History of the English fiscal system

Revenue dues collected by the king's agents, rents, or rather returns of produce from land, and special levies for emergencies formed the main elements of the royal income which gradually acquired greater regularity and consistency.

Following the Glorious Revolution, control of finance passed more and more to Parliament, which together with the decline of the importance of land rents as a source of income from about the time of the Wars of the Roses led to different forms of taxation.

The systematizing spirit, so characteristic of both the Norman and Angevin kings, produced the great institution of the Exchequer with its judicial and administrative sections and its elaborate forms of account and control.

The obscure question as to the real origin of the special contrivances employed by the Exchequer is, strictly speaking, irrelevant to the financial inquirer, who may be content to hold that, other than the existence of a few Old English analogies, the system, as it appears in the 12th century, is a product peculiar to the conceptions of fiscal organization formed by Norman subtlety.

The picture presented by the Dialogue of the Exchequer (c. 1176) is that of a comprehensive system which secured the receipt of royal income by providing a thorough audit of accounts, employing processes adapted to the circumstances of the time.

Although feudalism was, in one aspect, a powerful instrument for the division of political authority, the particular form in which the Conqueror introduced it to England nevertheless enabled the fiscal rights of the crown to be established more strictly than was possible under previous conditions.

Secondly, the king's various claims or dues took on a more decidedly feudal character, thus receiving stricter legal definition and, thirdly, the higher judicial organizations 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.

Broadly, the sources of revenue fall under the following heads: The history of the English financial system consists mainly of the different flows over time of the above exchequer receipts.

The tallage (or special levies) imposed on towns in the king's demesne at times of need appear to have been a doubtful exercise of the royal prerogative, albeit belonging scientifically to the same class as the Danegeld and scutage.

Almost at the beginning of the age of parliamentary taxation, one of the older sources of revenue ceased, popular opinion having forced King Edward I to issue in 1290 the Edict of Expulsion which required the Jews to leave the kingdom.

As this gave between £38,000 and £39,000 in the aggregate, the fifteenth and tenth 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.

Broader financial issues marked the Tudor period as the era of national monarchies arrived, necessitating the maintenance of greater military and naval forces, as well as more costly machineries of administration.

Both external and fiscal policy were affected by the set of ideas that developed into mercantilism while the state of finance reflected the monarch's personal character, particularly in the 16th century, so that decided contrasts could be found.

In addition, the desire for a vigorous foreign policy, the hope of encouraging native industry and the sentiment of retaliation against the trade regulations of other countries interfered with the strict aim of earlier times, namely the obtaining of the largest possible yields.

Crown lands were, however, an inelastic form of revenue, and their great impoverishment—begun in the 15th century by the Lancastrian kings, (in particular, Henry VI)—was caused through expenditure pressures, profligacy and wholesale plunder by officials.

Edward IV failed to capitalise on the many forfeited estates reverting to the crown during the Wars of the Roses of the 15th century, so that the main opportunity for aggrandizement was afforded by the dissolution of the monasteries and guilds under Henry VIII.

Among the many calls for further revenue, the chief included the need to maintain the ever-expanding machinery of state and price rises caused by growing supplies of precious metals, the effects of which extended into the 17th century.

These, together with the hereditary customs, supplied considerable revenue for crown's use and no better indication of the increased power and popularity of the monarchy can be found than during this era, the contrast with the suspicious, grudging attitudes of the Plantagenet and Lancastrian parliaments signifying a change in the national sentiment.

When these affected important commodities, they operated in the same way as taxes farmed out to collectors and, although crown profits therefrom were small, they effectively enhanced prices and excited discontent, promise of redress finally taking place after the hostile debate of 1601.

The direct grants of the parliaments of James I far exceeded those of earlier reigns—for example, in 1606 fifteenths and tenths, three lay and four clerical subsidies—although efforts to extend other sources of revenue by exercising the royal prerogative naturally reacted on this spirit of liberality.

In the early part of the 17th century, customs steadily increased from £127,000 in 1604 to nearly £500,000 in 1641 due to the growth of English trade, the adoption of new books of rates—1608 and 1635—the fixing of higher valuations and also the inclusion of new commodities, in particular, wine, currants (the subject of controversy in Bates' case) tobacco and sugar.

Licences on retailers and fees on law proceedings were further aids to revenue, which, in the later years of Charles II, and in the short reign of his successor, was kept up to the level of increasing expenditure, but only with difficulty.

The Commonwealth assessments were revived on several occasions, indirect taxation being made more rigorous by the imposition of extra duties on brandy, tobacco and sugar as well as French linens and silks.

The expansion of the fiscal system may be best realised from the fact that, during the comparatively short reign of William III (1689–1702), the land tax produced £19,200,000, customs raising £13,296,000, and excise £13,650,000, or approximately £46 million when added together.

Connected with the public debt at that time was the foundation of the Bank of England which increasingly became the agent for dealing with the state's revenue and expenditure, although the Exchequer continued to exist until 1834 as a real, albeit antiquated, institution.

The class of taxes organized during peacetime had been those on houses, carriages, servants, horses, plate, etc., these being raised by successive steps of 10% each until, in 1798, their total charge was increased threefold—four or fivefold for the rich—under the plan of a "triple assessment".

The landed interest, though powerful at the moment, had henceforth to face the rivalry of the wealthy manufacturing communities of the north of England, and it may be added that the influence of theoretic discussion was likely to be felt in the treatment of the financial policy of the nation.

Up to 1908-1909 the tax above the abatement limit of £700 remained strictly proportional but opinion showed a decided tendency in favour of extra rates or a supertax on incomes above an assigned amount (e.g. £5,000), and this was included in the budget of 1909–1910.

Between 1820 and 1860 the customs system was transformed from a highly complicated arrangement of duties, pressing with severity on nearly all foreign imports, into a simple and easily understood set of charges on certain specially selected commodities.

The stages of the development under the guidance of Huskisson, Peel, and Gladstone are commonly regarded as part of the movement for Free Trade but the financial working of the alteration is understood only by remembering that the duties removed by tens or by hundreds were quite trivial in yield, and did not involve any serious loss to the revenue.