Bank’s brokers are able to sell these to the public only slowly.

Sugar is to be taxed heavily. Our colonists are thought to make huge profits and the sugar has become a necessary and a staple. Now we can assert a monopoly on colonial production, we will bring the world’s supply to London for domestic sale and re-export to Europe. The duty on sugar is raised by 4/- per cwt, that is an increase of 20% ad valorem. No draw back is available, indeed a further tax of 1% is added on re-exports to Europe (and 3% to America). It is the ministry’s intention to bring colonial production into substantial contribution to our war expenses.[70]

All other customs duties are raised 12½% ad valorem except raw cotton, tea and wine, which all fall to be taxed under the Excise. Tea smuggling is a problem but the Company’s control of the bulk of supply allows an additional tax of 15% ad valorem on coarse tea and 45% ad valorem on fine tea. This will produce an extra £1.3 millions.

For wine, Pitt recalls he added £10 per pipe (a barrel of nearly 600 bottles) to the tax in 1795 and consumption hardly changed. He will restore the 1795 tax rate of £40 per pipe, about 200% ad valorem. This will produce £0.5 millions.

Wine is the drink of the rich; beer of the poor. The brewers have been making good profits and an additional tax of 2/- per bushel on malt should be acceptable to them. This tax will then produce £2.7 millions (about 45% ad valorem).

The Income Tax was introduced in the Revolutionary War as a war tax and will again be collected in this war. The common complaint was the requirement to disclose all assets liable to the tax. To address this, we have divided that tax according to source. All capitalist endeavour (lands, rents, interest on money in the funds, etc.,) is distinguished from income derived from labour or industry. The rich will not be required to disclose their profits on capital as the levels of income from their holdings are easily ascertained whilst income from labour and industry must be investigated to ascertain its value. Commissioners will again be appointed to investigate people on Oath.

On land, Pitt proposes a 5% tax on the landowner and 3¾% on the tenant (the discount recognises that the tenant has to pay the Poor Rates). The annual income from lands in England is about £80 millions as follows:

  • Lands and tithes produce £38 millions;
  • Money in the funds (Government, East India, Land, etc.) is £18 millions
  • Houses and buildings in England and Scotland produce nearly £10 millions.
  • Mortgages and loans are worth £7.5 millions.
  • Income earned abroad and remitted to England is £4 millions

We will take nearly £4 millions annually (c. 5%) in tax on these incomes.

Income of placemen, sinecure-holders, professional men (doctors & lawyers) and artisans should be about £0.6 million.

We understand the tax on income from investments in government paper is resented by commercial men who say it is a breach of public faith towards those people who support government with their capital. We appear to have promised x% income on the dividend, then actually pay x – tax%, but its a form of income and we do not wish to make exceptions.

This will produce £2 millions in Customs, £6 millions in excise and £4.5 millions in Income Tax. We therefore need a loan of £10 millions for the excess of spending over national income. I have actually borrowed £12 millions but £1 million is for Ireland.

Sat 4th Feb 1804

The House of Commons is working through the ministry’s demand for new taxes and is considering the level of import / export duties. Opium from the Levant is taxed at 12/6d per pound and a drawback of 7/- is allowed on re-export. Bengal opium pays an extra 5/- per pound with a drawback of 6/- on re-export.[71]

Sat 4th Feb 1804

The Chancellor of the Exchequer told the Commons that the revenue laws of England were so numerous and complex that hardly anyone in the revenue service understood them, let alone the public.

The revenue officer goes to a business and asks for money under such-and-such law and the merchant replies he is exempt under such-and-such law and the revenue officer goes away.

The difficulties created by these conflicts of laws had become insuperable, he thought.

The government has only two officers who understand the whole Customs tariff – Burton of the Excise and Jackson of the Customs – and they have successfully created a simplified procedure that seems to be intelligible to the public.

Sat 4th Feb 1804

Sheridan was surprised ministers had supposed that raising the Customs duty on opium would be a sufficient check on its use in the breweries (Whitbread MP, the brewer, had just informed the House of the practise of adding opium to the brew).

Sheridan thought people who put opium in beer should be punished – the government should not be going half / half on the profits with them.

The Chancellor of the Exchequer said there is an existing penalty for introducing noxious ingredients into beer.

Hobhouse said the opiate-flavoured beers were not produced by the major breweries, it was a niche market.

Sat 4th Feb 1804

The 3% consols were 53 on 20th Sept 1803

Sat 10th March 1804

British government debt paper fell heavily on 28th September 1803. It is attributed to the loss of Hanover which lies across an important trade distribution route for us. Now we are temporarily unable to supply N W Germany, a decreased demand is expected for our products. Many British merchants in this trade have failed to perform their engagements. It is also true that payments from the continent are delayed.

Our blockade force is bombarding all the French Channel ports indiscriminately and that has deterred our smuggling through those places too.

Sat 17th March 1804

Europe News, September 1803:

At the recent Frankfurt Trade Fair (the big commercial event of Europe) almost all the stands were English. Our manufactures are so predominant in Europe that it is difficult to imagine European trade continuing without them.

On this occasion, our merchants did not simply draw wealth away from Europe to London, they invested their trade proceeds in the grain harvest of southern Prussia by buying-up a huge supply that had arrived at Danzig.

It is a no-brainer. England always gets short of grain in war. Our economic system requires we do not produce an excess of grain so the value of production remains high and the rents to the landowners accordingly. Once we start war, if it is not the removal of labour from the farms to the navy and army, its the prohibition of exports to us from traditional suppliers that ensures disruption.

This is what maritime commerce thrives upon – buying cheap here to sell dear there. These merchants should make a killing from the war-created needs of the British people.

Sat 17th March 1804

In the House of Commons, Brooke has objected to the terms of the Woollen Clothiers Bill (Editor – This might be either Thomas Brooke, MP for Newton or Henry Richard Greville, Baron Brooke, MP for Warwick). It repeals all existing legislation regulating the industry and enacts entirely new ground rules. He spoke for a long time. He says its overall effect is to advantage a few big companies over myriad smaller ones.

Sat 21st April 1804

Castlereagh has spoken of the £1.8 millions of East India Company Bonds that are traded on the Royal Exchange. He distinguished the Company’s debt paper from the government’s in so far as the Company was liable to the provisions of the recent Income Tax law.

The interest payable on the bonds is 5% (totally £90,000 a year) and the application of Income Tax will reduce the value of the bonds in comparison to government paper which pays interest of 3½d per day tax free. He says holders of Company bonds should not worry as he will bring in a remedial Bill soon to remit the disadvantage.

Sat 11th Aug 1804

January 1804 – The British banker Walter Boyd, who specialises in the French funds, has written a long letter to the Journale de Paris. He says his erstwhile partner Paul Benfield made a written request to the Editors of two Paris newspapers to publish some information in which it was said that Boyd, the head of Boyd & Ker of Paris (and formerly of Boyd Benfield & Co of London) had been arrested for theft of 200,000 Livres.

The facts of the matter were that in 1791 M Bonne-Carrere invested £8,788 in the British 3% consols in the name of his London nominee Richard Johnson. The money belonged in part to General Dumouriez.

In 1793 Bonne-Carrere wished to withdraw the investment and applied to Walter Boyd Jr, the then manager of Boyd & Ker in Paris and cousin of the Walter Boyd who is complaining, to sell the stock and transfer the proceeds to Paris in secrecy without exposing Bonne-Carrere’s name, for which purpose Bonne-Carrere gave Boyd the written instruction of Johnson. Walter Boyd Jr sent the order next day to his cousin in London. When the order reached London, Johnson was said to be in Italy and the transfer could not be completed.

At that time the stock market of Paris became depressed due to civil disturbances and Bonne-Carrere’s need of the funds increased. A few days later, Boyd Jr wrote to London again concerning the fraught state of the Paris market. He requested London to delay all payments to Paris and particularly not to send money but to hold it to the credit of Boyd Jr’s account.

Bonne-Carrere was arrested at about that time for political reasons and imprisoned in the Abbeye.

About six months later Johnson returned to England and the stock was sold in conformity with Bonne-Carrere’s first instructions and the account of Boyd Jr with Boyd Benfield was credited with the nett proceeds. Bonne-Carrere visited England in 1802 and corresponded with Boyd Benfield & Co but was not told that his funds had been transferred to Boyd Jr.

After the peace of Amiens, Boyd returned with his family to Paris and remained there after war recommenced. Benfield was also in Paris then and he met Bonne-Carrere. Benfield denied that Boyd Benfield had ever had Bonne-Carrere’s money and produced a document that appeared to establish the case. Benfield suggested Bonne-Carrere should accuse the two Boyd’s. He (Benfield) supposed that the Boyd’s imagined Bonne-Carrere had been executed and they could appropriate his investment between them. Benfield was the only witness to Bonne-Carrere’s accusation. He seems to have believed the renewed war would preclude any evidence from Boyd Benfield & Co ever getting to France.

The French court gave no weight to Benfield’s evidence and concluded that the funds remained with Boyd Benfield in London. It acquitted Boyd of any criminal behaviour but adjudged that Boyd Benfield & Co was liable for Bonne-Carrere’s claim. This award was thought contradictory and an appeal was made to the Criminal Tribunal which concluded that Bonne-Carrere had a civil claim on Boyd Jr.

On these facts, Walter Boyd publicly repudiated the allegations of Benfield.[72]

Sat 25th Aug 1804

British capitalists are trying to elucidate the formal meaning of the terms of the Loyalty Loan that Pitt solicited from them. Repayment of these 5% annuities was promised two years after war’s end and six month’s notice of withdrawal was required.

Legal opinion on the notice period is varied. All lawyers agree the war did end with the peace treaty. Either you wait 18 months from the date of Amiens and give notice or you wait two years.

Sat 15th Sept 1804

Addington has met with the City bankers. He wants £16 millions of which £14.5 millions is for England and the remainder for Ireland. For every £100 of loan he offers the bankers £100 market value of the 3% reduced consols. The bidding is to be in the 3% consols with a 5% discount for prompt payment. He guaranteed that the first half year dividend would be free of the new income tax on interest. He also said he would soon be asking parliament to approve a further loan of £2.5 millions.

This negotiation will feature a novel approach to finance. There will be no annuities issued and the bidding will be in the 3% consols and not in the 3% Reduced. It should improve the dividend on the 3% reduced to the level of the 3% consols and ensure holders of both get a better return when dividends are paid in April and October.

The loan requires payments in tranches of 10 – 15% monthly from May 1804 – January 1805.

The bankers were not convinced of the advisability of Addington’s proposal and the eventual agreement was for government to pay £100 of 3% Reduced, worth £55.10.0d, and £82 of 3% consols, worth £45.18.5d which, adding the discount of £3.3.4d, produced £104.11.9d for every $100 of loan. Addington says this cheap money shows the confidence our bankers have in the economy.

Sat 15th Sept 1804

Addington has introduced his 1804 budget. He hopes to continue last year’s system whereby he tries to raise the required revenue without increasing the national debt. He estimated a need for £10 millions in war taxes last year to avoid increasing the debt and that turned out to be correct.

At the beginning of the Revolutionary War an abundance of colonial goods was caught in our warehouses and a stagnation of trade ensued. We gave financial aid to the merchants to help them over their temporary embarrassments.

There was financial difficulty again last year on the commencement of the renewed war but it was insufficient to require our direct aid. Instead we used the large floating capital of public money from taxation for the relief of trade. We gave the merchants enhanced drawbacks on their re-exports that cost the country £500,000 over the year.

Addington reminded merchants that they should act prudently in times of abundant profits so they may survive predictable economic downturns.

Our war taxes are estimated to produce £12.5 millions this year, the property tax £4 millions, Customs & Excise $8 millions. Parliament exempted incomes under £150 per annum from income tax and that has reduced Addington’s expected revenue by £1 million.

This year we need £35 millions for the army and navy. Ireland will pay her usual 2/17th share. We have paid £412,000 to America for its old shipping claims and that has restored relations to their former friendly level.[73] Civil List extras are £883,000 and miscellaneous services £617,000. Altogether Addington needs £35 millions for the year.

Sat 3rd Nov 1804

In the year to January 1803, the value of all British produce and manufactures exported was £48.5 million. In 1803 it was £40.1 million.

Sat 17th Nov 1804

Five apprentice hatters have been convicted of illegal combination against their employer Thomas Wattsby and been imprisoned in Surrey for six months. They sought to withhold their labour to obtain better terms of employment.

After their sentences are complete they will enter 3-year bonds of good behaviour in their own recognisance of £100.

Sat 29th Dec 1804

The French interdiction of smuggling at Meppen has forced the merchants to devise a new route. After we land the goods at Emden they are carried to Aurich in East Friesland and then via the Duchy of Oldenburg to Bremen from whence there is an established land route for merchandise.

Frankfurt says it is getting a great volume of British and colonial goods overland from Magdeburg. The goods are allowed through the British blockade on the Elbe. Prussia is keen to engross the smuggling trade. She has lowered the transit dues on all English goods from $1.50 Rix (135 Groschen) per cwt to 18 Groschen. It seems Prussia will be a beneficiary of the AngloFrench quarrel.

Sat 29th Dec 1804

The parliamentary committee appointed to investigate the effects of the Corn Laws has reported that the costs of imported grain for the 13 years (1790 – 1802) was £30 millions.

