Chapter XIV: Act 1875: , but that power is now rarely exercised, and new urban (6)

In the long course of English financial history the nearest approach to the new departure and an abandonment of old devices is found at the time of the Civil War and Commonwealth. The actual outlines of the now existing system made their appearances, while the older portions of the revenue--particularly the survivals of feudalism--are eliminated. Thus the Civil War and the Interregnum (1642-60) may be regarded as marking a watershed in the financial history of the country. At the beginning of the struggle both sides had to rely on voluntary contributions. Plate and ornaments were melted down and useful commodities were furnished by the adherents of the king and by those of the parliament. As holding possession of London and the central organization the parliament voted subsidies and a poll tax. Such imports could hardly be levied with success and new forms became necessary. The direct taxation took the shape of a "monthly assessment" which was fixed from time to time, and which was collected under strict regulations, in marked contrast to the lax management of the former subsidies. As the amount for each district was fixed, the systematic collection secured "the more equitable adjustment of the burden of the tax as regards the various taxpayers" without hardship to the community. In spite of its origin, the "assessment" was the model for later taxation of property. The yield of this tax--exceeding for the whole period L32,000,000--is a proof of its importance. Minor contrivances, e.g. the "weekly meal" tax, indicate the financial difficulties of the parliament, but are otherwise unimportant. Owing to its control of the sea and the principal ports the parliament was able to command the customs revenue; and in this case also it remodelled the duties, abolishing the wool subsidy and readjusting the general customs by a new book of rates. A more extensive tariff was adopted in 1656, and various restrictions in harmony with the mercantilist ideas of the time were enforced. Thus French wines, silk and wool were excluded from 1649 to 1656. Far more revolutionary in its effects was the introduction of the excise or inland duties on goods--a step which Elizabeth, James I. and Charles I. had hesitated to take. Beginning (1643) with duties on ale, beer and spirits, it was soon extended to meat, salt and various textiles. Meat and domestic salt were relieved in 1647, and the taxation became definitely established under the administration of commissioners appointed for the purpose. Powers to let out the collection to farmers were granted, and a bid for both excise and customs amounted in 1657 to L1,100,000. Confiscations of church lands and those belonging to royalists, feudal charges and special collections helped to make up the total of L83,000,000 raised during the nineteen years of this revolutionary period. Another mark of change was the removal of the exchequer to Oxford, leaving, however, the real fiscal machinery at the disposal of the committees that directed the affairs of the parliament. Under Cromwell the exchequer was re-established (1654) in a form suited for the changes in the finances, the office of treasurer being placed in the hands of commissioners.

A complete reconstruction of the revenue system became necessary at the Restoration. The feudal tenures and dues, with the prerogative rights of purveyance and pre-emption, which had been abolished by order of the parliament, could not be restored. Their removal was confirmed, and the new revenues that had been developed were resorted to as a substitute. Careful inquiry showed that just before the Civil War the king's annual revenue had reached nearly L900,000. The needs of the restored monarchy were estimated at L1,200,000 per annum, and the loyal spirit of the commons provided sources of revenue deemed sufficient for this amount. An hereditary excise on beer and ale was voted as a compensation for the loss of the feudal dues, and temporary excises on spirits, vinegar, coffee, chocolate and tea were added. All differences of "old" and "new" customs and subsidies had disappeared under the Commonwealth. The general or "great statute" (1660) provided a scale of duties--5% on imports and exports, with special duties on wines and woollen cloths--accompanied by a new book of rates. A house tax, levied after the French pattern, on each hearth, was introduced in 1662 and became established. Poll taxes were used as an extraordinary resource, as were the last subsidies, voted in 1663, and then for ever abandoned. Licences on retailers and fees on law proceedings were further aids to the revenue, which, in the later years of Charles II. and in the short reign of his successor, was with difficulty kept up to the level of the increasing expenditure. The Commonwealth assessments were revived on several occasions, and indirect taxation was made more rigorous by the imposition of extra duties on brandy, tobacco and sugar, as also on French linens and silks. A very important development was the placing of the customs (1670) and the excise (1683) in the hands of special commissioners, instead of the system of farming them out to private collectors. The approach to modern conditions is further evidenced by the greater care in the administration. Amongst expert officials Dudley North (q.v.), as commissioner of customs, was the most distinguished. In this period, too, the beginning of the public debt as in the appropriation of the bankers' deposits may be found.

