When the sixteenth Parliament of Great Britain met on 18th May 1784 the arrears of legislation and accumulation of debt were as serious as at any time in our history; for, owing to fierce party strifes and the distractions of war, very few remedial measures had been passed in recent years. The “Economic Reform” passed by Lord Rockingham’s Government is the only oasis in an otherwise arid waste, strewn with the wrecks of partisan warfare. The condition of affairs was therefore becoming most serious; and a collapse could be averted only by the utmost skill and care. The three per cent. government stocks told a tale of waning confidence. Even after the peace they steadily declined, from an average of 65 in January 1783 to 56 at the close of that year. They were as low as 53⅞ in part of January 1784; and it is a striking tribute to the confidence which Pitt inspired that, on the results of the elections of the spring of 1784 being known, they rose to more than 58. That first essential to a revival of national credit, a firm Government, was now assured, and patriots looked anxiously for the measures whereby the young Minister might stave off disaster.
The King’s Speech laid stress on two topics, finance and the East India Company. Within the limits of a short session Pitt could not possibly hope to pass other large measures; and he urged Alderman Sawbridge not to persevere with his annual motion in favour of Parliamentary Reform, promising to bring it forward himself in the session of 1785. When the Alderman pressed the matter to a division, he was defeated by a majority of seventy-four—a result damaging to the cause which he sought to serve.[225]
The way being thus left clear for the two great questions that would admit of no delay, Pitt sought to lay the ghost of national bankruptcy. The imminence of the danger can scarcely be realized. In that decade we link together the thought of bankruptcy with that of France; but if those years closed with the Revolution in France and prosperity in England, the result may be ascribed very largely to the wasteful financial system pursued at Versailles and to the wise husbanding of Britain’s resources by Pitt. According to the French statesman, Necker, the National Debts of the two countries were almost exactly equal.[226] The pamphlet literature of the years 1783–84 reveals a state of things wellnigh as serious in England as that which brought about the crash in France. One of the closest students of finance, Dr. Price, in a pamphlet of the early part of 1783, stated that the Fox-North Ministry openly avowed its inability to pay off any of the public debts; and he asserted that such helpless conduct must carry us fast to the brink of disaster. Another writer urged that, in order to abolish the National Debt, tithes must be swept away, the revenues of the Church reformed, and all citizens must submit to the payment of one-sixth part of their incomes. The National Debt, which amounted to £215,717,709 in January 1783, was denounced in language whose extravagance would cause a mild surprise to a generation that placidly bears a burden nearly four times as great; but, to a kingdom which with the utmost difficulty raised £25,000,000 in revenue, this burden seemed overwhelming. Dr. Price summed up a widespread conviction in his statement that the growth of debt brought about increased subservience to the Crown, prosperity to stock-jobbers, and depression to all honest traders.[227]
The war which ended in 1783 had been carried on in a singularly wasteful manner. Price computed that the increase to the National Debt owing to the war had been £115,654,000 up to January 1783, when all the accounts had not yet come in; he also reckoned that the last four years of that struggle had cost £80,016,000 as against £60,835,000 for the last four years of the Seven Years’ War. This increase resulted largely from the reckless way in which North had issued loans, so that bankers and subscribers, and, it is said, the Ministers themselves, reaped large profits, while the nation suffered. According to Price, loans which cost the nation £85,857,691, actually brought to the exchequer only £57,500,000.[228] This resulted partly from corrupt practices, but also from North’s endeavour to keep down the rate of interest to three or four per cent.; the outcome being that, in the impaired state of public credit of the year 1781 he had to allot £150 of stock in the three per cents and £25 in the four per cents for every £100 actually borrowed. Thus, the raising of a sum of £12,000,000 on these terms actually cost the nation £21,000,000; and interest had to be paid on £9,000,000 which never came into the exchequer. Obviously he would have done better to raise £100 for £100 stock, even had he given 6 or 7 per cent. interest; for the experience of the past showed that in time of peace and prosperity the rate of interest could be reduced without much difficulty. Nevertheless, the advisers of the Crown always preferred to keep to a low rate of interest, even at the cost of tempting lenders by allotting £175 of Government stock for every £100 of cash.
