Flashcards in Chapter 2: Pitt's Finance and Trade Reforms Deck (18):
What were the pressing issues Pitt needed to tackle once he had emerged victorious from the election?
Deal with the financial legacy of the war with the American colonies, take control of the spiralling National Debt and restore confidence in government. Wanted to improve trade and establish more efficient procedures for government administration.
How much was the National Debt? Why was it so high?
£240 million. It was especially high due to the War Britain fought against the American colonies that had been settled in 1783.
How was the Government's annual revenue being used? How much was the actual National Debt?
A large proportion of the annual government revenue was required simply to keep up with the interest payments of the debt- 8 million a year. The actual debt was approximately 16 times the annual revenue.
How did Pitt tackle the National Debt?
He set up the Sinking Fund. Into which he paid £1 million a year from taxation. It was tightly managed. It was successful peacetime policy, as it cut the debt by £10 million and helped restore national confidence, but was a failure as a war-time policy.
Why was Pitt interested in adopting Free Trade as a policy?
He believed it would boost the economy.
How did Pitt put his theories of Free Trade into practice?
By reducing heavy customs duties. Britain had an outdated system of tariffs (a list of customs duties on import or export of certain goods) and Pitt believed this restricted the development of trade and industry. Consolidation Act.
What were the results of the high tariffs (customs duties)?
Smuggling flourished and government revenue was reduced. (More than 3 quarters of Government revenue came from indirect taxes).
What impact did the loss of the American colonies have on trade? What impact did this have on Britain's high tariffs?
Britain lost beneficial trading rights and this highlighted the need for change of the high tariffs.
What did Pitt do to taxes under the Consolidation Act of 1787?
Lowered, simplified, or removed the outdated and complex customs duties on both imports and exoports under the umbrella of his Consolidation Act of 1787. Book of Rates published the rate of duty for each item, high taxes paid on tea, wine and tobacco reduced and this lessened the attractiveness of smuggling.
How was smuggling made more difficult?
By Pitt's Hovering Act, which enabled the authorities to confiscate ships discovered to be carrying smuggled goods within four miles of the shore.
What did the Excise Bill allow?
Tobacco and spirits to enter the country untaxed and be stored in bonded warehouses and then re-exported tax free.
What board was set up to see the area of trade reforms?
The Board of Trade.
What was the overall results of the trade reforms?
An increase in the volume of legitimate trade although in the short term the overall income from taxation was reduced.
How did Pitt recoup the losses from the reduction of duties?
He introduced new indirect taxes. Taxes on horses, coaches, windows, bricks, hats, maid servants, ribbons and candles- commodities that the wealthy and aspiring classes used.
What was the reaction to Pitt's approach of increasing government revenue through taxation?
Was seen as ingenious by some and was ridiculed by others. The window tax was seen as a poor decision as it was perceived as a penalty on light and air and limited the development of the glass industry.
Who did Pitt attempt to make a trade treaty with?
Ireland but was strongly opposed as British manufacturers feared competition as Irish wages were low.
What trade treaty did Pitt make with France?
He successfully made a free trade treaty in 1786, whereby both countries reduced duties on imports from the other country. The objective was to encourage a greater flow of trade between them. However, the success was short-lived as any benefits were negated by the outbreak of the French Revolution in 1789.