Pitt was a cautious reformer. In 1785, he unsuccessfully attempted to abolish thirty-six rotten boroughs and transfer their seats to London and the counties, failed to achieve economic union with Ireland and dropped the idea of economic union with America. These failures confirmed Pitt’s inability to lead the country in his own reforming terms because of the extent of opposition. Parliamentary reform was lost in the Commons by 248 votes to 174 and he abandoned economic union following opposition from British manufacturing and commercial interests. The framework of government within which Pitt operated was ‘administrative’, reacting to problems when they arose rather than initiating programmes of a fundamental reforming nature. He was primarily an administrative reformer responsible for a ‘national revival’ between 1783 and the early 1790s.
Restoring national finances
In 1783, government expenditure exceeded income by £10.8 million, largely because of the cost of the American War and inefficiency in collecting excise duties. Government had difficulty in raising loans and confidence in a recovery of national finances was low. Between 1783 and 1791, annual governmental revenue increased by almost £4 million of which half came from new taxes, reducing smuggling and fraud and by increasing the efficiency of collection. Pitt’s initial priority was to raise revenue and his first target was smuggling. It is difficult to estimate the effect smuggling had on national finances but perhaps a fifth of all imports was contraband. The finances of the East India Company were undermined by smuggled tea, which in the early 1780s amounted to between 3 and 4.5 million tons per year.
Pitt adopted a two-pronged approach. He introduced restrictive legislation to reduce the attractiveness of smuggling and extended the rights of search over suspect cargoes. An extended ‘Hovering Act’, for instance, allowed confiscation of certain types of vessel carrying contraband goods found at anchor or ‘hovering’ within four miles of the coast. Parallel to this was a massive reduction of duties. The 1784 Commutation Act reduced the duty on tea from 119 to a uniform 25 per cent and this was followed by reductions on wines, spirits and tobacco. The tightening up on revenue agencies and the transfer of more business to the excise department led to increased yields: 29 per cent on spirits, 63 per cent on wines and 39 per cent on tobacco by 1790. Pitt did not extinguish smuggling but he made it a far less profitable and far more risky activity.
The loss of revenue through reducing duties was recovered by the increased efficiency with which taxes were collected. Pitt was one of the most efficient tax-gatherers ever to govern England. His taxation policy was based on the prevailing view that all should bear a share but that the poor should not be overburdened. Luxury goods were consequently the major taxable items: horses, hackney carriages, gloves, hats, ribbons, candles, servants and hair powder plus a graduated increase in the tax on windows. Pitt’s taxation policy was sensible but could be both unpopular and misguided. The window tax may have held back the development of the glass industry. A projected tax on coal was withdrawn because of opposition and taxes on linen and cotton in 1784 had serious economic implications and were withdrawn. Pitt’s only real innovation was a tax on shops, introduced in 1785, but withdrawn in 1789 after widespread opposition and public disturbances in London.
In 1783, the National Debt stood at £238 million with interest charges amounting to about a quarter of government spending. Pitt wanted to reduce this by extending the ‘sinking fund’, a device where annual sums were set aside to pay off or reduce the National Debt. It had existed since 1716 but its value had been reduced by ministers raiding it for other purposes. Richard Price had argued in 1772 for a regularly supported fund and, as in many other areas of policy, Pitt was willing to use other people’s ideas and the reform of the sinking fund in 1786 was perhaps more important in restoring national confidence than in producing financial improvement. It was placed under the control of a board of six commissioners. The scheme worked well until the outbreak of war in 1793 by which time there was a £10 million reduction in the debt.
Offices, whether sinecures or not, were given as rewards for political services not on merit. Pitt wanted to reduce waste in government. Radical reform would have encountered widespread opposition from the entrenched power of patronage-mongers and consequently Pitt operated in a cautious manner. Sinecures were allowed to lapse on the death of their occupants. Most of the posts the public accounts commissioners recommended should be abolished in 1786 disappeared in the next twenty years. What had gone were ‘offices of profit’.
Efficient departmental management was gradually built up with greater Treasury control of public expenditure by the Treasury Commission of Audit created in 1785. The Board of Taxes was reinforced by transfers from the Treasury and the Excise Board. People with talent, like Richard Frewin at Customs, were promoted and encouraged to develop administrative policies on their own initiative. The creation of a central Stationery Office in 1787 secured economies in the supply of stationery to departments. Pitt tightened naval spending where he relied heavily on its Comptroller of the Navy Office Sir Charles Middleton, later Lord Barham, who was largely responsible for the creation of a navy capable of responding to the French challenge between 1793 and 1815.
Before 1787, there were 103 separate exchequer revenue accounts and revenue collectors forwarded funds to 68 different accounts. Under the Consolidated Fund Act of 1787, most revenue collected was paid into a single consolidated Treasury fund account. The exceptions were the Civil List and the land and malt taxes on which specific blocks of funded Exchequer bills were secured. This marked a major step forward in efficient administration and led to economies and reduction of confusion. Initially new taxes were accounted for separately but this was removed in 1797.
