The bill passed both houses without a division. The highest expectations were founded upon it, for people generally, in common with Pitt himself and Price, regarded the new fund as an infallible means of discharging the national debt solely by the uninterrupted operation of compound interest. That the application of surplus revenue to the payment of debt is sound finance, and that to treat surpluses designed for that purpose as a separate fund is a convenient arrangement need no demonstration. There is not, however, anything magical or automatic in the operation of compound interest, nor can the separation of a sinking fund from general revenue have any real efficacy. Reduction of national debt, whatever arrangements may be made for it, can only be effected by taxation. During the years of peace, when the revenue was in excess of expenditure, Pitt's sinking fund acted as a convenient mode of reducing the debt. In 1792 a second fund of 1 per cent. on all loans was established, and by 1793 the commissioners had reduced the debt by about £10,000,000. Then came the war with France; the revenue fell short of the expenditure, and Pitt met the deficiency by large loans raised at great expense. Yet in order to preserve the benefit which, it was believed, was derived from the uninterrupted operation of compound interest, the payments to the sinking fund were regularly continued, so that the state was actually borrowing money at a high rate of interest in order to reduce a debt at a low rate of interest. No member of the opposition saw the fallacy involved in Pitt's scheme. He is said, probably with truth, to have himself discovered it later, but he maintained the fund, which was useful as a means of keeping the duty of reduction of debt before the nation and of helping it to face with hopefulness the rapid accumulation of debt during the war with France.
COMMERCIAL TREATY WITH FRANCE.
In 1787 Pitt laid before parliament a treaty of navigation and commerce with France. The treaty of Versailles in 1783 provided that commissioners should be appointed to make commercial arrangements between the two countries. The French cabinet invited Shelburne to proceed in the matter, and he was about to do so when he was driven from office. Fox was opposed to a treaty. Pitt appointed a commissioner in April, 1784, but nothing further was done. It was a critical matter, for a commercial treaty with France was certain to give some offence at home, and Pitt may for that reason alone have been willing to delay action until his position was more secure. In 1785 the French council of state, irritated by the large influx of British manufactures which were smuggled into France, issued arrêts restraining trade with Great Britain. Pitt was too wise to retaliate. His opportunity had come, and he entrusted the negotiations to Eden, who deserted the opposition and accepted a seat on the new board of trade. Eden had a thorough knowledge of commercial affairs, and carried out his mission as envoy to the French court with great success.[198] The treaty, signed on September 26, 1786, reduced the duties on many of the principal articles of commerce of both countries, and put others not specified on the most-favoured-nation footing. A large and easily accessible market was opened to British commerce, and, as the exports of France were for the most part not produced in England and the French were in want of British products, both countries would, Pitt argued, be gainers by an increase in the freedom of their trade one with the other, and political ill-feeling would be diminished by more intimate and mutually profitable relations. The navigation clauses showed as liberal a spirit as the commercial; an enemy's goods carried in the ships of either country were to be held free by the other, except contraband of war, which was limited to warlike implements and was not to include naval stores.
The treaty favoured the interests of the consumer, and was contrary to the economic principles of the whigs, who maintained that commerce should be regulated so as to promote home industry. Fox strongly objected to it in parliament, mainly on the ground that France was "the natural foe of Great Britain," and that any close connexion with her was dangerous. Sheridan and Charles Grey, afterwards the second Earl Grey, in his maiden speech joined him in condemning the treaty, but it was approved of by large majorities. Though it caused some temporary displeasure among the manufacturers, it was followed by a large increase of trade with France. Among Pitt's achievements as minister in time of peace none deserves to be ranked higher than this treaty, whether regarded in its details, or as a monument of his enlightened commercial policy, or as illustrating his statesmanlike view of the relations which it was desirable to establish between the two countries. His credit was further strengthened in the same session by his bill for the consolidation of the customs and excise. The customs duties, fixed from time to time, some on one system and some on another, were so complex that no one could be sure what he might be required to pay, and merchants often depended on the custom-house officers to tell them the amount due on goods. The excise, though in a less confused state, was also in urgent need of regulation. Pitt abolished the whole mass of existing duties with their percentages and drawbacks, and put a single duty on each article as nearly as possible of the same amount as before. These duties and all other taxes he brought into a consolidated fund on which all public debts were secured. Simple as this change appears, it involved about 3,000 resolutions. While it only slightly increased the revenue, it was a great benefit to merchants, it simplified the work in public offices, prevented officials from abusing their power, and enabled Pitt to get rid of a large number of custom-house sinecures, and so at once to effect an economy and dry up a source of corruption. The bill received a warm welcome from Burke, and was passed without a division.
BILL FOR RELIEF OF DISSENTERS.
