Chapter VIII: Rates and Finance (3)

Our ideas of the financial operations of the Post Office from 1635 to 1711 are somewhat clearer than during the preceding period. We know that Witherings' aim was to make the system self-supporting. It had probably not entered into his head that it might ever be anything more. After the sequestration of the position of Postmaster-General to Burlamachi, he was called upon to render an account of the financial proceedings of the Post Office during the short period that he was in charge.[706] He reported that from August 4, 1640, to December 25, 1641, the receipts had been £8363 and the expenditure £4867. £1400 of the balance had been paid to the Secretary of State and "of the remaining £2000, those that keep the office are to be considered for their pains and attendance." This is rather vague but the report shows that the Post Office was self-supporting only six years after Witherings' reforms had been adopted.[707] Prideaux reported at an early period in his régime that, with the exception of the Dover road and the Holyhead packet, the posts paid for themselves.[708] After the Post Office was farmed, there can be no doubt as to the total net revenue, but it is impossible to say how much the farmer made over and above the amount of his farm or how large his expenses were. Manley paid the state £10,000 a year and is said to have made £14,000 during the six years that he farmed the Posts.[709] In 1659 the rent was raised to £14,000[710] a year, and in 1660 there was a further advance to £21,500.[711] Of this £21,500 the Duke of York received £16,117 and the rest was spent largely in paying pensions and for a few minor expenses such as the payment of the Court Postmaster.[712] By the act of 1663, the net Post Office revenue was settled upon the Duke of York and his male heirs, with the exception of about £5000 a year, that being the amount of the pension charges on the revenue.[713] Certain deductions were made from the sum total of rent due, on account of the loss to the farmer from the activity of the interlopers, and the deficit was ordered to be made up from some other branch of the royal revenue.[714]

[706] _Cal. T. P._, 1697-1702, p. 289.

[707] _Cal. S. P. D._, 1641-43, p. 213.

[708] _Jo. H. C._, 1648-51, p. 385.

[709] _Cal. S. P. D._, 1653-54, p. 365.

[710] Hist. MSS. Com., _Rep._, 15, app., pt. 1, p. 97.

[711] _Rep. Com._, 1844, xiv, app., p. 76 (53).

[712] _Cal. S. P. D._, 1661-62, pp. 122, 245.

[713] 15 Chas. II, c. 14.

[714] _Cal. S. P. D._, 1663-64, p. 598.

After James II took his involuntary departure from England, his pecuniary interest in the Post Office ceased. In 1690, an act of Parliament was passed, making the receipts from the Post Office payable into the Exchequer. They were to be used among other things to pay the interest on £250,000 borrowed to carry on the war.[715] From 1690 to 1710, the gross receipts rose from about £70,000 to £90,000 a year, no consideration being taken of the ups and downs caused by the French wars.[716] Complaint was made by the Lords that a large part of the postal revenue was wasted in paying pensions.[717] The Duchess of Cleveland received £4700 a year and William's Dutch General, the Duke of Schomberg, £4000 a year. Poor William Dockwra, the only one of the lot who had ever done anything for the Post Office, was at the end of the list with only £500 a year, terminable in 1697.[718] The sum total of money payable in pensions from the post revenue in 1695 was £21,200. The packet boats at the same time cost £13,000, and but £10,000 was spent for salaries and wages. The net revenue in 1694 was £59,972, the gross being about £88,000.[719]

[715] Hist. MSS. Com., _Rep._, 13, app., pt. 5, p. 81.

[716] Hist. MSS. Com., _Rep._, 13, app., pt. 5, p. 362.

[717] Hist. MSS. Com., _Rep._, 13, app., pt. 5, p. 406.

[718] Hist. MSS. Com., _House of Lords_, i, pp. 84-87.

[719] _Rep. Com._, 1844, xiv, app., p. 93 (66).

During the eighteenth century the postal revenue still continued to be burdened with the pensions of favourites, deserving and undeserving. Queen Anne asked Parliament to settle £5000 a year upon the Duke of Marlborough and his heirs. The House of Commons replied that they very much regretted that they could not do so for the Post Office was already paying too much in pensions. Probably the real reason for their refusal was the fact that the Duke and the war party were becoming unpopular. However, the Queen granted him the pension for her own life as she had a legal right to do. In 1713, the total amount of pensions payable from the postal revenue was £22,120. Before the act of 1711 was passed, the Scotch Office had paid £210 to each of the Universities of Edinburgh and Glasgow. This continued to be granted after the two Offices were united.[720]

[720] _Cal. T. P._, 1708-14, p. 20.

