Factory reform and the ‘condition of England’ question 1841-1842

More serious conflict over social legislation occurred between the government and a small group of socially concerned Conservative MPs. These Tory ‘paternalists’ commanded a certain respect for their devout Anglicanism and deeply held conservatism. Motivated by a strong humanitarianism, they were more willing than many of their colleagues to extend the role of the state where there was a clear social injustice. Most important was Anthony Ashley Cooper, Lord Ashley (later 7^th Earl of Shaftesbury[1]) whose reputation for sincerity and moral integrity gave his opinions an unusual influence in Parliament. Ashley’s independence and persistence on behalf of the poor and disadvantaged often created a dilemma for the government. The government feared that too much government regulation would inhibit entrepreneurial activity but it could not allow profit at the expense of public health and safety. It was on the question of factory reform[2] that problems first arose.

The redefining of the factory question was part of the shaping of the Victorian state and the accommodation of interests within it. The 1830s saw the development of responses to reform and vigorous resistance to them, at both popular and ruling-class levels. However, the 1840s saw modifications to this approach through its incorporation into a broader consensus that shaped the agenda of the ‘condition of England’ question. This had several dimensions.  First, the writing of the new public agenda owed something to expert knowledge and the role of the factory inspectorate. Initially the inspectors had been inclined to defer to the expertise of leading employers but the pressure of public agitation led them to take a more independent line.  Secondly, popular protest and the desire to contain unrest pushed inspectors, parliament and elite public opinion to take a firmer line on enforcement. In 1840, Leonard Horner, a leading inspector, presented the benefits of factory regulation in terms of moral order and economic efficiency appealing to the longer-term rational interests of employers and workers and emphasised the role of state inspectors in monitoring this process.  Finally, the issue became one, not of introducing new legislation, but fulfilling the intention of existing law by taking action to remedy defects in the 1833 Act. The key issue was enforcement, especially the vexed questions of age certification and the rights of entry to factories. Opposition to legislation was not solely in the interests of employers but of workers as well. Reducing child labour led to reductions in family budgets leading to much working class opposition. Adult labour had been left unaltered by the 1833 Act.

Oastler and the Ten Hour movement in the 1830s had projected a vision in which the regulation of the factory and the protection of labour generally was the key to remedying social distress. The factory question in the 1840s can be seen through the language of negotiation within a growing consensus in favour of further regulation: the prosperity of trade and the welfare of the nation were increasingly seen as two sides of the same coin. Two particular emphases worked to incorporate social criticism about the distress, moral degeneration and Chartist threat and the awareness of working class conditions, into a liberal vision of a rationalised factory system. The development of state regulation and the associated public debate tended to project a series of distinctions between ‘good’ and ‘bad’ factories and of the need to improve the ‘bad’. The agenda of the ‘condition of England’ extended into mines and child and female labour generally, the weavers, outwork and sweated trades and urban conditions. As a result the factory lost its centrality as a focus of social concern. The issue became a more general one of working conditions across the economy.

Public opinion saw social problems as separate and the evils of the factory as by no means the worst, though possibly the most readily remediable form of social distress. Education and a morally improved working force became the key. The debate continued to embody distinctive workers’ perspectives, though these were perhaps less challenging than in the 1830s. Ten-hour legislation insisted on the minimal protection of labour, including adult men’s labour. This was constructed as a moral imperative and a necessary limitation of the sphere of political economy. The eventual introduction of a fairly effective Ten Hours Act could be seen as a logical development within this framework.

Peel’s attitude

Peel remained steady in his opposition to the Ten Hour movement right up to the passage of the 1847 Factory Act. He had adopted the argument of political economists that wages would fall under a ten-hour day and the cost of production would increase with consequences for rising prices.  This was not a doctrinaire approach but one grounded in a genuine concern for the welfare of workers.  Peel was, however, prepared to accept intervention to control working conditions when convinced that the moral case was overwhelming.  He opposed Ashley over ten-hour legislation because he believed that the moral case was weaker than the economic one. But he was prepared to accept the moral arguments implicit in the Mines Act 1842.

The Mines Act 1842

Working conditions in collieries were dangerous and children and women played an important part in mining coal. In 1840 a Royal Commission was established to investigate the working conditions of children in coalmines and manufactories. Its findings were horrific with children as young as five or six working as ‘trappers’ [operating doors to enable air-coursing]. There were also many comments about the poor health of the mining community. Artists were employed to go underground and make sketches of workers. These appeared in the Commissioners’ Report published in 1842. They were graphic and immediate and public opinion was shocked.

The Mines Act 1842 was not a piece of government legislation and support was hardly enthusiastic. Although he admitted that some intervention was justifiable, Graham expressed reservations about its over-extension. Despite this, ministers were unwilling to defeat the proposals and contented itself by allowing amendments. The Lords lowered from 13 to 10 the age below which boys would be excluded from mines and Ashley reluctantly accepted it. Most ministers, with the exception of Gladstone supported the amended bill, though tepidly. Some help was given in drafting the legislation but the initiative lay with Lord Ashley. The Act made the employment of women underground illegal. It said boys under 10 could no longer work underground but parish apprentices between 10 and 18 could continue to work in mines

There were no clauses relating to hours of work and inspection could only take place on the basis of checking the ‘condition of the workers’. Many women were annoyed that they could no longer earn much needed money. In 1850, a further Act widened the authority of colliery inspectors; they could now check the condition of machines.

The issue of social reform was, in Peel’s mind, linked to successful economic conditions. These would enable economic growth, create new jobs and so stimulate consumption. Peel was sceptical of the value of direct government intervention in solving social problems. Free market answers were more effective. He recognised that government could not abdicate all responsibility in the ‘social question’ but, like many contemporaries, believed that its role should be severely limited and definitely cost-effective. . However, the publication of reports from committees originally set up by the Whigs in the late 1830s and extra-parliamentary pressure from radical politicians and Tory paternalists sceptical of the gains of industrial capitalism could not be ignored.

---

[1] Geoffrey Finlayson The Seventh Earl of Shaftesbury 1801-1885, Methuen, 1981 is a detailed biography that contains much on factory conditions.

[2] For a short summary of the issues see J.T. Ward ‘The Factory Movement’ in J.T. Ward (ed.) Popular Movements 1830-1850, Macmillan, 1970, pages 78-94. The shortest introduction to factory reform is Ursula Henriques The Early Factory Acts and their Enforcement, The Historical Association, 1971. J.T. Ward  The Factory Movement 1830-1850, Macmillan, 1962 is the most detailed study though it has, in part, been superseded by R. Gray The Factory Question and Industrial England 1830-1860, CUP, 1996. C. Driver Tory Radical: A Life of Richard Oastler, OUP, 1946 and A. Weaver John Fielden and the Politics of Popular Radicalism 1832-1847, OUP, 1987 are useful biographies which go beyond factory reform.  J.T. Ward (ed.) The Factory System, two volumes, David & Charles, 1970 contains primary material.

Factory reform and the ‘condition of England’ question 1841-1842

More serious conflict over social legislation occurred between the government and a small group of socially concerned Conservative MPs. These Tory ‘paternalists’ commanded a certain respect for their devout Anglicanism and deeply held conservatism. Motivated by a strong humanitarianism, they were more willing than many of their colleagues to extend the role of the state where there was a clear social injustice. Most important was Anthony Ashley Cooper, Lord Ashley (later 7^th Earl of Shaftesbury[1]) whose reputation for sincerity and moral integrity gave his opinions an unusual influence in Parliament. Ashley’s independence and persistence on behalf of the poor and disadvantaged often created a dilemma for the government. The government feared that too much government regulation would inhibit entrepreneurial activity but it could not allow profit at the expense of public health and safety. It was on the question of factory reform[2] that problems first arose.

The redefining of the factory question was part of the shaping of the Victorian state and the accommodation of interests within it. The 1830s saw the development of responses to reform and vigorous resistance to them, at both popular and ruling-class levels. However, the 1840s saw modifications to this approach through its incorporation into a broader consensus that shaped the agenda of the ‘condition of England’ question. This had several dimensions. First, the writing of the new public agenda owed something to expert knowledge and the role of the factory inspectorate. Initially the inspectors had been inclined to defer to the expertise of leading employers but the pressure of public agitation led them to take a more independent line. Secondly, popular protest and the desire to contain unrest pushed inspectors, parliament and elite public opinion to take a firmer line on enforcement. In 1840, Leonard Horner, a leading inspector, presented the benefits of factory regulation in terms of moral order and economic efficiency appealing to the longer-term rational interests of employers and workers and emphasised the role of state inspectors in monitoring this process. Finally, the issue became one, not of introducing new legislation, but fulfilling the intention of existing law by taking action to remedy defects in the 1833 Act. The key issue was enforcement, especially the vexed questions of age certification and the rights of entry to factories. Opposition to legislation was not solely in the interests of employers but of workers as well. Reducing child labour led to reductions in family budgets leading to much working class opposition. Adult labour had been left unaltered by the 1833 Act.

