Reforms to Finance, Administration and trade

• Number of factors that influenced his plans from 1784-1792:

  • influenced by his time as chancellor of the exchequer => Prime Minister Shelburne had ideas about modernising
  • pressure from the country which saw the defeat in the American War
  • many overseas wars, payment which led to increased levels of taxation
  • ever-growing national debt,
  • Pitt's reputation was built on a desire for cheaper and more effective government
  • Britain should be more moral and pure
• The Financial Situation:

  • national debt had risen from £127 million in 1775 increased by 91%
  • 1784 -> £243 million
  • 1793 -> war with France
  • 1801 -> £456 million in debt
• The Sinking Fund 1786:

  • reintroduced by Pitt
  • A version had been in place under Sir Robert Walpole 1721-1742 (whig Prime Minister)
  • Allowed under Richard Price (financial expert)
  • every year 1 million pounds from taxation revenue to be set aside to pay off some of the national debt
  • Positives = reduced interest payments on the debt, National debt was reduced by £10 million in 1793, hoped national debt would be paid within 45 years
  • Negatives = short-term borrowing increased by £7 million, ineffective during war
• New Taxes c1785:

  • increases on indirect taxes on large items like hats or servants and bachelors had to pay more
  • tax in retail shops introduced in 1785 based on annual sales values but it caused riots -> repealed in 1789
  • tax policies aimed to relate taxes to the ability to pay
• Pitt's Hovering Act of 1787

  extended to a previous measure of 1780, extended the jurisdiction of customs officers to search ships 12 miles off shore rather than the previous 6 miles
• Commutation Act in 1784:

  reduced the tax on tea from 119% to 12.5%
• Eden Treaty 1786:

  • most successful treaty with France
  • more industrialised than France
  • Britain should be less economically dependent on trade with America and become more adventurous in exploring trading opportunities in continental Europe.
  • reduced taxation on French Leather good, textiles and British textiles and manufactures
  • Britain benefited more
  • 1783-92 => trade with Europe doubled
  • deficit in trade became a surplus of £2 million
• Free Trade:

  • influenced by Adam Smith
  • trade without taxes
  • previously, taxed imports and exports as their main way of raising revenue to pay for expenditure
  • assumed that trade could keep growing
  • whigs opposed at first
• The Public lottery:

  • Pitt started a lottery to raise money (previous leaders had funded the building of westminster bridge and the British Museum this way)
• Better collection of existing taxes:

  • smuggling to evade import taxation was a real problem with many gangs
  • this occurred due to high taxation rates -> tax on tea was 119%
  • 1/5 of all goods sold in Britain gad arrived illegally
  • created the commutation act in 1784 and the Hovering Act in 1787
• 1785 Treasury Commission of Audit: oversee public expenditure
• Reduced opportunities for corruption:

  • taxation from imports was placed into a single consolidated fund 1787 -> this single account could be audited to check for theft
  • government contracts were put out to public tender (companies bid for jobs)
  • government stationary office
• 1787 Central Stationary Office: reduced the cost of supplying stationary to the departments
• Curbs to royal spending:

  • primary royal don’t see any changes
  • 1786 -> money paid to the extended royal family was reduced
  • royal estates were run more efficiently
• Increased efficiency:

  • Pitt reduced the number of sinecures (posts without a work but were paid) -> although this didn’t happen starlight away, by 1806 they were completely gone. This saved money
  • new administrators Richard Prewitt —> consolidated fund strategy, reduce the number of customs men by 750 —> reducing Government spending
  • Sir Charles Middleton reformed the Navy => savings to build new ships —> 33 major war ships
  • 1784 -> Pitt established the Board of Control to oversee the powerful East India Company (The India Act of 1784) the board of control had two cabinets
• How successful were the Pitt administrative reforms:

  • the state acquired more control over office holders within the UK -> reduced the bribery and corruption which was common
  • there was greater efficiency and less waste
  • standards in public life improved
  • patronage was not abolished
  • took a long time for change to occur in many cases
  • some changes were not fully implemented -> 1858 was when the East India Company stopped running India
  • appointed and promoted individuals -> lawsuits by Palmer —> 3000 pounds a year
• Adam Smith (1723-1790):

  • Scottish economist and philosopher
  • educated in Glasgow and Oxford
  • wrote -> An Inquiry into the Nature and Causes of the Wealth of Nations
  • most influential works on economics ever written
  • argued that if competition is allowed to flourish wealth will be created and not diminished
  • free market
• Britain and Trade:

  • trade was crucial to the British economy
  • it had built an empire on the back of its trading endeavours
  • large merchant navy transported goods and the large Royal Navy defended trade networks
  • great fortunes had been made from trade -> Glasgow tobacco merchant George Buchanan spent £10 000 on a house
  • some merchants and bankers married into the aristocracy
• Finance and Trade:

  • the american war of independence was costly as we had to send troops to a different continent
  • increase in debt
• Commutation 1784:

  • Pitt owed a good deal of support to the merchants of London
  • influenced by Adam Smith
  • he believed that reducing taxation on imports would be good for trade
  • high taxes and duties encouraged smuggling
  • this act reduced the tax on tea to 12.5%
• Old Taxes Tidied Up:

  • Customs and Excise -> all imports were charged a single rate of tax, replacing a very complicated system
  • Consolidated Fund 1786 -> in the past taxes had been collected and placed into a multitude of different accounts -> this made keeping track of income and government expenditure very difficult. Pitt simplified the system. From 1786, taxation went into one single consolidated fund and all expenditure was drawn against it
• Free Trade vs mercantilism:

  Free Trade —>

  • would expand trade and wealth, economic activity would grow, the costs of goods would fall and more sales would be made, imported food would be cheaper

  Mercantilism —>

  • restricted trade which was good for agriculture, used tariffs on imports and exports (this made goods more expensive), assumed a static amount of trading activity
• Pitt wanted to reduce trade with America and Ireland. He wanted commercial treaties with other European powers such as Spain, Portugal, France and Russia. Opposition to this by vested interests to freer trade, fear of foreign competition. A free trade treaty with Ireland had to be dropped in 1785 due to opposition from English manufacturers.
• The period of peace from 1783-93 and changed in manufacturing process influenced the improvement of trade