Politics and fiscal policy 1837-1846

Between 1836 and 1838, about 63 banks crashed in England. Little money was available for investment leading to increasing levels of unemployment at a time of high food prices. Much bullion had been invested in America where good returns could be made. Federal governments borrowed and Britain invested, then in 1837, President Jackson refused to re-charter the Bank of the United States, and caused a financial panic in America. In addition, the 1838 harvest was poor so bullion was exported to buy food. Industry suffered; there was massive unemployment and higher food prices. By the later 1830s, home demand, together with available export markets, was insufficient to absorb Britain’s manufactured output. By 1837 there was depression, not serious at first, but conditions worsened[1].

A depressed economy

Poor harvests resulted in heavy grain imports, especially in 1838 and 1839. This did little to reduce the high price of food and depressed home demand. Disillusion with foreign borrowers in the United States and elsewhere discouraged investment abroad reducing British exports. Prices had begun to fall in the cotton industry as early as 1833 when signs that over-production first became obvious. Mill owners, committed to costly plant and equipment, could not afford to limit output to keep prices up and capacity actually increased. By 1841-2, mill owners in Belgium, Saxony and Prussia, heavy buyers of British yarn, reduced their consumption. British producers pumped more and more goods into foreign markets in an effort to restore earnings with catastrophic effects on cotton prices. Similar trends were evident in other industries. By 1842, wool was in deep depression.

The coal and iron industries faced similar problems. Increased demand for coal in the early 1830s and rising coal prices stimulated capital investment. This too led to over-production. Between 1836 and 1843, coal output rose by between sixty and seventy per cent while demand increased by only thirty per cent. Attempts by colliery owners to control output using quotas failed and the industry slumped. The iron industry followed the same pattern. Output grew in South Wales and Staffordshire but most dramatically in Scotland. By 1840 the industry was increasingly unprofitable. The speculative boom in railways and shipbuilding, a major source of employment after 1836, was largely exhausted by 1840.

The problem faced by the manufacturing economy in the late 1830s was largely one of over-production that home that export markets were unable to absorb. The interconnected nature of the economy reinforced this depressed state. Coal depended on iron; iron on demand for industrial expansion at home and abroad; demand depended on an ability and willingness to invest and upon earnings. Depression in one area impacted on others. Britain’s trading policy did not help this situation. By 1840, tariffs on imports made up nearly half of total revenue. As the price of Britain’s exports fell faster than those of imports so the relative cost of imported raw materials and food increased. Between 1836 and 1840, imports stood at over £5 million a year more than exports. Far from protecting the British economy against foreign competition tariff policy depressed the workers’ capacity to consume, their incentive to work and this was reflected in the cost of the production of exports.

The Whigs and the depression

The weakness of the Whig government was obvious by the beginning of 1841. By then, the Whigs had alienated various sections of the electorate. Radical support evaporated with the cooling of Whig reforming spirit. Among the propertied classes, there was concern about the Whigs’ inability to prevent the riots and disorder of the late 1830s. The worsening economic crisis led to serious social unrest with the emergence of Chartism and in late 1839 led to confrontation with government at Newport. There was also among the electorate at large, and especially the newly enfranchised middle classes, growing doubts about the fiscal and administrative capacities of the Whigs. As the economic crisis deepened, the Whig budget deficit mounted. There were deficits in 1839 and 1840 and by 1841 it had risen to £6 with no solution in sight. The electoral alliance since 1835 with O’Connell and the Irish party was doubly unpopular for the Whigs and, in the eyes of some they were damned for consorting with both Irishmen and Catholics.

By 1840, constitutional reform may have been exhausted but changing fiscal policy was a fertile area to give the Whigs fresh impetus and rouse flagging enthusiasm. Charles Poulett Thompson, a long-term supporter of tariff reform wrote from Canada to Francis Baring, the Whig Chancellor of the Exchequer in May 1841 that fiscal policy ‘…does not meddle with religious prejudice; it does not relate to Ireland; it does not touch on any of the theoretical questions of government on which parties have so long been involved. It is a new flag to fight under.’