Oastler and the Ten Hour movement in the 1830s had projected a vision in which the regulation of the factory and the protection of labour generally was the key to remedying social distress. The factory question in the 1840s can be seen through the language of negotiation within a growing consensus in favour of further regulation: the prosperity of trade and the welfare of the nation were increasingly seen as two sides of the same coin. Two particular emphases worked to incorporate social criticism about the distress, moral degeneration and Chartist threat and the awareness of working class conditions, into a liberal vision of a rationalised factory system. The development of state regulation and the associated public debate tended to project a series of distinctions between ‘good’ and ‘bad’ factories and of the need to improve the ‘bad’. The agenda of the ‘condition of England’ extended into mines and child and female labour generally, the weavers, outwork and sweated trades and urban conditions. As a result the factory lost its centrality as a focus of social concern. The issue became a more general one of working conditions across the economy.

Public opinion saw social problems as separate and the evils of the factory as by no means the worst, though possibly the most readily remediable form of social distress. Education and a morally improved working force became the key. The debate continued to embody distinctive workers’ perspectives, though these were perhaps less challenging than in the 1830s. Ten-hour legislation insisted on the minimal protection of labour, including adult men’s labour. This was constructed as a moral imperative and a necessary limitation of the sphere of political economy. The eventual introduction of a fairly effective Ten Hours Act could be seen as a logical development within this framework.

Peel’s attitude

Peel remained steady in his opposition to the Ten Hour movement right up to the passage of the 1847 Factory Act. He had adopted the argument of political economists that wages would fall under a ten-hour day and the cost of production would increase with consequences for rising prices. This was not a doctrinaire approach but one grounded in a genuine concern for the welfare of workers. Peel was, however, prepared to accept intervention to control working conditions when convinced that the moral case was overwhelming. He opposed Ashley over ten-hour legislation because he believed that the moral case was weaker than the economic one. But he was prepared to accept the moral arguments implicit in the Mines Act 1842.

The Mines Act 1842

Working conditions in collieries were dangerous and children and women played an important part in mining coal. In 1840 a Royal Commission was established to investigate the working conditions of children in coalmines and manufactories. Its findings were horrific with children as young as five or six working as ‘trappers’ [operating doors to enable air-coursing]. There were also many comments about the poor health of the mining community. Artists were employed to go underground and make sketches of workers. These appeared in the Commissioners’ Report published in 1842. They were graphic and immediate and public opinion was shocked.

The Mines Act 1842 was not a piece of government legislation and support was hardly enthusiastic. Although he admitted that some intervention was justifiable, Graham expressed reservations about its over-extension. Despite this, ministers were unwilling to defeat the proposals and contented itself by allowing amendments. The Lords lowered from 13 to 10 the age below which boys would be excluded from mines and Ashley reluctantly accepted it. Most ministers, with the exception of Gladstone supported the amended bill, though tepidly. Some help was given in drafting the legislation but the initiative lay with Lord Ashley. The Act made the employment of women underground illegal. It said boys under 10 could no longer work underground but parish apprentices between 10 and 18 could continue to work in mines

There were no clauses relating to hours of work and inspection could only take place on the basis of checking the ‘condition of the workers’. Many women were annoyed that they could no longer earn much needed money. In 1850, a further Act widened the authority of colliery inspectors; they could now check the condition of machines.

The issue of social reform was, in Peel’s mind, linked to successful economic conditions. These would enable economic growth, create new jobs and so stimulate consumption. Peel was sceptical of the value of direct government intervention in solving social problems. Free market answers were more effective. He recognised that government could not abdicate all responsibility in the ‘social question’ but, like many contemporaries, believed that its role should be severely limited and definitely cost-effective. . However, the publication of reports from committees originally set up by the Whigs in the late 1830s and extra-parliamentary pressure from radical politicians and Tory paternalists sceptical of the gains of industrial capitalism could not be ignored.

---

[1] Geoffrey Finlayson The Seventh Earl of Shaftesbury 1801-1885, Methuen, 1981 is a detailed biography that contains much on factory conditions.

[2] For a short summary of the issues see J.T. Ward ‘The Factory Movement’ in J.T. Ward (ed.) Popular Movements 1830-1850, Macmillan, 1970, pages 78-94. The shortest introduction to factory reform is Ursula Henriques The Early Factory Acts and their Enforcement, The Historical Association, 1971. J.T. Ward The Factory Movement 1830-1850, Macmillan, 1962 is the most detailed study though it has, in part, been superseded by R. Gray The Factory Question and Industrial England 1830-1860, CUP, 1996. C. Driver Tory Radical: A Life of Richard Oastler, OUP, 1946 and A. Weaver John Fielden and the Politics of Popular Radicalism 1832-1847, OUP, 1987 are useful biographies which go beyond factory reform. J.T. Ward (ed.) The Factory System, two volumes, David & Charles, 1970 contains primary material.

Social policy: the Poor Law

In contrast to the government’s fiscal policy, its social policy affecting the poor, the insane, factory and other workers and railway passengers was remarkably cautious. The ministry’s social legislation sought to tidy up the loose administrative ends of existing programmes rather than to advance new ones. Had it not been for the initiatives of Lord Ashley, the record of social legislation during the Peel administration would probably have been less than it was. In spite of its fundamentally cautious approach, the ministry encountered far more opposition for its social legislation than to its fiscal policy. This opposition was due to the controversial nature of the issues involved and partly to the growing disenchantment of some Conservative back-benchers with their leadership.

Poor Law policy exemplified the cautious approach of Peel’s government. There was general agreement in the cabinet that the new Poor Law[1] was a success. Since 1834, it had had the desired effect of implementing a more efficient system of poor relief and lowering poor rates. However, the law was unpopular in the countryside and was an issue in the 1841 election. Some Conservative MPs were pledged to a revision of the new system and in this they were joined by a group of like-minded radicals.

William Busfield Ferrand[2], the Conservative MP for Knaresborough was the most prominent of the anti-Poor Law MPs. He and his supporters objected to the new Poor Law on three general grounds. First, they claimed that to place the administration of the Poor Laws under a centralised body was an infringement of local rights. Secondly, they claimed that the Poor Law Commission lacked specific knowledge of local conditions and tended to adopt an inflexible approach to the problems of poor relief. Thirdly, they charged that the new Poor Law oppressed the poor, was inhumane and even unchristian. Practices such as discontinuing outdoor relief, separation of families, arbitrary punishment and bad food were cited as evidence. While there were some abuses under the new system, Ferrand was certainly overstating his case.

The government defended the new Poor Law with some rigour from Ferrand’s graphic attacks. It argued that the Poor Law Commission only guided policy to ensure certain standards of uniformity and that local management of poor relief was guaranteed by the system of elected Poor Law Guardians. This did not mean rigidity: Sir James Graham stated that it was a ‘plastic system’ that was capable of responding to local needs and conditions. In practice, he argued, however desirable the workhouse test was, ‘it would be cruel in the extreme if [it] was to be made the universal rule’. In fact, in 1841 of the 345,000 people in receipt of relief, only 65,467 were relieved in the workhouse. The government won the debate and the Poor Law Commission was extended for a further five years.

The only other Poor Law legislation of important was the Poor Law Amendment Act of 1844. It enacted a new law of bastardy, regulated more clearly the relations between pauper apprentices and their masters, altered the mode of voting for Guardians and their qualifications for office and sponsored district pauper schools. Sporadic anti-Poor Law opposition continued through the life of the government but it never weakened ministerial determination to maintain the new Poor Law system.

---

[1] D. Fraser (ed.) The New Poor Law in the Nineteenth Century, Macmillan, 1976 is a collection of excellent essays on the operation of the system. M.E. Rose  The  Relief  of Poverty 1834-1914, Macmillan, 2^nd ed., 1985 and P. Wood Poverty and the Workhouse in Victorian England, Alan Sutton, 1991 are the  most useful books on the introduction and operation of the ‘new’ poor  law.

[2] John Ward W.B. Ferrand ‘The Working Man’s Friend’ 1809-1889, Tuckwell Press, 2002, especially pages 29-40.

Social Policy: The Poor Laws

In contrast to the government’s fiscal policy, its social policy affecting the poor, the insane, factory and other workers and railway passengers was remarkably cautious. The ministry’s social legislation sought to tidy up the loose administrative ends of existing programmes rather than to advance new ones. Had it not been for the initiatives of Lord Ashley, the record of social legislation during the Peel administration would probably have been less than it was. In spite of its fundamentally cautious approach, the ministry encountered far more opposition for its social legislation than to its fiscal policy. This opposition was due to the controversial nature of the issues involved and partly to the growing disenchantment of some Conservative back-benchers with their leadership.

Poor Law policy exemplified the cautious approach of Peel’s government. There was general agreement in the cabinet that the new Poor Law[1] was a success. Since 1834, it had had the desired effect of implementing a more efficient system of poor relief and lowering poor rates. However, the law was unpopular in the countryside and was an issue in the 1841 election. Some Conservative MPs were pledged to a revision of the new system and in this they were joined by a group of like-minded radicals.

