Encyclopaedia Britannica, 11th Edition, "England" to "English Finance" / Volume 9, Slice 4

by Various

In order to understand the character Of English finance in the middle ages it is absolutely essential to bear constantly in mind the identification of the king with the state. Though feudalism (q.v.) was, in one of its aspects, a powerful instrument for division of political authority, it, nevertheless, in the particular form in which the Conqueror introduced it into England, enabled the fiscal rights of the crown to be established in a more definite shape than was possible under the older condition. For, in the first place, the actual property of the crown was more carefully administered as each royal manor came under the system of accounting. Again, the various claims or dues of the king took more decidedly the feudal type and received stricter legal definition. Further, the higher judicial organization assisted the expansion of court fees; while, above all, the increased authority of the state made the casual receipts (for such they were) from trade more profitable.

In a broad view the sources of revenue fall under the following heads:—(1) The royal estates which were distributed over England, derived in part from the possessions of the old English kings, but increased by the confiscations that followed the events of the Conqueror’s reign, as well as by the doctrine that unowned land was the king’s (terra regis). Over fourteen hundred manors appear in Domesday as royal property. The forests, placed under special laws, yielded little revenue, except in the form of penalties on offenders. The rural tenants, who at first paid their rents in produce, gradually commuted them into money payments. As the royal demesne was favourable for the growth of towns the rents derived from urban tenants became a valuable part of the yield from the demesne; this, later, took the shape of a payment from the town as a unit (the firma burgi), a method which secured to the burghers freedom from the exactions of the sheriff and which was purchased by special payments. (2) The feudal rights. These included the claim to military service; the three regular aids and the payments of relief at succession to a fief, as also the profits on wardships and marriages. Escheats and forfeitures completed the list. The yield from this source varied with the power of the king and was kept within bounds by the resistance of the tenants as shown in the provisions of Magna Carta. (3) The administration of justice was a lucrative prerogative of the crown. Suitors had to pay for securing the hearing of their cases in addition to the fees for writs, and both amercements and compositions increased the receipts under this head. (4) Two special classes contributed to the royal exchequer. As a great deal of the wealth of the country was in the hands of the church the opportunities afforded by the vacancies of sees, abbacies and priories were utilized for the purpose of securing the profits of these offices during the time in which there was no occupant; and this term was frequently prolonged by the king’s action or inaction. The Jews, until their expulsion, were an even more profitable class to the revenue. Being under the absolute control of the crown, they could be taxed at pleasure, either by taking a percentage of their property (e.g. in one case, one-fourth), or by levies for alleged offences. The existence of a separate exchequer for the Jews is an indication of their fiscal value. (5) Direct taxation formed an extraordinary or occasional head of revenue. The Danegeld was succeeded by the carucage, and the commutation of military service introduced the scutage, but these forms were of little immediate importance, though very significant for the future course of development. (6) Lastly come the dues claimed at the ports, which contain in germ the customs system of later times, though they rather resemble the harbour charges of modern ports and were very trivial in amount.

The history of the English financial system consists largely in the exhibition of the different fortunes of these several component parts of the exchequer receipts; for it must be remembered that the sheriff was bound to account to that tribunal for all that he should have received, and by this agency the local contributions passed into the king’s possession for the service of the state, During the century and a half that lay between the Conquest and the granting of the Great Charter the account given above holds good. The character of the ruler affected the vigour of the fiscal, as well as the general, administration. Henry I. and Henry II. secured much better results than Stephen or John; but the collection of the rent and profits of the royal manors and the feudal and other dues continued as the mainstay of revenue. Indications of change are, however, to be found. Thus the substitution of the “carucage” or plough tax for the “Danegeld” marks an advance towards direct taxation of land through its produce, and the introduction of “scutage” is not only further evidence of the same tendency, but also a step in the development of “money economy” in place of the earlier “natural economy” or system of payments in kind. The special levies or “tallages” imposed at times of need on the towns in the king’s demesne appear to have been a doubtful exercise of the royal prerogative, but scientifically they belong to the same class as the Danegeld and scutage. Perhaps the most important advance made in this period is the beginning of taxation of movables, first applied in the Saladin tithe of 1189 and, later, expanded into a general system.