Sat 29th Dec 1804

British exports in 1804 were £40.1 millions (1803 £48.5 millions). The reduction is attributed to French influence in northern Europe. Sales are delayed by the need to establish alternative routes to avoid French inspections.

The merchants are endeavouring to replace Hamburg with Tonning as our port of entry for smuggled goods. Shipments take a little extra time and there is an added expense of 60 miles of land transit but it should settle down soon with only a slight increase in prices.

Sat 26th Jan 1805

The India Company has laid a claim on the home government for £4 millions. It was tabled in the House of Commons on 2nd July 1804.

Amongst the charges is £3+ millions for the capture of Ceylon. Another million is for the capture of the French and Dutch ports of India. A 5th million is for the aborted invasions of Mauritius in 1794 and Manila in 1797 and there is an additional amount for the maintenance of HM regiments in India beyond the numbers previously agreed.

All the claims include interest running from the date the disbursement was paid. The overall claim is reduced by a credit of £1.5 millions paid to the Company prior to 1st March 1804 leaving the nett claim of £4 millions.

The estimated costs of the Company’s involvement in the Egyptian campaign are said to be £2 millions but the Directors have agreed not to make this claim yet.

Sat 9th February 1805

In 1776, Surinam had about 400 plantations of which 20 were free of debt. Since then farming has become less profitable and debts have increased. The Dutch have been unable, since the declaration of their Republic, to fund the colony appropriately.

It is a foreseeable result of our conquest that British capital will now be invested in Surinam. This investment is not to get the interest on the money (the rate available is about 3-4% and Surinam is hardly the most secure place to put your savings). If we were after interest-payments we would get a better and safer return in British government stock.

The capitalist interest in Surinam is overwhelmingly in the consignments. Every West Indian merchant knows that his creditor becomes his consignee. This is how we run our colonies. In the last war we simply assumed the colonial government of Surinam and our merchants funded the planters who were contractually bound by our loan agreements to sell us their goods. Once the consignments had been redirected from Amsterdam to London and their profitability became apparent, a speculative bubble formed and the Dutch planters were offered loans by every Tom, Dick and Harry in London, intent on securing a supply of colonial goods. Trading in commodities (necessaries) is a lovely cash-cow to which every merchant aspires.

Our speculative loans to the Surinam farmers funded the clearance of new lands for planting. These produced more colonial goods. During our short government of Surinam and the other Dutch colonies in the Revolutionary War, London invested £18 millions in their increased production. After the peace of Amiens, the colonies were restored and the capitalists were left with the interest income of 3-4%. The source of big profits reverted to the Dutch bankers of Amsterdam who became creditors (and consignees) in our place.

Many planters resent this transfer of a majority share of their profits to bankers. Some claimed ‘poverty’ and failed to repay the interest. They then moved to Step 2 – ‘not only can we not repay the interest but we will imperatively require new loans if we are to survive’. If we had called-in our loans then, we would have got perhaps 25% of our money back.

Our own planters in our own colonies are similarly placed. They can rarely raise loans, even small ones, in the City. Planters are seldom wealthy enough to get the benefit of their production. The speculators, who insert themselves between producer and consumer, make the big bucks in the early stages until production exceeds demand and late-coming financiers get burned.

Timing is everything.

Late-comers have been obliged to pay further loans that they would ordinarily have declined. Even then, if peace breaks out, they may not get the consignments any more.

Now we are again occupying French and Dutch colonies worldwide, we should devise our investment strategy more carefully.

Sat 9th Feb 1805

In England everything is fine. 250 merchant ships are expected from the West Indies with this year’s harvest. Some early East Indiamen have already arrived with valuable cargo. The 3% consols on 13th October were 57½; East India stock (always a good buy in war) is 166½.

Sat 16th Feb 1805

The published prices of grain per quarter (28 lbs) in England during the three months ending 6th October 1804 were wheat 65/10d; rye 38/7d; barley 34/8d and oats 25/7d.

A semi-official newspaper in Paris (Journal des Defenseurs) calls on Europe to take advantage of the food shortage in England. It says:

“Her capital is locked-up in the purchase of the entire world’s colonial goods. Her warehouses are stuffed with rich produce while her barefoot people starve in the streets. If she cannot make sales she will be bankrupt in 12 months. Is that too long a time to wait for peace?”

Sat 9th March 1805

The difficulties in trading at Bremen and Hamburg have caused many British merchants to ship to Fiume and Trieste. All the other harbours of Dalmatia have English ships visiting too. British merchants seek to open a new trade route into central Europe. This is a cash trade – goods for silver – because our productions are in high demand. If it is maintained for long, Europe will have to buy silver from the English at whatever price it can get.

Sat 9th March 1805

Joseph Jackson has been executed outside Newgate for forgery. His father is a businessman and Joseph showed some promise as a literatus. His English, French and Latin were good and he wrote some lyrical imagery at 15 years of age. He then became acquainted through inveterate reading with the works of William Godwin and submitted to the logic of the robbers in the novel ‘The Adventures of Caleb Williams’.[74]

He married for love and the girl had no dowry. They soon had a son and his wage as a clerk was inadequate for their expenditure. He ultimately forged his employer’s signature on some Bills but was easily caught, confessed, tried and executed for it. He was 23 years old. He was silent on the scaffold and seemed to expire the instant he dropped.

Another youth, Thomas Bucknell, was hanged for forgery at the same time.

Sat 13th April 1805

Within the last month, English merchants trading to the Baltic have bought £5 million of grain in Poland, Russia and Germany.

Sat 20th April 1805

House of Commons, 19th July 1804 – Castlereagh has continued his review of the East India Company’s largely incomprehensible accounts for the last ten years. This is the third statement Castlereagh has made to the House on the subject:

The final nett surplus revenue for the period was expected to be £5,910,000 but was actually £1,981,000. Members will be pleased to see the Company administered and defended the Indian empire for ten years and still had nearly £2 millions left over.

The Company’s debt has increased from £8,074,000 in 1793 to £19,869,000 in 1803 and this has caused annual interest payments to increase from £537,000 to £1,457,000.

The gross revenue for the ten years was £94,756,000 and the Company is pleased to note the increased annual productive capacity of its lands. The cost of operating the Penang and Bencoolen factories for the decade was £0.7 millions. The territorial charges paid in London (the Home Charges) for ten years was £3.5 millions. Add the interest payments on debt and the costs of administering India brings outgoings to £92.6 millions.

During the decade, the Company has made advances of £2.5 millions and received tribute of £4.6 millions.

The Company loaned the Nabob of the Carnatic £1.2 millions in 1797 to put that province on a sound financial basis. Interest due on that (non-performing) loan is now £600,000. Cash balances at the various treasuries abroad is £1.32 millions. The Guikwar loan and other advances are accounted at £900,000 and public participation in these instruments has produced £500,000. All these expenses total less than the tribute received.

Based on these figures Castlereagh calculates that the Territorial Account was in profit by over £2 millions for the period.

MPs may be concerned at the increase of Company debt. The figure, including China, is £12,055,000 but the debts in London are decreased by £2.218 millions making a nett £9.837 millions. The Company’s funds are necessarily tied-up in many places and it imperatively needs to raise loans from time to time to meet extraordinary expenditure. While debts are thereby increased, total assets over the decade are likewise greater at £12,100,000.

Castlereagh deplores the Company’s transfer of debt from London to India and the general increase in Indian debt ‘where interest rates are so high’. He has asked the Company to keep the economic viability of borrowing in London always in view. Nevertheless, the balance of debts and assets reveal the Company’s financial situation has not deteriorated over the period whilst the size of the British Indian empire has grown substantially. He is satisfied.

The Company’s commerce is conducted on enlightened principles of encouragement to the manufacturers of England and the producers of India rather than mere mercantile profit and advantage. It has continued buoyant and permits the annual dividend of 10%. This great achievement has occurred against a background of war and debts. The Company has excluded itself from the London debt market in deference to the interests of the state – that is why they have been borrowing in India, they say. Had they raised their loans here at the moderate interest levels of London market, their profits would have been greater……[75]

Sat 1st June 1805

Rochefoucault, the French minister at Dresden, has protested to the Elector of Saxony against the public way that English goods are imported and exposed for sale in his Electorate. The annual Leipzig Fair is almost entirely an exhibition of British manufactures.

This is distressing local manufacturers. He says British trade at the great annual Fairs of Frankfurt, Leipzig, Brunswick and Munster produce over £12 millions of sales each year for that country.

These sales should be seen as contributions to enable England to prosecute her financial and maritime tyranny. The Elector and his people should recognise where their real interests lay.

Tues 5th Nov 1805 Extraordinary

This year’s Jamaica fleet (201 ships) has reached the Channel without incident.

Sat 14th Dec 1805

The 3% consols are softer at 58-59 but India stock is well up at 180-181. The 10% rise is attributed to the historical profitability of the Company in war.

Sat 1st Feb 1806

September 1805 – silver has increased 1½d per ounce in London in this few days. It appears to be due to speculative purchases. There is a market expectation of higher demand as England starts paying subsidies to its European allies. This suggests the Company will be required to bring more silver to England and more pressure will be put on India, China and the Spanish South American colonies to secure the necessary supply of the metal.

Sat 8th Feb 1806

The Directors of the Bank of England are having a good year. At their quarterly meeting in late Sept 1805 they added a 5% bonus to the standard half-yearly dividend of 3½% due for the half-year ending 2nd October which period had then not yet been concluded.

Sat 15th Feb 1806

Some evidence presented recently to the House of Commons reveals that out of an English population of 8,872,980 we have 1,039,716 people (c. 12%) reliant on parish poor relief for their subsistence.

Sat 22nd Feb 1806

25th September – the Bank of England is making windfall profits. In addition to the 5% bonus granted a few weeks ago, another 5% bonus is announced today to the holders of its capital of £11 millions.

If there are no more bonuses this year, that will give the shareholders 17% return on their money. The price of bank shares on the exchange has risen suddenly to 185¾ ex the first half’s dividend.

Sat 22nd Feb 1806

16th September – the subsidies for our European allies are being paid out of the Bank of England. The wagons were brought round to the back door and some 14 casks of silver dollars were loaded onto each. The total value is estimated at £500,000 (about 55 tons). The Horse Guards escorted the wagons to Portsmouth where the specie was loaded onto HMS Royal Sovereign, HMS Defiance and HMS Renommee which will take it to Malta. It is insured All Risks at Lloyd’s at a premium of 50% with a refund of 9½% for no claims. That £200,000 should keep the underwriters happy.

Another shipment of £300,000 in silver has been loaded to HMS Antelope (Sir Sidney Smith) for carriage to Husum on the Schleswig coast north of Hamburg where a new smuggling route is being developed. The insurance premium on this consignment was only 20% of value (the tariff for goods carried on British warships to the Baltic). The postal service from Harwich to Husum will be changed to Cuxhaven from 1st November once the Russian/Swedish army is in possession of Hanover.

Sun 6th April 1806 Extraordinary

3% consols on 19th November were up at 60½

Sat 19th April 1806

In Bedlington v the Duke of Northumberland the Lord Chancellor has quoted Lord Mansfield in saying that ‘there is something blacker in the coal industry than the product itself.’ He was referring to a few large capitalists in the north of England who engaged with each other to fix the quantity and price of coal for sale.

This recollection of Lord Mansfield’s harsh words was induced in the Lord Chancellor by the temerity of the Defendant Duke and other mine owners. Their offence was to file Bills in Chancery to give legal effect to the agreement governing their restrictive cartel.

A former Attorney General opined they are guilty of conspiracy however, unfortunately for the Plaintiff Bedlington, his case, although broadly similar, can be judicially distinguished from the one Mansfield heard.

Judgment for the Defendants.

Sat 31st May 1806

Our Baltic fleet of 70+ sail has been safely convoyed to England.

Sat 28th June 1806

London newspapers have published a eulogy to Pitt who has died:

On 16th May 1784 Pitt entered power and in the ensuing nine years he established the commercial foundation to Britain’s rise to its unequalled position of prosperity in the World. He won the support of the majority of MPs by replacing Fox’s India Bill with another proposal that left the Company’s independence intact.[76] This gave him a following of 50-60 MPs who represented the Company’s interests and were all the King’s friends.

After the American war his plan for paying-off the national debt was an eternal monument to his greatness. It commenced in 1785 when we had a surplus of £500,000. He doubled this with some special taxes and applied the million to reduction of debt. He reformed the Excise laws and introduced taxation of wine.

It was the loss of America that threw England into this new path. We had absurdly overspent ourselves in suppressing the colonists to the point that, when we finally abandoned the attempt, the interest on our national debt consumed 60% of annual revenue. France, who was in much the same state, fell into Revolution but we avoided that by a dextrous mixture of carrot and stick. It was this national near-bankruptcy that horrified all his contemporaries and gave Pitt the entrée he needed to secure the respect and support of the power centres.

In 1787 he interfered in Dutch affairs to prevent French control of that country. The following year with Prussian help he frustrated the expansionist policies of Catherine of Russia against Sweden. At the end of 1786 the King fell ill but Pitt’s support never wavered during his illness.

He protected England against French principles when that country adopted democracy. During 1790-92 the English Press was awash with popular ideas of national administration that threatened monarchy, aristocracy and clergy. The consternation of the English ruling class allowed Pitt, as their instrument, to accede to a great concentration of power with which he suppressed the dissemination of democratic ideals by harsh legislation and violence.