William Busfield Ferrand[2], the Conservative MP for Knaresborough was the most prominent of the anti-Poor Law MPs. He and his supporters objected to the new Poor Law on three general grounds. First, they claimed that to place the administration of the Poor Laws under a centralised body was an infringement of local rights. Secondly, they claimed that the Poor Law Commission lacked specific knowledge of local conditions and tended to adopt an inflexible approach to the problems of poor relief. Thirdly, they charged that the new Poor Law oppressed the poor, was inhumane and even unchristian. Practices such as discontinuing outdoor relief, separation of families, arbitrary punishment and bad food were cited as evidence. While there were some abuses under the new system, Ferrand was certainly overstating his case.

The government defended the new Poor Law with some rigour from Ferrand’s graphic attacks. It argued that the Poor Law Commission only guided policy to ensure certain standards of uniformity and that local management of poor relief was guaranteed by the system of elected Poor Law Guardians. This did not mean rigidity: Sir James Graham stated that it was a ‘plastic system’ that was capable of responding to local needs and conditions. In practice, he argued, however desirable the workhouse test was, ‘it would be cruel in the extreme if [it] was to be made the universal rule’. In fact, in 1841 of the 345,000 people in receipt of relief, only 65,467 were relieved in the workhouse. The government won the debate and the Poor Law Commission was extended for a further five years.

The only other Poor Law legislation of important was the Poor Law Amendment Act of 1844. It enacted a new law of bastardy, regulated more clearly the relations between pauper apprentices and their masters, altered the mode of voting for Guardians and their qualifications for office and sponsored district pauper schools. Sporadic anti-Poor Law opposition continued through the life of the government but it never weakened ministerial determination to maintain the new Poor Law system.

---

[1] D. Fraser (ed.) The New Poor Law in the Nineteenth Century, Macmillan, 1976 is a collection of excellent essays on the operation of the system. M.E. Rose The Relief of Poverty 1834-1914, Macmillan, 2^nd ed., 1985 and P. Wood Poverty and the Workhouse in Victorian England, Alan Sutton, 1991 are the most useful books on the introduction and operation of the ‘new’ poor law.

[2] John Ward W.B. Ferrand ‘The Working Man’s Friend’ 1809-1889, Tuckwell Press, 2002, especially pages 29-40.

Peel and Church reform

Peel looked to the Established Church[1] to fulfil its national mission by developing Christian values among the urban masses. In that sense, he looked beyond simply economic solutions to the ‘condition of England’ question. There was growing concern for the spiritual life of the urban population during the 1830s and 1840s and there was clearly an urgent need for the church to extend its physical presence in towns and cities. Progress in this field was hampered by the growing power and assertiveness of the different Nonconformist churches who had adapted to the geographical shift of population away from rural areas with greater speed than the Established Church. In addition, Nonconformity remained concerned about the privileged position of the Church of England and this limited the room for manoeuvre by politicians. Some Conservative MPs were still demanding that public funds should be used for building new churches. Grants for this purpose had been given in 1818 and 1824 but Peel recognised this was no longer a viable political option as it would generate further damaging sectarian conflict. This was evident in Nonconformist antipathy towards the education clauses of Graham’s 1843 Factory Bill.

A Populous Parishes Act was passed in 1843 empowering the Ecclesiastical Commission to create new parishes and provide the necessary stipends (payment for the vicar or curate) out of Church funds but it was clear to Peel that the cost of building new churches would have to be covered by the more efficient use of the Church’s existing resources and charitable contributions. An impressive fund-raising campaign resulted in £25 million being spent on building and restoration work between 1840 and 1876 but this did little to stem the numerical slide of the Church of England in urban and increasingly rural areas. The 1851 Religious Census showed that the Church of England could no longer claim to be the ‘national’ church. It remained strongest in the counties round London and in eastern England, but in some northern and western areas and in Wales chapel-goers were in the majority[2].

---

[1] For the development of religion in the Victorian period see Owen Chadwick The Victorian Church, two volumes, 1970, 1972 for the standard reading with A. D. Gilbert Religion and Society in Industrial England, Longman, 1976 for a different interpretation. G. Kitson Clark Churchmen and the Condition of England, London, 1973 is an important study of the ‘social’ role of the church. K. S. Inglis Churches and the Working Classes in Victorian England, Routledge, 1963 remains perhaps the best study.

[2] On the issue of working class ‘indifference’ and antagonism towards the churches see H. McLeod Religion and the Working Class in Nineteenth Century Britain, Macmillan, 1984 for a brief bibliographical study.   On the position of the Church of England see B. I. Coleman The  Church of England in the Mid-Nineteenth Century: A Social Geography,  The Historical Association, 1980 and ‘Religion in the Victorian City’, History Today, August, 1980.

Peel and Church Reform

Peel looked to the Established Church[1] to fulfil its national mission by developing Christian values among the urban masses. In that sense, he looked beyond simply economic solutions to the ‘condition of England’ question. There was growing concern for the spiritual life of the urban population during the 1830s and 1840s and there was clearly an urgent need for the church to extend its physical presence in towns and cities. Progress in this field was hampered by the growing power and assertiveness of the different Nonconformist churches who had adapted to the geographical shift of population away from rural areas with greater speed than the Established Church. In addition, Nonconformity remained concerned about the privileged position of the Church of England and this limited the room for manoeuvre by politicians. Some Conservative MPs were still demanding that public funds should be used for building new churches. Grants for this purpose had been given in 1818 and 1824 but Peel recognised this was no longer a viable political option as it would generate further damaging sectarian conflict. This was evident in Nonconformist antipathy towards the education clauses of Graham’s 1843 Factory Bill.

A Populous Parishes Act was passed in 1843 empowering the Ecclesiastical Commission to create new parishes and provide the necessary stipends (payment for the vicar or curate) out of Church funds but it was clear to Peel that the cost of building new churches would have to be covered by the more efficient use of the Church’s existing resources and charitable contributions. An impressive fund-raising campaign resulted in £25 million being spent on building and restoration work between 1840 and 1876 but this did little to stem the numerical slide of the Church of England in urban and increasingly rural areas. The 1851 Religious Census showed that the Church of England could no longer claim to be the ‘national’ church. It remained strongest in the counties round London and in eastern England, but in some northern and western areas and in Wales chapel-goers were in the majority[2].

---

[1] For the development of religion in the Victorian period see Owen Chadwick The Victorian Church, two volumes, 1970, 1972 for the standard reading with A. D. Gilbert Religion and Society in Industrial England, Longman, 1976 for a different interpretation. G. Kitson Clark Churchmen and the Condition of England, London, 1973 is an important study of the ‘social’ role of the church. K. S. Inglis Churches and the Working Classes in Victorian England, Routledge, 1963 remains perhaps the best study.

[2] On the issue of working class ‘indifference’ and antagonism towards the churches see H. McLeod Religion and the Working Class in Nineteenth Century Britain, Macmillan, 1984 for a brief bibliographical study. On the position of the Church of England see B. I. Coleman The Church of England in the Mid-Nineteenth Century: A Social Geography, The Historical Association, 1980 and ‘Religion in the Victorian City’, History Today, August, 1980.

Politics and fiscal policy 1837-1846: Peel and budgetary policy 1843-1846

Having established the momentum for tariff reform and tax redistribution in 1842, Peel sought to capitalise on it in subsequent budgets. The 1842 budget did not produce instant results in terms of reviving trade and reducing unemployment. The major disturbances in the manufacturing areas of northern England occurred after the budget and although a good harvest may have helped, the economy remained in a sluggish state through most of 1843. This made further budgetary reductions impossible in 1843 other than the Canada Corn Act that extended the policy established the previous year. Trade revived from 1843 and the boost of reduced duties to consumption soon outran the lower tariff return on each item. In 1844, there was a strong recovery in the economy because of further good harvests and a boom in railway investment and government finance moved into the red by the end of the year.

In the 1844 budget, Peel slashed excise duties on flint glass and vinegar as well as customs duties on coffee and currants. Later in the session, the government took on the sugar duties. These supplied a third of all customs revenues but were protected by the powerful West Indies lobby in the Commons and Peel had to fight hard to reduce them. Opposition from Philip Miles, the sugar interest’s chief parliamentary spokesman jeopardised the government’s proposal to reduce substantially the differential between colonial and foreign sugar. Peel forced the plan through with a threat to resign and managed to reduce the differential still further in 1845.

Further changes took place in 1845. In February, Peel introduced his 1845 budget reporting an estimated budget surplus of £3.6 million, enough to allow the government to dispense with income tax.  However, he proposed that income tax be renewed for a further three years so that the budget surplus could be used to introduce further cuts in indirect taxation. Peel argued that this would promote even greater economic prosperity. All surviving duties on exports were abolished of which coal was the most important. Of the 813 items liable for customs duties, 430 yielding small amounts of revenue disappeared.  Duty on raw cotton was abolished at a cost to the Exchequer of £680,000.  Duties on colonial sugar from the West Indies and foreign sugar were both reduced, sacrificing £1.3 million of revenue.  Excise duties on glass (worth £642,000) and the auction duty (£300,000) were abandoned.

