The King knew where to turn. The City of London had invited him in and lit bonfires for him. On 7 January he asked them for a loan. ‘The City received his letter with great respect,’ Roger Morrice reported,
‘and on Wednesday sent commissioners of their own to the Prince ... The Prince mentioned no particular sum but it may be taken for granted the subscription will in a very few days’ time rise to £200,000.’3
James could not have done that. In his four years on the throne, he had never once raised money in the City. But James did not have supporters like Sir George Treby and Sir Robert Clayton, who, Roger Morrice reported, ‘by their interest and wisdom greatly facilitated this matter’. Afterwards, Morrice discovered that more than three-quarters of the loan had been raised through Dissenters. When William applied to the City again in May there was even talk of raising the new loan only from Dissenters, although that idea was abandoned. Once again, though, the money was raised without difficulty. By the time William next ran short of funds, however, his relations with the City were looking less secure. It was autumn, the time of the Lord Mayor’s Show, and City supporters were showing increasing anger at the Tory takeover. William’s advisers warned him that tact was in order. The loan was filled, but it provided only a short breathing-space. On 18 December, first anniversary of the day he rode into London, William ran out of money again. At a Treasury meeting at Kensington Palace, he ‘was greatly troubled and said he could no way pay off his seamen or army’. William knew what England was up against; he had experienced French power in the Dutch wars of the 1670s. French revenues were known to add up to something like £12m a year. Against that English receipts, even in the best years, never exceeded £2m – and that was in peacetime, when customs were swelled by healthy income from the merchant fleets. The King was reported to be ‘very much discomposed’.
Once again, the City bailed him out. Locke’s friend the Earl of Monmouth had already prepared loans through City contacts. At the meeting he unveiled them with a flourish, assuring William that the money would be paid into the Treasury by the weekend. To make quite certain the political point went home, he added that ‘this money was raised generally by some that were counted disaffected to his Government, and friends to a Commonwealth, for it was mostly Fanaticks and Wiggs money’.4
The message was that William could not survive without the City Whigs, but the King’s shift to the Tories the following spring took him ever further from them. Carmarthen summoned the Lord Mayor to listen to the next loan request, but it took intense lobbying from supporters like Treby (and pump-priming from Sir Robert Clayton) to get subscriptions under way. Two months later Carmarthen was forced to make his own way to the Guildhall, cap in hand, to beg more money from a stony-faced audience of Whig ‘Citizens’. ‘£100,000 will be raised,’ Roger Morrice commented, ‘but not very readily and in little parcels.’5 The accidental blowing up of the Government’s gunpowder warehouse at Hackney must have seemed to William like the final straw.
The costs of war were rising exponentially. Gunpowder, transport, growing armies, had all shifted warfare from chivalry into the realm of finance. There was new technology to pay for, both at sea and on land,
‘witness the new sort of bombs and unheard-of mortars, of seven to ten ton weight, with which our fleets standing two or three miles off at sea, can imitate God Almighty himself and rain fire and brimstone out of heaven, as it were, upon towns built on the firm land.’6
More elaborate tactics required lengthy training, rather than a hasty muster of peasants with pitchforks. The fortifications which engineers like Vauban had thrown up in Flanders cost fortunes – as did the extensive siegeworks needed to pull them down again. This was the continuation of a trend which had been distorting European politics for the best part of two hundred years: rising military costs placing power increasingly in the hands of those who had access to funds. Wars had once been won by valour. Now it was the country which could dig deepest into its pocket which was assured of victory.
As if to illustrate the trend, the current war had settled, by 1693, into an expensive and inconclusive pattern of manoeuvres in Flanders which rarely led to battles, of sieges raised and relieved, of costly fleets which for the most part failed to encounter each other at sea. Back in 1689 Thomas Papillon had been persuaded by William to take on the role of victualler to the navy. On 1 November 1693, four months after the Turkey fleet disaster, Papillon met William at Kensington Palace to give him the unwelcome news that his office had run out of money. Papillon had long ago been forced to start buying on credit, and what credit the office had commanded was now gone.
It seemed as if defeat was unavoidable in this new warfare of the balance-book. Annual peacetime expenditure in England had been just under £2m. By October 1690 it was already over £4m, ‘the vastest sum that ever a King of England had asked of his people’.7 By 1696 William would be spending £5.5m, an unheard of amount for an English parliament to dispense. Revenues from the customs, meanwhile, were falling – the loss of the Turkey fleet spelled ruin not only for investors but for the Government. There was no more to be screwed out of taxation. ‘The taxes were grown so heavy,’ wrote Edmund Bohun, who had returned to tend his estates in Suffolk,
‘[and] the tenants paid their rents so ill ... that I became very melancholy, and feared I should be ruined by it ... I lived in Dale Hall in great poverty and distress; being loth to increase my debt and scarce able to subsist ... The taxes continued high, yea increased, in the next year. So that I fell into such poverty that it was a shame to me.’8*
The Government raised funds wherever it could. Excise was slapped on beer, malt, leather, hides, soap, candles – ‘even’, the Earl of Ailesbury wrote in shock, ‘dice and cards!’9 But the Government’s problems were compounded by overestimating tax revenues. Vast deficits on their funds created yet more need for money. To increase taxes further was becoming impossible. To run a war by purchasing supplies on credit was impossible. The Government had to look elsewhere for the huge funds it needed in the struggle against Louis XIV.