By characterising the dissidents as traitors and severely punishing them (the many pieces of repressive legislation), he silenced criticism whilst maintaining our manufactories in production and increasing our foreign trade at the same time. This added the commercial men to his supporters.

When the Revolutionary War commenced, if our European allies had been as competent as Pitt, we would have got a far better peace treaty than was in fact the case.

By 1793 our economy was expanding faster than we had money to support. With the Dutch and French increasingly closed-out of their colonies by our Royal Navy, British capital flooded into their ex-colonies and we assumed a monopoly of colonial trade (shared with the Americans where-ever they could evade the Rule of 1756). This sudden spread of our merchants’ wealth all around the world left them with inadequate funds at home and Pitt refinanced them by assigning a value to their property overseas and in ships and allowing them to draw on it by issue of Exchequer Bills secured on the merchant’s documentary evidence of overseas assets. This injection of liquidity very quickly caused our trade to again flourish. Had it not been made available, a succession of businesses would have stopped payments and the money-go-round would have come to a standstill.

A second commercial difficulty at that time arose from the subsidies that we wished to pay our allies in Europe to keep them fighting. These payments left the home country with an inadequate circulating medium and induced a run on the Country Banks that spread to London and threatened to derail our whole capitalist system. Pitt allowed the Bank of England to cease payments. That delighted the City merchants who were the only people aware of the danger. Pitt incrementally issued paper money (then already in use by merchants in large Bills which had no application in ordinary day-to-day exchange). Utilising the value reportedly locked-up in British property abroad and afloat, he permitted the issue of £10 notes, then £5 notes and £1 notes and brought the whole country onto a system whereby real wealth stayed at the Bank of England whilst paper credit notes, representative of value, were held by the people and were notionally exchangeable for value at the Bank. Paper money was easily transportable, compared to gold and silver, and became very popular.[77]

These financial innovations were concurrent with the mutinies in the Royal Navy to which a contributing cause was late-payment of wages. They started at Spithead and spread first to the Nore (a sandbank at the mouth of the Thames, North of the isle of Sheppey and close to the confluence with the River Medway, used as an assembly point for shipping fleets and marked at the time by a light-ship) and then to every naval port and required both concession and violence to put-down.

That year Pitt introduced the idea of raising the bulk of national funds within the year it was to be spent. The French had already widely published the extent of British debt along with their view that it would bankrupt the country. France had a role in disturbing the Sterling exchange rate at Hamburg which had exacerbated the Bank of England’s payments problem. Pitt needed to reassure national creditors that he would protect the value of the Pound. This led to Pitt’s adoption of the bankers’ idea of capitalising the Land Tax which did so much to support the value of British debt paper and thus reduce the costs of borrowing.

In 1797 the shortage of specie was a serious threat. A part of the silver we might ordinarily use for trade had gone into Europe as subsidies. Some good part of it came back into British funds through our consular offices which issued Bills for the silver proceeds of our trade and remitted the metal from time to time. There were also nominee investments in British funds by continental officials and army officers.

By 1799 our foreign trade was double the 1792 figure and four times the value at the time when Lord North had resigned. At the same time our debt to the City bankers had ballooned. Pitt converted the Sinking Fund from a tool to reduce debt to a means of funding war. He increased the Sinking Fund proportionately more than he increased the national debt. Had Pitt been in power when we fought the American colonists his financial policy would predictably have allowed England to win that war.

Pitt’s statesmanlike act was to risk the odium of the people by raising taxes rather than, like his contemporaries, slipping a loan through an obedient Commons to burden posterity. One may compare the results with Neckar’s policy of fighting a war on loans which ultimately ruined France and contributed to the occurrence of the Revolution.

Pitt’s financial system has now been with us for twenty years. It is familiar to businessmen and is becoming familiar to others.

His terminal disease was characterised by an inability to sleep for weeks, by the recurrence of gout which spread up his leg and by an inability to retain food. At the moment of death he had not eaten for 48 hours.

Sat 5th July 1806

When the Sinking Fund was instituted in 1786 it was able to repay £1 million a year of the national debt. In the last quarter of 1805 a repayment of £2 millions was achieved from this Fund. The value of the Fund doubles every fourteen years.

Last week shares in the Bank of England were up 3% on Friday to 199½ and there were still plenty of buyers. The reason is the repayment due from government of the £3 millions borrowed (at no interest) three years ago. This loan was treated then as the Bank’s payment to government to renew its Charter.

Sat 12th July 1806

When Pitt resigned the ministry to Addington, the man who had made the fortunes of thousands of merchants was almost penniless. His friends checked around and ascertained a total of £50,000 debts. Against that he had his income of £3,000 a year as Warden of the Cinque Ports.

His creditors discussed the case and asked him how much he needed for his personal expenses. ‘£1,000 a year’, he said. The creditors were embarrassed and offered £1,500. The City merchants also wanted to help. The great financiers Sir Francis Baring, J J Angerstein and Sir Wm Curtis offered to pay-off his debts.

Wed 30th July 1806 Extraordinary

After the new national loan was agreed, the 3% Consols were trading at 60½ on 4th April. The bankers interested in the new loan were Baring & Co, Goldsmid & Co and Curtis & Co but they combined to share the risks and rewards.

For every £100 given they receive £100 of 3% Consols and £68 of 3% reduced Consols. Effectively the government has obtained this loan on interest of slightly under 5%.

Last year we borrowed £25 millions; this year it is £20 millions (so far). Last year we sent £3 millions in subsidies to Europe; this year we have sent no subsidies.

Sat 16th Aug 1806

House of Commons – We have transferred £3 millions of the nation’s tax revenue to the Sinking Fund. This is applied to buy 3% consols which are thus maintained at about 60 – the value that the ministry has more or less guaranteed to the bankers.

We then go to the bankers to borrow money and give them these inflated value 3%’s as security. As a result they give us loans at lower interest rates.

It is a form of gearing – an investment-grade security is subvented by regular injections of revenue to maintain its value.

Huskisson said it was not just the Sinking Fund that facilitated the cheap loans. The principle of raising revenue within the year it was required was also important. In 1798 we started doing that after small loans in 1797 could not be had for less than £6.16. 6d per £100, although the Sinking Fund was operating throughout that period.

Over half the outstanding Exchequer Bills (unfunded government debt) are still held by the Bank of England which pays the property tax on them.[78]

Sat 30th Aug 1806

London, 24th March – the funds are well supported although the government is on the cusp of agreeing a big loan. Usually government loan stock declines prior to each loan and recovers only afterwards.

One reason is the latest French peace proposal which, excepting the loss of Hanover to the King, is now rumoured to be actually conciliatory; the other is that the City is already awash with money, the proceeds from trade and from prudently cautious Europeans.

The loan amount is £20 millions but the Goldsmid Brothers say they have tenders for over £70 millions from their connections. Napoleon will be green with envy.

Sat 11th Oct 1806

Lord Henry Petty moved the 3rd reading of the Property Bill.

Francis moved that the clause exempting foreigners from English taxes be omitted. He said applications for exemptions involve £40,000 in the funds and this year the amount is increasing daily. It appears the total for this year will probably exceed £100,000 and its likely to continue increasing. A good part of it was investments by resident foreigners (almost exclusively émigrés).

All British stocks are bought and sold by British stockbrokers. They control the process and say foreigners threaten to withdraw their money if it is taxed.

It is rumoured that Englishmen own stock through foreign nominees to take advantage of the exemption. They are protected by the stock-brokers.

Several members of the present administration were also members of the Friends of the People which club has a view on this. They agree there should be no taxation without representation but investment in British stock is purely an economic decision by foreigners.[79]

Fox noted that foreign investment in British funds gave foreigners some influence over our economy but the basic rule was that we should not take what is not our own.

Sat 11th Oct 1806

The House of Commons has become a much more interesting place since the death of Pitt and the commencement of a liberal ministry. The MPs have been debating the costs of extra barracks required around all major English towns by the militias and volunteers. They are strangely expensive.

The government approved extra barracks four years ago (1801) to relieve the publicans who were said to be oppressed with the duty of boarding and lodging the home guard. The expense of building barracks was initially small but has increased annually in ‘leaps and bounds’. In 1803 it had reached £2.3 millions; in 1804 a further £1.9 millions was required. Mostly the soldiers are housed in refurbished barns. The rents should be quite reasonable.

Lord Henry Petty said government would reveal everything but there was a Commission of Military Enquiry sitting on precisely this matter and it would be politic to await its findings.

Robson said ‘is that the ghost of Pitt I hear?’ (loud laughter). He declined to be fobbed-off with ‘pending committee reports’. “I’m an MP, a guardian of the public trust (more laughter). These committees take forever to report and delay everything.”

Robson has papers from the Isle of Wight evidencing that building a barn there for use as barracks costs the government exactly twice as much as everyone else. He thinks the enhanced costs are nationwide.

Huskisson said all military building contracts are awarded to the lowest bidder.

Sat 11th Oct 1806

English goods have been discovered in large quantities in Swiss warehouses and the quantity is manifestly too great for the Swiss market. France suspects they are to be smuggled into her own lands.

The General Assembly of Swiss Cantons has been requested to enact measures to prevent these imports.

Eleven of the principal merchants of Basel have been called-in to explain themselves and a Proclamation was issued reiterating that trade with England is forbidden.

Only English goods that arrived before 6th May are exempt from seizure but even these are not to be sold until a general peace has been agreed.

Sun 26th Oct 1806 Extraordinary

Fox has proposed England abolish the slave trade as soon as possible. Wilberforce has got House of Commons agreement to Petition the King for this emancipation. The parliamentary resolution to abolish slavery was made last century and was intended to become effective in the year 1800.

Every ministry has an anti-slavery policy but no-one does anything – it is the constant political hesitancy to restrain the merchants; no politician dares do it.

Sat 8th Nov 1806

Lord Henry Petty is disentangling the national accounts. The Committee enquiring into government receivables is one of the measures of Fox’s liberal Whigs during their brief administration of the country. Petty says the public accounts show arrears in collections of £534 million. It is so big that no politician likes to talk about it. He plans to unite the two Commissions of Audit, increase their staff and put the Treasury Board in control of them. This amalgamated body will review all old government accounts and try to collect whatever is still collectible.

George Rose, Pitt’s Treasury man and patronage manager, said Petty would get no more than about £8 millions maximum.

For the new national accounts, Petty proposes a Board of Audit be formed to monitor the dealings from year to year. The appointment of officers to both proposed Auditing units would be made by parliament. He proposes to enact a legal requirement compelling all departmental accountants to submit accounts annually.

He wants to hive-off the inscrutable army account altogether.

Sat 15th Nov 1806

Gross British revenue for the year ending 5th January 1806 was £43,026,583.

After collection charges, repayments, etc., the nett was £35,314,158.

Add the war taxes – Property £4,337,583; Customs £2,622,147; Excise £6,360,229 = £51,339,045.

Adding the loans of £25,130,404 paid into Exchequer gives a grand total of £76,469,450 to spend this year.

Sat 15th Nov 1806

The British government has just contracted with Russia for supply of 6,060 tons of hemp for rope-making. We are paying £57.15.0 for Petersburg hemp and £58.11.0 for Riga hemp.

Mon 9th Feb 1807 Extraordinary

On 20th October the 3% consols were at 61½

Sat 14th Feb 1807

The Customs Collector at Deal in Kent has escaped murder. He recently made a big seizure of contraband and deposited it in the King’s Warehouse at that port. The smugglers discussed the matter with him for days but no compromise could be agreed.

They threatened to hang him at the masthead. Then a cache of gunpowder was discovered under the Collector’s house. The army has been called in to guard the Customs House and the warehouse.

Sat 4th April 1807

General Mortier has occupied Hamburg and put all British goods under seal. Every merchant and banker is required to declare his English goods, whether belonging to English principals or not. The army is checking the declarations. Its like Leipzig all over again. Correspondence with England has ceased. English residents of Hamburg are ordered back to London. English ships are barred from the river.

Sat 11th April 1807

The start of the Continental System:

After the breakdown of the peace discussions, France protested that England declares blockades of ports that have no military functions. They are commercial ports and England is at war with maritime commerce. This policy stops the trade of all countries and permits only the trade of England to continue. European merchant ships and the merchants accompanying their goods are arrested and imprisoned.

In order to bring home the suffering and injustice that flows from English policy, France has resolved to apply the same principles in the lands of herself and her allies. Until England acknowledges that war does not extend to private property, France will enforce the following policies:

  • England is blockaded. Commerce with her is forbidden. Letters to or from England or written in English will be confiscated.
  • Every Englishman found in the lands of France or her allies will be treated as a prisoner-of-war.
  • All kinds of English property found in our lands will be lawful prize.
  • Trade in English goods is forbidden. One half of the proceeds of prizes will indemnify our merchants for their losses.
  • Every ship coming to French lands that has touched at an English port will be arrested and sold. Any ship endeavouring to evade these regulations by documentary fraud will be arrested and sold.
  • The Prize Courts of Paris and Milan will adjudicate all claims.[80]

Sat 2nd May 1807

A third exhibition of British commercial supremacy occurred yesterday when five of the Company’s 800-ton ships entered the new East India Docks in London.

Recently we have seen the opening of the West India Docks and the London Docks and now we have this third splendid display of burgeoning national wealth.

The French might regret their absurd taunt that we are a nation of shopkeepers if they could enjoy the same extent of riches.[81] The East India export dock can contain about 40 of these enormous ships and the import dock about 100. The basin in between can hold 6 ships.