Pitt's position in the commons was not yet one of command. In 1788 his party, those who recognised him as their leader, was said to number only 52, while Fox's party, the regular opposition, was estimated at 138; the "crown party" which might be reckoned on to uphold the government for the time being "under any minister not peculiarly unpopular," consisted of 185, and the rest were "independent" members, whose votes were uncertain. Pitt then had to walk warily. His practical temperament was in his favour. That the country should be well governed, and that it should be governed by himself, which was the same thing to him, as it is probably to all great ministers, was the object of his life. Compared with that, special questions were of small importance. There was nothing doctrinaire in his turn of mind; the abstract righteousness of a cause did not appeal to him, and could not divert him from the pursuit of his main object. In 1787 a bill for the relief of dissenters by the repeal of the test and corporation acts of the reign of Charles II. was brought in by Beaufoy, a supporter of the government. In reality the dissenters suffered very little from these acts, for they were relieved by annual acts of indemnity. Yet their grievance was not wholly sentimental, and, even had it been so, it would still have been a grievance. The opposition was divided; North opposed the bill, Fox warmly advocated it. Pitt consulted the bishops. All save two were against it. He valued the support of the Church, and declared himself against the bill, which was rejected by a majority of 78. In 1789 the majority against it sank to 22. Yet Pitt was thoroughly high-principled. As we shall see later in the case of Hastings, he would not be false to his convictions, and if he judged that a cause was worth maintaining, even at the cost of weakening his own position, he did not shrink from his duty. This is proved by his conduct with reference to the slave trade.
The cruelties attendant on the trade were forcibly represented by a society for procuring its abolition, founded in 1787, mainly by quakers, of which Granville Sharp and Clarkson were prominent members. Wilberforce's sympathy was already aroused by reports of the sufferings of the negroes in the slave-ships. Pitt advised him to undertake the question in parliament, and as a preliminary agreed to the appointment of a committee to inquire into the methods of the trade. The merchants of London, Lancashire, and Bristol were indignant at the threatened interference, and efforts were made to conceal the truth. Nevertheless the abominable cruelties to which the slaves were subjected during the middle passage were clearly proved. Chained to their places, fettered and fastened together, they were packed so closely on the lower decks and in stifling holds that they could scarcely turn, they were kept short of food and water, and were exercised to keep them alive by being forced under pain of the lash to jump in their fetters. While Wilberforce was ill in 1788, Pitt gave notice of a motion on the trade, and supported a bill moved by Sir William Dolben which mitigated the sufferings of the negroes during the passage. In 1789 Wilberforce in a long and eloquent speech moved resolutions for the abolition of the trade, and Pitt, Fox, who was always quick to feel for human suffering, and Burke joined in supporting him. Pitt's conduct on this question displeased many of his followers. The interests concerned in the trade were powerful, and for a time the question was virtually shelved.
AUSTRIA AND THE UNITED PROVINCES.
The peace of Versailles left England isolated. The new government was to show that she was able and ready to reassert her right to exercise an influence in Europe. The political situation presented three alliances, of France and Austria, Austria and Russia, France and Spain, and opposed to them two isolated powers, England and Prussia. None of these alliances directly threatened England, yet there were elements of danger in the two first. After the death of Maria Theresa, in 1780, her son Joseph II. changed the general direction of Austria's policy. He was restless and full of great schemes which he looked to Russia rather than France to support. The growth of Russian power under Catherine had changed the political state of Europe. The treaty of Kutchuk Kainardji, in 1774, at the close of a successful war against the Turks, saw Russia strongly established on the Black Sea; the partition of Poland augmented her preponderance in the north: and in 1780 England found that her maritime interests were threatened by a power seated both on the Baltic and close to the Mediterranean. Catherine welcomed the overtures of Joseph, for she contemplated further conquests from the Turks, and the good-will of Austria was important to her. Of these two allied powers Austria was the more dangerous to England and Prussia. Russia had already gained much, Austria was hoping for gain; Catherine was looking mainly to extension in eastern, Joseph's ambitions tended to disturb the balance of power in western and central Europe. France was impoverished; she desired peace and was anxious to restrain the emperor's ambition, and Spain could do nothing without her. A quadruple alliance, then, between the two imperial courts and France and Spain was impossible. The late war had raised the Bourbon influence in Europe. England was unable to detach Austria from France, and to form an alliance, as Carmarthen wished, with the two imperial courts; and she was, as we shall see, led by a conflict in Holland to enter into an agreement with Prussia which had important results.
Her foreign policy between 1784 and 1788 was chiefly concerned with the affairs of the United Provinces. Anxious to remove the restrictions imposed by treaties on the Austrian Netherlands, Joseph set aside the Barrier treaty of 1715, designed to check French aggression; and the Dutch withdrew their garrisons from the border fortresses. He pressed other claims upon them, relying on their weakness, for they paid dearly for provoking a war with England; and he demanded that the Scheldt, which was closed by the treaty of 1648, should be open to navigation. His claim concerned England, for though Austria could never become a great naval power even if Antwerp had access to the sea, the ports of the Netherlands and, indeed, of the United Provinces might fall under the control of some strong maritime state, such as France or Russia. Joseph's demand was backed by a recommendation from the Russian empress. He sent ships to sail up and down the river, and they were forcibly stopped by the Dutch. War seemed imminent. France, however, was then gaining great influence in Holland, and though she compelled the Dutch to assent to some of the emperor's demands, she upheld their refusal with regard to the Scheldt, and negotiated a treaty concluded at Fontainebleau in November, 1785, between the emperor and the republic, by which Joseph renounced his demand for the opening of the river.