War on the Home Front: living in a wartime economy 1792-1815

Painting

The Morning After the Battle of Waterloo by John Heaviside Clark, 1816

On 18 June 1815, a coalition under Wellington, consisting of troops from the United Kingdom, the Netherlands, Belgium, Hanover, Brunswick, and Nassau, combined with a Prussian army under Blücher to meet and defeat Napoleon’s army at Waterloo.  This victory, while not immediately ending the war, effectively put an end to almost a quarter of a century of continuous warfare between England and France.  By the end of the Napoleonic Wars, the national debt of England stood at £848,000,000, almost 240% of GDP.  How, with a population only about half that of France, was the United Kingdom able to finance 23 years of worldwide war and how did it affect the British economy and the average citizen?

Financing the Wars

As 1792 ended, the British economy already was responding to the challenges caused by previous war spending.  Unlike America, where the printing of large quantities of paper money during the Revolutionary War led to hyperinflation, an undermining of public confidence, and almost brought the American war effort to a halt,  England was able to secure loans at a lower interest rate than either France or Spain.  (Dickinson, 1998)  These lower interest rates, combined with Britain’s industrial manufacturing output, allowed the United Kingdom to cut its national debt from 156% of GDP just after the end of the American Revolution to 123% of GDP by 1792.  (Chantrill, 2015)

On 1 February 1793, the French National Convention declared war on Great Britain.  Within a month, the Convention had prohibited importation of large classes of British goods, and in October it banned all British manufactured goods; meanwhile, the British side adopted a policy of blockading the coast of France to shut off France’s ability to generate revenue for the treasury.

Painting

Nelson’s Blockading Squadron at Cadiz 1797 by Thomas Buttersworth

With 16 million people, Britain’s population was barely half the size of France with 30 million, and just as today, taxes made up a significant part of the government’s annual income.  An organized system of smuggling finished products into the continent undermined French efforts to ruin the British economy by cutting off markets entirely.  However, diversion of the output of Britain’s well-organized business sector into products the military needed, reduction of trade caused by French privateers, and American actions to cut off trade with both parties, resulted in a diminished income for the Crown.

Throughout the 18th Century, the British government had traditionally raised its revenue from several sources: a land tax (4 shillings in the pound), excise taxes on items of common consumption.  Customs duties on imported items (in 1759 the rate was 25%), and loans added to the public debt.  When war broke out with France in 1793, the government initially funded its war effort by taking out more loans – 90% of its expenditures between 1793 and 1798 were from loans, thus doubling its level of indebtedness by the end of that period.

Color engraving of the Bank of England during the Regency Era; Supplied by The Public Catalogue Foundation

Bank of England during the Regency Era; Supplied by The Public Catalogue Foundation

A turning point in war funding occurred in 1797 when the British government suspended specie payments.  Up until then, Britain had been on the gold standard and claims against the Bank of England could be met by withdrawing gold coins or bullion.  By stopping specie payment, the government was able to get more loans from the Bank of England by issuing more paper money.  As the war continued and became increasingly expensive the Crown began to raise taxes, such as the so-called “assessed taxes” imposed on many luxury goods (houses, carriages, servants, horses, plate).  These increased so often and applied to more and more items (increasingly on common consumer goods) that it was said of the government that “Wherever you see an object, tax it!”  (The Liberty Fund, 2015)

Not only did Britain finance its own war effort but it also gave very large contributions to the other monarchies of Europe to encourage them to keep fighting the French republicans.  Later, during the Napoleonic wars, British subsidies that paid for a large proportion of the Austrian and Russian soldiers, peaking at about 450,000 in 1813, helped to offset the French numerical advantage in terms of soldiers.  (Kennedy, 1987)  These subsidies – colloquially referred to as the “Golden Cavalry of St. George” due to the image of Saint George, the patron saint of England, on the British golden guinea coin, – were of significant size.  One example is the £1,500,000 (£273,000,000 adjusted for inflation to today’s value) paid to Austria to commit troops to the campaign against the French in the Netherlands in 1793, an expedition to which the British could supply few men.  (Harvey, 2006)  These foreign subsidies placed added demands on English finance and did much to help increase the National Debt throughout this period.