Sat 4th July 1807

The 3rd enquiry into military purchasing anomalies has focused on Alexander Davison, the banker of St James’ Square and former Governor of the India Company’s Madras Presidency.

Since Jan 1795 he has held the army contract for provision of all the main articles of consumption by the militia whilst in barracks – beds, bedding, coals, towels, utensils, candles, beer and forage. He was appointed by Lt General de Lancey and agreed to do the militia purchasing for a 2½% commission but neither the Treasury nor the Military Board approved the contract.

His coal is about 40% more expensive than other wholesalers but he sells it as a merchant for his own account and it is not caught by the 2½% arrangement. Between 1795 and 1801 he was paid about £500,000 for coal. His delivery notes are unique in not indicating the weight of coal delivered. He says he buys by weight (bushels) but the army pays by measure (baskets). This has facilitated an uncertainty in the amount of coal supplied.

Davison says he always gave the best prices but he has mislaid the purchasing invoices to establish the point. The main complaint, due to the lack of records, has devolved on payments. He was supposed to be paid as he worked but in fact he submitted his own estimates of likely purchasing every six months and got the money up front. So far Davison has had nothing to say about that.

Sat 11th July 1807

The City bankers have been to the Treasury to offer terms for this year’s loan. The government wants £14.2 million and has an informal indication from the bankers that they are agreeable to pay £100 for every £70 of the 3%s and £70 of the 3%s reduced. Bidding is to be in the 5%s.

Before committing themselves, the bankers asked Grenville if he would grant any subsidies to Europe within the year. He said subsidies to allies, if any, would not exceed £2 millions.

The subscribing capitalists this year and their bids are M/s Barnes, Steeres & Ricardo £10.12.0d, M/s B & A Goldsmid £11. 1.0d, M/s Barings £11. 1.0d and Robarts & Co £11.17.6d.

M/s Barnes, Steeres & Ricardo, representing the stockbrokers’ cartel, got the business.

The 3% consols are down at 62½; India stock is off at 185½.

Sat 1st Aug 1807

Andrew Charles, one of the clerks at the Bank of England, has written to Lord Grenville that the Earl of Moira used information gleaned from Privy Council meetings to speculate in British funds. Moira employed the banker Alexander Davison as his Agent to make his transactions. Davison’s runners came to Charles for their purchases and sales.

Charles’ specific complaint relates to speculation in the funds when Lauderdale was returning from Paris to London but had not yet arrived. That was when the Privy Council, and no-one else, knew the peace talks had failed. Davison’s transactions were against the market and attracted Charles’ attention.

Grenville is persuaded that a crime has occurred. He has ordered the prosecution of Charles for libel.

Sat 29th Aug 1807

Since the occupation of Hanover (by the French, the Dutch, the Prussians and now the French again), the trade of London with the continent has been disrupted.

The British have now occupied the Danish island of Heligoland to use as a trading base. Its far from ideal and the river boats are reluctant to venture out so far into the North Sea, but its better than nothing.

Tues 1st Sept 1807 Extraordinary

On 13th April the 3% consols were down at 62¼; the Company’s stock was firm at 185½.

Sat 19th Sept 1807

On 17th April the 3% consols were 62¼

Sat 26th Sept 1807

Alexander Davison, the man accused of over-charging the militia for provisions and undertaking the insider-trading of cabinet ministers, is in the news again. He is reportedly a banker and a lawyer. In cross-examination he says he is not an army officer (he is popularly known as ‘Major’ or ‘Colonel’) but served the East India Company for 25 years until his suspension for an (unspecified) event that occurred on board a ship.

He says that on one occasion he was seized of a case at the Court of King’s Bench involving a debtor named Richard Andrews who seemed to have fallen on hard times but who appeared to be a gentleman with good connections. Andrews claimed friendships with the Earl of Bessborough, Lord FitzWilliam and Lord Robert Spencer and evidenced he actually received letters from these people.

At that time Davison was concerned to obtain a parliamentary seat and Andrews claimed ability to effect the necessary introductions through his friends. Davison asked him to do so. The three nobles all supported Andrews whilst in prison (in so far as they received and answered his importunate letters) and, after he had left the bench, Davison also provided some occasional pecuniary help.

Soon after, Andrews ‘took the benefit’ of the terms of the Insolvency Act and was freed. He told Davison he (Andrews) had been offered a parliamentary seat by Earl FitzWilliam but he could hardly make use of it having so recently been released from prison. The seat in question was one of four in Ireland in the ownership of the Earl of Bessborough.

Davison went to dine with Benjamin Goldsmid, the City financier, at his Estate in Roehampton and he took Andrews along. The cost of each of Bessborough’s seats was advised at dinner as £4,000 which, it was said, would satisfy the Earl for five years, even if parliament was dissolved earlier. Davison canvassed his friends for expressions of interest and requested to buy all four seats. He paid a deposit to Goldsmid.

Thereafter Davison, to preserve his friendship with Andrews, accepted several of the latter’s Bills – for a carriage, for his stud and for several trade debts – but ultimately he became suspicious and enquired directly with Bessborough whereupon the fraud was exposed. Andrews was then discovered to have perpetrated numerous other frauds.

(A similar fraud on a Major is detailed in next year’s newspaper below.)

Sat 17th June 1809

Alexander Davison is being prosecuted. He was appointed by General de Lancey in 1797 to supply the British army with barrack stores for which he was to receive, as Agent, a commission of 2½% on invoice value.

Davison made out two papers for every sale to the army – one showing the quantity of goods delivered and other showing the prices. It has proved difficult for the prosecution to relate the two.

Most of the goods he supplied were his own goods on which he received both the merchant’s profit and the 2½% commission. Davison’s warehouse manager Mungo Sheddon is named as the merchant supplying many of Davison’s own goods. The names of Watson and Allen, two of Davison’s clerks, also appear as merchant supplier’s names. This was the evidence of an intent to conceal.

In spite of a multiplicity of supplier names, Davison’s goods turned out to invariably be his own. Nevertheless, 2½% was charged on their invoice value. The business was naturally substantial. Davison employed a hundred men in his warehouse and several hundred on outside duties.

Lord Moira gave evidence that he had known Davison a long time and approved his appointment as Commissary General. Evan Nepean, Andrew Hammond, William Rule, Wellesley Pole, Charles Long, Huskisson and many other public figures gave evidence of good character.

Ellenborough found him guilty on 27th April. He gave allowance for £18,800+ paid into the Exchequer as repayment of 2½% commission for part of the period. He awarded Davison two years in prison.

Sat 31st Oct 1807

It is reported from London that our government is considering financing the Dutch Republican government. Hope and Co (London office) wants to raise a loan for the ex-King of Holland of some millions of Sterling that will be paid in British manufactures and colonial produce.

British merchants and manufacturers are lobbying government for agreement. They have been having a hard time making sales recently and its partly taxes on their trade that are funding our overall war effort, so they feel they have a right to be heard.

Some people are shocked by these considerations of government but Pitt did something similar a few years ago. He allowed an English firm at Hamburg to contract with the French government to provide clothing to the French army. They were successful and for a year or more French troops went to war clothed in Yorkshire woollens.

With this precedent of Pitt’s, who has attained Godlike status since his unexpected death, the present government may well feel this new Dutch business should be approved.

Sat 26th Dec 1807

The Frankfurt fair was held in March and was apparently quite well attended although the British were excluded. Some exhibitors were arrested for displaying English goods.

Sat 9th Jan 1808

Alderman Combe of the City of London has complained that the unexpected prorogation of parliament prevented the proper punishment of one of the King’s friends. In light of the popular call of ‘no peculation’ he feels it is extraordinary.

A gentleman at the Pay Office had taken £12,800 and £7,000 for his private purposes. When put on enquiry he said it was for payment of army contractors. When that defence was investigated and found unmerited he agreed it had been for private purposes but excused himself by saying it had been repaid with interest. That was true but repayment occurred only after the investigation commenced.

Combe says the entire parliamentary investigation was hindered by obfuscation and delay. Every attempt was made to screen the delinquent. When the committee was ready to present its findings to the House of Commons, the King called for prorogation.

Combe concedes that parliament would likely have been prorogued even if the delinquency had not been uncovered.

The dissolution of this parliament is noteworthy mainly for the King’s criticism of his former ministers in respect of the reverses sustained at Constantinople and Alexandria. He never liked them and the Catholic Services Bill they forced through confirmed his gut feeling.[82]

Sat 13th Feb 1808

The value of farm land appears to have tripled. Six arable farms around Paisley belonging to the Marquis of Abercorn and comprising some 496 acres have just been let at auction for £1,909 a year. Formerly they had rented for £653.

The Marquis also has Brownside farm, two miles south of Paisley, which is 72 acres of lowland and 200 acres of hill pasture, and it rented at the same time for £406 whereas formerly it was £150.

This doubling and tripling of rents does not reflect a doubling and tripling of agricultural production. We infer that the paper money we now use for exchange has inflated the economy by two to three times.

Sat 13th Feb 1808

A London bank has defended itself in the Court of King’s Bench from a charge of failing to honour a Draft. A gentleman presented a Bill of Exchange drawn on a Paris bank in favour of the late General Pichegru, but in the name of the General’s English nominee.

The London bank sent it to the Paris bank for collection and it was dishonoured. The London bank says it is only defending the action to obtain the Court’s assistance in identifying the rightful claimant.

Sat 2nd April 1808

A fleet of 170 merchant ships from Jamaica arrived safely in London in August 1807.

Sat 9th April 1808

Report of the House of Commons on West Indian trade, 8th August 1807 (the beginnings of the quarrel with America):

Until 1799 the profits from sugar plantations in West Indies were satisfactory although they had been in slight decline since 1796. Since 1799 the costs of production and Customs duty on import to England have increased. At the same time stocks in London have increased and the value of sugar has accordingly reduced.

The cost of production is about £1 per cwt (112 lbs). The cost of freight to London, insurance, warehousing here, etc., is 16/- per cwt. In the Gazette over the last 8 months the sale prices of West Indian sugar have averaged 33/6d per cwt which is half of the prices ten years ago and less than their CIF London price today.

We have investigated everything carefully and the cause of the problem is American merchants undercutting us. Formerly we monopolised European markets, now they do. The enemy colonies we have seized are all trading to Europe under the American flag. The French have sold many merchant ships to ‘neutrals’ with a condition that the ship should return to French registry within a year of peace being declared. All those ships get the equivalent of a 4/- per cwt discount on the Customs duty for imported sugar as if they were still French ships (which we think they are).

At Amsterdam during 1806, 211 American ships imported 45,097 hogsheads of sugar (the sugar and tobacco hogsheads contained about 750kgs. each, whereas the wine hogshead was considerably smaller). Freight and insurance from enemy colonies in West Indies to Europe via American ships is 9/- less to Holland and 12/6d less to the Mediterranean than our own colonial supply. Our shipowners, bankers and insurers value their services too highly. The advantages of cheaper money, freight, insurance and Customs duty have permitted the Americans to displace us in European markets and this is why stocks of British sugar are piling up in the West India Docks.

The Committee recommends that the trade of all enemy colonies be disrupted by naval action and all exports from those colonies brought to London as prize. Our own West Indian colonies rely on America for grain, flour and timber but we can ourselves supply these items from elsewhere should it become necessary. Once we have monopolised the supply of colonial goods we can evict the Americans from the European market and our plantations will prosper. If we fail to do so, all that part of our economy based on West Indies – the loans on property, annuities, etc., as well as the annual production – will be jeopardised.[83]

Sat 30th April 1808

George III has ordered that any port in Europe that excludes British shipping will have its own shipping seized wherever it is found and condemned. All maritime trade of those ports and countries is deemed unlawful …. “but, being a merciful King, I wish to allow neutrals to supply themselves with colonial produce and they are all welcome in English ports.”

Sat 7th May 1808

There is criticism of England in the European newspapers for the pre-emptive strike on Denmark. Europeans think it was illegal to burn Copenhagen and seize Danish warships without some prior discussion or at least a Declaration of War. They say the point is settled under the Law of Nations and has been honoured since the Romans – “Arms are the last reason of Kings and the first reason of Brigands.”

The German press has been particularly virulent – ‘take care you are not next’ is a common expression in editorials. They examine the King’s Declaration paragraph by paragraph and ridicule its logic.

They think his suggestion that he has insight into Napoleon’s future intentions is laughable. For months Napoleon has had sufficient troops in Mecklenburg and lower Saxony to occupy Denmark had he wished to do so. They say the fault of the Danes was to trust England and they call us ‘the country that conspires, assassinates and proscribes.’

Every European believes England is simply removing the competition to its maritime trade. The unprovoked attack on Denmark came at a time the Russian Tsar was offering his mediation to bring peace. “Britain is not governed; it is a business ruled by merchants, etc.”

Sat 9th July 1808

The 3% consols are at 53 but Bank stock has risen to an incredible 251. India stock is still in the doldrums at 172.

Sat 16th July 1808

London, February 1808 – The Commissioners for Reduction of the National Debt have recently been buying £100,000 of government paper daily and this has kept the 3% consols above 50.

Mon 20th Aug 1808 Extraordinary

The 3% consols have taken off – they were 65½ on 29th March 1808

Sat 27th Aug 1808

The American embargo is beginning to bite in London. Turpentine and tar have both more than doubled in price. Rice, cotton and tobacco are up about 60%. Our annual exports to America were formerly worth £10 millions. Most of this trade went through Liverpool.