The Revolution of 1688 may be regarded both on its constitutional and financial sides as the completion of the work of the Long Parliament. In the latter respect its chief effects were: (1) the transfer of the administration of the finances from the king's nominees to officials under parliamentary control, (2) the consequent application of the revenue to the purposes designated by parliamentary appropriation, (3) the rapid expansion of the various kinds of revenue, particularly the indirect taxes, (4) the rise and growth of the national debt, combined with the creation of an effective banking system. The greater part of the 18th century was occupied with the working out of these results.

The government of William III. had to face the expenses of a great war and to allay discontent at home. As a preliminary step to the necessary settlement of the revenue a return was prepared, showing the tax receipts at over L1,800,000 and the peace expenditure at about L1,100,000. Parliament accepted the view that L1,200,000 per annum would suffice for the ordinary requirements of the kingdom. It, further, introduced the system of the Civil List (q.v.) and assigned L600,000 for the fixed payments placed under that head, leaving the remainder to be appropriated for the other needs of the state. As the "hearth money" had proved to be a very unpopular charge, it was, in spite of its yield (L170,000), given up. The temporary excise duties were voted for "their majesties' lives" and the customs for a limited term. These branches of revenue were altogether insufficient to meet the pressure of the war outlay, and in consequence new heads of taxation--or old ones revived--came into use. A series of poll and capitation taxes were imposed between 1689 and 1698, but were after that date abandoned for the same reason as that for the repeal of the hearth money. The monthly assessment was tried in 1688; then came an income tax followed by "twelve months'" assessments in 1690 and 1691. The way was thus prepared for the property tax of 1692, imposing a rate of 4s. in the pound on real estate, offices and personal property. The old difficulties of securing returns made the tax chiefly one on land. It was under the name of "the land tax" that it was generally known. The 4s. rate brought in L1,922,712, a return which declined in the following years. To meet this a fixed quota of nearly half a million (a 1s. rate) was adopted in 1697, the amount to be apportioned in specified sums to the several counties and towns. The framework of the tax remained without substantial change till 1798, the time of Pitt's redemption scheme. In 1696 houses were taxed 2s. each, with higher rates for extra windows. The beginning of the "window tax," licences on pedlars, and a temporary tax on the stocks of companies complete the imposts of this kind. Stamp duties--imitated from Holland--were adopted in 1694 and extended in 1698: they mark the beginnings of the modern duties on transactions and the "death duties." Large additions were made to the excise. Breweries and distilleries were placed under charge, and such important commodities as salt, coal, malt, leather and glass were included in the list of taxable articles, but the two last mentioned were soon relieved for the time. The customs rates were also increased. In 1698 the general 5% duty was raised by the new subsidy to 10%. French goods became liable to surtaxes, first of 25%, afterwards of 50%; those of other countries had to pay similar charges of smaller amount. Spirits, wines, tea and coffee were taxed at special rates. How great was the expansion of the fiscal system may be best realized from the fact that during the comparatively short reign of William III. (1689-1702) the land tax produced L19,200,000, the customs L13,296,000, and the excise L13,650,000, or altogether L46,000,000. In the last year of the reign, the opening one of the 18th century, the returns from these taxes respectively were: land tax (at 2s.), L990,000, customs L1,540,000, excise L986,000, or a total exceeding three and a half millions. The removal of the regular export duties in respect of (a) domestic woollen manufactures, (b) corn, was the only alleviation of taxation, and in both cases it was due to special reasons of policy.

Quite as remarkable as the growth of revenue is the sudden appearance of the use of public loans. In earlier periods a ruler had accumulated treasure (Henry VII. left L1,800,000) or had pledged "his jewels or the customs or occasionally the persons of his friends for the payment" of his borrowings. Edward III.'s dealings with the Florentine bankers are well known; but it was only after the Revolution that the two conditions essential for a permanent public debt were realized, viz.: (1) the responsibility of the government to the people, and (2) an effective market for floating capital. At the close of the war in 1697 a debt of L21,500,000 had been incurred, over L16,000,000 of which remained due at William III.'s death. Connected with the public debt is the foundation of the Bank of England (see BANKS AND BANKING), which more and more became the agent for dealing with the state revenue and expenditure; though the exchequer continued to exist until 1834 as a real, even if antiquated institution.

