Amy Stanning | Lancaster University
Britain in the 'long' eighteenth century was a state at war, fighting no less than six separate wars with the French between 1688 and 1815, increasingly on a global scale. Ever-growing resources were needed as military technologies developed and were deployed globally to protect and expand growing commercial and colonial interests. By 1814, the annual cost of warfare was sixty million pounds (over three and a half billion pounds in 2013 prices). The State's capacity to harness national resources for warfare was as crucial to the success of Britain's military strategy, as were the capabilities of its generals and admirals.
The late seventeenth and early-eighteenth century' Financial Revolution' saw the British State develop a model of finance which was to ensure these increasingly long and expensive wars could be funded. Finance was raised through long-term public debt issued on the Government's behalf by the Bank of England, debt for which there was increasing demand from investors. This debt over time became regarded as secure and literally 'as safe as the Bank of England'. Crucial to investors' confidence was the certainty that they would receive their regular interest when due and repayment at maturity. Fundamental to this confidence was the State's capacity to tax. The transformation of the British State into an efficient fighting and taxing 'machine' has come to be characterised as 'The Fiscal-Military State' (J. Brewer).
Yet this reputation of fighting and financial effectiveness conceals much about 'The Fiscal-Military State's' financial system that was ineffective and in places corrupt. The tax system which was required to extract ever-increasing portions of the national wealth was far from the efficient monolithic 'machine' which has been suggested. What is intriguing is how a tax system came to be developed, that in parts was highly efficient, and in others the opposite. With the State's military and expansionist strategy dependent on an efficient tax system, this contrast within the system is puzzling.
By the late eighteenth century, the 'golden goose' of tax collection was the Excise, generating more than half of all income by 1770. An indirect tax dating back to the Civil War, Excise was collected on many essential items in universal usage such as beer, malt, tea, soap, candles and salt. Indeed, the widespread use of these products made them attractive items to tax. The tax was 'hidden' from buyers as it was collected from manufacturers by the Excise Department's extensive network of officers working with detailed and intrusive regulations, all with the force of law. Candlemakers, for example, were required to give Excise Officers advance notice of production and had to keep all their tools locked away, with only the Excise Officer having the key. Manufacturing soap without giving notice or having unlocked soapmaking tools was severely punished. So much so that counterfeiting Excise seals on goods was a capital offence. Tax was collected within a month of assessment and remitted to the Exchequer within days. A report to the House of Commons in 1780 confirmed there had been defaults of only three thousand pounds over the previous twenty-four years.
Customs duties also contributed to the public purse, yet the system of collection bore no relation to the rigour and effectiveness of Excise collection. Imported goods, particularly high-value and light items were pilfered from ships as they entered port, even removed from docked ships hidden in clothing, or simply thrown overboard in barrels to drift downstream to where smugglers awaited them. Customs officers who received no regular salary (unlike their well-paid Excise colleagues) were dependent on fees from importers as well as downright bribes and gifts of contraband. Smuggling of goods to evade duties was so endemic that by 1783, 86% of all brandy consumed was smuggled, as well as large quantities of tea, wines and sugar (Ashworth).
Yet despite the revenue losses from smuggling, there was little appetite to address the problem. The Customs Commissioners were appointed for life; their offices were heritable and regarded as private property. The Commissioners' duties were discharged through deputies, who were often poorly trained and ineffective. In 1786 duties on wine were passed to the Excise for collection but apart from attempts to consolidate duties and legislation and to suppress smuggling, little was done to improve efficiency. We might speculate that smuggled brandy, wine and tea was enjoyed by too many in positions of influence.
The third component of tax revenues was the Land Tax, first collected in 1693, reformed in 1698 and collected every year until 1798, being made permanent and redeemable in 1789. Although the tax was also due on personal property and government salaries, land was the principal taxed item. The tax was levied yearly in multiples of a shilling rate (five new pence), varying between one shilling in 1731 to four shillings in wartime and continually from 1775. Each shilling rate levied was estimated to generate half a million pounds in gross revenue. Everyone with land or income valued in excess of twenty pounds was due to pay, excluding the poorest but taxing the 'middling sort' of shopkeepers, tradesmen and small farmers as well as their wealthy aristocratic and gentry neighbours. Using Gregory King's 'Social Tables', we can estimate that just under half the population paid the tax.
The Land Tax was administered by the Tax Office but collected on a county basis through a locally nominated network of assessors, collectors and receivers, answerable only to their County Commissioners who were nominated by Act of Parliament. The efficacy of collection depended entirely on the diligence of the local officials as the Tax Office had little or no power to compel payment. With collection firmly in the hands of local interests, local priorities dominated. Tax receipts were often used for private purposes by the County Receivers before being remitted to the Exchequer. Much local trade and even banking were financed using Land Tax balances. A House of Commons Select Committee report in 1786 identified that of the two million pounds due each year, only just over a quarter was received in the first year, with a further two-thirds paid in the second year and full payment taking until the fourth year. Losses, defaults and glacial rates of payment were commonplace, yet there is scant evidence of any serious action taken to make collection more efficient or speedy. We can ask, given the network of local interests in which collection was enmeshed and MPs' own self-interest as taxpayers, was there little appetite for reform, given the success of the Excise' golden goose'?
The contrast between the disciplined effectiveness of the Excise and the inefficiency of the Customs and Land Tax collections is quite stark, and with the State seeking ever-increasing revenues to fund the escalating cost of war, puzzling. Perhaps the success of the Excise 'golden goose' diminished the will of the Government to seriously tackle the vested interests and customary practices of the Customs and Land Tax administration. Research is needed to find out whether this lack of determination was down to benign neglect, deliberate policy, or perhaps both.
Either way, the cost of the French Revolutionary Wars put the fiscal system under such intense pressure it buckled in 1799. William Pitt, the younger, found his answer to the problems of tax collection, ducked a decade previously, his legacy to us: Income Tax.
Amy Stanning is a PhD Student in the History Department at Lancaster University. Amy's research interest is in the public finances of the British eighteenth century' Fiscal Military state'. Her research project considers the development of differential taxation contributions within the population as taxation policy evolved and consumer consumption developed in response to the commodities newly available within the expanding imperial economy.
Twitter: @amywok1