William Pitt and the Great War

by J. Holland Rose

At that time a novel expedient was shaping itself in his mind. On New Year's Day he drove Sir John Sinclair from Dundas's house at Wimbledon up to town; and on the way the baronet suggested the raising a great loan on easy terms by an appeal to the loyalty of Britons.[446] The need of some such device became increasingly apparent; for sinister symptoms began to appear amidst the alarms of the autumn of 1796. The threats of invasion led the Ministry to propose a special levy of 15,000 men to reinforce the army, of 20,000 irregular cavalry, and of 60,000 supplemental Militia (18th October). These expenses, in addition to the ever growing demands for the public services, involved a deficit of £18,000,000. It was most important to raise this sum promptly in order to uphold the credit and display the loyalty of the nation; for, as we shall see, Pitt had recently opened negotiations for peace at Paris in the hope that the late successes of the Austrians both in Italy and the Rhineland (which proved to be only temporary), would induce the Directory to accord fair terms to enemies who thus evinced their energy and vitality. After consultation with the officials of the Bank of England, he decided to raise the required sums, not by means of "contractors," but by appealing direct to the public. Accordingly, on 1st December, he adopted the unusual course of appealing to the Lord Mayor and the Directors of the Bank of England to encourage in every possible way the raising of an extraordinary loan of £18,000,000. The rate of interest, 5 5/8 per cent., seems somewhat high in the case of a "Loyalty Loan," especially as Consols rose from 53 3/4 in September to 57 in November; but competent authorities agree that it was not too high.[447]

The response was most gratifying. The Bank subscribed £1,000,000, the Directors in their private capacity further contributing £400,000. Similar feelings were displayed in the City and in the provinces. Before the hour of 10 a.m. on 5th December, when the subscription list was opened at the Bank, the lobby of the hall and even the approaches were crowded with eager patriots, who fought their way towards the books. Those in the rear called to more fortunate friends in the front to inscribe their names. Within an hour and twenty minutes the amount which could then be allotted was made good, and hundreds retired disappointed. Similar scenes ensued on the two following days, the whole sum of £18,000,000 being subscribed in less than fifteen and a half hours.[448]

It was under these encouraging conditions that on 7th December 1796 Pitt made his Budget Statement, which included the proposal of further advances of £3,000,000 to our Allies. As a set-off to this, he pointed to the yield of the taxes and the Imports and Exports for the quarter as affording gratifying proof of the strength of the country. But, he added, "this flourishing state of our affairs ought not to lessen our moderation or abate our desire for peace." Those who blame him for continuing to pay £200,000 into the Sinking Fund, while he had to borrow large sums at a ruinous rate of interest, should remember that he believed this costly device to be only temporary in view of his efforts for peace.

The usually dull details of finance are at this point enlivened by the ingenious suggestions poured in upon Pitt for opening up new sources of revenue. The aim of financiers then being to press on the taxpayer at all points with the imperceptible impartiality of air, the hints as to the taxation of neighbours and rivals are of refreshing variety. Among the less obvious are duties on barges, pawnbrokers' takings, toys, theatre and concert tickets, buttons, corks, glass bottles, umbrellas, sheriffs and under-sheriffs, county commissioners and attorneys who keep clerks. On behalf of the last suggestion an anonymous writer points out that it would enhance the dignity of the legal profession. Another correspondent suggests a similar impost on physicians, surgeons, and chemists, ranging from ten guineas in London to three guineas in the provinces, in order to discourage the entry of illiterates. He also urges the need of stopping the increase of luxury and amusements by taxing hot-houses, horses and carriages let out on Sundays, organs, pianos, and all musical instruments, as well as the owners thereof, on the ground that this step will lessen the alarming growth of bankruptcies and divorces. A tax on armorial bearings is suggested as one which will not be resented by the rich. A fourth correspondent advocates a graduated Income Tax, ranging from 6d. in the pound on incomes under £400, up to 5s. in the pound on incomes of more than, £30,000 a year, and estimates the total yield at £62,625,000. The same writer urges the need of a tax on sinecures and pensions, and finally begs Pitt for a place for life, devolving on his son.[449]