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

Regarded broadly, the 18th and 19th centuries exhibit several distinct periods with definite financial aspects. In the ninety years from the death of William III. (1702) to the outbreak of the Revolutionary War with France (1793) there are four serious wars, covering nearly thirty-five years. There is the long peace administration of Walpole, and there are the shorter intervals of rest following each of the contests. From the beginning of the war with the French Republic to the year of Waterloo there is a nearly unbroken war time of over twenty years. The forty years' peace is closed by the Crimean War (1854-56); and another forty years of peace ends with the South African War (1899-1902). During this time the older mercantilism passes into protectionism; and this, again, gives way before the gradual adoption of the free trade policy. At each time of war, taxation (particularly in the indirect form) and debt increase. Financial reform is connected with the maintenance of peace. Among the great financial ministers Walpole, the younger Pitt, Peel and Gladstone are conspicuous; while Huskisson's services in the kindred field of economic policy deserve special notice in their financial bearing.

By taking the several great heads of revenue in order it is comparatively easy to understand the nature of the progress made in subsequent years. (1) The land tax, established on a definite basis in 1692, was the great 18th century form of direct taxation. Varying in rate from 1s. (as in 1731) to 4s. (as in most war years), it was converted by Pitt in 1798 into a redeemable charge on the lands of each parish, and by this process has sunk from the amount of L1,911,000 in 1798 to L730,000 in 1907-1908. The great increase in other heads had impaired the value of the land tax as a fiscal support. (2) Parallel with the movement of the land tax but showing much more rapid growth was the excise of the 18th century. Most of the articles of common consumption were permanently taxed. Soap, salt, candles and leather are described by Adam Smith as taxed, and that taxation is unreservedly condemned by him. In 1739 the excise duties brought in L3,000,000. By 1792 they had risen to L10,000,000. Their continued expansion was due both to the wider area covered and to the increased consuming power of the country. (3) The customs were equally serviceable, and in their case the increased duties were even more considerable. The general 10% of 1698 became 15% in 1704, a fourth 5% was imposed in 1748, and in 1759 the general duties were raised to 25%. Coincidently with this general extension of the customs duties special articles such as tea were subjected to increased duties. The American War of Independence brought about a further general increase of 10%, together with special extra duties on tobacco and sugar. In 1784 the customs revenue came to over L3,000,000. Two circumstances account for this slower growth. (1) The extreme rigour of the duties and prohibitions, aimed chiefly against French trade; and (2) the absence of care in estimating the point of maximum productiveness for each duty. Swift's famous saying that "in the arithmetic of the customs two and two sometimes, made only one" is well exemplified in England at this time. The smuggler did a great deal of the foreign trade of the country. Efforts at reform were not, however, altogether wanting. Walpole succeeded in carrying several useful adjustments. He abolished the general duties on exports and also several of those on imported raw materials such as silk, beaver, indigo and colonial timber. His most ambitious scheme--that for the warehousing of wine and tobacco in order to relieve exporters--failed, in consequence of the popular belief that it was the forerunner of a general excise. Walpole's treatment of the land tax, which he kept down to the lowest figure (1s.), and his earlier funding plan deserve notice. His determination to preserve peace assisted his fiscal reforms. Pitt's administration from 1783 to 1792 marks another great period of improvement. The consolidation of the customs laws (1787), the reduction of the tea duty to nearly one-tenth of its former amount, the conclusion of a liberal commercial treaty with France, and the attempted trade arrangement with Ireland, tend to show that "Pitt would have anticipated many of the free trade measures of later years if it had been his lot to enjoy ten more years of peaceful administration." One of the financial problems which excited the interest and even the alarm of the students of public affairs was the rapid increase of the public debt. Each war caused a great addition to the burden; the intervals of peace showed very little diminution in it. From sixteen millions in 1702, the debt rose to L53,000,000 at the treaty of Utrecht (1713). In 1748 it reached L78,000,000, at the close of the Seven Years' War it was L137,000,000, and when the American colonies had established their independence it exceeded L238,000,000. Apprehensions of national bankruptcy led to the adoption of the device of a sinking fund, and in this case Pitt's usual sagacity seems to have failed him. The influence of R. Price's theory induced the policy of assigning special sums for debt reduction, without regard to the fundamental condition of maintaining a real surplus.