Peel predicted that in three years’ time government revenue from remaining indirect taxes would be so high that he could dispense with income tax. Further reductions followed and when Peel fell in 1846, Britain was almost a free-trading country.  Peel succeeded in establishing the budget as the most effective instrument of his government’s domestic policy. Much of its success was directly due to Peel. Few could match his mastery of financial detail or his imagination in making fresh approaches to perplexing problems. Despite the undoubtedly favourable impression made on Parliament and the country at large by Peel’s budgets, there remained the insistent and nagging back-bench opposition to Peel’s reduction of agricultural protection. Peel’s unrivalled financial skills were never translated into the political arts and he was unwilling to take the time to smooth over his differences with the protectionists. It was a mistake that was to cost him dear in 1846.

Three further measures complemented the government’s budgetary policy: the reduction of the National Debt, the Joint Stock Companies Regulation Act and the Bank Charter Act, all passed in 1844.  Early in the 1844 session, Goulburn opened an attack on the National Debt[1] by proposing a reduction of 3½ per cent consols[2] to 3¼. The immediate gain to the revenue would be £625,000 annually. There was no parliamentary opposition to the scheme and very little among stockbrokers. Upon a conversion of £250 million of stock, only £247,000 was paid off to ‘dissentients’ (as Goulburn called them). It was a very smooth operation and contributed to the government’s reputation as one that shaped the Victorian budgetary tradition of reducing the National Debt and extending free trade.  A similarly easy passage was also accorded the Joint Stock Companies Regulation Act. Since the repeal of the Bubble Act in 1825, joint stock companies had been freed from stringent government regulation. The result was a rapid increase in investment as promoters pressed on clients’ projects of all kinds. However, there were problems caused by the collapse of under-funded companies and the failure of unrealised schemes that caused financial ruin for many individuals. To protect the public from unscrupulous companies, Gladstone, at the Board of Trade brought forward a plan for regulating joint stock companies. It established a Registrar of Companies and all partnerships with more than 25 members and freely transferable shares were required to register. Company directors had to present fully audited balance sheets periodically to the Registrar. These and other regulatory provisions helped protect the public against speculative excesses and created a more responsible climate for company development. This legislation is widely regarded as representing an epoch in the history of English company law. In addition, bankruptcy courts were established.

Bank Charter Act 1844

The baking world was plagued with instability throughout the first half of the nineteenth century. In 1825, 73 banks suspended payments and around 50 collapsed completely. This accelerated the move towards joint stock banking. This made banking safer in that joint stock banks had more partners and were therefore able to accumulate more capital. Despite banking reform in 1833, there were further banking crises in 1836 and 1839. In 1836, the stock market crashed leaving debts unpaid and in 1839 the poor harvest meant that gold was needed to pay for imports of foreign capital. The drain on the reserves was considerable.

The Bank Act of 1819 (also known as Peel’s Act, for his role in its passage) had imposed upon the Bank of England the duty of honouring its notes in gold if asked to do so: the so-called ‘Gold Standard’. In normal times, the bank’s customers did not wish to exchange their notes for gold, and in 1819 Peel had believed that the bank could be trusted to decide how many more notes it would be prudent to put into circulation than it had gold to back. On several occasions, when speculation was rife and sound management was called for, the bank had still been increasing its note issue when prices were rising and gold had already begun to leave the country.

The Bank of England paid too little attention to the state of the foreign exchanges, and the English country banks, which had about one-quarter of the circulation, paid none. The result was that the collapse, when it came, and the consequent business failures and distress were all the greater. Here was another factor bearing upon the condition of England question. Between 1826 and 1844, over-issue by provincial banks had caused the failure of 100 banks or about a quarter of all private or joint-stock bans to issue their own notes. Even this situation did not convince all of the need for change. The so-called ‘banking school’ believed that the volume of currency issued should be left to the bankers to decide and opposed any attempt by government to restrict the quantity of paper money issued. By the 1840s, an alternative view, the ‘currency school’ had gained ground. It believed that the function of a bank was less the transaction of business than the maintenance of a sufficient reserve on behalf of the nation to enable it to meet its liabilities to other countries. If there were too many notes issued, there would be periodic crises of the type seen in 1836 and 1839. Currency advocates believed that note issue ought to be far more closely tied to bullion reserves than the banking school was willing to allow and that the government should decide on the size of the note issue.

As a committed supporter of the currency school, Peel determined to end the discretion allowed to the bank emphasising their larger economic responsibilities. If gold was leaving the country, notes must be withdrawn from circulation until prices fell, British goods became attractive to foreign buyers, and gold returned to the country again to pay for them. The bank’s charter had been renewed in 1833. But there was a break clause, and Peel waited until he could move in and place note issue under statutory control. The result was the Bank Charter Act 1844 which aimed to establish a more stable foundation for the English banking system by preventing the excessive supply of paper money. The Act defined the position of the Bank of England in the British economy very carefully.

There were to be no new banks of issue. Existing country bank (207 private banks and 72 joint-stock banks) issues were frozen at their present levels and no bank that gave up issuing its own notes would ever be allowed to resume.  Note issue would imperceptibly become concentrated in the hands of the Bank of England. This led, by the end of the century, to a Bank of England monopoly. By 1901, there were only 33 private banks and 27 joint-stock banks left and by 1918, with the emergence of the Big Five joint-stock bans, there were few survivors of the country banking era, though the last country notes did not disappear until 1921. The bank itself was to be separated into a banking department and an issue department, the first free, the second regulated.  After August 1844, the Bank’s ability to issue promissory notes in place of cash was confirmed up to £14 million (the minimum amount needed if the business of the country was to continue) had to be backed by bullion reserves (the credit of the British government). Beyond that amount notes were only to be issued when there was gold in hand to back them, and the figures were to be published every week.

The act had interesting overtones. It was a vindication of the right of the state to interfere with powerful interests, and, in a period when other monopolies were being swept aside, it established a new one. It has been criticised in detail for paying too little attention to other negotiable instruments such as cheques and bills of exchange and to the bank’s role as lender of last resort, but it was an excellent demonstration of Peel’s command of an abstruse subject. The act initially applied to England and Wales but was followed in 1845 by comparable measures for Scotland and Ireland. It did help to reduce the severity of crises and lasted until 1914. Peel considered the Bank Charter Act 1844 as one of his most important achievements.

Assessing Peel’s fiscal policies

Peel recognised the contribution made by the non-agrarian sectors of the economy and endeavoured to stimulate manufacturing and trade and so improve the material well-being of many working people. Britain could not go back to being an agrarian nation and Peel expected the newly revolutionised sectors of the industrial economy to soon outstrip farming. Significantly, Peel does not seem to have envisaged an indefinite expansion of the industrial sector. Parallel to this was his commitment to preserving the political rule of the aristocracy that depended for its economic and political strength on agriculture. This suggests that Peel did not understand that industrial expansion was destined to finally subjugate the agrarian classes. For Peel, his fiscal policies were simply designed to restore prosperity to the existing manufacturing sector and as a result promote social stability and tranquillity. They were, in part therefore simply a way of resolving the current economic and political problems: short-term rather than visionary.

In many respects, Peel had an essentially ‘static vision’ of the economy, a self-regulating machine. This contrasts with the ‘growth-oriented’ perspective associated with individuals such as Richard Cobden. The Bank Charter Act 1844 illustrates this point. Had the measure operated as Peel intended, its effect would have been deflationary since it restricted the scope of banks to finance economic growth and diversification by placing a limit on the issue of currency over £14 million. That this did not occur is down to new gold discoveries from the late 1840s (much of which found its way into the Bank of England’s reserves, enabling note supply to increase) and the development of alternative forms of ‘money’ such as cheques and bills of exchange. It was these, not Peel’s policies that fostered expansionary economic conditions in the 1850s and 1860s.

---

[1] The national debt is the total amount of debt the government has on its book. Most of the national debt is in the form of government issued bonds

[2] Consols (consolidated annuities) are British government bonds, most commonly used in the 19^th and early 20^th century, when they constituted the major part of the British national debt.

Politics and fiscal policy 1837-1846: Peel and budgetary policy 1843-1846

Having established the momentum for tariff reform and tax redistribution in 1842, Peel sought to capitalise on it in subsequent budgets. The 1842 budget did not produce instant results in terms of reviving trade and reducing unemployment. The major disturbances in the manufacturing areas of northern England occurred after the budget and although a good harvest may have helped, the economy remained in a sluggish state through most of 1843. This made further budgetary reductions impossible in 1843 other than the Canada Corn Act that extended the policy established the previous year. Trade revived from 1843 and the boost of reduced duties to consumption soon outran the lower tariff return on each item. In 1844, there was a strong recovery in the economy because of further good harvests and a boom in railway investment and government finance moved into the red by the end of the year.

In the 1844 budget, Peel slashed excise duties on flint glass and vinegar as well as customs duties on coffee and currants. Later in the session, the government took on the sugar duties. These supplied a third of all customs revenues but were protected by the powerful West Indies lobby in the Commons and Peel had to fight hard to reduce them. Opposition from Philip Miles, the sugar interest’s chief parliamentary spokesman jeopardised the government’s proposal to reduce substantially the differential between colonial and foreign sugar. Peel forced the plan through with a threat to resign and managed to reduce the differential still further in 1845.