The Whigs relied heavily on indirect taxation that was vulnerable to economic slump. In 1840, Baring, faced with a projected deficit of £2 million reversed the trend towards ‘cheap government’ and increased Customs and Excise duties by 5 per cent and 10 per cent on Assessed Taxes[2]. However, this did not relieve the slide in the budgetary deficit. Faced with a bankrupt fiscal policy, the Whigs suddenly became coverts to free trade and tariff reform. Francis Baring had contemplated the resumption of the Peel-Huskisson economic reforms of the late 1820s almost as soon as he became Chancellor in 1839. There were three main reasons why this appeared to be a shrewd political move. First, it was recognised that one way to stimulate commercial growth was to reduce the level of indirect taxation. Secondly, tariff reform was bound to please a wide range of manufacturing interests and Corn Law reform had been an issue in middle class (ands not only radical) circle for some years. Finally, radical activity had shifted away from constitutional issues after the threats to public order posed by Chartism and was now fixed on the issue of tariff reform. The appointment of Joseph Hume’s Select Committee on Import Duties in May 1840 was the vehicle to do this. Whigs support for tariff reform might lead to a revival of Radical support for the government.

Baring was able to persuade the leading Whigs to swallow a low fixed duty on corn, for reasons of political pragmatism if not principle. Some doubters may have been won over by Edward Ellice’s prediction that ‘Sir R. Peel will move on it, if we do not’. The result was that Baring’ free trade budget was the major measure of the 1841 session. It embraced both a general tariff reform and a further reduction in the Corn Laws. He suggested raising the duty on imported colonial timber from 10s to 20s per load (50 cubic feet), but lowering it on foreign timber by 5s to 50s per load. This would equalise somewhat the Baltic and the hitherto more favoured Canadian timber imports. Secondly, he proposed retaining the duty on colonial sugar imports at 24s per hundredweight while reducing it dramatically on foreign sugar imports from 63s to 36s per hundredweight. Again the effect would be to equalise imports. Brazil would be able to compete more readily with the traditional colonial suppliers in the West Indies. Even with the revision of the sugar and timber duties, there would still be a deficit of some $400,000. Baring aimed to remove this by abolishing the sliding scale (as established by the Corn Law of 1828) and replacing it with a moderate fixed duty on corn, proposed at 4s per quarter.

The budget offered the Conservatives a number of targets for the proposed budget hit simultaneously at the shipping, West Indian colonial timber and agricultural interests. They decided to focus on the issue of the sugar duties that the Manchester Guardian noted on 12^th May 1841 as a ‘crafty move’ since it allowed the Conservatives to bring a moral tone to their opposition. They could argue that the reduction in foreign sugar import duties might encourage, not merely the continuance but the expansion of slavery in countries such as Brazil and Cuba. This enabled to Conservatives to gain the support of powerful anti-slavery groups outside parliament and gain the moral high ground. The debate began on the Commons on 7^th May and lasted eight evenings. In addition to their criticisms of the sugar duties, the Conservatives poured scorn on the perilous state of the Whigs’ fiscal position. The result was a Whig defeat by thirty-six votes, followed by defeat on a vote of no confidence in June that precipitated the general election.

It would be unfair to suggest that Baring’s attempt to fiscal reform was the cause of the Whigs’ electoral defeat in 1841 but for many people it characterised the bankruptcy of the administration. Many manufacturers were not convinced by the sincerity of the Whig conversion to tariff reform. As middle class interests swung from political to commercial reform, Peel seemed a more responsible and credible leader than members of the Whig aristocracy.

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[1] R.C.O. Matthews A Study in Trade-Cycle History: Economic Fluctuations in Great Britain 1833-1842, Cambridge, Mass., 1967 remains a valuable study of the depression in the late 1830s and early 1840s.

