4. William III's wars + the financial revolution Flashcards
(4 cards)
Why were changes made to the British financial system?
The Nine Years War involved over 70,000 troops and was costing £5 million a year. In order to meet the high costs, the taxation systems and the ways government raised public loans were changed. This is called the ‘financial revolution’ by many historians.
What were the changes in taxation?
. Customs and excise duties were extended to a wider range of goods, and the rates of taxation were very high. These duties couldn’t be avoided and provided up to a 1/4 of the Crown’s income.
. A land tax was introduced in the early 1690s, and quickly became a permanent and lucrative source of income. The rate for the tax was set at 20% of the profits which landowners made from their land. By 1700, the land tax alone accounted for 1/2 the income raised from taxation and was a very difficult tax to avoid.
What were the changes in government borrowing?
In 1693, the Million Loan Act was intended to raise a loan of £1 million and repayment was guaranteed out of income from the excise duties. In 1694, investors were invited to raise a loan of £1.2 million to pay for the war. In return, investors would be allowed to establish the Bank of England, which provided banking services as well as raising further crown loans. As a result of these innovative ways of raising loans, the prestige of London money markets rose and soon London was challenging Amsterdam as a major financial centre.
What was the impact of the financial revolution?
The financial position of the Crown was improved dramatically. By 1700, around 9% of the nation’s wealth went towards taxation. There was growing confidence in the reliability of the state and its ability to repay its debts (as previously the Crown had had a bad reputation - with Charles II in 1672 having to issue the Stop of the Exchequer as he was unable to repay £1 million in debt). Also, the Crown’s ability to raise funds for the war depended on an annual vote in Parliament to supply funds. As a result, Parliament became a permanent feature of the system of government.