In the reign of John (1199-1216) the loss of Normandy and the concession of the barons’ demands by the issue of Magna Carta rendered financial readjustments inevitable. During the long reign of Henry III. the struggle to maintain the privileges granted by the Charter acted on the fiscal system by checking the arbitrary use of tallages, and as a consequence, encouraging the regular assessment of the tax on movables, which was becoming more prominent. The fruitful idea that it was necessary to obtain the consent of the payers of taxes before the imposition operated powerfully in favour of the establishment of bodies representing the several estates. It is through the reaction of constitutional on fiscal development that the transition from feudal to parliamentary taxation in its earlier form is made.

Almost at the opening of the age of parliamentary taxation one of the older sources of revenue ceased. The pressure of popular opinion forced Edward I. to decree the expulsion of the Jews (1290), though he naturally desired to retain such profitable subjects. It is, indeed, probable that, owing to the exactions practised on them, the Jewish usurers had become less serviceable to the exchequer; while it is certain that the general resources of the kingdom had so increased as to make their contribution relatively much smaller. The first effects of the representative influence in the fiscal domain are the abandonment of the tallages on towns and the decline of scutage as a mode of levy. The tax on movables was framed in a more systematic way. Instead of distinct charges on different classes, or variations in proportion of levy from one-fourth to one-fortieth, the policy of imposing a tax of one-tenth on the towns and one-fifteenth on the counties was adopted. Greater strictness in assessment was sought by the appointment of commissioners for each county, supplied with special instructions as to taxable goods and exemptions. This method continued in force for the tax on movables from 1290 till 1334, though in some cases the proportions imposed on the towns and counties were varied (e.g. an eighth and a fifth were granted in 1297, and a tenth and a sixth in 1322). A more general influence was the growing national economy which led to greater activity on the part of the king as administrator, and which also increased the need of the state for revenue. Though the doctrine that “The king should live of his own” was generally accepted as a constitutional maxim, the force of events was making it obsolete. From being an infrequent and uncertain kind of taxation the direct tax on movables, which was practically absorbing the older forms, became usual and regular. Under medieval conditions the collection of a general property tax (for such, in fact, was the nature of “the tenth and fifteenth”) presented serious difficulties. Each locality gained by keeping its assessment down to the lowest point, while the borough authorities were naturally not eager to enforce the charge on their fellow-citizens. England in the 14th century was not ripe for a system that has been found hard to make effective in more advanced societies. Hence, from 1334 onward, the method of “apportionment” was employed, i.e. the tenth and fifteenth was taken as affording a definite sum measured by the yield on the ancient valuation. As this gave, in the aggregate, between £38,000 and £39,000, “the tenth and fifteenth” became for the future “practically a fiscal expression for a sum of about £39,000”; the total to be divided or “apportioned” between the several counties, cities and boroughs according to their former payments. This settlement, which remained in force for centuries and affected all the later direct taxes, had the great advantages of certainty and adaptability. The inhabitants of any particular town knew their total liability and could distribute it amongst themselves in the manner most convenient to them. From the royal standpoint also the arrangement was satisfactory, for the “tenth and fifteenth” could be multiplied (e.g. in 1352 three “tenths and fifteenths” were voted for three years), and supplied a stable revenue for the service of the kingdom. To the parliament the power of regulating the policy of the crown by the bestowal or refusal of grants was naturally agreeable. Thus, all sections of the nation united in support of the system established in 1334, just before the opening of the Hundred Years’ War, in connexion with which it was particularly serviceable.