[2] Assessed Taxes aimed to tap the income of the rich by taxing signs of conspicuous spending and display such as male servants, windows, carriages and pleasure horses.

Establishing the government

There is little evidence of Peel’s attempts in the 1830s to broaden the base of the MPs elected since they were largely from the ‘Tory’ wing of the party. They wanted to defend their Protestant religion and their ways of life, had no interest in change and little sympathy for reform. Above all many were ardent Protectionists. Tory votes had been cast in favour of a party most likely to protect landowners and defend the Established Church. Theirs was a far narrower perspective than Peel’s. He had used the revived Conservative Party as a means to achieve power but increasingly adopted policies out of sympathy with the majority of his MPs. He saw himself increasingly as an executive Prime Minister rather than a party leader. Public duty on behalf of the monarch and in the interests of the nation was his first imperative; party came a poor second. The 1841 election was a triumph for Protectionist Toryism[1] not Peelite Conservatism. The party did best in the English and Welsh counties and in those boroughs that had been changed least by the 1832 Reform Act. This proved a problem particularly as the election had been fought largely on the Protection question. The route from the electoral triumph of 1841 to the political disaster of 1846 was, in retrospect, a logical one.

The new parliament met on 19^th August. Lord Melbourne and the Whigs were still in office, despite the recent electoral defeat.  In the British Constitution, the prime minister is not chosen by the electorate but appointed by the monarch. In practice, this means that the monarch needs to take account of whether or not a particular party commands majority support in the House of Commons. The development of a more defined party political system in the 1830s restricted the monarch’s choice. However, the 1841 election was unique in the way it converted a Commons majority for the governing party into a majority for the opposition. This had not occurred before and was not to happen again until 1874.

In this unprecedented situation, the Conservatives were obliged to carry an amendment to the Royal Address, expressing lack of confidence in the ministers, before the Whigs could actually resign. Melbourne advised the queen that he and his ministers could no longer conduct and business of government. The queen, who was now guided by Prince Albert, made no difficulty about the bedchamber, and on 30^th August Peel at last became prime minister upon his own terms. Or so it seemed at the time. But in fact, for all his attempts to modernise the party and to broaden its appeal to the industrious middle classes, he was more dependent than ever upon the country squires. Analysis of the borough seats shows that Peel’s success was concentrated in the small English boroughs, with fewer than 1000 electors, and that in the large English boroughs, with more than 2000 electors, he had actually won two fewer seats (15 to his opponents’ 43) than in 1837. The triumph and the tragedy of the ministry of 1841-6 were written into the results.

Peel’s ministers

Peel established a government based on administrative effectiveness. Sir James Graham[2] and Viscount Stanley[3], who had defected from the Whigs in 1834, became respectively Home Secretary and Secretary for War and the Colonies. Henry Goulburn[4] became Chancellor of the Exchequer and the earl of Ripon[5], a close colleague from the 1820s, President of the Board of Trade (with William Gladstone[6] as Ripon’s deputy succeeding him in 1843). The Earl of Aberdeen[7] returned to the Foreign Office, a post he had held in Wellington’s government in the late 1820s. Wellington himself was Minister without Portfolio and his immense personal prestige made him indispensable to the government.

Graham acted as his lieutenant, Peel himself took responsibility for explaining Aberdeen’s conciliatory conduct of foreign affairs to the House of Commons, and Goulburn and Ripon, survivors of the governments of the 1820s, both turned, by long habit, to Peel for advice. Stanley, who took the colonies, was more independent but went to the House of Lords in 1844. Ellenborough[8] became president of the Board of Control, and then, a month later, governor-general of India. The forward policy that he adopted towards Afghanistan and China, the annexation of Sind and the conquest of Gwalior were not much to Peel’s taste. Among the less-effectives, Lord Lyndhurst and Sir Edward Knatchbull (paymaster-general) represented the Ultras, as they had in 1835. The Duke of Buckingham, the leading Protectionist, was made Lord Privy Seal, Peel’s only concession to party feeling and calculated to appeal to the agricultural interest. The striking feature of Peel’s Cabinet was that it was overwhelmingly aristocratic: of the 14 Cabinet ministers, eight were peers, Stanley was the heir to an earldom and four were baronets. Henry Goulbourn was the only untitled member of the Cabinet and he had aristocratic connections through his mother and his wife.