Further changes took place in 1845. In February, Peel introduced his 1845 budget reporting an estimated budget surplus of £3.6 million, enough to allow the government to dispense with income tax. However, he proposed that income tax be renewed for a further three years so that the budget surplus could be used to introduce further cuts in indirect taxation. Peel argued that this would promote even greater economic prosperity. All surviving duties on exports were abolished of which coal was the most important. Of the 813 items liable for customs duties, 430 yielding small amounts of revenue disappeared. Duty on raw cotton was abolished at a cost to the Exchequer of £680,000. Duties on colonial sugar from the West Indies and foreign sugar were both reduced, sacrificing £1.3 million of revenue. Excise duties on glass (worth £642,000) and the auction duty (£300,000) were abandoned.

Peel predicted that in three years’ time government revenue from remaining indirect taxes would be so high that he could dispense with income tax. Further reductions followed and when Peel fell in 1846, Britain was almost a free-trading country. Peel succeeded in establishing the budget as the most effective instrument of his government’s domestic policy. Much of its success was directly due to Peel. Few could match his mastery of financial detail or his imagination in making fresh approaches to perplexing problems. Despite the undoubtedly favourable impression made on Parliament and the country at large by Peel’s budgets, there remained the insistent and nagging back-bench opposition to Peel’s reduction of agricultural protection. Peel’s unrivalled financial skills were never translated into the political arts and he was unwilling to take the time to smooth over his differences with the protectionists. It was a mistake that was to cost him dear in 1846.

Three further measures complemented the government’s budgetary policy: the reduction of the National Debt, the Joint Stock Companies Regulation Act and the Bank Charter Act, all passed in 1844. Early in the 1844 session, Goulburn opened an attack on the National Debt[1] by proposing a reduction of 3½ per cent consols[2] to 3¼. The immediate gain to the revenue would be £625,000 annually. There was no parliamentary opposition to the scheme and very little among stockbrokers. Upon a conversion of £250 million of stock, only £247,000 was paid off to ‘dissentients’ (as Goulburn called them). It was a very smooth operation and contributed to the government’s reputation as one that shaped the Victorian budgetary tradition of reducing the National Debt and extending free trade. A similarly easy passage was also accorded the Joint Stock Companies Regulation Act. Since the repeal of the Bubble Act in 1825, joint stock companies had been freed from stringent government regulation. The result was a rapid increase in investment as promoters pressed on clients’ projects of all kinds. However, there were problems caused by the collapse of under-funded companies and the failure of unrealised schemes that caused financial ruin for many individuals. To protect the public from unscrupulous companies, Gladstone, at the Board of Trade brought forward a plan for regulating joint stock companies. It established a Registrar of Companies and all partnerships with more than 25 members and freely transferable shares were required to register. Company directors had to present fully audited balance sheets periodically to the Registrar. These and other regulatory provisions helped protect the public against speculative excesses and created a more responsible climate for company development. This legislation is widely regarded as representing an epoch in the history of English company law. In addition, bankruptcy courts were established.

Bank Charter Act 1844

The baking world was plagued with instability throughout the first half of the nineteenth century. In 1825, 73 banks suspended payments and around 50 collapsed completely. This accelerated the move towards joint stock banking. This made banking safer in that joint stock banks had more partners and were therefore able to accumulate more capital. Despite banking reform in 1833, there were further banking crises in 1836 and 1839. In 1836, the stock market crashed leaving debts unpaid and in 1839 the poor harvest meant that gold was needed to pay for imports of foreign capital. The drain on the reserves was considerable.

The Bank Act of 1819 (also known as Peel’s Act, for his role in its passage) had imposed upon the Bank of England the duty of honouring its notes in gold if asked to do so: the so-called ‘Gold Standard’. In normal times, the bank’s customers did not wish to exchange their notes for gold, and in 1819 Peel had believed that the bank could be trusted to decide how many more notes it would be prudent to put into circulation than it had gold to back. On several occasions, when speculation was rife and sound management was called for, the bank had still been increasing its note issue when prices were rising and gold had already begun to leave the country.

The Bank of England paid too little attention to the state of the foreign exchanges, and the English country banks, which had about one-quarter of the circulation, paid none. The result was that the collapse, when it came, and the consequent business failures and distress were all the greater. Here was another factor bearing upon the condition of England question. Between 1826 and 1844, over-issue by provincial banks had caused the failure of 100 banks or about a quarter of all private or joint-stock bans to issue their own notes. Even this situation did not convince all of the need for change. The so-called ‘banking school’ believed that the volume of currency issued should be left to the bankers to decide and opposed any attempt by government to restrict the quantity of paper money issued. By the 1840s, an alternative view, the ‘currency school’ had gained ground. It believed that the function of a bank was less the transaction of business than the maintenance of a sufficient reserve on behalf of the nation to enable it to meet its liabilities to other countries. If there were too many notes issued, there would be periodic crises of the type seen in 1836 and 1839. Currency advocates believed that note issue ought to be far more closely tied to bullion reserves than the banking school was willing to allow and that the government should decide on the size of the note issue.

As a committed supporter of the currency school, Peel determined to end the discretion allowed to the bank emphasising their larger economic responsibilities. If gold was leaving the country, notes must be withdrawn from circulation until prices fell, British goods became attractive to foreign buyers, and gold returned to the country again to pay for them. The bank’s charter had been renewed in 1833. But there was a break clause, and Peel waited until he could move in and place note issue under statutory control. The result was the Bank Charter Act 1844 which aimed to establish a more stable foundation for the English banking system by preventing the excessive supply of paper money. The Act defined the position of the Bank of England in the British economy very carefully.

There were to be no new banks of issue. Existing country bank (207 private banks and 72 joint-stock banks) issues were frozen at their present levels and no bank that gave up issuing its own notes would ever be allowed to resume. Note issue would imperceptibly become concentrated in the hands of the Bank of England. This led, by the end of the century, to a Bank of England monopoly. By 1901, there were only 33 private banks and 27 joint-stock banks left and by 1918, with the emergence of the Big Five joint-stock bans, there were few survivors of the country banking era, though the last country notes did not disappear until 1921. The bank itself was to be separated into a banking department and an issue department, the first free, the second regulated. After August 1844, the Bank’s ability to issue promissory notes in place of cash was confirmed up to £14 million (the minimum amount needed if the business of the country was to continue) had to be backed by bullion reserves (the credit of the British government). Beyond that amount notes were only to be issued when there was gold in hand to back them, and the figures were to be published every week.

The act had interesting overtones. It was a vindication of the right of the state to interfere with powerful interests, and, in a period when other monopolies were being swept aside, it established a new one. It has been criticised in detail for paying too little attention to other negotiable instruments such as cheques and bills of exchange and to the bank’s role as lender of last resort, but it was an excellent demonstration of Peel’s command of an abstruse subject. The act initially applied to England and Wales but was followed in 1845 by comparable measures for Scotland and Ireland. It did help to reduce the severity of crises and lasted until 1914. Peel considered the Bank Charter Act 1844 as one of his most important achievements.

Assessing Peel’s fiscal policies

Peel recognised the contribution made by the non-agrarian sectors of the economy and endeavoured to stimulate manufacturing and trade and so improve the material well-being of many working people. Britain could not go back to being an agrarian nation and Peel expected the newly revolutionised sectors of the industrial economy to soon outstrip farming. Significantly, Peel does not seem to have envisaged an indefinite expansion of the industrial sector. Parallel to this was his commitment to preserving the political rule of the aristocracy that depended for its economic and political strength on agriculture. This suggests that Peel did not understand that industrial expansion was destined to finally subjugate the agrarian classes. For Peel, his fiscal policies were simply designed to restore prosperity to the existing manufacturing sector and as a result promote social stability and tranquillity. They were, in part therefore simply a way of resolving the current economic and political problems: short-term rather than visionary.

In many respects, Peel had an essentially ‘static vision’ of the economy, a self-regulating machine. This contrasts with the ‘growth-oriented’ perspective associated with individuals such as Richard Cobden. The Bank Charter Act 1844 illustrates this point. Had the measure operated as Peel intended, its effect would have been deflationary since it restricted the scope of banks to finance economic growth and diversification by placing a limit on the issue of currency over £14 million. That this did not occur is down to new gold discoveries from the late 1840s (much of which found its way into the Bank of England’s reserves, enabling note supply to increase) and the development of alternative forms of ‘money’ such as cheques and bills of exchange. It was these, not Peel’s policies that fostered expansionary economic conditions in the 1850s and 1860s.

---

[1] The national debt is the total amount of debt the government has on its book. Most of the national debt is in the form of government issued bonds

[2] Consols (consolidated annuities) are British government bonds, most commonly used in the 19^th and early 20^th century, when they constituted the major part of the British national debt.