It was at this point that William began to woo Whigs back into his Ministry. The switch was credited to a remarkable political survivor, a man whose career had seemed dead only four years earlier. After the Revolution the Earl of Sunderland had been spotted praying fervently in the French church at Utrecht. By 1690 he had talked his way back into England, and two years later William was taking his advice ‘behind the curtain’. That advice was to drop the Tories who, Sunderland warned, would as likely as not abandon him in time of danger. Nottingham was sacked in November 1693, a scapegoat for the loss of the Turkey fleet. The King ‘must employ such as would advance money,’10 William had remarked back in 1690; now he would do exactly that. All over the country Tories were removed from their places on commissions of peace. John Somers, a friend of John Locke, became Lord Keeper. The Earl of Shrewsbury became Secretary of State and was elevated to a Dukedom. Thomas Wharton, reformed rake and resident of Soho Square, organised the Whigs in Parliament, and Edward Russell became First Lord of the Admiralty while Charles Montagu, a friend of Newton, became Chancellor of the Exchequer. The group known as the Whig Junto was in place.
The greatest task facing them was to resolve this crisis in war finance. Their solution would change forever the way governments worked. It would be less a matter of strategy, however, than a series of desperate improvisations carried out on the brink of financial ruin. Those improvisations did save the nation – but only at a cost. For the revolution in finance would drag the state itself into the new world of risk.
All nations were struggling with the costs of war. The French King’s credit was so poor in December 1689 that Paris bankers were said to have ‘buried their money’11 rather than lend it him. By contrast, the Whig Government in early 1694 had two advantages. The City’s leading financiers were on their side, and the loans they had made immediately after the Revolution had revealed to them a fundamental truth: that war at 8 per cent
was extremely good business.
So long as the interest was paid. In the past this had been the check to substantial investment in Government. Charles II’s ‘Stop of the Exchequer’ was a notorious case study in royal untrustworthiness. It had ruined the City’s leading banker, Edward Backwell, and underlined the Dutch maxim that finance could never prosper under an arbitrary monarch. There was no longer such a monarch in England, however. It was Parliament who now voted through loans and guaranteed to pay the interest upon them. And that shift was the first breakthrough in Government finance, for from now on a loan to Government was no longer a loan to an individual – the King – on whose doubtful character the creditor must then depend. It was founded on the credit of Parliament. ‘Public credit’, as Daniel Defoe later put it, ‘is national, not personal, so it depends on no thing or person, no man or body of men, but upon the Government.’12 The result was vastly to enhance the credit-worthiness of the state. Not only did Parliament and the nation answer for it, but loans raised on this basis could be managed as a long-term part of the finances, rather than as a series of expensive and ad hoc short-term loans. The House of Commons could envisage a ‘fund of perpetual interest’. The national debt had come into being.*
With such security, City financiers could start to construct risk-based financial institutions on a scale previously impossible. ‘It is much to be wondered at,’ Nicholas Barbon had written in his Discourse of Trade, ‘that since the City of London is the largest, richest and chiefest City in the world, for trade ... the merchant [sic] and traders of London have not long before this time addressed themselves to the Government for the establishing of a public bank.’ Various proposals for an English national bank had, in fact, been drafted, but before the Revolution there was always a serious objection. ‘A public bank cannot be safe in a monarchy’13 – that was so commonplace a notion that few bothered to challenge it, while Tories reversed this into the opposite objection: ‘they never met with banks ... anywhere but only in Republics’.14 The objection against absolute monarchy was now removed, but those who came forward in 1694 with proposals for a Bank of England certainly had a ‘republican’ air about them. Michael Godfrey was brother to Sir Edmund Berry Godfrey, the magistrate murdered during the Popish Plot scare. Michael and his brother Benjamin had joined Thomas Papillon, Patience Ward and John Houblon in signing the 1674 Scheme of Trade which marked the emergence of an early Whig grouping in the City. And it was Michael Godfrey, in partnership with the Scottish entrepreneur William Paterson, who presented the 1694 scheme for a new Bank of England. They proposed a fund of £1.2m, to be made available to the Government immediately at 8 per cent, the loan to be secured on the new institution of parliamentary credit. That was the immediate solution for the war finance crisis. In the longer term, though, Godfrey and Paterson foresaw all the advantages which a national bank would bring: Government debt could be managed; payment by bill of exchange could reduce bullion outflow and facilitate trade, while interest rates might at last start to fall, perhaps even to the Dutch figure of 3 per cent (a rate eventually reached in 1749).