Peel introduced talented members of the Conservative party into the lower levels of government. The most important proved to be Lord Lincoln, Sidney Herbert and William Gladstone, all of whom had been given their first brief taste of office in 1834-5. In addition to them, newcomers such as Lord Dalhousie, Lord Canning and Lord Eliot were given junior office. Gladstone was the first to make the Cabinet in 1843 but Dalhousie, Herbert and Lincoln achieved this distinction in 1845. Peel’s relationship with these protégés was far warmer than his relation to his party which was rather cold and remote. Like William Pitt in the 1790s, Peel found it easier to relax with those he sought to train for future high office and they repaid him by being devoted to their political mentor.

Peel’s as ‘control freak’

The most important characteristic of Peel’s leadership was his desire to control what was being done in every department of state. Peel found it difficult to delegate responsibility to others and this placed him under considerable personal pressure. He was what is today called a ‘workaholic’. This was particularly the case with the Exchequer and, although Goulbourn was nominally Chancellor in reality it was Peel who devised the budgets and presented them to parliament. Irish affairs also occupied a good deal of Peel’s time and he worked closely with Sir James Graham, the relevant ministers on this area. Peel exercised close supervision over foreign policy often amending drafts of dispatches before they were sent to British ambassadors abroad. Aberdeen was a somewhat pacific and conciliatory Foreign Secretary and Peel sometimes found it necessary to counter this position. He was highly suspicious of French intentions and acted decisively when there were calls for increased spending on the navy and coastal defences in the summer of 1845. Peel’s burdens as Leader of the House of Commons were far heavier than they might have been because many senior ministers sat in the Lords and he sometimes spent eight hours a day in the Commons when Parliament was sitting.

This excessive workload took its toll. As the end of the 1842 session, Peel found himself under considerable physical pressure. By the time he left office in 1846, he confided to Graham and Gladstone that he was physically exhausted and would have found it difficult to continue much longer anyway. Since Peel made this statement after he had left government, it may well not reflect his intentions when he was in power. However, there is little doubt that his physical resources were being exhausted by the feelings of frustration at the hostility displayed towards him by his own party. This may help to explain why, after 1846, Peel decided never to take office again.

Peel and the Queen

Victoria’s attachment to the Whigs and especially to Lord Melbourne could have been a major problem for Peel. However, the influence of Prince Albert, who had married Victoria in 1840, soon enabled Peel to establish a far more cordial relationship with the Crown that could have been anticipated in the aftermath of the Bedchamber crisis. Peel and the much younger Prince Albert shared the same high ideals about the conduct of government and about the need for an impartial constitutional monarchy.

In the event, there was no second bedchamber crisis and when Peel’s government was formed, three of the most senior Whig ladies retired voluntarily. Under Albert’s influence, Melbourne’s influence soon diminished as he took on the role of his wife’s adviser and in effect private secretary. The Queen was pleased with Peel’s suggestion that her husband should chair the Royal Commission on fine arts, an opportunity for him to get acquainted with many of the leading figures in British public life and there is ample evidence of the growing personal attachment between the Prime Minister and the royal couple. It was Peel, for example who recommended Osborne House on the Isle of Wight as a suitable royal retreat not too distant from London.