Such was the state of affairs when Pitt introduced his Budget (30th June 1784). It will be convenient to set forth and explain his proposals singly and in connection with the facts which he had to face. The first was the appallingly large deficit, constantly swollen by the coming in of bills for war expenses. The champion of peace and retrenchment had to confess that, despite all his efforts to balance income and expenditure, he must raise a loan of £6,000,000. Obviously, as Consols still stood as low as 58, he could borrow only on exorbitant terms; but it is regrettable that he now fell back on North’s plan of borrowing at a low rate of interest and of burdening the funds with a vast amount of fictitious debt. He proposed to allot to every subscriber of £100 no less an amount of stock than £100 of three per cents, £50 of four per cents, and 5s. 6d. of long annuities, besides three fifths of a lottery ticket in a lottery of 36,000 tickets.[229] He computed that the terms and chances now offered were actually worth £103 14s. 4½d., and that lenders would therefore be tempted to lend.[230] This was so. But, for the reasons stated above, the burdens bequeathed to posterity were crushing, though less than those entailed by North’s loan of 1781.
As regards Pitt’s personal dealings with financiers, his conduct shone radiantly clear when contrasted with those of Lord North. It had been the custom for that guardian of the public purse to arrange the price of the loan with a few favoured supporters in the City, and then allot scrip on scandalously low terms to his friends in Parliament, who could thereafter sell at a handsome profit. Pitt now threw open to public competition all tenders for his loan; and the proposals sent in were formally opened at the Bank in a way which precluded jobbery and safeguarded the nation’s interests.
Scarcely less serious was the problem of the huge floating, or unfunded, debt, that is, that portion of the National Debt for which no provision whatever had been made by Parliament. In the main it consisted of unpaid bills, which had been increased by about one quarter or even one third of their original amount. It now stood at about £14,000,000. Pitt ardently desired to fund the whole of it, but he found that so great an effort would cause too much disturbance in the money market. He therefore proposed to fund at present only £6,600,000, forming it into stock bearing 5 per cent. interest and issued at 93. He defended this high rate of interest on the ground that such a stock could in the future be redeemed on more favourable terms than a three per cent. stock which might be worth a comparatively small sum when capitalized. The argument was surely just as applicable to the former loan of £6,000,000.[231]
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It still remains to notice the worst ills that beset the fiscal and commercial life of our land. Indeed, we shall not understand the daring nature of Pitt’s experiment of the year 1784 unless we take a comprehensive view of the losses, both material and moral, which resulted from the extraordinary prevalence of smuggling. Never had contraband trade been so active as of late. How should it be otherwise, when the customs dues were tangled and burdensome; when the Navigation Laws, especially respecting the coasting trade in Scotland, were so annoyingly complex that the papers which a vessel needed for crossing the Firth of Forth involved nearly as much expense and delay as if she were bound for Canada.[232] In such a state of things illicit trade was ever gaining recruits from the ranks of honest merchants and seamen.
For monopoly, too, depressed their calling and exalted that of the smuggler. By far the most important article subject to monopoly was tea. That expensive luxury of the days of Queen Anne, a “dish of tea,” was now fast becoming a comfort of the many. Indeed, Arthur Young found that the use of tea had spread into the homes of cottagers; and he classed as extravagant those villages which owed their refreshment to China, and commended the frugality of those which adhered to home-brewed ale.[233] The increased use of Bohea was certainly not due to the East India Company or to the State; for the former sold the “drug” at the high prices warranted by its monopoly of trade with China; and on the arrival of the precious chests at our shores, an ad valorem duty of 119 per cent. had to be met. The increase of habits which Arthur Young deprecated and temperance reformers now applaud was due to smugglers. We learn from Adam Smith that Dutch, French, and Swedish merchants imported tea largely;[234] and from their ports enterprising skippers conveyed it to our shores, there to be eagerly welcomed by a populace which found the cheating of Government far more attractive and gainful than agriculture. The annals of the time show how deeply the coast population was infected. The large barns which the tourist admires in many an East Anglian coast village, more often held contraband than corn. Thomas Hardy has shown how the dull life of a Wessex village kindled at the news of a successful “run in,” and how all classes helped to defeat the “King’s men.” The poet Crabbe, with his keen eye for the stern realities of life in his parish of Aldborough, tells of his grief at finding there, not the simple home-loving life of an old English village,