In 1807 there were 489 American ships trading to Liverpool. The port has lost all those tonnage duties, port duties and dock charges, pilotage, board & lodging of seamen and employment of carpenters, rope and sail makers, chandlers etc.

All this is additional to the loss of mercantile profit.

Sat 27th Aug 1808

Whitbread objected to the Bill to prohibit the export of Peruvian bark (Jesuit bark – quinine) from London noting we were proposing to monopolise the supply of a medicine that was important for the whole world. He thought it detestable.

Ministers did not respond. The Bill passed.

Sat 10th Sept 1808

3,000 people of Liverpool have petitioned the King. The document opens with a declaration of their undying support but continues with the hope that war will end soon so their businesses and employment may recommence.

The City of London has been more forthright. They have petitioned parliament against the recent Order-in-Council of November 1807 which they say has changed the trading patterns of the world.[84] They say America was the sole market remaining open to British goods and bought £10 millions a year. We buy in return a much lesser amount of grain and naval stores (mostly timber). American neutrality has provided an important channel through which British goods are re-exported to Europe. America also buys our West Indian and Eastern produce. All this is stopped by the Order-in-Council. This diminishes the trade on which our ability to fight a war is based. The City gentlemen say these new rules will be fatal to our fundamental interests.

Sat 10th Sept 1808

The Chancellor of the Exchequer has called the City bankers to receive their proposals concerning the government requirement for an extra £4 million loan.

They consulted amongst themselves and made two proposals. For every £100 of Exchequer Bills they buy from the Bank of England they want either:

  • £65 of the 5% consols worth £97.10.0 plus £50 of the 4%s worth £50.15.0 ex div, or
  • £80 of the 4%s worth £80.15.0 plus £39 of the 5%s worth £57.10.0

On present prices this will be a windfall to the bankers. The offer was greatly over-subscribed. Coutts alone took £500,000. It may be indirect compensation for the lost Baltic convoy (see the second Economy chapter for Lloyds of London’s report on this frightful loss of 700 ships and cargo).

Sat 24th Sept 1808

The 3%s on 18th June were up to 70½, the 3% reduced at 69½

Sat 15th Oct 1808

The effects of American and French embargoes on our trade have caused most of the weavers of Stockport to be laid-off by their employers.

Some 10,000 of them protested along the Lancashire side of the Mersey in late May 1808 and, although the Riot Act was read to them repeatedly, they did not disperse.

The few weavers still in employment are being incited to join the unemployed men. Stockport has sent delegations to the neighbouring towns requesting support. The magistrates are soliciting householders to support government.

Sat 22nd Oct 1808

The House of Commons has been debating the effect of the American embargo on our cotton industry. Lord Bathurst thinks it will have no effect. We use about 60 million pounds a year. 18 million comes for our West Indian islands, 8 million now from Brazil, 24 from USA and 10 from India.

He says firstly, there is a considerable stock on hand; secondly, Brazilian exports must inevitably all come to us now and her total production is 22+ million lbs, and thirdly, we can always get more from India should we need it, so there is nothing to worry about.

If we have a production surplus, we can export it under the licensing system. As a general rule trading with the enemy is illegal but the King-in-Council has licensed it throughout this war. Bathurst noted that a licensing system has precedents – Grenville introduced one in 1794 for Bills of Exchange to permit money to come from France to England.[85] He said Germany has ordered cotton from Turkey and, in view of our maritime control, will have to import it overland with all the frightful cost implications that entails.

Right now the only places we can straightforwardly export to in Europe are Sweden and Sicily, and neither of those places has a cotton industry – a licensing regime makes sense to open the continent more fully to our trade. We can allow this to the Neutrals to give them a share of maritime trade whilst at the same time taxing-off a reasonable part of the value under the Order-in-Council of November 1807 as the costs of the Licence. We thus control the supply of goods.

As Napoleon controls the consumer markets, Neutrals who are willing to pay our taxes will have to assume the risks of smuggling into Europe – this will be ‘win, win’ for England.

Lord St John said British trade was founded on competition. If we commence a licensing system every merchant in England will become dependent on the Minister for licences. Such an accumulation of commercial power on the ministry would have predictably deleterious effects on its morality.

Grenville said it was the merchants, manufacturers and shipowners who had come to the bar of the House and asked for the licensing system – obviously they wanted it.

Hawkesbury said successive ministries have granted licences to trade with the enemy for 14-15 years and no abuse was rumoured.

The sale of licences to trade with the enemy was then approved by a majority of the House.

Lauderdale moved that there be some mechanism of chance in selecting the merchants favoured with licences to avoid government becoming enmeshed in allegations of favouritism, etc. This was negatived.

Sat 5th Nov 1808

Ministers have informally advised an ultimatum to Pinckney, the American ambassador, on 18th May 1808. They are willing to pass an Act giving MFN status to the USA as a mark of friendship. The United States would then enjoy all the rights and privileges of our other allies Sweden and the island of Sicily.

They will also allow some arrangement to permit American carriage of West Indian goods direct from our governments of those islands to Europe without touching at a British port.

However our asserted right to search merchant ships will not be surrendered – take it or leave it.

Napoleon, on the other hand, has asked America to join the other states of Europe and endure the inconvenience of denying British trade until London can be brought to a willingness to negotiate peace. He will keep the arrested American ships inviolate in French ports while the American government considers his proposal.

Sat 14th Jan 1809

Heidelberg Review leader on the latest British Order-in-Council:

In the 3 years before 1804 America imported £8 millions of goods annually from Britain and exported £5 millions of American productions back to that country.

In the 3 years since 1804 Britain exported £12 millions to America annually and received back £4½ millions a year.

M/s Baring and Brougham have explained in the Commons how this is possible – the exact reverse applies to American trade with continental Europe and the great balance of American European trade (of £7+ millions) is remitted to London in Bills of Exchange. Its triangular business.

The effect of the Order-in-Council is to prevent or at least limit American trade with Europe. This prevents her transferring the balance derived from her European trade surplus to London for purchasing the excess of goods she imports from England over and above what she exports directly to us. The tendency of the Order is thus to disable America from continuing to buy British goods in excess of her exports to England.

Baring has shown that £2 – £3 millions of British manufactures exported to America annually are actually immediately re-exported from that country to Europe.

On the other hand an important part of British imports from America, which are primarily cotton and tobacco, are also re-exported from London to Europe in neutral bottoms. That London traffic, which approximates £2 millions, is now suspended by the restraint of the Order on neutral shipping.

It is imperative to the British war effort that the country receives silver for the payment of her allies in Europe, her own troops in Spain (where discounting of British Bills by local merchants has become an expensive problem) and for her trade with India and China.

Any reduction of specie coming to the Bank of England will undercut British ability to maintain confidence in the value of her paper money. Foreign stockholders take away £700,000 each year in dividends on British funds and they are not like Britons – they cannot be satisfied with paper money, they demand specie.

Brougham has said that it has always been supposed that when labour is cheap and money plentiful, trade and commerce thrive. The American population has been increasing rapidly and her merchants have enjoyed a long period of peace. This has facilitated a regular increase in her trade.

There are now 73 banks and 13 insurance companies in America. Interest on money has fallen from 10-12% a few years ago to 6-7% today. Capital has accumulated to the extent that it is common to find 30 merchants on one exchange, each with over £50,000. Land prices in America have greatly increased. Within 4 miles of a major town, land commonly costs $500 per acre. As a result there has been an internal emigration inland from the North East towards the West where land is cheap.

A great number of manufactories have been established and some of them already produce a surplus for export. These factories are taking a part of the market formerly monopolised by English goods which can no longer be bought by the American traders because of the restraint on trade with Europe. Effectively, the British capitalist has underwritten this new American production to maintain employment for his capital. The amount of that investment is now about £8 millions. If British capital continues to be invested like this, her trade will be completely excluded from the American domestic market. Effectively, the City of London is financing a rival in trade.

Left to herself it is possible that America will continue her agricultural pursuits but she has evidenced a capacity for other employments and has commenced manufacturing for herself. If British wartime commercial policy drives America to maintain investment in manufacturing, we British will expedite the loss of our market to their own manufactures.

The danger is that in endeavouring to subdue France by monopolising the commerce of Europe, Britain may briefly achieve commercial hegemony over that continent, but when she comes to dictate the peace terms she will have diminished Europe’s ability to trade and will have raised up a colossus on the other side of the Atlantic. Britain might then recover the £8 millions that America presently owes her for it is a truism that ‘successful trade produces honest dealings,’ but she will have allowed American capital to accumulate by compound interest and by its employment in the other channels that compete with her and thus hazarded the basis to her wealth and power.

The ministers who framed the Order-in-Council recognise that it cannot be maintained for any extended period of time. British captains of commerce and industry have been induced to submit to the Order on the understanding it will quickly produce beneficial effects; that the distress caused to the people of Europe will force France to relax her embargo on British goods; that she will conceivably sue for peace resulting from allied fomentation of internal chaos and rebellion in the lands France controls or influences. This is ridiculous.[86]

Europe suffers less from a restraint in trade than Britain does. She has her inland waterways to distribute goods. Hardly a penny in European revenue derives from trade. The temporary expense of sugar and tobacco causes discontent but the power of the state can control that.[87]

The baneful effects of our reduced trade are spreading all over England. The ministry says the Order will force open new channels of trade (by smuggling and bribery) – can it indicate any evidence tending to support that assertion?

The fact is the French Revolution has withstood repeated attacks and there is no indication of discontent against Napoleon. Eighteen years of revolution have not produced a whimper and Royalist incitements to rebellion have repeatedly failed. Now the British ministry says the price of tobacco and the scarcity of sugar or cotton will set France alight and bring about a revocation of the Berlin Decree.

Historically belligerents have always relied on neutrals for assistance. It is particularly so for countries that depend on commerce like the British. Of all the neutrals, America is the most sympathetic to the British cause, sharing a common ancestry, language and culture. They are as dependent on commerce as Britain.

Sat 21st Jan 1809

The 3% consols have dropped from 70½ to 67½. Brokers attribute cause to investors selling stock to invest in goods for export to South America – if that is the sole cause, an enormous trade must be intended.

Sat 21st Jan 1809

28th July – The latest Order-in-Council decrees that no more Licences will be sold to neutrals for the import of French wines and brandy to England. The ministry supposes that trading with the enemy in these commodities is unnecessary now we control the supply of similar products from Portugal and Spain.

The Order may also facilitate better sales of our own West Indian rum.

Sat 25th Feb 1809

A letter from London dated 7th September 1808 says Louis Bonaparte of Holland has relaxed the embargo on certain exports through Dutch ports. Some Italian raw silk is coming out which has depressed prices in London by 15-20% but even at this slight rate of supply the volume of sales is small as London silk manufacturers are only buying for their immediate needs.

In fact the Dutch merchants are doubtful about Louis’ relaxation of the embargo and note that firstly it might be revoked at any time and secondly there are some French privateers off the coast.

London is using the opportunity presented by the silk shipments to smuggle British manufactures and colonial goods into Europe on the return leg of the few Dutch ships that are involved in the trade. Nearly all the indigo recently auctioned by the Company has been sent into Europe by this route along with some piece-goods.

Sat 13th May 1809

In early September 1808 a large number of merchant ships arrived at London from Holland. This confirmed the recent rumours that the Dutch ports would be opened for exports.

The merchants of Amsterdam made representations to King Louis Bonaparte of the imperative need to revive commerce. He agreed.

Sat 18th March 1809

Directors’ letter of 8th December 1808 to be published in all the Presidencies:

People arriving in England from India may be unaware that it is illegal to wear printed, painted or dyed calicoes or any type of silk garment in England. It is also illegal to use napkins with a coloured stripe in the weave.

Any such clothes or napkins found in your baggage on arrival at London will be confiscated by the Customs.

Sat 17th June 1809

On 1st October 1808 the firm of M/s Walsh & Nesbitt failed on the London Stock Exchange. These two young men have distinguished themselves by the extent of their transactions.

They were contractors for the last two national lotteries and the City Lottery. They should have £150,000 from national lotteries and £80,000 from the City Lottery in their account but that all seems to have disappeared.

It is surprising that such young men should have been able to gain so much credit. It seems there is some sort of market in Lottery tickets that enhances their value and risk.[88] The House of Commons wishes to investigate. The claims on Walsh & Nesbitt so far total £174,000.

Sat 5th Aug 1809

London market 25th February 1809 – 3% consols 67½

Sat 21st Oct 1809

Colquhoun’s Tables for 1803 show total economy activity in England and Wales is about £222 millions per annum and government revenue (including war taxes and poor rates) on that activity is about £40 millions (18%).[89]

The derivation of that part of government revenue that comes directly from the people is said to be 28% from the rich, 20% from the upper middle class, 16% from the lower middle class and 9% from manual workers.

Sat 21st Oct 1809

In 1795 a Commission was appointed by the ministry to inventory, maintain and sell Dutch property that had been detained in English ports when we declared war.

It was composed of James Crawford, John Brickwood, Allan Chatfield, John Bowles and Alexander Baxter. No rate of remuneration was fixed by government on appointing these gentlemen who unilaterally assessed the value of their services at 5% of the gross proceeds of sales.

The amount paid to the five gentlemen, including interest, exceeds £120,000. Had they been restricted to 5% of nett sales they would have received about £50,000, but their costs were extensive.

Their windfall profits derive partly from costs and partly from interest on the cash proceeds which was deposited with private bankers known to the committee members.