Peel recognised that a constitutional monarchy, popular and respected by both the people and politicians of all parties, still had an important role to play in the British system of government. The monarch, once he or she had reigned for several years had a permanence and experience that ministers did not have. For Peel, the presence of an experienced constitutional monarch was essential for the true interests of the country because she provided ‘so much ballast keeping the vessel of the State steady on her course, counteracting the levity of popular ministers, of orators forced by oratory into public councils, the blast of Democratic passions, the groundswell of discontent’.

His view of constitutional monarchy reinforced Peel’s ‘executive’ approach to government. He saw himself as the servant of the Crown, devoted to furthering the interests of the whole nation rather than as the agent of a partisan majority in the Commons. This gave him a sense of statesmanlike disdain, a determination to pursue an independent course for the sake of the country even if it made him unpopular with his own party. This was to pose a real problem for Peel and his reluctance to allow his policies in government to be shaped by the interests and prejudices of the Conservative party despite owing his position to their support in the Commons was to have disastrous consequences in 1845-6. Peel as a professional administrator found himself increasingly impatient with what he saw as the amateurish and ignorant nature of the back-bench Conservatives on whose votes he relied. What is surprising is not that Peel and many in his party parted company in 1846, but that it took so long for this to occur.

Peel’s objectives

Peel’s first objective was to restore the authority of government. Throughout the 1830s, the Whigs (as he saw it) had allowed their policies to be suggested to them and their measures to be amended, by their Radical and Irish supporters. This was dangerous. Ministers should be seen to be in charge. It was imperative to put the political pyramid back the right way up again. Legislation should be prepared by ministers, with deliberation. Considered measures should then be respected as the work of professionals and they should be seen to pass without amendment. Peel would exercise power upon his own ‘conception of public duty’ and he took pride in never having proposed anything which he had not carried. Peel recognised that the major problem facing the nation was economic and his priority was the need to make the country debt-free and affluent. The focus of his administration before the Corn Law crisis was on fiscal and economic reform. A prosperous country, he believed, was one where social distress and disorder would be reduced.

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[1] Protectionist Tories argued for continuing the Corn Laws to protect British farming.

[2] J. T. Ward Sir James Graham, 1967 and A. B. Erickson The public career of Sir James Graham, 1952 provide complementary biographical studies. A. P. Donajgrodzki ‘Sir James Graham at the home office’, Historical Journal, volume 20 (1977), pages 97-120 is a useful article.

[3] W. D. Jones Lord Derby and Victorian conservatism, 1956 is a useful study but Angus Hawkins The Unknown Prime Minister, two volumes, Oxford University Press, 2007, 2008 is now the definitive work on Derby

[4] Brian Jenkins Henry Goulburn 1784-1856: A Political Biography, Liverpool University Press, 1996, pages 264-336 covers 1841-46. This is an important biography that shows just how important Goulburn was, as Peel’s lifelong friend in the revival of the Conservative in the 1830s and as Chancellor of the Exchequer from 1841-1846.

[5] W.D. Jones Prosperity Robinson: The Life of Viscount Goderich 1782-1859, Macmillan, 1967 is the only modern biography of an individual who was Chancellor of the Exchequer and briefly Prime Minister in 1827-1828, Viscount Goderich and then Earl of Ripon, but who is now largely forgotten. When he died, The Times asked ‘Who was Lord Ripon? What did he do?’

[6] There are many books on Gladstone: Richard Shannon Gladstone: volume one 1809-1865, Hamish Hamilton, 1983, pages 112-184 and H.C.G. Matthews Gladstone 1809-1874, Oxford University Press, 1986, pages 59-103 are the best place to start for Gladstone and Peel.

[7] Muriel E. Chamberlain Lord Aberdeen: A Political Biography, Longman, 1983, pages 297-379 covers his role as Foreign Secretary in Peel’s government.

[8] Albert H. Imlah Lord Ellenborough: A Biography of Edward Law, Earl of Ellenborough, Governor-General of India, Cambridge, 1939 is the only available biography.