Akin to the tax that has just been described, at least in its nature as a direct impost, is the poll or capitation tax. Financial pressure at the close of Edward III.’s reign (1377) led to the adoption of a tax of fourpence per head on all persons in the kingdom (mendicants and persons under fourteen years being excepted). This “tallage of groats,” which seems to be derived by analogy from the hearth money for Peter’s pence, was followed by the graduated poll taxes of 1379 and 1380. In the former the scale ranged from ten marks (£6:13:4) imposed on the royal dukes and the viscounts, through six marks on earls, bishops and abbots, and three on barons, down to the groat or fourpence payable by all persons over sixteen years of age. Such a form of taxation approximated—as Adam Smith saw—to an income tax, but it proved to be unproductive, only half of the estimated yield of £50,000 being obtained. The tax of 1380 varied within narrower limits; from twenty shillings to fourpence (or sixty groats to three), with the proviso that “the strong should aid the weak.” But this particular tax is chiefly memorable as the occasion—whatever may have been the real causes—of the great “Peasants’ Revolt” of 1381. This unlucky association sealed the fate of the poll tax as a fiscal expedient. It was abandoned, with one exception, for nearly three hundred years; and its occasional employment in the 17th century did not result in its permanent revival. Apart from special circumstances it is plain that the “tenth and fifteenth” was better suited than the poll tax for the purpose of English finance. The machinery for collection was ready to hand for the former, while special agents had to gather the latter, even from the poorest classes. In fact, the episode of the poll taxes may be regarded as an attempt—fortunately unsuccessful—to relieve the propertied classes at the expense of the peasants and poorer burghers. Failure in this respect helped in the maintenance of the settlement of direct taxation devised in 1334.

Parallel with the evolution of direct taxation, but decidedly lagging behind, is the progress of indirect taxation. As already mentioned, the right of levying dues on goods entering or leaving English ports belonged from very early times to the king. Whether this power was, in its origin, due to the protection afforded to traders and thus a kind of insurance, or the result of the royal prerogative of pre-emption is immaterial for finance. What is established is that the “prisage” of wine or levy of one cask in ten, and the taking of one-tenth or one-fifteenth of other commodities was in force. Attempts to impose additional dues were forbidden by an important article (41) of the Great Charter which recognized “the ancient and just customs.” One of the earliest effects of parliamentary influence is manifested in the establishment of duties on wool, woolfells and leather by Edward I.’s first parliament. After some efforts by the king to gather increased duties, the “Confirmation of the Charters” (1297) forbade any increases on the amounts fixed in 1275, which were henceforth known as the ancient customs. Another attempt was made to obtain a higher scale of duties by arrangement with the merchants. The foreign traders consented to the royal proposals, which comprised duties on wine, wool, hides and wax, as well as a general tax of 1¼% on all imports and exports. Thus, in addition to the old customs of half a mark (6s. 8d.) per sack of wool and on each three hundred woolfells, and one mark (13s. 4d.) per last or load of leather, the foreign merchants paid an extra duty (or surtax) of 50% and also 2s. on the tun of wine—the so-called “butlerage.” The privileges granted in the Carta Mercatoria (1303) were probably the consideration for accepting these enhanced dues. The English merchants, however, for the time, successfully resisted the application in their case of the higher charges, and consequently remained under the old prisage of wine. In spite of parliamentary opposition, on the ground that they amounted to an infringement of the Great Charter, the new customs were maintained in force. After being suspended in 1311 they were revived in 1322, confirmed by royal authority in 1328, and finally sanctioned by parliament in the Statute of the Staple (1353). They became a part of the permanent crown revenue from the ports, and, with the old customs, were the basis for further development.