Sat 3rd March 1810

Stock report, 1st October 1809 – 3% Consols 68; India stock 188; Exchequer Bills 6/10d

Sat 17th March 1810

A general meeting of the Bank of England’s shareholders was held on 21st September. It was very well attended in expectation of another windfall bonus. Bank shares have inexplicably risen 30% in the last few weeks – much faster than the market – and an alternative suspicion was that government had done another deal with the bank that would swell profits further.

The lawyer Randle Jackson proposed a slightly increased dividend of 6% for the half-year in light of continuing great profitability but the Chairman said the Directors had to be prudent and kept the 6-month dividend at the usual 5¼% level.

A popular rumour amongst shareholders was that the Chancellor of the Exchequer has allowed the Bank to increase its issued capital by another £2½ million and existing shareholders would be preferred for subscriptions to the new stock at a special price of £200 per share (bank shares are trading on the Exchange at £278).

Another rumour related to a supposed deal with the minister whereby the Bank would provide funds and government would proscribe all competition in the bearer-note business within 50 miles of London.

The attractions of this derives from the practice of the banking shops in all the villages around London of intervening in the pricing of goods that they finance. This practice has enhanced the cost of necessaries.

It seems certain that both the government and the Bank Directors are concerned to understand the effects of the super-abundance of paper money they have issued.

This seems to underlay the Chairman’s unexpected prudence.[90]

Sat 24th March 1810

Exports from England may have diminished but revenue is buoyant. The new Legacy Tax required 30 new clerks to collect and produces an average £500 a day.

Sat 24th March 1810

The Governor and Directors of the Bank of England have paid a bonus of one Guinea to each of their 927 clerks to enable them to celebrate the King’s Jubilee (50 years on the throne) with a dinner.

The Admiralty is issuing extra rations of fresh beef, flour, raisins, wine and rum to all naval ratings for the same celebration

Sat 2nd June 1810

The manufacturers of Glasgow have petitioned on 20th December 1809 that the export of raw cotton under government licences be stopped – the Treasury has agreed.

Sat 2nd June 1810

Paris, 1st January 1810 – the merchants of France have discussed business with their government. They say since the Berlin and Milan Decrees, French trade is conducted through circuitous routes by people who were not formerly merchants.

The government says the Decrees are targeted against England. It wishes to re-establish trade with neutrals that will flow through the main ports to the real merchants.

It also reiterated that ‘stop and search’ of ships at sea was not per se a violation of international law and the Milan Decree was only intended to reciprocate for the British Order-in-Council of Nov 1807 which required all neutral ships to go to England for inspection before proceeding on their voyages.

Sat 7th July 1810

Cavendish died last week at Clapham Common. He had £1.2 million in the funds, almost entirely Bank of England stock of which he was the largest holder in England (over 4,000 shares). Of his Estate, £700,000 goes to Lord George Cavendish; £200,000 to the Earl of Bessborough and the rest in legacies to other members of the Devonshire family.

Sat 21st July 1810

Letters from Heligoland (the British-occupied base off the Elbe) of 27th March say the French army has occupied the island of Newwork, at the mouth of the Elbe, and threatens our free trade with Hamburg.

In St Petersburg 6 British merchant ships have been condemned and 28 others are being examined. We have an additional 120 other ships in Russian ports.

Sat 6th Oct 1810

London, 10th May – Perceval interviewed a group of bankers and asked for a loan of £13½ million. He says £8 millions is for England, £4 millions for Ireland but raised in England and £1½ millions is to be raised and paid in Ireland.

£12 millions will be funded in the 3% consols and the 3% reduced stock. Perceval offers £130 of 3% reduced and will negotiate on the amount of 3%s. Payment is required between May 1810 and January 1811 in 9 monthly tranches.

He told the bankers that the India Company will need a £2 million loan before March 1811. It will be paid by an issue of £1½ million in Exchequer Bills and the balance found by postponing the Company’s payment of annual tea duties that it collects this year.[91]

He also said a further issue of £3 million in Exchequer Bills will be needed.

The discount on offer is worth £1.16. 1d and property tax on the first half-year dividend of the stock will not be required of successful loan subscribers. The bankers asked for government terms for receipt of specie in payment (they now have the South America supply and there is an advantage) but Perceval has to ask the Bullion Committee. Government has announced no new taxes and it is supposed repayments will be funded from existing revenue (there has been considerable violence done recently to individual tax-farmers in collecting the Assessed Taxes).

Sat 27th Oct 1810

The £12 millions national loan that Perceval sought from the bankers has been subscribed entirely by Sir Francis Baring and the Goldsmid Brothers at a rate that yields them interest of £3.15.9d per £100 exclusive of the exemption from payment of property tax. The bonds are already trading in the market at a premium of 1½%. The discount, if any, has not been published.

Sat 3rd Nov 1810

The Marquis of Lansdowne in the same debate[92] noted that there had been a greater addition made to the paper currency in 1809 than had ever occurred in any country over the same short period.

From a variety of circumstances the value of the currency had diminished greatly which had acted severely on the working class. It had swelled the numbers of paupers requiring the services of the Poor Houses and it had been generally noted that there were few working men with three or more children who were not in the Poor House. This was something Lansdowne thought should receive attention from government.

Sat 8th Dec 1810

George Villiers, the King’s friend and Paymaster of the Marines who, over a good many years, has drawn some £300,000 from the public funds for personal purposes, is apparently mad. No-one can get any sense out of him.

His estate is valued at about £100,000 and where the rest of the money went is still unexplained.[93]

Sat 12th Jan 1811

The London banking house Brickwood & Co of Lombard St has failed. They had a Bill to £200,000 from a famous broker which could not be settled. That broker specialised in West Indian trade.

One of the bank’s partners is a relative of Admiral Rainier who acquired considerable wealth whilst in command of the East Indian squadron and invested £100,000 in the business in his relative’s name just a few months ago.[94] Brickwood himself invested a further £60,000 two weeks ago but it was not sufficient.

Sun 13th Jan 1811 Extraordinary

The banking house of Devaynes Croft & Co in Pall Mall (old East India Company family) has stopped payments on 3rd August 1810. W Devaynes died recently. He was a long-term Chairman of the Company.[95]

Sat 26th Jan 1811

The parliamentary Committee on the High Price of Bullion has reported that the excess of paper notes issued in Britain is the main cause of rising prices. A contributing cause is the low value of British securities on the Continental Exchanges (Hamburg et al).

They say the suspension of cash payments removed the normal regulation of gold on banknote value and since then the Bank of England has printed too much money.

They say it should be notionally possible for all paper money to be converted into specie, otherwise the paper will lose value i.e. however much paper money is issued, it cannot in toto be worth much more than the specie backing it.

The Committee regrets that the suspension of cash payments has been extended by parliament for so long. They fear it has become a permanent war measure.

The Committee deplores the effect of the Bank’s irrational exuberance. The prices of all goods sold for paper are augmented; annuities and all creditors are devalued whilst government and other debtors receive an advantage. Wages rise slowly and only as a result of hard bargaining – the working classes are paying disproportionately for this undisciplined financial policy. Once wages and salaries are increased, it will be difficult to reduce them when financial stringency is again reasserted. The Committee concludes that cash payments must be permitted on presentation, at the option of holders of Bank paper.

Government suggests a limit on Bank advances and discounts. Alternatively it suggests a limit on the Bank’s profits and dividends with that part exceeding the limit to be paid-back into the public revenue.

The Committee believes these palliatives would be inadequate to meet the need. It commends parliament to fix a date for resumption of cash payments that will permit the Bank to schedule its acts to smoothly achieve the object. It should not be attempted too quickly and the Committee suggests a scheduled reduction of paper over two years. There is a law requiring the Bank to recommence cash payments within six months of a definitive peace with France – that will have to be amended as the excess paper currency cannot be withdrawn in six months without causing chaos. If peace breaks out there will be a foreseeable increase in commercial transactions and demands on the Bank for discounts would increase rather than reduce.

The Committee deplores the temptation to devalue the price of gold. Many governments, in the circumstances facing the present ministry, have resorted to such a legislative Act but it is a breach of public faith that rewards the spendthrift and punishes the prudent man. It would be an improper interference in the rights of commercial property.

There is only one course of action that can be recommended. We must restore the convertibility of gold. Only in that way can confidence in paper be re-established. If we do not do so, the stocks traded on the Exchange will continue to fall in value (whilst increasing in paper price), confidence will be lost and a crisis will evolve. We believe it would be wise for the Bank to continue to issue £5 notes concurrently with the resumption of gold payments. The Chartered Banks of Scotland and Ireland and all the country banks should be permitted to continue paying in paper instead of specie until some time after the Bank of England itself resumes cash payments, but their own paper should be incrementally be replaced by Bank of England paper.[96]

Sat 2nd Feb 1811

On 20th July a meeting was held in the City by the principal bankers and merchants of London to consider ways of supporting those merchants who had fallen into financial difficulty.

The bankers were represented by Smith Payne & Smith, Masterman & Co, Everett & Co, Vere Druce & Co and some others. It was agreed to settle the full amounts claimed against selected respectable traders in four equal 6-monthly payments.

A list of the debts and assets of some selected debtors (those with prospects of recovery) was circulated:

£ Debts £ Assets
Grave Sharp Fisher & Fisher 503,000 631,592
Rowlandson & Bates 285,898 330,444
Rowlandson Isaac & Co 288,698 339,432
Hardy Ottley & Co 311,982 377,775
John Goodiar 381,952 487,209

These failures all arose in the linen trade. Four of the London brokers in that market (Richard Ford, Sir Robert Graham, M Shaw of M/s Shaw & Fletcher and another) will supervise the accounts of the debtors.

Sat 23rd Feb 1811

Cobbett’s Political Register, 11th August 1810 (written from his cell where he remains imprisoned for libel – see the Dissent chapter):

The pro-government London Morning Post has been railing against the credit notes (paper money) issued by the country banks, which it calls ‘destructive assignats,’ by publishing a series of ‘Letters to the Editor’ which all commend that the country banks’ note-issuing authority be abolished.[97] It appears the minister wishes to make Bank of England paper the exclusive credit of this country.

In fact the government does not understand what credit is doing to the country. It seems to have determined that it must do without one or the other and only knows it has a closer friend in the Bank of England than the country banks.

The Morning Post says the country banks are under-capitalised and if any one of them failed, it could only pay 50% of its engagements. They say paper money has been over-issued and threatens to be increasingly discounted. They say the country banks collect whatever specie is in circulation but only pay-out their notes. No-one can get silver for bank notes and workers are effectively going without pay week after week because shopkeepers have become reluctant to exchange their paper money.

The problem is caused by the landowners and farmers. They are in a conspiracy with the country bankers. They keep back their grain from the market in the expectation that real prices will rise and in the interim they pay their way with these bits of paper. One of the Morning Post’s ‘Letters to the Editor’ is from a reader in Salisbury where the banks have stopped payment. It reports widespread hardship. Another writer says he has an income of several hundred pounds each year which has been paid to him for many years in country bank notes and he has never, in all that time, been paid a guinea or a Bank of England note. It seems well-established that the country banks are selecting against their customers by paying-out their own notes but keeping-back more widely acceptable securities.

On the subject of remedies, one letter writer says only the government, or the Bank of England under government control, should be allowed to print money. Another wishes to link the face value of the paper money to the amount of capital of the issuing bank. Another suggestion is to have government banks in every county into which the local people would pay their taxes and deposit their savings.

The London bankers routinely deplore the activities of country banks but they are known to wish for a monopoly of national banking services.

The great flow of paper from the country banks has increased the price of necessaries. Everyone on a fixed income is suffering. If we simply hand over the country bank business to government or the Bank of England it will make no difference. The landowners will still hold-back their grain – they don’t want paper of any sort, they want gold and silver. The problem is an excessive note issue which has to be reduced.

The French assignats were secured upon national land but they were ultimately over-issued and lost value. It was the same with the Congressional Notes in America. It seems very likely that it will always be the case, when a government issues money, that it will be incapable of restricting the issue to the amount of underlying value.

We tend to think of government as a safe debtor because it has so much power but is it easy to get payment from powerful debtors? These are the people who control the House of Commons and can make law at an instant. They often indemnify themselves from liability for their acts. These are the people who deduct Income Tax from all dividends on public stock making the stock less attractive as an investment. They are the people who relieved the Bank of England of liability to redeem its notes. The French and American governments pay their debts with a sponge and every other government in the same circumstances may reliably be expected to do the same.

The propaganda campaign that government has initiated in the correspondence columns of the Morning Post is very likely its opening gambit in assuming control of the note issue of England. It may be a preparatory step to de-licensing the country banks. It is worse than giving the same power to the Company in Threadneedle Street.

The merchants of Carnarvon met in their Guild Hall on 3rd August and voted not to receive country bank notes in exchange as several banks had recently failed. It was a unanimous decision. In future they will only accept Bank of England notes. The resolution was signed by fifty merchants. How foolish they all are.

The Bullion Report has now been published. It appears to confirm everything I have been saying about the credit system. I need time to digest the Report but I shall certainly give you its prominent features soon.

Sat 2nd March 1811

The London ministry’s Bullion Report is widely reviewed in England. It contains a section dealing with exchange between England and Asia. The Bullion Committee has reviewed the India Company’s accounts for ten years up to 1808/09. They have also interviewed Charles Grant.