Our knowledge of the financial operations of the Post Office during the eighteenth century is much more extensive than during the seventeenth, owing to the reports made by the Post Office officials to the Parliamentary committees, appointed to enquire into abuses. The reports are all signed by the Accountant-General or his deputy, and are therefore as trustworthy as anything which can be obtained. They show that during the first half of the century, or more explicitly from 1717 to 1754, there was a very small annual increase in gross product, with an actual decrease in net product, and of course an increase in expenditure. In round numbers the average yearly gross product for the years 1725-29 was £179,000, the net product for the same period being £98,000 and the expenses of management £81,000. For the five years from 1750 to 1754, the average annual gross product was £207,000, net product £97,000, and expenses £110,000. It is not surprising that there was no increase worthy of the name in the gross product, for the period under consideration was a time of stagnation, an intermediate stage just before the dawn of the industrial revolution. The actual decrease in net product or, what amounts to the same thing, the increase in expenses of management, is due largely to the abuse of the franking privilege, the large amounts received in fees and emoluments, the extraordinary way in which the packet service was mismanaged, and the losses and increased expense due to war. Enough has been said about all but the last of these causes. The Post Office suffered most during war from increased expenses and direct losses in connection with the sailing packets. The placing of these upon a war footing involved considerable increased cost. In the second place, extra boats were used for political purposes in addition to those regularly employed, and it was customary for the Post Office to make good to the owners all damages inflicted by the enemy. From 1725 to 1739, the expenses of the Post Office averaged £80,000 or £90,000 a year. Then came the War of the Austrian Succession, when the expenses averaged £105,000 per year from 1745 to 1749. The five following years being a period of peace, the average annual expenses were £110,000, while the Seven Years' War brought them up to £147,000. It may be thought that expenses should become normal again when war has ceased, but it has generally proved to be the rule that although peace brings a decrease, yet the expenditure does not fall quite so low as before the war.

From 1755 to the end of the century there is a marked rise both in gross and net receipts and a comparative diminution in expenses. The gross average annual product from 1755 to 1759 was £228,000, from 1790 to 1794 it was £602,000. For the five years from 1755 to 1759 the average yearly net product was £81,000, from 1790 to 1794 it was £375,000, while expenses had risen for the same periods only from £147,000 to £227,000. The following table shows the average yearly increase or decrease in gross product, expenses, and net products for the six five-year periods from 1765 to 1794. The increases or decreases are given in the form of percentages, each five-year period being compared with the preceding period.[721]

_Gross product_ _Expenses_ _Net product_ 1765-69 17% increase 22% decrease 76% increase 1770-74 11 " 27 increase unchanged 1775-79 12 " 30 " " 1780-84 19 " 37 " " 1785-89[722] 21 " 21 decrease 90% increase 1790-94 24 " 14 increase 30% "

[721] For the gross product, net product, and expenses for each year, see Appendix, pp. 243, 244, 245, Tables I, II.

[722] Rates were increased in 1784.

The net product from both the Scotch and Irish Posts was remitted to England. These receipts did not amount to much as compared with those from the English Post. Earl Temple, Lord Lieutenant of Ireland, in writing to Grenville in 1784, said that the Irish post "had never paid £8000 a year clear of expenses."[723] In 1796, the gross product was £26,949 and the expenses of management £8718. Of the net product, £6651 were retained, being placed to the credit of Great Britain for returned and missent letters and for the £4000 which the Irish Post was entitled to receive in lieu of the receipts from the Holyhead packet boats. The remaining £11,579 were sent to the general Post Office. The Scotch Posts did considerably better. The gross product in 1796 was £69,338, the expenses of management £14,346, for returned letters £1206, and the net product sent to the General Office was £54,265.

[723] Hist. MSS. Com., _Dropmore_, i, p. 179.

The time had long since passed when the London-Dover road was the most important in the kingdom and when the receipts from foreign exceeded those from inland letters. As late as 1653, when contracts were called for from those wishing to farm the posts, the amount offered in one instance was almost as great for the foreign as for the inland post. The average annual gross product from the foreign post for the period 1785-89 was £61,431, the expenses £32,169 and the net product £29,262. For the period from 1790 to 1794 there was a small increase to £65,497 for gross product, £34,277 for expenses, and £31,200 for net product.[724]

[724] _Parl. Papers_, 1812-13, _Rep. Com._, ii, 222, p. 93.

The receipts from the London Penny Post were never an important factor in postal finance but it had always paid for itself and given a reasonable surplus. Its importance was due more to its social value in affording a cheaper letter rate and a speedier postal service than the General Post. The average yearly gross product from 1785-94 was £10,508, expenses £5177, and net product £5331. After Johnson had improved it so much, it produced a yearly average gross product from 1795 to 1797 of £26,283. Expenses averaged £18,960 and net product £7323.

In the seventeenth century the receipts from bye and cross post letters amounted to very little. So little was expected from them that no provision was made for checking the postage on them. It was taken for granted that all letters would pass to, from, or through London. In 1720 they brought in only £3700. Allen had done much to increase the revenue, but it was not until the last part of the eighteenth century that the increase was at all marked. From 1780 to 1784, the average annual gross product was £77,911, expenses £12,346 and net product £65,565. From 1785 to 1789, these had increased respectively to £104,817, £11,589, and £93,228, and from 1790 to 1794 to £140,974, £15,030, and £125,944. The small expense for these letters is explained by the fact that the separate department for bye and cross post letters was debited with only a portion of the total cost, the larger part being carried by the general establishment.[725]

[725] _Parl. Papers_, 1812-13, _Rep. Com._, ii, 222, p. 91.