Just as the old direct taxes were first supplemented by, and then absorbed in, the general taxation of movables, so the customs, in the strict sense, were followed by the subsidies or parliamentary grants. One great source of English wealth in the 14th century was the export of the peculiarly fine wool of the country, and the political circumstances of Edward III.’s time suggested the manipulation of the trade in this commodity for purposes of policy as well as revenue. Sometimes, in order to influence the towns of Flanders, the export of wool was absolutely prohibited; at others, export duties of varying amounts were imposed on wool, skins and leather. In the early years of the reign these arrangements were settled by agreement with the merchants. The subsidies of this class began in 1340 and henceforward were frequently granted, though complaints were very often made. Thus, in 1348 the Commons objected to the subsidy of an export duty of £2 per sack on wool on the ground that it was really a tax on the landowners, who received a lower price for their wool in consequence of the duty. Bargains between the king and the merchants were forbidden, and this species of taxation was brought under parliamentary control by statutes passed in 1362 and 1371. Along with the special duties on wool there was an increase of the imposts on wine and general goods. By agreement with the merchants a charge of 2s. per tun on wine and 2½% on goods was levied in 1347. Between 1371 and 1376 these dues were established as parliamentary grants under the names of “Tunnage” and “Poundage,” leaving the older dues intact.

One class or “estate” occupied a peculiar position. The clergy still claimed the privilege of self-taxation, and therefore it was convocation, not parliament, that voted the tenths imposed on clerical property. In some instances much heavier charges (e.g. in 1296 one-third) were decreed by the king, but the taxation of the clergy declined in productiveness during the 14th century. By the close of the reign of Richard II. the results of the transition from feudalism to a parliamentary constitution were practically complete. In respect to finance the most important of these were: (1) The disappearance or reduction to unimportance of the feudal dues. The fact that this change occurred at, relatively speaking, so early a date is of special significance for English development. (2) The royal demesne, though it had not suffered the losses that the grants of later times inflicted on it, had also lost some of its value as a source of revenue. (3) In compensation the direct taxation of property had become a ready means of supplying the growing requirements of the administration, and the mode of levy had been reduced to a well-recognized form, unsatisfactory experiments—such as the poll tax—being withdrawn. (4) The growth of import and export duties through the “old” and “new” customs and the subsidies furnished a large part of the requisite funds. In fact, in the course of a little over three hundred years the constituent parts of the public income had, without any violent change, been completely altered in relative value and in organization.

The period of the Lancastrian kings, extending over two-thirds of the 15th century (1399-1471), is noticeable for various experiments in the system of direct taxation. The standard tax—“the tenth and fifteenth”—failed to suit the changed conditions. In consequence of the decay of some of the towns allowances had to be made to them, amounting to over 15% (£6000), which, with other deductions, lowered the yield from a “tenth and fifteenth” to £31,000. As a supplement a land tax, affecting only the large owners, was voted at the rate of 5% in 1404, and repeated with wider scope, but at the lower rate of 12⁄3%, in 1411. A house tax made its appearance in 1428. Taxes on knight’s fees and other freeholds were also tried, while in 1435 and 1450 the graduated income tax was employed. The minimum rate, 2½%, applied to incomes under £100 (or under £20 in the tax of 1450), and rose to 10% on the higher incomes. These devices are evidence of the demand for larger revenue, and also of the increasing unfitness of the existing direct taxation. It may be added that they indicate a disposition to adopt foreign models, particularly the methods of taxation in use in France and Italy. As to indirect taxation the receipts seem at first to have declined, and the subsidies were only granted for fixed terms (the victory of Agincourt gained a life grant to Henry V.). After the establishment of Edward IV. on the throne, the idea of a “tenth,” in the literal sense, was taken up and voted (1472) by the two houses as a special military provision; but it failed to bring in the required revenue, and the king had to fall back on grants of the old-established form. Extra taxes on aliens were levied under both Lancastrian and Yorkist rulers with little profit. The most original contribution of Edward IV. to fiscal policy was the “benevolence” (q.v.) or payment by wealthy subjects of sums requested by the king. Voluntary in form, these payments were, in fact, compulsory, and became in later times one of the great grievances against which parliament had to struggle.