On Thursday 21 June, in glorious summer weather, subscriptions for the new Bank were opened at Mercer’s Hall, a stone’s throw from Threadneedle Street. The Bank’s Commissioners sat from 8am to noon, and from 3 to 8 in the afternoon. There was no shortage of subscribers. ‘Tuesday last,’ wrote John Locke, ‘I went to see our friend J[ohn] F[reke]. Upon discourse with him he told me he had subscribed £300, which made me subscribe £500 ... Last night the subscriptions amounted to £1,100,000 and tonight I suppose they are full.’15 They were. Just ten days after the lists were opened, the Bank of England had reached its target. On Tuesday 10 July all those who had subscribed £500 or more met at Mercer’s Hall to elect governors. The first Director was John Houblon, who would hold meetings at his home in Threadneedle Street. Three other Houblons joined the board of governors, as did three others of Huguenot origin. Michael Godfrey was Deputy Governor. Fifteen per cent of Bank of England subscriptions would eventually come from Huguenot families, with many Dissenters among the rest. The City Whigs had swallowed their disappointment over the London charter of 1690. Once again they had come to William’s rescue.
The Bank of England did not emerge as a fully-formed modern state Bank. Its foundation, however, was the key step in London’s development as a financial centre. Increasingly the Bank would be used to manage the Government’s long-term debt. As the country’s financial position worsened in the next two years, with exchequer tallies discounted 30 per cent, and the Bank’s own notes down 16 per cent, it was the Bank of England which stepped in to rescue deficient tax funds with new loans, eventually to be converted into long-term debt. It would be the Bank of England which made Government debt liquid, and therefore desirable. Its foundation was a fundamental change in the way governments paid for their operations.
It was not the only innovation of 1694, however, as the new ministers dragged the state ever further into the world of risk. They also began a series of imaginative efforts to persuade the British public to invest in parliamentary credit. The forerunner was a state tontine in 1693,* only a partial success although Robert Clayton and George Treby reliably came forward to open the subscriptions. The next money-raising project, however, capitalised on that start. As if to underline concern about the path the Government was taking, its initiator had once been Groom Porter. He was also a speculator and property developer. That same year, 1694, John Evelyn visited ‘the building beginning near St Giles’s where seven streets make a star [Seven Dials] ... said to be built by Mr Neal’.16 (Neal Street and Neal’s Yard are named after their developer.) Thomas Neale had already run a skilfully publicised private lottery to capitalise on the gambling craze. Daniel Defoe was one of the business associates he used to manage it, and it was in Freeman’s Yard, where Defoe lived, that it reached its climax in November 1693.
‘In the view of a multitude of spectators; the lots were drawn out of 2 boxes by two blue coat hospital boys, and after open’d view’d, and read by the governors, and then published aloud whither blank or prize.’17
John Evelyn’s coachman won £40.
The scheme which Neale presented to the new Government in 1694 was on a larger scale altogether. It was a true National Lottery, organised on behalf of the state, which Neale, promoting it with characteristic flair, called The Million Adventure. Tickets would be sold for £10 each. ‘Blanks’ repaid nominal interest of £1 a year for 16 years, although without return of capital. The jackpot, however, was to draw one of the 2,500 special tickets which offered a range of dividends up to £1,000 a year.
£10 was beyond most pockets, but London was fast catching up with Amsterdam in business acumen. As soon as the Million Adventure was announced, syndicates were formed and tickets subdivided. Tickets were prized investments. Thomas Heath, a Fleet Street silkman, advertised four guineas reward for the ‘little wooden box’ he dropped from a hackney carriage which contained ‘3 tickets of the Million Lottery, number 93M271, 93M272, 58M587’.18 A market even emerged in insurance against blanks – ‘there is hardly a prentice boy or a waiter to a tavern or coffee house in the neighbourhood of [Exchange] Alley that is not a sporter [in this]’,19 wrote one startled observer. When the draws were made in autumn 1694, Neale staggered them over several weeks to maintain the buzz of interest about the Adventure. The lottery drew in investors from every corner of society, from City businessmen to tradesmen’s clubs, aristocrats to gamesters. The jackpot was eventually drawn not by any nobleman but by a syndicate of Huguenot refugees.
That final draw was made on St Cecilia’s Day 1694. Henry Purcell had written a Te Deum and Jubilate, to be performed in St Bride’s, Fleet Street, the scene of this year’s celebration. The general mood was optimistic for the Government, with improving finances and better war news. A British fleet had taken up permanent station in the Mediterranean. Raids had been carried out on the French coast. Huy had been recaptured, while Victor Amadeus of Savoy had
achieved dramatic victories against the French. There was good domestic news for the Government as well, with the foiling of a Jacobite plot in Lancashire. But only the next day would come a setback: the death of Archbishop Tillotson after a stroke. And his would not be the only loss that winter. On 20 December Queen Mary retired to bed complaining of a headache. Doctors diagnosed measles. They were wrong. The Queen had contracted smallpox.
John Evelyn had caught smallpox in Geneva in 1646. He recorded the frightening first stage of the infection:
‘Extremely weary, & complaining of my head ... went immediately [to bed] being so heavy with pain & drowsiness, that I would not stay to have the sheets changed ... Now no more able to hold up my head ... imagining that my very eyes would have dropped out, & this night felt such a stinging all about me that I could not sleep.’20
The Last Revolution Page 37