The financial history of the Post Office from the beginning of the nineteenth century to 1838 is a rather depressing record.[726] From 1805 until 1820 both the gross and net receipts had increased steadily although not rapidly, but for the remainder of the period the revenue was practically stationary. During the five-year periods, 1820-24 and 1830-34, there had been a decrease in gross receipts, and during the latter of these periods the net receipts had been kept a little ahead of the five-year period 1815-19 only by a decrease in expenditure.

[726] See Appendix, p. 246, Table III; p. 247, Table IV.

The annual gross receipts from Scotland had increased from £117,108 during the period 1800-04 to £204,481 during the period 1830-34, the annual net receipts for the same periods being £98,156 and £149,752. The relatively large increase in expenses from £18,952 to £54,729 had been due largely to the payment of mail coach tolls after 1814, amounting to something under £20,000 a year.[727] Ireland started with a smaller gross revenue, £92,745 a year during the period 1800-04, but a larger annual expenditure £64,368,[728] and comparatively small net receipts of £28,377. Gross receipts, expenses, and net receipts had increased slowly throughout the first thirty-four years of the nineteenth century with the exception of the period 1820-24. For the five years from 1830 to 1834 inclusive they amounted to £244,098, £108,898, and £135,200 respectively.[729]

[727] See Appendix, p. 248, Table V.

[728] Ireland had paid for mail coach tolls from the first and this partly explains the relatively high expenditure.

[729] See Appendix, p. 248, Table V.

The increases in rates in 1801, 1805, and 1812 had not produced the desired and expected results. The increase in 1801 had been estimated to produce £150,000 but results showed that this estimate was too large by £35,000. In 1805, the additional penny had resulted in an increase of only £136,000, inclusive of any natural increase of revenue, although it had been estimated to produce £230,000. The third increase in rates in 1812 proved even less productive. The Chancellor of the Exchequer said that he expected it to produce £200,000. As a matter of fact the revenue increased only £77,892 in amount. The fact of the matter was that rates were already so high that an increase only led to greater efforts to evade the payment of postage. As a system of taxation the Post Office had become rigid. It could yield no more with postage as high as it had been forced by the acts of 1801 and 1805. But, considered primarily as a taxing medium, and it had been considered as such for 200 years, it could hardly be called a failure. We flatter ourselves that our idea of the Post Office is broader in its scope and more utilitarian in its object but we have the good fortune to live several generations after 1840. What England demanded was revenue and still more revenue, and a postal system which could produce £70 net for every £100 collected had some excuse for its existence.

Rowland Hill has pointed out that from 1815 to 1835 the population had increased from 19,552,000 to 25,605,000 while the net revenue from the Post Office had remained practically stationary. He said nothing, however, about the industrial depression of the country during that period nor of the political and economic crisis through which England was passing. He referred to the great increase in the postal revenue of the United States during the same period; on the one hand, a nation with immense natural resources and a population doubling itself every generation, and on the other hand, a people inhabiting two small islands, making heroic efforts to recover from a most burdensome war.

With the introduction of penny postage the gross revenue of the Post Office fell from £2,390,763 in 1840 to £1,359,466 in 1841, and did not fully recover from the decreased postage rates for twelve years. The cost of management, on the other hand, increased only from £756,999 in 1840 to £858,677 in 1841. But the financial loss is shown most plainly in the falling off in net revenue from £1,633,764 to £500,789. If we exclude packet expenses, and such was the practice until 1858, the net revenue did not again reach the maximum figure of high postage days until 1862. Including packet expenses we find that the net revenue did not fully recover until the early seventies. The average yearly gross revenue for the period from 1841-45 was £1,658,214, expenditure £1,001,405, and the net revenue £656,809. These all increased steadily and on the whole proportionately until 1860, the average yearly figures for the preceding five years being £3,135,587, £1,785,911, and £1,349,676. In 1858 the packet expenses are included under cost of management and their enormous increase from the beginning of the century sadly depleted the net revenue. It seems more advisable, however, not to include them until 1860 when the packets passed from the control of the Admiralty to that of the Post Office. The average gross revenue for the years 1861 to 1865 was £4,016,750, expenditure (including packets) £3,013,389, and net revenue £1,003,341. During the next quarter of a century these increased to £6,326,141, £4,019,423, and £2,306,718 respectively, exclusive of telegraph receipts and expenditures. For the five years ending 31st March, 1906, the average gross revenue was £15,926,905, expenditure £11,156,292, and net revenue £4,770,613.[730]

[730] See Appendix, pp. 249, 250, 251, Table VI; p. 252, Table VII.