Financial and administration efficiency was paralleled by a commercial policy that encouraged growing trade. The value of imports doubled to £20 million between 1783 and 1790 and exports rose from £12.5 million in 1782 to over £20 by 1790. This was a major achievement. Economic recovery meant protecting British industries and trade and the United States was seen as a threat to British commercial supremacy. Pitt’s new Committee of Trade rejected the reduction of trade barriers and the Navigation Acts were maintained with vigour. In 1783, American shipping was excluded from the West Indian islands; trade with America for cheaper meat and fish via the French and Spanish islands was made illegal in 1787-1788. Pitt’s protectionist policy towards America trade was shown by the passage of the last Navigation Act in 1786. If America could be prevented from challenging Britain’s merchant shipping then, although there had been loss of political control, Britain could retain commercial domination. By 1787, British exports to America had returned to the levels achieved in the early 1770s and by the 1790s the tariffs acted only as a minor irritant. The outbreak of the French war led to the Jay Treaty of 1794 that opened certain markets to American shipping. The effects were dramatic. Britain’s exports to America more than doubled between 1793 and 1799 and by 1800, America was taking a quarter of British exports. This more liberal policy recognised the growing economic importance of the American market for exports and the dependence of Britain’s textile industry on imported cotton.
The immediate economic advantages of Canada were limited in the 1790s. Its furs, fish and timber were important but its scattered population did not offer a large market for British goods. Yet, relations with Canada were handled with care. An arena of Anglo-French conflict, it was only brought under the British Crown by conquest in 1760. In Quebec, there was still tension between English and French-speakers. Canada’s population had been substantially increased by the migration of many American loyalists north: some 25,000 settled in Nova Scotia and a further 20,000 in upper Quebec. The costs of administering the Canadian provinces of Quebec, Nova Scotia and New Brunswick were largely borne by the British government. Canada assumed greater importance after 1783 as a barrier to possible American expansion. The 1791 Canada Act, which radically recast the government of the province of Quebec, reflected an imprecise desire to give some self-determination to colonial development.
The loss of the American colonies focused the attention of government on India and the East, with their potentially large markets. Pitt had come to power because of the abortive Fox-North India Bill and the issue was quickly dealt with in his East India Act of 1784. The East-India Company kept its patronage but political and strategic control passed to a Board of Control made up of ministers of the Crown. Responsibility for Indian affairs passed to Henry Dundas in London and the Governor-General in India. Sinecures were suppressed and able recruits enlisted. Trade in the East improved under Pitt, though this was partly the result of ending tea smuggling.
There was an important commercial thread in ending Britain’s isolation in Europe after 1783. Negotiations were opened with all the leading courts of Europe for reciprocally lowered tariff duties. The Eden trade treaty with France, signed in September 1786, was the only real, though temporary, achievement of this policy. French wines entered Britain at the same rates as the Portuguese and, although opposition from manufacturers kept the silk market protected, France was opened to British goods through general tariff reductions of 10-15 per cent. Within three years, French manufacturers were complaining that the treaty was unfairly weighted in favour of British manufacturers. In reality, their complaint was a reflection of Britain’s competitiveness in the early stages of industrialisation.
Commercial considerations played a part in challenging French expansion into the Low Countries though Britain also wanted to stop France using Dutch overseas bases like Cape Town. Britain’s isolation was emphasised by the French alliance with the Dutch in 1785, which involved a reduction in the powers of the pro-English House of Orange. A successful Prussian invasion in 1787 revived Orange fortunes and was followed by a Triple Alliance between Prussia, the United Provinces and Britain. This ended Britain’s diplomatic isolation and enabled Britain successfully to exert her authority in the North Pacific in 1790 when Spain seized ships from a British trading base for furs and fish at Nootka Sound, off western Canada. Pitt was less successful in his support of Anglo-Prussian policy over Russian round Ochakov on the Black Sea. Demands that Russia return the area to the Ottoman Empire were resisted and Pitt abandoned his policy following large-scale opposition to his warlike stance in the House of Commons.
Pitt was an efficient administrator rather than an innovative minister. He improved existing systems of government and taxation, building on the work of previous governments. His approach was cautious and responsive to opposition. Historians frequently argue that Pitt was committed to free trade. This may be true but it did not divert him from the practicalities of politics. Diplomatic and commercial realities meant that his commitment to freer trade was always limited. Britain’s commercial success was built on protection and the move to freer trade resulted from British industry no longer needing protection as much as the intellectual attraction of the new system. The outbreak of war in 1793 drove the British government back to protection.
 The Exchequer dealt with national finances.
 The Civil List was the money paid by Parliament for the monarch’s personal support and for his household. It was introduced in the late-seventeenth century.
 Canada was originally a French colony (New France) but was conquered by British troops in 1759-1760. It proved an attractive destination for those American colonists (the loyalists) who had fought with the British during the American war.