Painting of William Pitt the Younger; Supplied by The Public Catalogue Foundation

William Pitt the Younger; Supplied by The Public Catalogue Foundation

A second turning point came in 1799 when Prime Minister William Pitt the Younger, in his budget of December 1798, introduced an income tax.  The tax, designated to pay for weapons and equipment for the French Revolutionary War as well as to fund these foreign subsidies, was a graduated (progressive) income tax.  On incomes less than 60 pounds it was zero, over 60 pounds (£5,641 as of 2015) (Clark, 2015) it was 2 pence in the pound (1/120), and rose to a maximum of 2 shillings in the pound (10%) for incomes over 200 pounds.  By the end of the war, the British government was raising 80% of its revenue from the new income and land taxes.

Pitt’s income tax was levied from 1799 to 1802, when Henry Addington abolished it during the Peace of Amiens.  Addington had taken over as prime minister in 1801, after Pitt’s resignation over Catholic Emancipation.  Addington reintroduced the income tax in 1803 when hostilities with France recommenced, but abolished in 1816, one year after the Battle of Waterloo.

Thanks to these financial moves undertaken by the British government, combined with Britain’s strong industrial and trade base, although the national debt soared to well over 2.5 times GDP, investors, who bought up the British government bonds, never lost faith in the British economy or the government’s ability to repay their investments.

Effects on the Economy

We know from experience here in the United States, that increasing national debt loads can sometimes lead to inflation and weakness in the economy.  How did this increase in Britain’s national debt, to almost 2.5 times GDP, affect the economy of England and the lives of the British people, during the war?

After 1792, the progress of inflation accelerated in an unparalleled degree due to the state of war resulting from the French revolution.  A rise of prices continued throughout the ensuing twenty years, eventually reaching greater than 60 per cent above those of 1792.  Meanwhile, the fluctuations in the price of land and houses during the war were, in a great measure, nominal.  (Lowe, 1822)  Table 1 shows the rate of inflation for a number of commodity classes during 1790 – 1819.  For comparison, it also shows the inflation rate for those same commodities during the earlier period 1760 – 1789.  As can be seen, the rate of inflation during the era of the French wars was unprecedented in the lives of the British citizen.

Meanwhile, wages were not increasing at anything near the rate of inflation.  Throughout the period, worker’s real wages stayed flat showing an increase of only 8% over the 1790 – 1819 period.  (Clark, 2003)  This combination of flat or only slowly increasing wages placed significant stress on the British populace.

Table 1 – Living Cost Index by Decade, by Commodity Groups
Index set to 100 = 1860-69
(Clark, 2003)

Decade

Grain and Potato Meat Dairy Sugar Drink Salt Shelter Fuel Light Clothing Soap
1790-9 93.5 77.6 68.2 169.2 123.7 609.7 49.4 120.4 178.2 98.6 174.7
1810-9 145.9 119.1 119.2 204.4 179.9 1633.8 86.9 164.6 249.8 124.2 236.4
    % Change 1790-1819 56% 53% 75% 21% 45% 268% 76% 37% 40% 26% 35%
    % Change 1760 – 1789 16% 19% 20% 13% 6% 25% 8% 19% 11% -2% 6%

Just like today, this price inflation did not affect all English families equally.  Work by Joseph Lowe in the period shortly after the end of the Napoleonic wars showed there were significant differences in spending allocation between those in the agricultural/working class and those in the skilled labor/middle class.  For a laborer, provisions, rent, fuel, and light – all commodities experiencing high inflation rates – made up 85.5% of the family’s budget.  At the same time, for the middle class these commodity categories only made up 49% of their spending budget.