Two of the principal Agency Houses in London that inter alia discount India Bills say from 1800 – 1804 they exchanged the Bills at 2/6d per silver Rupee 6-month’s Sight; from 1805 – 1809 they paid 2/7d per Rupee, 12-month’s Sight and most recently they pay 2/6d or 2/5d per Sicca Rupee. All the London Agency Houses paid about the same.

These Bills represent our payment for goods from India and as those exports have decreased in the last two years, the London Agents are paying less for the Bills in order to maintain the overall profitability of the business line.

Grant says the relationship of value between silver and gold in China was 10:1 in 1730 but with the steady accumulation of silver in that country from foreign trade purchases of tea and silk for export, the rate deteriorated to 16:1 today. In China silver metal is used as the medium of exchange and is accordingly sought after.

Gold is nowhere used for exchange in Asia except on the Coromandel coast (Madras Presidency) where they use Star Pagodas and in the British Presidential towns where there is a small circulation of Gold Mohurs. The currency of the rest of India is silver and silver coins are changing in value in comparison with gold coins.

For several years the Company has ceased exporting silver to China. We now send sufficient goods from India to make up the trade balance. Silver for China trade now comes from the Americans and somewhat from the Spanish at Manila.[98]

Sat 16th March 1811

The Bullion Committee Report notes that there are some imports for which there is no corresponding export – the product of fisheries is one example and capital returned on investments in the East and West Indies is another. These together account for the following surplus income:

1805 £ 6,616,000
1806 £10,437,000
1807 £ 5,806,000
1808 £12,184,000
1809 £14,834,000

This table was produced by Mr Irving and he admits it is defective in so far as it does not account for sums withdrawn from Britain by foreigners.

We are presently paying huge sums to foreign shipowners to carry our goods to wherever our own ships are disallowed. On the other hand many British shipowners have re-registered their ships in foreign ports and chartered them to foreigners to carry this trade and the charter fees are a capital import just like the profits from the Indies. Nevertheless, this might affect the total apparent surplus.

Another adjustment should be made for interest on investments made by foreigners in England and by Englishmen in foreign countries. Again it should produce on balance a continuing surplus to us.

More difficult to quantify is the huge smuggling trade which is cash business and involves the receipt of silver and gold for our goods. Finally Irving’s table omits the Bills discounted by our navy and army overseas for their provisions etc. We asked the ministry for details of this last item but they say it is difficult to calculate.

As regards England’s balance of trade with Europe during the last 5 years, it was £5 millions in our favour for each of the three years 1805 – 1807; it was £6 millions to us in 1808 and that increased to £14 millions in 1809.

It is the belief of this Committee that the balance of trade is self-regulating. A favourable balance draws funds into the economy which raises the prices of goods in that country until exports are restrained and imports increase, whereupon the excess funds flow away to the trading partners.

As regards paper currency, we find it affects the price of bullion in the same way. When more paper currency is available, the price of bullion payable in that currency increases and the exchange rate of that paper with other currencies is correspondingly reduced. It is the exchange rate and the price of bullion that tells us whether our paper currency issue is excessive or deficient.

The Parliamentary Committee concludes that the financial difficulties being experienced throughout the country by the surfeit of paper money is proximately due to our success in international trade.

Sat 20th April 1811

Another of the Goldsmid brothers has killed himself, this time it is Abraham. He walked out of the back of his house in Morden into the woods and shot himself through the head. The suicide is rumoured to relate to alarm that the discount on Omnium 10% stock would increase. The City says the Goldsmid family is not bankrupt, they just need time to recover. The family’s loss is said to be about £200,000 but that is only a couple of day’s dealing for them.

Abraham’s problems started with the last government loan of £12 millions which he shared with Sir Francis Baring’s company. The price of 3% consols was at £65 per mille on Thursday and he has been unable to offload his half share although Baring got his sold in the market successfully. Abraham’s monied friends were deterred by the over-issue of paper and the inevitable consequent decline in the real value of government paper. Even his great family fortune was insufficient to overcome the difficulty.

The trigger for Abraham’s problem and proximate cause of his death was a loan he had previously taken from the East India Company for £500,000 which, although secured, was unexpectedly called-in when his difficulty with the government loan was first rumoured. The Company had demanded payment on the day he died.

The India Company Directors have brought down a great Jewish banking family.

Once the news reached the City, Consols fell from 66½ to 63¾. Omnium declined from a discount of 6½ to a discount of 10¼. The prices remained steady at the new low rate for some time and then marginally recovered. Seventeen banking houses ceased payments in connection with this fall in value.

In the last few weeks both Sir Francis Baring and Abraham have died. They were long considered the two foundation-stones of the City’s financial system.

Sat 13th April 1811

The Chancellor of the Exchequer was obliged to buy back £8 million of Exchequer Bills between 20th – 27th March 1810 at the Exchequer Bill Office.

The management of this office is the responsibility of three paymasters – Sir John Peter, Mr Planta and Dr Cudlipp. Cudlipp’s job is a sinecure and he is never there; only Peter and Planta are actually involved. The operations of the Office have historically been characterised by favouritism and by an apparently willing acceptance of 2-3% of forged Bills.

Some Exchequer Bills in circulation today are endorsed to pay interest of 3¼d per diem and others 3½d per diem. The former were relegated to buy-back only after 22nd March. Discontent arose amongst some holders of 3½d Bills over preference in payment to some holders before others.

On 20th March, before the Exchequer Bill Office opened at 10am, Peter brought the bankers Goldsmid, Sutton and Gilman to the office and they got their 3½d Bills settled first.

By close of business on 21st March nearly £6 millions had been paid-out and there remained £2,188,700 of the original £8 millions available to disburse to the holders of 3¼d Bills. By that time widespread complaints had been made that sales were not ‘first come, first served’.

Goldsmid, Sutton (& his partner Robarts) and Gilman gave their 3¼d Bills to Sir John Peter to negotiate on their behalf to avoid attending at the Office and attracting attention of other holders. These people thus again got their payments in full.

Peter says he was very busy at the time and has since forgotten all the details.

The accounts reveal that £311,000 more Bills (nearly 4%) were negotiated by the Exchequer Bill Office than were actually issued. Numerous people, who had queued since 10 am, had their Bills returned after the money ran out.

Footnotes    (↵ returns to text)