Politics and fiscal policy 1837-1846: Peel's problems

Peel had now to grapple with the problem of the recession that had faced his predecessors and which, after three years remained intense and especially the persistent budgetary deficit. He calculated that total expenditure stood at around £50 million. Around £30 million was spent servicing the national debt and a further £15 million paid for the armed forces. He estimated that the aggregated budgetary deficit for the six year period 1837-43 was likely to exceed £10 million, or roughly a fifth of total spending. Peel did not introduce emergency measures in the autumn of 1841. He and his cabinet spent the autumn and winter of 1841-1842 taking stock and then brought forward proposals designed to resolve the problem of the budgetary deficit.

The deficits were symptomatic of the depressed state of the British economy in the late 1830s and early 1840s. With over 80 per cent of government revenue coming from customs and excise duties, the sharp decline in commercial activity inevitably affected the tax receipts to the Exchequer. Though it is difficult to estimate the level of unemployment, conditions in manufacturing towns were certainly at their worst since the post-war depression in the 1810s and 1842 may well have been the worst year in the century for industrial workers. The downturn in the industrial economy was not helped by a series of poor harvests that kept bread prices high. For Peel, the problem was not simply fiscal because of the social and political unrest it stimulated. This was the ‘condition of England’ question that he faced, together with the working and middle class radicalism that rode upon them: Chartism and the agitation to repeal the Corn Laws. Popular discontent clearly influenced Peel’s financial planning.

Chartist activity reached its peak in the summer of 1842 during the ‘Plug Plot’. Peel and Graham forcefully suppressed these disturbances and were generally less hesitant than their Whig predecessors in using the full rigour of the law to stifle popular agitation. But perhaps the greater threat to the government came from the Anti-Corn Law League that articulated a middle class sense of grievance against a political establishment committed to protecting the sectional interests of the aristocratic, landed elite. The ability of the League and its supporters to wield influence through the electoral system represented a long-term challenge to the political establishment that could not easily be ignored. While the Chartists failed to get anyone elected in 1841, Anti-Corn Law League candidates won seats in Manchester, Stockport and Walsall and there was an obvious potential for further gains in the future. Peel recognised that tariff reform was one way of reducing this threat.

Peel’s economic liberalism had its origins in the 1820s. At its heart were the notions of ‘sound money’, low taxes and a freeing of trade. Without monetary control and stability there would be inflation and this, Peel maintained, would inhibit economy growth. It was necessary to restrict the Bank of England’s power to issue money ‘to inspire just confidence in the medium of exchange’. The Gold Standard became the dominant financial orthodoxy linking sound money to cheap government and low rates of direct and indirect taxation. If businessmen and industrialists were given freedom to exploit the market, Peel suggested this would increase profitability, improve employment and result in economic growth for everyone’s benefit.

Peel’s budgetary policy 1842

By the end of 1841, Peel had a fairly clear idea how he was going to tackle the growing budgetary deficit and the economic problems that had brought it about. Raising further the level of indirect taxation, as the Whigs had done in 1840, was simply not an option. Unless the trade depression ended, this would not result in an increase in government revenue and there was little indication in 1841 that this would occur in the short-term. A better approach, the one tentatively adopted by the Whigs in 1841, was to reduce the level of indirect taxation[1] and so cut the costs of raw materials for industry and foodstuffs and other items for the consumer.

Peel concluded that freeing up trade was the only real alternative open to him. This did not represent a particularly radical departure since he was reverting to ideas he and Huskisson had advocated while in government in the 1820s. What was new, however, was the introduction of income tax[2] in peacetime. This remained politically controversial and was something that the Whigs had not proposed. The strongest argument for adopting income tax was that it would signal to the masses that the propertied not only abstained from exploiting their political power for the maintenance of economic privileges but that the elite was willing to shift the tax burden from the masses to itself and to lower food prices in the process. Fiscal responsibility not certainly an ethical good but it was also a practical means of upholding the social hierarchy, both because it facilitated public credit and because it redressed one of the principal grievances of the under-privileged.

In 1842, then, Peel was addressing himself through the fiscal system to the health of the economy and to the morale of the nation as a whole. He resolved to redistribute the tax burden by reducing duties upon articles of mass consumption and reintroducing the income tax which had been abolished after a back-bench revolt in 1815. Reducing duties would help to get the nation back to work and take the momentum out of the Chartist movement. Peel did not recognise the political aspirations of the Chartists, and (unlike his father) he would never himself propose statutory restrictions upon the hours of labour. But he understood hunger and he wanted thoughts of ‘sedition’ to be forgotten ‘in consequence of greater command over the necessaries and minor luxuries of life’[3]. Imposing a peacetime income tax would demonstrate that the British state was an equitable one, in which burdens were placed (despite the warnings of political economists who identified income as the source of savings and the route to capital formation) upon those best able to bear them.

These measures had to be sold to a party which was still solidly protectionist. Accordingly, in 1842, grain was singled out for separate treatment and dealt with first, and on 9^th February Peel announced a thorough revision of the Corn Law sliding scale of 1828 to make it more defensible. The sliding scale had failed in its object of providing greater price stability and by the autumn of 1841 Peel was convinced that the sliding scale provided excessive protection for farming. The result was a new sliding scale where duty would be 16s when the domestic price of wheat stood at 56s per quarter. Peel erred on the side of generosity since 11s would have sufficed to protect British farmers from being undercut by foreign imports. Even so, the adjustment to the sliding scale did represent a significant reduction in the amount of protection afforded home producers. Changes were made to the scale of duties on corn reducing the level of tax paid. These proposals were controversial and reportedly greeted with cold indifference by many Conservative back-benchers and Buckingham resigned from the Cabinet as a result. They were, however, generally well regarded and certainly politically astute.

Land, as Peel’s supporters reminded him, was the historic basis of the constitution. It was a ‘permanent’ interest which appreciated in value with cultivation. Commercial capital, by contrast, put down no roots and might be taken to another country, while manufacturing capital depreciated with use. But commerce and manufactures had borne Britain to its pre-eminence in the world. Writing to J. W. Croker on 27^th July 1842, Peel agreed that one might, if one ‘had to constitute new Societies’, ‘prefer Corn fields to Cotton factories’, but ‘our lot’ was cast. The decision had already been taken in Peel’s father’s or in his grandfather’s day, and there could be no turning back now. What was wrong with the economy was not that population had outrun capital, but that the power of production had overtaken the capacity to consume. The way to ‘remove the burden which presses upon the springs of manufactures and commerce’ was to make Britain a cheap country to live in[4].

Then, on 11^th March, when he introduced the budget, which he did himself (the complaisant Goulburn stepping aside), he began by making much of the deficit. Having worked up a sense of urgency he explored and rejected alternative remedies (lower expenditure, increased duties, and the ‘wretched expedient’ of borrowing). Finally he came to his own plan.[5]. Income tax was reintroduced at 7d in the pound on incomes of more than £150. This, sensibly, excluded most of the working classes. It was designed to last three years and raise £3.7 million.  With that surplus Peel proposed to undertake ‘a complete review, on general principles, of all the articles of the tariff’. No duty should ever again be prohibitive. Customs duties were reduced on about 750 of about 1,200 durable items at a loss of £270,000 in revenue.  Maximum duties on imported raw materials, partly manufactured and manufactured items were set at 5 per cent, 12 per cent and 20 per cent respectively.  In addition, duty on coffee was reduced at a loss of £171,000 to the Exchequer and, most importantly, £600,000 was sacrificed by cutting the duty on timber.

Peel was convinced that the package of free trade reform was necessary for the sake of social stability. Throughout the 1840s, Peel’s policies were informed by the belief that the survival of the ruling elite depended on his ability to cultivate public confidence in the fairness and impartiality of the nation’s system of government. In that respect, the 1842 budget can be seen as ‘anti-revolutionary’, a means of deflecting attacks by radicals that government was extravagant and that the elite that controlled it was corrupt and parasitical. ‘Cheap government’ and ‘fair government’ commended itself to all sections of society.

Peel’s budget paid off in political as well as financial terms. Parliament passed it by large majorities. The Chartist press hailed in as a measure of enlightened government. The Northern Star on 26^th March 1842 saw the replacement of a broad range of indirect taxes with a direct tax on property as a heavy blow against Old Corruption on behalf of social justice. There was hardly a murmur of protest from the middle classes who would now have to pay more to the Treasury. Te broad acquiescence and support for an income tax represented an important shift in public attitudes towards direct taxation that was fiscally progressive and socially fair[6]. Only the Anti-Corn Law League opposed the tax and then only because it was dissatisfied by Peel’s minor Corn Law revision of February 1842.

It was Peel’s finest hour; the crisis of the century was met by his fiscal reform although he recalled that ‘these changes…were not effected without great murmuring and some open opposition to the Government on the part of many of its supporters’. But in fact it was a wonderfully ambiguous measure. He had rationalised tariffs but had also taken a step towards free trade. He could still move in either direction.

---

[1] In many respects, Peel was ‘stealing the Whigs’ clothes’ and he was clearly influenced by the outcome of Joseph Hume’s 1840 commission of inquiry into tariffs which concluded that freer trade would stimulate consumption and production and lead to a recovery of government revenues even if, in the short-term cuts in tariffs would cause the budget deficit to broaden even further.

