the economy

• Serious problems that Peel faced:

  • budget deficit of £1.8 million -> it was great concern to contemporaries ->> likely to grow to £2.5 million by 1843 and lot of public spending (£30 million) was going on repaying interest on the national debt
  • economic downturn had hit trade which in turn affected government income as nearly 80% came from customs and excise duties
  • downturn was also of considerable importance in creating social and political unrest -> chartism
  • middle class agitation
• Peel's ministry was notable for some major changes. Further moves towards free trade culminated in the repeal of the corn laws of 1815. Ministry introduced measures to modernise banking and was seen as representing the interests of the growing middle classes. Peel was not necessarily going against Conservative reforms by passing Free trade.
• Peel decided on a strategy:

  • introduce measures for freer trade to encourage prosperity, raise income and therefore bring in more taxes
  • pay for the short term loss of income from taxes on trade by reintroducing Pitts idea of income tax which was abolished in 1816
• 1842 Free Trade Budget:

  • reintroduced income tax for those earning over £150 a year at a rate of 7d per £1
  • originally, this controversial tax was abolished in 1816 but Peel bought the tax back as a temporary measure for three years to make up for the losses in revenue which would suffer the abolition of so many duties
  • allow tariffs to be reduced on 750 goods like timber
  • more imported grain
• 1842 Free Trade Budget significance:


  Government was able to raise money without negatively impacting on the poorest members of society. Turned the Whig deficit of £2 million into a healthy surplus. Manufacturing was helped by the removal or reduction of import taxes on raw materials. Corn law measures were unpopular with farmers
• The Bank Charter Act 1844:

  • important financial measure made necessary because many banks were unreliable -> the issue was that all banks, no matter how small could issue bank notes
  • demand for currency was high amongst businessmen -> tendency for banks to issue to much paper money which they lent out for investment in new companies
  • banks over issued notes, currency was unsound
• The Bank Charter Act 1844: parts of the acts

  1. no new banks were allowed to issue notes
  2. existing banks were restricted to their average issue during the three months preceding the passing of the act; if any existing banks amalgamated they lost the right to issue notes
  3. Bank of England could issue notes worth up to £14 million but any paper money issued beyond that had to be covered by gold reserves in the Bank's vaults
• The Bank Charter Act 1844 success:

  The act was generally successful. It had the effect of gradually phasing out the note-issuing function or ordinary banks. Bank of England came to control the amount of currency in circulation; there was less danger of over issuing notes. English currency became extremely stable. London became the world's leading monetary centre.
• The Companies Act 1844:

  • dealt with another finance and business problem -> no controls over the formation of businesses
  • anybody could start a business by publishing an advertisement
  • receive money from foolish investors
  • 1830s -> many such dubious companies went dishonest directors absconded with the capital
  • act aimed to prevent the 'reckless speculation
  • SUCCESS -> some success but it didn't apply to companies which had to get special approval from parliament. Racketeers in the Railway continued
• The Railway Regulation Act 1844:

  • Peels President of the Board Trade > Peel's protege Gladstone
  • government could -> limit rail profits, purchase railways for the state, inspect company accounts
  • Railway companies had to -> provide one day train a day on all routs with third class carriages charged 1d per mile -> the parliamentary trains
• Impact of Railways:

  • changing economy
  • Britains trade and financial sector had grown consistently
  • 1852 -> 3000 miles of track had been laid
  • railway mania
• review:

  • reduced manufacturing goods
  • encouraged exports
  • created confidence in the currency
  • reduced indirect taxation
  • balanced the books and established sound finances
  • controversial towards agriculture