The revolutionary and Napoleonic wars mark an important stage in English finance. The national resources were strained to the utmost, and the "whip and spur" of taxation was used on all classes of the community. In the earlier years of the struggle the expedient of borrowing enabled the government to avoid the more oppressive forms of charge; but as time went on every possible expedient was brought into play. One class of taxes had been organized during peace--the "assessed taxes" on houses, carriages, servants; horses, plate, &c. These duties were raised by several steps of 10% each until, in 1798, their total charge was increased threefold (for richer persons four- or fivefold) under the plan of a "triple assessment." The comparative failure of this scheme (which did not bring in the estimated yield of L4,500,000) prepared the way for the most important development of the tax system--the introduction of the income-tax in 1798. Though a development of the triple assessment, the income-tax was also connected with the permanent settlement of the land tax as a redeemable charge. It is possible to trace the progress of direct taxation from the scutage of Norman days through "the tenth and fifteenth," the Tudor "subsidies," the Commonwealth "monthly assessments," and the 18th century land tax, to the income-tax as applied by Pitt, and, after an interval of disuse, revived by Peel (1842). The immediate yield of the income-tax was rather less than was expected (L6,000,000 out of L7,500,000); but by alteration of the mode of assessment from that of a general declaration to returns under the several schedules, the tax became, first at 5%, afterwards at 10%, the most valuable part of the revenue. In 1815 it contributed 22% of the total receipts (i.e. L14,600,000 out of L67,000,000). If employed at the beginning of the war, it would probably have obviated most of the financial difficulties of the government. The window tax, which continued all through the 18th century, had been supplemented in the American War by a tax on inhabited houses (one of Adam Smith's many suggestions), a group to which the assessment taxes were naturally joined. During the 18th century the probate duty had been gradually raised, and in 1780 the legacy duty was introduced; but these charges were moderate in character and did not affect land. Though the direct and quasi-direct taxes had been so largely increased, their growth was eclipsed by that of the excise and customs. With each succeeding year of war new articles for duties were detected and the rates of old taxes raised. The maxim, said to have guided the financiers of another country--"Wherever you see an object, tax it"--would fairly express the guiding policy of the English system of the early 19th century. Eatables, liquors, the materials of industry, manufactures, and the transactions of commerce had in nearly all their forms to pay toll. To take examples:--salt paid 15s. per bushel; sugar 30s. per cwt.; beer 10s. per barrel (with 4s. 5d. per bushel on malt and a duty on hops); tea 96% _ad valorem_. Timber, cotton, raw silk, hemp and bar iron were taxed, so were leather, soap, glass, candles, paper and starch. In spite of the need of revenue, many of the customs duties were framed on the protective system and thereby gave little returns; e.g. the import duty on salt in 1815 produced L547, as against L1,616,124 from excise; pill-boxes brought in 18s. 10d., saltpetre 2d., with 1d. for the war duties. The course of the war taxation was marked by varied experiments. Duties were raised, lowered, raised again, or given some new form in the effort to find additional revenue. Some duties, e.g. that on gloves, were abandoned as unproductive; but the conclusion is irresistible that the financial system suffered from over-complication and absence of principle. In the period of his peace administration Pitt was prepared to follow the teaching of _The Wealth of Nations_. The strain of a gigantic war forced him and his successors to employ whatever heads of taxation were likely to bring in funds without violating popular prejudices. Along with taxation, debt increased. For the first ten years the addition to it averaged L27,000,000 per annum, bringing the total to over L500,000,000. By the close of the war period in 1815 the total reached over L875,000,000, or a somewhat smaller annual increase--a result due to the adoption of more effective tax forms, and particularly the income tax. The progress of English trade was another contributing agency towards securing higher revenue. The import of articles such as tea advanced with the growing population; so that the tea duty of 96% yielded in 1815 no less than L3,591,000. It is, however, true that by the year just mentioned the tax system had reached its limit. Further extension (except by direct confiscation of property) was hardly possible. The war closed victoriously at the moment when its prolongation seemed unendurable.