[2] William Pitt had introduced income tax in 1799 in part to fund the French Wars as a ‘temporary expedient’. However, when Lord Liverpool attempted to make income tax more permanent in 1816 he was defeated in the Commons.

[3] Hansard 3^rd series, volume 87, column 1048

[4] Hansard 3^rd series, volume 61, column 460

[5] Hansard 3^rd series, volume 61, columns 422–76

[6] In 1816, the propertied classes damned direct taxation as an invasion of privacy and a catalyst of big government.

Politics and fiscal policy 1837-1846: Peel's problems

Peel had now to grapple with the problem of the recession that had faced his predecessors and which, after three years remained intense and especially the persistent budgetary deficit. He calculated that total expenditure stood at around £50 million. Around £30 million was spent servicing the national debt and a further £15 million paid for the armed forces. He estimated that the aggregated budgetary deficit for the six year period 1837-43 was likely to exceed £10 million, or roughly a fifth of total spending. Peel did not introduce emergency measures in the autumn of 1841. He and his cabinet spent the autumn and winter of 1841-1842 taking stock and then brought forward proposals designed to resolve the problem of the budgetary deficit.

The deficits were symptomatic of the depressed state of the British economy in the late 1830s and early 1840s. With over 80 per cent of government revenue coming from customs and excise duties, the sharp decline in commercial activity inevitably affected the tax receipts to the Exchequer. Though it is difficult to estimate the level of unemployment, conditions in manufacturing towns were certainly at their worst since the post-war depression in the 1810s and 1842 may well have been the worst year in the century for industrial workers. The downturn in the industrial economy was not helped by a series of poor harvests that kept bread prices high. For Peel, the problem was not simply fiscal because of the social and political unrest it stimulated. This was the ‘condition of England’ question that he faced, together with the working and middle class radicalism that rode upon them: Chartism and the agitation to repeal the Corn Laws. Popular discontent clearly influenced Peel’s financial planning.

Chartist activity reached its peak in the summer of 1842 during the ‘Plug Plot’. Peel and Graham forcefully suppressed these disturbances and were generally less hesitant than their Whig predecessors in using the full rigour of the law to stifle popular agitation. But perhaps the greater threat to the government came from the Anti-Corn Law League that articulated a middle class sense of grievance against a political establishment committed to protecting the sectional interests of the aristocratic, landed elite. The ability of the League and its supporters to wield influence through the electoral system represented a long-term challenge to the political establishment that could not easily be ignored. While the Chartists failed to get anyone elected in 1841, Anti-Corn Law League candidates won seats in Manchester, Stockport and Walsall and there was an obvious potential for further gains in the future. Peel recognised that tariff reform was one way of reducing this threat.

Peel’s economic liberalism had its origins in the 1820s. At its heart were the notions of ‘sound money’, low taxes and a freeing of trade. Without monetary control and stability there would be inflation and this, Peel maintained, would inhibit economy growth. It was necessary to restrict the Bank of England’s power to issue money ‘to inspire just confidence in the medium of exchange’. The Gold Standard became the dominant financial orthodoxy linking sound money to cheap government and low rates of direct and indirect taxation. If businessmen and industrialists were given freedom to exploit the market, Peel suggested this would increase profitability, improve employment and result in economic growth for everyone’s benefit.

Peel’s budgetary policy 1842

By the end of 1841, Peel had a fairly clear idea how he was going to tackle the growing budgetary deficit and the economic problems that had brought it about. Raising further the level of indirect taxation, as the Whigs had done in 1840, was simply not an option. Unless the trade depression ended, this would not result in an increase in government revenue and there was little indication in 1841 that this would occur in the short-term. A better approach, the one tentatively adopted by the Whigs in 1841, was to reduce the level of indirect taxation[1] and so cut the costs of raw materials for industry and foodstuffs and other items for the consumer.

Peel concluded that freeing up trade was the only real alternative open to him. This did not represent a particularly radical departure since he was reverting to ideas he and Huskisson had advocated while in government in the 1820s. What was new, however, was the introduction of income tax[2] in peacetime. This remained politically controversial and was something that the Whigs had not proposed. The strongest argument for adopting income tax was that it would signal to the masses that the propertied not only abstained from exploiting their political power for the maintenance of economic privileges but that the elite was willing to shift the tax burden from the masses to itself and to lower food prices in the process. Fiscal responsibility not certainly an ethical good but it was also a practical means of upholding the social hierarchy, both because it facilitated public credit and because it redressed one of the principal grievances of the under-privileged.

In 1842, then, Peel was addressing himself through the fiscal system to the health of the economy and to the morale of the nation as a whole. He resolved to redistribute the tax burden by reducing duties upon articles of mass consumption and reintroducing the income tax which had been abolished after a back-bench revolt in 1815. Reducing duties would help to get the nation back to work and take the momentum out of the Chartist movement. Peel did not recognise the political aspirations of the Chartists, and (unlike his father) he would never himself propose statutory restrictions upon the hours of labour. But he understood hunger and he wanted thoughts of ‘sedition’ to be forgotten ‘in consequence of greater command over the necessaries and minor luxuries of life’[3]. Imposing a peacetime income tax would demonstrate that the British state was an equitable one, in which burdens were placed (despite the warnings of political economists who identified income as the source of savings and the route to capital formation) upon those best able to bear them.

These measures had to be sold to a party which was still solidly protectionist. Accordingly, in 1842, grain was singled out for separate treatment and dealt with first, and on 9^th February Peel announced a thorough revision of the Corn Law sliding scale of 1828 to make it more defensible. The sliding scale had failed in its object of providing greater price stability and by the autumn of 1841 Peel was convinced that the sliding scale provided excessive protection for farming. The result was a new sliding scale where duty would be 16s when the domestic price of wheat stood at 56s per quarter. Peel erred on the side of generosity since 11s would have sufficed to protect British farmers from being undercut by foreign imports. Even so, the adjustment to the sliding scale did represent a significant reduction in the amount of protection afforded home producers. Changes were made to the scale of duties on corn reducing the level of tax paid. These proposals were controversial and reportedly greeted with cold indifference by many Conservative back-benchers and Buckingham resigned from the Cabinet as a result. They were, however, generally well regarded and certainly politically astute.

Land, as Peel’s supporters reminded him, was the historic basis of the constitution. It was a ‘permanent’ interest which appreciated in value with cultivation. Commercial capital, by contrast, put down no roots and might be taken to another country, while manufacturing capital depreciated with use. But commerce and manufactures had borne Britain to its pre-eminence in the world. Writing to J. W. Croker on 27^th July 1842, Peel agreed that one might, if one ‘had to constitute new Societies’, ‘prefer Corn fields to Cotton factories’, but ‘our lot’ was cast. The decision had already been taken in Peel’s father’s or in his grandfather’s day, and there could be no turning back now. What was wrong with the economy was not that population had outrun capital, but that the power of production had overtaken the capacity to consume. The way to ‘remove the burden which presses upon the springs of manufactures and commerce’ was to make Britain a cheap country to live in[4].

Then, on 11^th March, when he introduced the budget, which he did himself (the complaisant Goulburn stepping aside), he began by making much of the deficit. Having worked up a sense of urgency he explored and rejected alternative remedies (lower expenditure, increased duties, and the ‘wretched expedient’ of borrowing). Finally he came to his own plan.[5]. Income tax was reintroduced at 7d in the pound on incomes of more than £150. This, sensibly, excluded most of the working classes. It was designed to last three years and raise £3.7 million. With that surplus Peel proposed to undertake ‘a complete review, on general principles, of all the articles of the tariff’. No duty should ever again be prohibitive. Customs duties were reduced on about 750 of about 1,200 durable items at a loss of £270,000 in revenue. Maximum duties on imported raw materials, partly manufactured and manufactured items were set at 5 per cent, 12 per cent and 20 per cent respectively. In addition, duty on coffee was reduced at a loss of £171,000 to the Exchequer and, most importantly, £600,000 was sacrificed by cutting the duty on timber.

Peel was convinced that the package of free trade reform was necessary for the sake of social stability. Throughout the 1840s, Peel’s policies were informed by the belief that the survival of the ruling elite depended on his ability to cultivate public confidence in the fairness and impartiality of the nation’s system of government. In that respect, the 1842 budget can be seen as ‘anti-revolutionary’, a means of deflecting attacks by radicals that government was extravagant and that the elite that controlled it was corrupt and parasitical. ‘Cheap government’ and ‘fair government’ commended itself to all sections of society.

Peel’s budget paid off in political as well as financial terms. Parliament passed it by large majorities. The Chartist press hailed in as a measure of enlightened government. The Northern Star on 26^th March 1842 saw the replacement of a broad range of indirect taxes with a direct tax on property as a heavy blow against Old Corruption on behalf of social justice. There was hardly a murmur of protest from the middle classes who would now have to pay more to the Treasury. The broad acquiescence and support for an income tax represented an important shift in public attitudes towards direct taxation that was fiscally progressive and socially fair[6]. Only the Anti-Corn Law League opposed the tax and then only because it was dissatisfied by Peel’s minor Corn Law revision of February 1842.