  1. I exclude the brief access granted to Indian sugar when it appeared the Jewel in the Crown was about to lose its opium revenue from China – see a Friend of China article dated 2nd June 1842.
  2. See a Bombay Courier article datelined Sat 17th May 1823. This was several years after the Emperor had raised the Rothschilds of Frankfurt to the nobility in recognition of their courier service delivering British subsidies. Gratitude is not disabling. Note also the stock brokers’ permission to allow speculative short-selling by investors. The stock exchange has always been a casino.
  3. It provides a predictable basic income to large capitalists on which to found their other endeavours. Effectively tax-payers settle the interest required by the banks and other investors and government gets the use of the loans. The minister becomes dependent on his financiers e.g. Pitt’s later sale of the Land Tax and introduction of the Income Tax when the security underlying loans was inadequate to the creditors.
  4. The 3% Consolidated Annuity and the 3% Reduced Annuity are the basic determinants of value of British debt. In this work they are promiscuously referred to as 3% Consols and 3% Reduced.
  5. This might be Henry, MP for Southwark, or his brother Samuel, MP for Hull, who were both in the House at this time. The Thorntons made their money from Russian trade and had interests in Sierra Leone. Their bank is M/s Down Thornton and Free.
  6. Whitsun is a Christian festival seven Sundays after Easter.
  7. The providers of Accommodation Bills that allow the purchaser to appear adequately funded. Such Bills are not intended for presentation. It is the availability of accommodation bills that usually initiates a boom and their withdrawal a bust.
  8. This is prior to the great expansion of paper currency for domestic exchange and refers to high-value mercantile Bills, used for trading at a distance but also employed in speculation. Banks can get 5% a year on their trade and real estate finance but considerably more from speculators borrowing funds to gamble on the Stock Exchange. Those repayments are now exposed to risk.
  9. The determined British resistance to Equality was founded on the threat it posed to the Master / Servant laws upon which employment is regulated and, at a higher level in the capitalist system, the performance of contractual terms by the smaller party to the agreement. If the employee / sub-contractor was equal to his employer / main contractor he might not submit to some contractual terms. British resistance to Equality continued throughout the war.
  10. This reversal of the prudent procedure is characteristic of Pitt’s approach to revenue as a debtor. It has since become popular at many levels of society.
  11. This swingeing tax had attracted mercantile attention. A thoughtful trader had shipped his right gloves to London and left gloves to Bristol and declined to pay Customs duty on either shipment whereupon they were put up for auction. His nominees were the only bidders.
  12. Until about 1791 Napoleon was identified with the Corsican independence movement and this event might have been expected to irritate him but he is not yet of much significance in French politics. The induction of Corsica into the Empire appears to have been solely for its ports which are well located to disrupt the grain shipments from north Italy to France and the soldiers it could supply to the allied effort. The first British investment was in improvements to the port of Bastia.
  13. A bit of special pleading by Baring who is prominent in the lucrative government loans business.
  14. An unusual feature of the operation of the India Company is that, since Clive’s shareholder rebellion, the Directors have unfettered control of the business and the owners have little voice.
  15. Lawyers have become somewhat suspect, particularly to merchants and the ministry. They traditionally hold liberal views and commonly if tacitly support the legal opposition to Pitt through the Constitutional Societies.
  16. This is actually due to Grenville’s introduction of Licences in 1794 to trade with the enemy. It permitted the receipt in London of continental capital in Bills of Exchange. The Licensing regime continued throughout the war although it is more commonly associated with the final years when the ministry managed all trade.
  17. This is a substantial change. The usual banking names are absent. Pitt based the deal on Benjamin Goldsmid, bringing him into government loans business in return for a 3% increase in funds produced. (Goldsmid appears to be an assumed name, meaning Goldsmith, the forerunners of banks, in the same way Rothschild means Red Shield and does not denote a family name). The Goldsmid family came from Cassel and had the continental connections to break the ring on government loans business in return for a bigger share. Note also Paul Benfield, the Madras financier, has involved himself with the Boyds, bankers of Paris and London. See the Asia and China chapters for details of Madras loans to Indian princes and Chinese Hong merchants.
  18. By making the loan under treaty, Pitt avoids immediate parliamentary scrutiny. So far as Benfield is concerned, his inclusion appears to be a sweetener for political ‘services rendered’.
  19. A feature of government loans secured on the market value of debt paper had been for the underlying stock prices to decrease in value during negotiations with the bankers, recovering on agreement. There was only one year of war when the national creditors did not profit substantially from this manipulation of the stock market.
  20. Pitt’s assessment, which may have originally been formulated by Benfield, is that Austria is key to continuing the war. If Austria fights, everyone fights; if she makes peace, everyone makes peace.
  21. This derangement of production in some West Indian colonies – Santo Domingo and Guadaloupe particularly – results from Danton and his group obtaining National Convention agreement to bestow freedom on the slaves in French colonies. This destabilises all the West Indian colonies.
    Concerning the dependence of expatriate planters on European capital, see the article dated 9th February 1805 on Surinam
  22. King George III, by this time, has accumulated about £6 million in droits from which he offered to give the people £1 million. The thanks of parliament solicited by Pitt effectively acts as an estoppel when MPs finally become aware of the extent of the droits fund that is available to the King independent of parliamentary control.
  23. Next to wages, the cost of transports is the single largest item in overseas expeditions.
  24. Some of the published figures do not cast correctly and should be considered indicative only. The emigre army is the Prince of Conde’s army of French aristocrats which was funded by the British people.
  25. Given life expectancy at that time, 28 years purchase appears on the high side but this is the fundamental calculation on which the national loans business is based.
  26. The London newspapers for public consumption are always received late at Bombay, perhaps indicative of a Company policy in London
  27. This is the well-known addition to national wealth attributed to Pitt – the inclusion of traders’ overseas balances in the country’s accounts which they are encumbering for bank money to invest in the market.
  28. The first public whiff of the Bank of England’s bankruptcy.
  29. This refers to the capture of the Cape, Cochin, Ceylon and Malacca – see the Asia chapter for details.
  30. The Company invites subscriptions from the British public to about £500,000 a year to finance its voyages East. These paid 10% dividends and were always fully subscribed by the churches and charitable institutions.
  31. The common arrangement is for the British exporter to receive specie for his goods sold in Europe. This is exchanged with the local British honorary consul for Bills on the Treasury. When the Hanseatic towns marked down the value of the pound, ultimately by 30% due to domestic inflation, exporters would have obtained only 70% of their expected receipts if they exchanged their gold with the Consul. To exchange this reduced income for Treasury Bills (paid in bank notes in London) compounded the losses and persuaded the merchants to keep their gold and silver offshore, mainly in Amsterdam where the financing of smuggling was centred. The result was a nett outflow of value from the British economy. It required Pitt to consider means of divorcing the domestic and international economy.
  32. Boyd made his money in the French market. His partner Benfield is Paul Benfield, the master of usurious loans in Madras. The City supposes Boyd Benfield’s funds are from French and Indian capitalists.
  33. This frightful drop on the value of the 3% Consols nearly induced peace. The country weathered the storm by increasing the assessed taxes. National creditors were tranquillised by a guarantee that the 3%s would be maintained above 60.
  34. Comprised of short-term 90-day ‘paper’ loans from the Bank of England – Pitt told the House a central Bank should not spend real money in a war. He appears to be emulating Revolutionary France which issued assignats and mandats secured on national lands – a practice the French government continued until Napoleon’s coup.
  35. See the Political Management and Europe chapters for details of the Liberal Whig secession this year. Debate is now solely confined to motions of the 10 – 20 independent MPs who continue to attend the House.
  36. A reference to the run on Sterling in Hamburg that had required shipments of gold to Hamburg earlier in 1797 to avert and had caused the ministry to trawl the World for bullion. The major contributions came via the India Company from India and China and from South America via the West Indies and American traders.
  37. Note the fifteen dissenters. This is the small group of patriotic independents continuing to attend debates. These independents should be better known. With the bankruptcy of the Bank of England, the City bankers require better security which presages the introduction of the sale of the Land Tax in 1798 followed shortly thereafter by the introduction of Income Tax. These imposts are clearly contradictory of the capitalist ideological position.
  38. Barracks are being built near every city for crowd control – see the Dissent chapter for better details. It is interesting that these costs appear in the army estimates.
  39. This indicates the role of China-trade in the British financial system. Several hundred thousand Pounds of Indian goods, mainly cotton and, increasingly, opium, were sold in China each year and the proceeds used to buy mainly tea which was auctioned in London for c. £4 millions, on which the government took a large Customs levy of about the same amount. Neither the Company nor the government could forego this windfall income. Only the West Indian sugar trade provided a similar amount of Customs revenue although the sugar wholesalers received nothing like the Company’s astonishing profits on China tea.
  40. i.e. their title to the land will be encumbered to another. This is in the country that says it is fighting to preserve individual property rights from French egalitarianism. The emasculation of the popular representatives is well evidenced here – no MP raised a query about the situation of the landowner who did not redeem his tax liability. It is clear that some property rights are greater than others.
  41. The City banker Angerstein and others have estates in Grenada that have become unproductive due to French emancipation of the slaves which has caused most other West Indian, inter alia Grenadan, slaves to rebel. All the British planters on Grenada have decamped.
  42. It might also show that the Convoy Tax is a more accurate indicator of actual imports and exports than the Customs records. It applies to all exports in the ship. Smuggling into France was assiduously done. Not only the islands off Brittany and Normandy and Toulon were involved either – Molenes on the Rhine and Ile Verte on the Isere were also important bases.
  43. See ‘Fiat Money Inflation in France’, A D White 1914, for an account of Napoleon’s sustainable financial policy. It was inevitably feared by the British who had been obliged to operate a debt-based system.
  44. Pitt already knows something of British merchants’ capital overseas as he has brought it into the computation of national assets – this enquiry largely concerns India Company employees and ex-employees and the Indian Agencies whose commercial activities are more inscrutable.
  45. This seems to mean that the British government pays 32/- per cwt in London but, if the actual sale price is less, the Indian exporter gets the balance.
  46. See the Ireland chapter for brief details.
  47. Due to disorder and lost production consequent on French emancipation of slaves in their colonies, which freedom was also sought by British slaves.
  48. In the course of this speech Pitt acknowledged that popular support for war had evaporated. He mentions ‘proving true to ourselves’, ‘exaggerated difficulties’, ‘nothing to discourage us’, “commercial prosperity never so great’ and the like.
  49. A shrewd observation on the Agency ‘infection’ in the capitalist system of distribution.
  50. The amount paid in poor rates is of political significance as it is relevant to the quantification of value of electoral constituencies for sale – see the Helstone election in the Political Management chapter for an example of the amount of poor rates setting the price of the borough – however unrepresented midland towns cannot make use of this significance (The reader will recall that manufacturers had selected these towns – Birmingham, Manchester, etc. – for industrial development precisely because they did not pay tithes. They sought for economies from the outset. Poor rates in those towns are a charge on production. If trade and employment are high, poor rates are tolerable.
    The presence of Irish MPs like Parnell at Westminster follows the incorporation of Ireland in the United Kingdom and George III’s assumption of the title ‘Emperor.’
  51. Mercantile doublespeak from Lushington, unless the value of international trade does not include the profits on its financing.
  52. This is a useful article in that it describes the parameters to the establishment of an Exchange, in this case the Grain Exchange, but it might exchange any valuable thing, and shows how competition is readily subverted in a market system.
  53. This is an element in the privatisation of common land that occurred at this time. An immense acreage was sold-off and cleared for cultivation. It is said to have increased grain production.
  54. The reader will be aware that these prices over the preceding centuries are all comparable because they pre-date the adoption of paper money for exchange and the introduction of inflation to everyday life. That was Pitt’s historic achievement
  55. The 1770s are customarily considered the years in which England became a nett importer due to legislated protection of English farmers. From about that time, British self-interest dictated a policy concerned with the promotion of international trade.
  56. A uniquely dense wood (it sinks in water) used for load-bearing in ship construction. This order reveals the British decision to restart war.
  57. Here is the decisive fact that ensures war must recommence – Britain cannot afford to make peace and expect to remain competitive in international trade whilst paying off ten millions of annual interest on the national debt. The merchants and bankers will take their profits offshore and no income will be obtained from them.
  58. The virtual British monopoly of international trade, except for the Americans, is essential to the British economy. The removal of the Dutch East India Company from trade, which is about to be achieved by prize-taking, will consolidate the monopoly.
  59. At least three of the leading names are ex-residents of India e.g. Elijah Impey, the former Chief Justice of Bengal, who is said to be the major holder. Impey had been accused with Warren Hastings of impropriety but exonerated. The purchase of French, Dutch and Danish Bills was a way for Company employees to remit funds from India without the knowledge of their employer.
    The ex-residents coordinate the recovery of their investments under Impey’s leadership during the brief peace of Amiens but it appears from other reports that they had not completed their attempt before war broke out again.
  60. Readers might find the reference to Omnium perplexing. According to the late David Joslin, when government issued a loan, the subscribers initially received various stocks that remained unsold in the Bank of England. These were known as Omnium and paid better interest than was formally due. It was only when the loan was fully subscribed that Omnium was converted into its component stocks.
  61. He then faced a new criminal charge of felony for the theft of paper and was found guilty on the same facts. The Attorney General added ‘purporting to be’ before the words ‘Exchequer Bills’ in the charge to circumvent Aslett’s Defence. Felony is also a capital offence but the valuation of the paper ((less than 40/-) made it non-capital.
  62. This represents a substantial part of the stock accumulated at Vera Cruz and elsewhere during the Revolutionary War. Its transfer will interest the British ministry.
  63. A valuable red colouring derived from the bodies of crushed beetles.
  64. One of the imponderables for the reviewer is the rather small amount of loans and subsidies paid by London to European allies. Most summaries of loans in the newspaper are less than £20 millions for the entire Revolutionary War although the British national debt during those years increased by about £500 millions (including the loan from Bank of England of £300 million).
  65. This bankers’ view, which has characterised world history for the last two centuries, was most recently expressed by President George W Bush in conversation with Argentinian President Nestor Kirchner – the best way to revitalise an economy is to make war.
  66. He is considered the epitome of Englishness.
  67. London financed the expedition. France paid for her purchases of sugar from the former estates of the émigrés at Santa Domingo and elsewhere. This fleet was caught on its return by renewed war and many ships and cargoes were made prize.
  68. A bold bit of doublespeak from Pitt. There should be no doubt it is Britain and not France that declines to make peace.
  69. This is a little-discussed aspect of British revenue management. It seems the lower Customs tariff at London was really to benefit the City intermediaries in international trade. From the administration’s viewpoint the concentration of Customs collections at London was supposed to be more certain and less subject to evasion.
  70. The handsome profits alluded to in this article are only partly for the planters’ account. The preponderance accrues to the London bank of the planter who, in return for providing loans, becomes consignee of the goods and controls the shipping, insurance, inland transportation, storage (all of which the planter pays) and sale of the commodity. See an article below dated 9th February 1805 for a full description.
    It should also be recalled that British Customs revenue from West Indian sugar approximates £4 millions a year, comparable to the revenue from tea, due to the Rule of 1756 preserving the imperial monopoly in home colonies and the exclusion of competing colonial powers from international trade by the loss of their shipping to prize-taking.
  71. Turkish opium contains about 10% morphine. It is medicine – eaten as pills, dissolved in wine or used recreationally in baking. The Company’s opium is about 6% morphine and smokable. See the Opium and China chapters for more discussion.
  72. I have included this crime report in the Economy Chapter as it indicates how some funds between London and Paris were handled.
  73. Britain requires American ship-owners to deliver British goods into Europe. That required the old American claims first be settled. See the North America chapter for more details.
  74. A rollicking good story of a servant who discovers his master’s secret and, although innocent, lives in constant apprehension of being trapped. An excellent commentary on political justice of the times. Godwin’s novel is today considered as the first ‘thriller.’
  75. It should be recalled that debates on India are attended by those interested, commonly less than 100 MPs. Castlereagh can say what he likes. He is not going to be questioned. The India Company legislates for itself. As regards the Company’s debt, it is absolutely reluctant to allow London capitalists any access to the Indian market where they might use their political power with the home government to gain special terms of business.
  76. Fox would have transferred the Company to government control to devalue the King, his perennial Constitutional objective.Fox’s intention was later achieved by Castlereagh after George III’s demise.
  77. This insertion of paper money between value and production was an insight. It was adopted incrementally more or less all over Europe as the increased spending power it gave governments became apparent from the British example. Not only was value removed from the domestic economy and replaced with paper but only the net balance of exchange (the profit or loss) required reinstating. A small capital supports a large turnover because the funds are all ‘out there’ circulating and only a fraction comes back for discounting on any one day. Effectively Pitt had adopted a means of running the domestic economy without exposing real wealth to risk, and the people were content as paper was more convenient than specie.
  78. It was not all profit at the bank. Here is a rare, perhaps unique, example of expense.
  79. See the Dissent chapter for more on the Friends of the People.
  80. This put the responsibility for abstemiousness on the people at large. Colonial goods became unavailable. The alternatives were unpalatable. Chicory was little like coffee; French tobacco tasted differently; grape-syrup was unlike sugar. Clothes made of wool and flax on the continent were expensive. The ideal of national self-sufficiency clashed with individual liberty and free employment as Constitutionally guaranteed in France. This abnegation could not be maintained long. It could be somewhat enforced against British ships but everyone sympathised with neutral shipping.
  81. It really seems true that the route to financial success was shop-keeping. All other avenues, except smuggling, required connections or were cartelised.
  82. See the Political Management chapter for the ease with which the King dismissed the “Ministry of all the Talents.”
  83. A new commercial treaty has concurrently been concluded with America but the West Indies is not mentioned. This Report indicates the direction of British financial and economic policy
  84. The Order-in-Council determined what goods foreign shipping might carry and required all foreign shipping to visit England before delivering their cargoes.
  85. Licensed trade creates a monopoly of foreign trade in the hands of a few chosen people, commonly known to the minister. It is necessarily equal in both directions. British licences by 1811 became transferrable, allowing the recipients to sell them on to real traders at a profit. As an invariable consequence, goods sold under licence were more expensive than similar goods openly traded.
    At the opposite end of the scale is free trade and between the two is adequate room for moderate protectionism had the belligerents in this war sought it.
  86. The perennial British foreign policy predilection – attributing her own motivations to the rest of the world.
  87. This period saw the development of French domestic tobacco farming, the use of grapes and later beets to provide sugar and of chicory as a coffee substitute. There was a concurrent German invention of sulphur dyeing in replacement of indigo. The denial of commodities by sanctions to an inventive species like ours is only a brief inconvenience.
  88. Recalling the merchants with ‘estates in Tipperary,’ I suppose that winning lottery tickets may be purchased on ‘prize plus’ basis to launder funds.
  89. Pitt’s calculation of GDP in 1798 is in an article dated 11th May 1799 above. The figure has doubled in five years.
  90. An early indication of the extent of inflation in the British domestic economy.
  91. Tea duty is collected at the Company’s auctions. The sum is immense – about £3 – £4 million a year – many times the cost price.
  92. A debate on reform and government economy – see the reports of Charles Grey’s and Lord Liverpool’s speeches in the same debate in the Europe chapter. They reveal a growing political realisation that inflation is causing hardship to the poor.
  93. In another article Villiers is said to have received public funds to assist Cort in improving his method of iron production but the improvements never materialised and the Admiralty’s investments, through Villiers, disappeared.
  94. Rainier commanded the Company’s invasion of the Spice Islands and arranged the sale of much of the prize goods.
  95. The Brickwood and Devaynes failures may be related to the informal South American trade which has historically been conducted via Jamaica and the Antilles.
  96. This is largely the stockbroker Ricardo’s work. It appears to recognise that killing inflation means making peace. Deflation would foreseeably decrease productivity. The Treasury’s income would reduce. Money transfers to Wellington would be more difficult. These were the reasons Perceval used to repudiate prudence and continue the war.
  97. Some Letters to the Editor are widely supposed to be from the Editor or solicited by him. They are all routinely anonymous.
  98. Alluvial gold dust by weight was money in some spice islands – Maluccas and Celebes – and Sumatra but the amounts were quite small. The Star Pagoda was produced from gold mined in the Madras hinterland at the Kolar goldfields.
    Silver from Manila is hardly mentioned in the China chapter. It is sourced from the dividends of Spanish shareholders in South American mines that are received on the annual treasure ship from Acapulco. New England traders bring silver to Canton from their West Indian and South American trade – this funds China exports.

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