A particular aspect of the English financial system is its relation to the organization of the finance of territories connected with the English crown. The exchequer may be plausibly held to have been derived from Normandy, and wherever territory came under English rule the methods familiar at home seem to have been adopted. With the loss of the French possessions the older cases of the kind disappeared. Ireland, however, had its own exchequer, and Scotland remained a distinct kingdom. The 18th century introduced a remarkable change. One of the aims of the union with Scotland was to secure freedom of commerce throughout Great Britain, and the two revenue systems were amalgamated. Scotland was assigned a very moderate share of the land tax (under one-fortieth), and was exempted from certain stamp duties. The attempt to apply selected forms of taxation--custom duties (1764), stamp duties (1765), and finally the effort to collect the tea duty (1773)--to the American colonies are indications of a movement towards what would now be called "imperialist" finance. The complete plan of federation for the British empire, outlined by Adam Smith, is avowedly actuated by financial considerations. Notwithstanding the failure of this movement in the case of the colonies, the close of the century saw it successful in respect to Ireland, though separate financial departments were retained till after the close of the Napoleonic War and some fiscal differences still remain. By the consolidation of the English and Irish exchequers and the passage from war to peace, the years between 1815 and 1820 may be said to mark a distinct step in the financial development of the country. The connected change in the Bank of England by the resumption of specie payments supports this view. Moreover, the political conditions in their influence on finance were undergoing a revolution. The landed interest, though powerful at the moment, had henceforth to face the rivalry of the wealthy manufacturing communities of the north of England, and it may be added that the influence of theoretic discussion was likely to be felt in the treatment of the financial policy of the nation. Canons as to the proper system of administration, taxation and borrowing come to be noticed by statesmen and officials.

These influences may be followed out in their working by observing the chief lines of adjustment and modification that followed the conclusion of peace. Relieved from the extraordinary outlay of the preceding years, the government felt bound to propose reductions. With commendable prudence it was resolved to retain the income-tax at 5% (one-half of the former rate), and to join with this reduction the removal of some war duties on malt and spirits. Popular feeling against direct taxation was so strong that the income-tax had to be surrendered _in toto_, a course which seriously embarrassed the finances of the following years. For over twenty-five years the income-tax remained in abeyance, to the great detriment of the revenue system. Its revival by Peel (1842), intended as a temporary expedient, proved its services as a permanent tax: it has continued and expanded considerably since. Both the excise and customs at the close of the war were marked by some of the worst defects of a vicious kind of taxation. The former had the evil effect of restricting the progress of industry and hampering invention. The raw materials and the auxiliary substances of industry were in many cases raised in price. The duties on salt and glass specially illustrated the bad results of the excise. New processes were hindered and routine made compulsory. The customs duties were still more restrictive of trade; as they practically excluded foreign manufactures, and were both costly and in many instances unproductive of revenue. As G. R. Porter has shown, the really profitable customs taxes were few in number. Less than a score of articles contributed more than nineteen-twentieths of the revenue from import duties. The duties on transactions, levied chiefly by stamps, were ill-graded and lacking in comprehensiveness. From the standpoint of equity the ground for criticism was equally plain. The great weight of taxation fell on the poorer classes. The owners of land escaped giving any return for the property that they held under the state, and other persons were not taxed in proportion to their abilities, which had been long recognized as the proper criterion.