It was Peel’s finest hour; the crisis of the century was met by his fiscal reform although he recalled that ‘these changes…were not effected without great murmuring and some open opposition to the Government on the part of many of its supporters’. But in fact it was a wonderfully ambiguous measure. He had rationalised tariffs but had also taken a step towards free trade. He could still move in either direction.

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[1] In many respects, Peel was ‘stealing the Whigs’ clothes’ and he was clearly influenced by the outcome of Joseph Hume’s 1840 commission of inquiry into tariffs which concluded that freer trade would stimulate consumption and production and lead to a recovery of government revenues even if, in the short-term cuts in tariffs would cause the budget deficit to broaden even further.

[2] William Pitt had introduced income tax in 1799 in part to fund the French Wars as a ‘temporary expedient’. However, when Lord Liverpool attempted to make income tax more permanent in 1816 he was defeated in the Commons.

[3] Hansard 3^rd series, volume 87, column 1048

[4] Hansard 3^rd series, volume 61, column 460

[5] Hansard 3^rd series, volume 61, columns 422–76

[6] In 1816, the propertied classes damned direct taxation as an invasion of privacy and a catalyst of big government.

Politics and fiscal policy 1837-1846

Between 1836 and 1838, about 63 banks crashed in England. Little money was available for investment leading to increasing levels of unemployment at a time of high food prices. Much bullion had been invested in America where good returns could be made. Federal governments borrowed and Britain invested, then in 1837, President Jackson refused to re-charter the Bank of the United States, and caused a financial panic in America. In addition, the 1838 harvest was poor so bullion was exported to buy food. Industry suffered; there was massive unemployment and higher food prices. By the later 1830s, home demand, together with available export markets, was insufficient to absorb Britain’s manufactured output. By 1837 there was depression, not serious at first, but conditions worsened[1].

A depressed economy

Poor harvests resulted in heavy grain imports, especially in 1838 and 1839. This did little to reduce the high price of food and depressed home demand. Disillusion with foreign borrowers in the United States and elsewhere discouraged investment abroad reducing British exports. Prices had begun to fall in the cotton industry as early as 1833 when signs that over-production first became obvious. Mill owners, committed to costly plant and equipment, could not afford to limit output to keep prices up and capacity actually increased. By 1841-2, mill owners in Belgium, Saxony and Prussia, heavy buyers of British yarn, reduced their consumption. British producers pumped more and more goods into foreign markets in an effort to restore earnings with catastrophic effects on cotton prices. Similar trends were evident in other industries. By 1842, wool was in deep depression.

The coal and iron industries faced similar problems. Increased demand for coal in the early 1830s and rising coal prices stimulated capital investment. This too led to over-production. Between 1836 and 1843, coal output rose by between sixty and seventy per cent while demand increased by only thirty per cent. Attempts by colliery owners to control output using quotas failed and the industry slumped. The iron industry followed the same pattern. Output grew in South Wales and Staffordshire but most dramatically in Scotland. By 1840 the industry was increasingly unprofitable. The speculative boom in railways and shipbuilding, a major source of employment after 1836, was largely exhausted by 1840.

The problem faced by the manufacturing economy in the late 1830s was largely one of over-production that home that export markets were unable to absorb. The interconnected nature of the economy reinforced this depressed state. Coal depended on iron; iron on demand for industrial expansion at home and abroad; demand depended on an ability and willingness to invest and upon earnings. Depression in one area impacted on others. Britain’s trading policy did not help this situation. By 1840, tariffs on imports made up nearly half of total revenue. As the price of Britain’s exports fell faster than those of imports so the relative cost of imported raw materials and food increased. Between 1836 and 1840, imports stood at over £5 million a year more than exports. Far from protecting the British economy against foreign competition tariff policy depressed the workers’ capacity to consume, their incentive to work and this was reflected in the cost of the production of exports.

The Whigs and the depression

The weakness of the Whig government was obvious by the beginning of 1841. By then, the Whigs had alienated various sections of the electorate. Radical support evaporated with the cooling of Whig reforming spirit. Among the propertied classes, there was concern about the Whigs’ inability to prevent the riots and disorder of the late 1830s. The worsening economic crisis led to serious social unrest with the emergence of Chartism and in late 1839 led to confrontation with government at Newport. There was also among the electorate at large, and especially the newly enfranchised middle classes, growing doubts about the fiscal and administrative capacities of the Whigs. As the economic crisis deepened, the Whig budget deficit mounted. There were deficits in 1839 and 1840 and by 1841 it had risen to £6 with no solution in sight. The electoral alliance since 1835 with O’Connell and the Irish party was doubly unpopular for the Whigs and, in the eyes of some they were damned for consorting with both Irishmen and Catholics.

By 1840, constitutional reform may have been exhausted but changing fiscal policy was a fertile area to give the Whigs fresh impetus and rouse flagging enthusiasm. Charles Poulett Thompson, a long-term supporter of tariff reform wrote from Canada to Francis Baring, the Whig Chancellor of the Exchequer in May 1841 that fiscal policy ‘…does not meddle with religious prejudice; it does not relate to Ireland; it does not touch on any of the theoretical questions of government on which parties have so long been involved. It is a new flag to fight under.’

The Whigs relied heavily on indirect taxation that was vulnerable to economic slump. In 1840, Baring, faced with a projected deficit of £2 million reversed the trend towards ‘cheap government’ and increased Customs and Excise duties by 5 per cent and 10 per cent on Assessed Taxes[2]. However, this did not relieve the slide in the budgetary deficit. Faced with a bankrupt fiscal policy, the Whigs suddenly became coverts to free trade and tariff reform. Francis Baring had contemplated the resumption of the Peel-Huskisson economic reforms of the late 1820s almost as soon as he became Chancellor in 1839. There were three main reasons why this appeared to be a shrewd political move.  First, it was recognised that one way to stimulate commercial growth was to reduce the level of indirect taxation. Secondly, tariff reform was bound to please a wide range of manufacturing interests and Corn Law reform had been an issue in middle class (ands not only radical) circle for some years. Finally, radical activity had shifted away from constitutional issues after the threats to public order posed by Chartism and was now fixed on the issue of tariff reform. The appointment of Joseph Hume’s Select Committee on Import Duties in May 1840 was the vehicle to do this. Whigs support for tariff reform might lead to a revival of Radical support for the government.

Baring was able to persuade the leading Whigs to swallow a low fixed duty on corn, for reasons of political pragmatism if not principle. Some doubters may have been won over by Edward Ellice’s prediction that ‘Sir R. Peel will move on it, if we do not’.  The result was that Baring’ free trade budget was the major measure of the 1841 session. It embraced both a general tariff reform and a further reduction in the Corn Laws. He suggested raising the duty on imported colonial timber from 10s to 20s per load (50 cubic feet), but lowering it on foreign timber by 5s to 50s per load. This would equalise somewhat the Baltic and the hitherto more favoured Canadian timber imports. Secondly, he proposed retaining the duty on colonial sugar imports at 24s per hundredweight while reducing it dramatically on foreign sugar imports from 63s to 36s per hundredweight. Again the effect would be to equalise imports. Brazil would be able to compete more readily with the traditional colonial suppliers in the West Indies. Even with the revision of the sugar and timber duties, there would still be a deficit of some $400,000. Baring aimed to remove this by abolishing the sliding scale (as established by the Corn Law of 1828) and replacing it with a moderate fixed duty on corn, proposed at 4s per quarter.

The budget offered the Conservatives a number of targets for the proposed budget hit simultaneously at the shipping, West Indian colonial timber and agricultural interests. They decided to focus on the issue of the sugar duties that the Manchester Guardian noted on 12^th May 1841 as a ‘crafty move’ since it allowed the Conservatives to bring a moral tone to their opposition. They could argue that the reduction in foreign sugar import duties might encourage, not merely the continuance but the expansion of slavery in countries such as Brazil and Cuba. This enabled to Conservatives to gain the support of powerful anti-slavery groups outside parliament and gain the moral high ground. The debate began on the Commons on 7^th May and lasted eight evenings. In addition to their criticisms of the sugar duties, the Conservatives poured scorn on the perilous state of the Whigs’ fiscal position. The result was a Whig defeat by thirty-six votes, followed by defeat on a vote of no confidence in June that precipitated the general election.

It would be unfair to suggest that Baring’s attempt to fiscal reform was the cause of the Whigs’ electoral defeat in 1841 but for many people it characterised the bankruptcy of the administration. Many manufacturers were not convinced by the sincerity of the Whig conversion to tariff reform. As middle class interests swung from political to commercial reform, Peel seemed a more responsible and credible leader than members of the Whig aristocracy.

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[1] R.C.O. Matthews A Study in Trade-Cycle History: Economic Fluctuations in Great Britain 1833-1842, Cambridge, Mass., 1967 remains a valuable study of the depression in the late 1830s and early 1840s.

[2] Assessed Taxes aimed to tap the income of the rich by taxing signs of conspicuous spending and display such as male servants, windows, carriages and pleasure horses.