Reform of finance, trade and administration

Question 1

What pressing issues did Pitt have to tackle after the 1784 election?

Answer 1

• The financial legacy of the war with the American colonies
• Take control of the spiralling national debt
• Restore confidence in the government

Question 2

What was Pitt eager to do after the 1784 election?

Answer 2

Introduce reforms to improve trade and establish more efficient procedures for government administration.

Question 3

What had national debt reached following war with the American colonies

Answer 3

A record high £240,000,000

Question 4

How much were annual interest payments at the start of Pitt’s premiership?

Answer 4

Around £8,000,000 per year, which was extremely hard for the government to keep up with

Question 5

How many times larger was debt than government revenue?

Answer 5

16

Question 6

How did Pitt intend to manage to growing debt?

Answer 6

By setting up a reformed and tightly managed sinking fund, into which he payed £1,000,000 a year from taxation. It was a successful peacetime policy, helping cut debt by £10,000,000 and increasing confidence in the government, but it was a failure as a war time policy

Question 7

Define free trade

Answer 7

An econmic policy that involves the free exchange of commdities between nations without imposing duties or tariffs

Question 8

Define tariff

Answer 8

A set or list of customs duties on the import or export of certain goods

Question 9

Define mercantilism

Answer 9

The accepted method of trade regulation which involved a complex system of tariffs levied on goods coming into and going out of the country

Question 10

Why was Pitt interested in adopting free trade?

Answer 10

He believed it would boost the economy. He was an early disciple of Adam Smith and attempted to put his ideas into practise by reducing heavy customs duties

Question 11

What did Pitt think about Britain’s outdated system of tariffs?

Answer 11

He thought they were restricting the development of trade and industry

Question 12

Why was the a system of tariffs in place?

Answer 12

It was believed it was the government’s duty to regulate trade for the benefit of the nation

Question 13

What were indirect taxes?

Answer 13

Customs and excise duties levied on every commodity possible

Question 14

What proportion of government revenue came from indirect taxes?

Answer 14

3/4

Question 15

What did Pitt do for trade under the umbrella of his 1787 Consolidation Act?

Answer 15

Simplified or removed the outdated customs duties on both imports and exports

Question 16

What did Pitt do to taxes?

Answer 16

• Customs duties and excise duties were amalgamated. This meant that goods qualified for one tax instead of several
• The high taxes paid on tea, wine and tobacco were reduced, which lessened the attractiveness of smuggling

Question 17

What did Pitt do to combat smuggling?

Answer 17

• Reduced taxes on wine, tea and tobacco to make it less attractive
• Pitt’s hovering act enabled the authorities to confiscate any ships discovered to be carrying smuggled goods within 4 miles of the shore
• An excise bill allowed tobacco and spirits to enter the country untaxed and stored in bond warehouses to be re-exported tax free
• ## A board of trade was set up to oversee this whole area

Question 18

What was the result of Pitt’s anti-smuggling measures?

Answer 18

There was an increase in the volume of legitimate trade, although, in the short term, revenue from taxation was introduced.

Question 19

Describe Adam Smith

Answer 19

• known as ‘the father of political economy’
• published the wealth of nations
• expounded the theory of free trade
• opposed the existing system of mercantilism
• Pitt was greatly influenced by his theories

Question 20

How did Pitt recoup the loss from the reduction of duties?

Answer 20

By introducing new indirect taxes. He put taxes on horses, coaches, windows, bricks, hats, playing cards, maid servants, man servants, ribbons and candles - all commodities that the wealthy and aspiring classes used

Question 21

What was the reeaction to Pitt’s decision to increase indirect taxes?

Answer 21

It was seen as ingenious by some and ridiculed by others. The window tax was poorly received as it was seen as a tax on lights and air and limited the development of the glass industry

Question 22

Where did pitt fall short on the foreign policy stage?

Answer 22

• Attempted to make a trade treaty with Ireland but was strongly opposed, as maunfacturors feared competition with Ireland, where wages were low
• The benefits of his treated with France were negated by the breakout of the French Revolution in 1789

Question 23

What was Pitt’s main success in terms of foreign policy?

Answer 23

He made a successful free trade treaty with France in 1786, whereby both countries reduce duties on imports from the other. However, the success was short-lived

Question 24

Describe the outcomes of Pitt’s reforms

Answer 24

• By 1793, annual government income had increased to £4,000,000 through the introduction of new taxes
• The value of imports and exports doubled
• Smuggling was hit hard as it was becoming unprofitable
• He succeeded in restoring national credit and public confidence
• The end result was that Britain was in a stronger position than France to deal with their eventual war in 1793

Question 25

What was a sinecure office?

Answer 25

Position with salary handed out to MPs to gain their support, but the that required little effort or time; the modern euivalent is a ‘cushy job’

Question 26

Why did Pitt need to reorganise the machinery of government?

Answer 26

• There were no set procedures for carrying out the day to day business of government, which led to confusion and inefficiency
• The roles of various ministers overlapped
• MPs took advantage of priviledges like free post
• There was corruption among ministers, who enriched themselves through public funds and accepting profitable sinecure offices and pensions.
• The government loan system was corrupt as ministers allowed their friends to raise loans at high rates of interest

Question 27

Describe Pitt’s administrative solutions

Answer 27

• abolished many of the sinecure offices by allowing them to lapse, so as to avoid provoking opposition
• He set an example by refusing the lucrative sinecure of Clerkship of the Pells, which was worth £3,000 a year
• Devised a new budgeting system where estimated of expenditure from each department were taken and parallel tax proposals were introduced in response; this is a system that is still in place today
• Created a consolidated fund at the BofE into which revenue from taxes was taken and government expenditure was taken
• Established an audit office overseen by independent experts to make sure that public expenditure was not marred with corruption
• He abolished the system of free post for MPs
• He set up a central stationery department to fund government departments instead of purchasing high cost goods from friendly suppliers
• Government loans were raised by public tender and so were gemuinely competitive
• Reorganised the cabinet and established the office of PM as being most important