Stop of the Exchequer

To bridge the gap, the Crown departments increasingly sold more and more debt to the leading London goldsmith bankers, secured against first call on the following two years' revenues.

This was an attractive investment for a gilded circle of preferred bankers, who could make annualised returns of 8 to 10% or more by buying the debt at a discount, at a time when interest payments were capped by law at 6%.

[3] A letter from Richard Langhorne to Lord Hatton on January 6 gives additional background on the causes and effects of the stop:[4] The outstanding obligations in all were later estimated to come to £1,211,065.

Finally, after the accession of William and Mary, Parliament reallocated the earmarked revenue completely, to new debts arising from the Nine Years' War against France, and payments dried up altogether.

In response the creditors sued, leading to a lawsuit, The Goldsmith Bankers case, of almost unheard-of length,[7] raising constitutional questions of just what obligations courts could enforce against the Crown.

Facing an "avalanche" of renewed demands,[10] in 1701 Parliament legislated a definitive settlement "in lieu and discharge of certain perpetual annual payments and of all arrears thereof" in the Appropriation of Revenue Act 1700 (12 & 13 Will.

[11] Interest would thereafter be paid annually at 3% (the generally prevailing rate by that time) – but only from December 1705, and then only on the principal sums as calculated at the end of 1676 (assessed at £1,328,526).

Gilbert Burnet wrote that "the bankers were broken, and multitudes who had put their money in their hands were ruined by this dishonourable and perfidious action".

Danby, the Lord Treasurer, promised them compensation, but this was never forthcoming, One important legacy of the Great Stop of Exchequer was the founding of the Bank of England in 1694.