The grievance as to distribution has been modified, if not removed, by the great development of (1) the income-tax, (2) the "death" or inheritance duties. Beginning at the rate of 7d. per pound (1842-1854), the income-tax was raised to 1s. 4d. for the Crimean War, and then continued at varying rates; reduced to 2d. in 1874, it rose to 5d., then in 1894 to 8d., and by 1909 appeared to be fixed as a minimum at 1s., or 5% on income from property. The yield per penny on the L has risen almost uninterruptedly. From L710,000 in 1842, it now exceeds L2,800,000, though the exemptions and abatements are much more extensive. In fact, all incomes of L3 per week are absolutely free (L160 per annum is the precise exemption limit), and an income of L400 derived from personal exertion pays less than 5-1/2d. per pound, or 2-1/4%. The great productiveness of the tax is equally remarkable. From L5,600,000 in 1843 (with a rate of 7d.) the return rose to L32,380,000 in 1907-1908, having been at the maximum of L38,800,000 in 1902-1903, with a tax rate of 6-1/4%. The income-tax thus supplies about one-fifth of the total revenue, or one-fourth of that obtained by taxation. Several fundamental questions of finance are connected with the taxation of income and have been dealt with by English practice. Small incomes claim lenient treatment; and, as mentioned above, this leniency means in England complete freedom. Again, earned incomes appear to represent lower ability to pay than unearned ones. Long refused on practical grounds (as by Gladstone and Lowe), the concession of an abatement of 25% on earned incomes of L2000 and under was granted in 1907. The question whether savings should be exempt from taxation as income has (with the exception of life insurance premiums) been decided in the negative. Allowances for depreciation and cost of repairs are partially recognized. Far more important than these special problems is the general one of increased tax rates on large incomes. Up to 1908-1909 the tax above the abatement limit of L700 remained strictly proportional; but opinion showed a decided tendency in favour of extra rates or a "super tax" on incomes above an assigned amount (e.g. L5000), and this was included in the budget of 1909-1910 (see INCOME-TAX).

In close relation with the income-tax is the estate duty, with its adjuncts of Legacy and Succession Duties. After Pitt's failure to carry the succession duty in 1796, no change was made till Gladstone's introduction in 1853 of a duty on land and settled property parallel to the legacy duty on free personality. Apart from certain minor alterations, the really vital change was the extension in 1894 of the old Probate Duty into a comprehensive impost (entitled the Estate Duty) applicable to all the possessions of a deceased person. This "Inheritance Tax"--to give it its scientific title--operates as a complementary property tax, and is thus an addition to the contribution from incomes derived from large properties. By graduation the charges on large estates in 1908-1909 (before the proposal for further increase in 1909-1910) came to 10% on L1,000,000, and reached the maximum of 15% at L3,500,000. From the several forms of the "Inheritance Taxes" the national revenue gained L14,500,000, with 4-1/2 millions as a supplementary yield for local finance. The immense expansion of direct taxation is evident on comparing 1840 with 1908. In the former year the Probate and legacy duties brought in about one million; the other direct taxes, even including the "House duty," did not raise the total to L3,000,000. In 1908 the direct taxation of property and income supplied L51,500,000, or one-third of the total receipts as against less than one-twentieth in 1840.

But though this wider employment of direct taxation--a characteristic of European finance generally--reduced the _relative_ position of the taxation of commodities, there was a growth in the absolute amount obtained from this category of duties. There were also considerable alterations, the result of changes in the views respecting fiscal policy. At the close of the Great War the excise duties were at first retained, and even in some cases increased. After some years reforms began. The following articles amongst others were freed from charge: salt (1825); leather and candles (1830); glass (1845); soap (1853); and paper (1860). The guiding principles were: (1) the removal of raw materials from the list of goods liable to excise, (2) the limitation of the excise to a small number of productive articles, with (3) the placing of the greater part (practically nearly the whole) of this form of taxation on alcoholic drinks. Apart from breweries and distilleries, the excise had little field for its work. The large revenue of L35,700,000 in 1907-1908 was derived one-half from spirits (L17,700,000), over one-third from beer, while most of the remainder was obtained from business taxation in the form of licences, the raising of which was one of the features of the budget in 1909. As a feeder of the revenue the excise might be regarded as equal to the income-tax, but less to be relied on in times of depression. Valuable as were the reforms of the excise after 1820, they were insignificant as compared with the changes in the customs. The particular circumstances of English political life have led to perhaps undue emphasis being placed on this particular branch of financial development. Between 1820 and 1860 the customs system was transformed from a highly complicated arrangement of duties, pressing with severity on nearly all foreign imports, into a simple and easily understood set of charges on certain specially selected commodities. All favours or preferences to home or colonial producers disappeared. Expressed in financial terms, all duties were imposed "for revenue only," and estimated in reference to their productiveness. An assimilation between the excise and customs rates necessarily followed. The stages of the development under the guidance of (1) Huskisson, (2) Peel, and (3) Gladstone are commonly regarded as part of the movement for Free Trade; but the financial working of the alteration is understood only by remembering that the duties removed by "tens" or by "hundreds" were quite trivial in yield, and did not involve any serious loss to the revenue. Perhaps the most remarkable feature of the English customs of the 19th century was the steadiness of the receipts. In spite of trade depressions, commercial crises and sweeping changes in rates, the annual revenue in the period 1815-1900 only varied between L19,000,000 and L24,000,000; though, on balance, duties amounting to L30,000,000 were remitted. The potential resources of this branch of revenue were made evident in the rapid rise of the yield by the new taxation imposed for the South African War (1899-1902). In consequence of this increase the customs became equal to the excise in return, and, combined, they collected over L60,000,000 annually from the consumption of commodities. They accordingly afforded a counterpoise to the burden put on income and property, or, more accurately speaking, they obtained due, or somewhat more than due, contribution from the smaller incomes, particularly those of the working class.

