The Age of George III
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During the French Wars, Pitt needed gold to pay and equip the army and navy and to pay European armies to fight the French in Europe. War led to fears of invasion, which resulted in financial panic. Investors removed money from the banks in gold leading to an internal drain on gold. This meant there was less gold available for the government to draw upon.
In 1797 the suspension of cash payments by the Bank of England put England on a paper money economy and kept the gold for the government. Britain was taken off the gold standard. The gold standard was resumed on 1 May 1821. Suspension of cash payments was a wise measure at the time, but as it continued, inflation followed - hence demands for higher wages and dearer bread as imports ceased. It did stop the panic and the drain on gold.
Also in 1797 Income Tax was imposed as a temporary measure, for the duration of the war. It was repealed in 1816. Pitt set income tax at 2d in the £1 on incomes over £60 pa, graduated up to 2/- in the £1 on incomes over £200 pa. Again, it was a wise measure because trade was restricted because of the war and government revenue from indirect taxation fell. The way in which Income Tax was implemented was changed by Addington during his ministry.
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Last modified 5 January, 2011
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