The Chancellor of the Exchequer therefore had the choice of the direct attack on the purse or the increase of atmospheric pressure. For the present he chose the latter method, enhancing the duties on tea, wines, sugar, spirits, game licences, glass, tobacco, and snuff, besides raising the "Assessed Taxes" by ten per cent. The produce of some of these imposts is curious. Hair-powder yielded £197,000; the extra tea and wine duties £186,000 and £923,000, severally; those on tobacco and snuff only £40,000. Pitt's procedure in December 1796 was very cautious. He carefully watched the yield of the new taxes, in order to see whether the increase of price checked consumption. Finding that this did not happen in the case of tea and spirits, he further raised the duties on those commodities; but, on behalf of the poor, he exempted the cheaper kinds of tea. On the other hand he proposed to check the consumption of spirits by imposing an extra duty of five pence a gallon along with a surcharge on distillery licences. Further, as the duties on bricks, auction sales, sugar, bar iron, oil, wines, and coal had not lessened consumption, he again increased them. A questionable experiment was an increase in the postage of letters and parcels, and in the duties on newspapers, stage coaches, and canal tolls. A new House Duty, levied in proportion to the number of servants, is open to less objection. On the whole he expected the new taxes to yield £2,138,000. The total supply asked for was £27,640,000.

The financial outlook grew darker in the year 1797. At the close of January came the news of Hoche's expedition to Bantry Bay, which revealed the possibility of revolutionizing Ireland. On 4th February Pitt heard of the triumph of Bonaparte at Rivoli. The tidings told disastrously on markets already in a nervous state. A correspondent of Pitt attributed the decline to the action of the Bank of England at the close of 1795, in reducing their discounts. Fox and his friends ascribed it to the export of specie to Vienna; while Ministers and their friends gave out that it resulted from the fears of invasion, and the desire of depositors everywhere to withdraw their money and place it in hiding. Privately, however, Pitt confessed to Auckland that the export of gold brought matters to a climax.

The amount of specie in the Bank of England, which was nearly £8,000,000 in 1795, fell to £1,272,000 in February 1797. In reality the Bank was solvent, but it could not have realized its securities; and on several occasions the Directors warned Pitt that any further withdrawals of specie would bring on a crisis.[450] The final cause of alarm was a loan of £1,500,000 to the Irish Government, the first occasion on which any large sum was raised for that Administration.[451] On 25th and 26th February, then, crowds rushed to withdraw money from the Bank into which eleven weeks before they thronged in order to procure shares in the Loyalty Loan. So serious was the crisis that Ministers decided to intervene. On Sunday the 26th a meeting was held of the Privy Council, which issued an Order in Council empowering the Directors to refuse payments in cash until Parliament gave further orders on the subject.[452]

For a few hours there was the prospect of a general collapse; and as the Bank issued no notes for less than £5, though Sinclair and others had advised the issue of £3 and £2 notes, small traders were threatened with a recurrence to barter. Fortunately on 27th February the Directors published a reassuring statement, and the Lord Mayor presided at an influential meeting on the same day, which decided to accept banknotes as legal tender for any amount. Thus a crash was averted. But Fox, Sheridan, and the Opposition ably accused Pitt of leading his own country to the brink of bankruptcy, even while he proclaimed the imminent insolvency of France. They thundered against the export of gold to the Emperor, and demanded a searching inquiry into the high-handed dealings of the Minister with the Bank and with national finance. "We have too long had a confiding House of Commons," exclaimed Fox; "I want now an inquiring House of Commons." Despite Pitt's poor defence of his loans to the Emperor, the Government carried the day by 244 votes to 86 (28th February); but the unwonted size of the minority was a sharp warning to curtail loans and subsidies. Apart from a small loan to Portugal in 1798, nothing of note was done to help Continental States until Russia demanded pecuniary aid for the War of the Second Coalition. In order to provide a circulating medium, the Bank was empowered to issue notes for £2 and £1, and to refuse cash payments for sums exceeding £1 (March to May 1797).

Meanwhile, shortly after the Bank crisis, came news of the failure of an American, Colonel Tate, with some 1,400 French gaol-birds, to make a raid at Fishguard in Pembrokeshire. A later legend sought to embellish this very tame affair by ascribing his failure to the apparition on the hills of Welsh women in high hats and scarlet cloaks, whom the invaders took for regulars. Unfortunately for lovers of the picturesque, the apparition occurs only in much later accounts.[453] Far more important were the tidings from Cape St. Vincent. There Jervis, with only fifteen ships, boldly attacked twenty-seven Spaniards while still in confusion after a foggy night. As is well known, the boldness of Nelson, in wearing out of the line so as to prevent the reunion of the enemy's ships, crowned the day with glory (14th February). The weakness of the Spanish navy stood glaringly revealed, and the fear of invasion, which turned mainly on a junction of their fleet to that of France, thenceforth subsided.