The exemption of raw materials and food; the absence of duties on imported, as on home manufactures; the selection of a small number of articles for duty; the rather rigorous treatment of spirits and tobacco, were the salient marks of the English fiscal system which grew up in the 19th century. The part of the system most criticised was the very narrow list of dutiable articles. Why, it was asked, should a choice be made of certain objects for the purpose of imposing heavy taxation on them? The answer has been that they were taken as typical of consumption in general and were easily supervised for taxation. Moreover, the sumptuary element is introduced by the policy of putting exceptionally heavy duties on spirits and tobacco, with lighter charges on the less expensive wines and beers. Facility of collection and distribution of taxation over a larger class appear to be the grounds for the inclusion of the tea and coffee duties, which are further supported by the need for obtaining a contribution of, roughly speaking, over half the tax revenue by duties on commodities. The last consideration led, at the beginning of the 20th century, to the sugar tax and the temporary duties on imported corn and exported coal.

As a support to the great divisions of income-tax, Death Duties, Excise and Customs, the stamps, fees and miscellaneous taxes are of decided service. A return of L9,000,000 was secured by stamp duties.

In recent years the so-called "non-tax" revenue largely increased, owing to the extension of the postal and telegraphic services. The real gain is not so great, as out of gross receipts of L22,000,000 over L17,500,000 is absorbed in expenses, while the carriage of ordinary letters seems to be the only profitable part of these services. Crown lands and rights (such as vintage charges) are of even less financial value.

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

AUTHORITIES.--The constitutional historians--Stubbs, Gneist,
Hallam--deal with the legal and constitutional aspects of finance.
Special financial histories are: Sir J. Sinclair, _History of the
Public Revenue of the British Empire_ (3 vols., 3rd ed., London,
1803); S. Dowell, _History of Taxation and Taxes in England_ (4 vols.,
2nd ed., London, 1888); Schanz, _Englische Handelspolitik_ (2 vols.,
Leipzig, 1881), and H. Hall, _History of the Customs Revenue of
England_ (2 vols., London, 1885), are valuable for the earlier
periods. W. Cunningham, _Growth of English Industry and Commerce_ (2
vols., Cambridge, 1903-1907); H. O. Meredith, _Economic History of
England_ (London, 1908), devote sections to finance. A. Smith, _Wealth
of Nations_ (1776), Tooke and Newmarch, _History of Prices_ (6 vols.,
London, 1837-1856), give financial details. G. R. Porter, _Progress of
the Nation_ (3rd ed., London, 1851); Sir S. Northcote, _Twenty Years
of Financial Policy_ (London, 1862); S. Buxton, _Finance and Politics_
(2 vols., London, 1888); J. R. McCulloch, _Taxation and Funding_ (3rd
ed., London, 1863); W. M. J. Williams, _The King's Revenue_ (London,
1908), for 19th-century finance. (C. F. B.)