Table 2 – Percent of Income Expended by Category, by Class
(Lowe, 1822)

Family of a Laborer/Agricultural Worker;
Expense about £37 a Year
Family of the Middle Class residing in a Provincial Town Expense £370 a Year

Provisions

74%

33%

Clothing and Washing

13%

18%

House Rent

4 ½%

10%

Fuel and Light

7%

6%

Other Charges
(Servant Wages, Assessed Taxes, Education, Medical Treatment, &c)

1 ½%

33%

Meanwhile, the wealthy were largely unaffected by the financial strain of the high price inflation and low wage growth.  Since the upper class at this time was primarily Landed Gentry and wealthy business owners, their sources of income tended to increase.  During the period, rents increased by 76%, while, as noted above, increases in the cost of land and houses remained nominal.  Increased orders to British Manufacturers from the military for goods and services to support the war effort boosted business revenues.  At the same time, the increasingly mechanized manufacturing, brought about by the Industrial Revolution, helped to hold labor costs steady in a period when many of Britain’s men were fighting overseas and one would expect a labor shortage. this combination resulted in greater profits for the business owners.  Finally, the increased demand for investors in government notes and other interesting-earning financial vehicles, to help fund the war and the business expansion required to support the war effort, provided increased opportunities for those who had money to generate income.

So what does all this mean in terms of purchasing things?  The price of bread, the commodity most commonly used to measure historical change in the cost of living, reached its high point in the first half of the 1810s, when a four-pound loaf of bread was priced at over a shilling.  For most of the period leading up to the wartime economy, the equivalent price was between five and ten pence for the same loaf.  (Old Bailey Proceedings Online, 2015).  Strong Beer went from 1s/gallon in 1792 to over 1s/8d /gallon in 1815.  Beef prices increased from 4½d /lb. in 1792 to 10d/lb. in 1814.  Yearly housing rents from 38s/year in 1792 to almost 68s/year in 1815.  Coal, for heating, went from an average of 1s/2d / ton in 1792 to 2s/6d / ton in 1815.  (Clark, England_1209-1914_(Clark).xls, 2006)  [For those not familiar with English money of the period there were 12 pence (d) in the shilling (s) and 20 shillings in the Pound Sterling.]

© 2015
Chuck Hudson

Works Cited

Chantrill, C. (2015, June 04). United Kingdom National Debt Charts. Retrieved from UK Public Spending: http://www.ukpublicspending.co.uk/spending_chart_1780_1815UKp_14c1li011mcn_G0t

Clark, G. (2003). The Condition of the Working-Class in England, 1200-2000: Magna Carta to Tony Blair. Davis, CA: UC Davis.

Clark, G. (2006, April 10). England_1209-1914_(Clark).xls. Davis, CA, USA. Retrieved June 17, 2015, from http://gpih.ucdavis.edu/files/England_1209-1914_(Clark).xls

Clark, G. (2015, June 05). What Were the British Earnings and Prices Then? (New Series). Retrieved from Measuring Worth: http://www.measuringworth.com/ukearncpi/

Dickinson, H. T. (1998). Britain and the American Revolution. Abingdon: Addison, Wesley, Longman Group Limited.

Harvey, R. (2006). The War of Wars: The Great European Conflict, 1793-1815. New York: Carrol & Graff Publishers.

Kennedy, P. M. (1987). The rise and fall of the great powers : economic change and military conflict from 1500 to 2000 . New York: Random House.

Lowe, J. (1822). The Present State of England in Regard to Agriculture, Trade, and Finance. London: A & R Spottiswoods.

Old Bailey Proceedings Online. (2015, June 17). London History – Currency, Coinage and the Cost of Living. Retrieved from Old Bailey Online: https://www.oldbaileyonline.org/static/Coinage.jsp#costofliving

The Liberty Fund. (2015, June 05). James Gillray on War and Taxes during the War against Napoleon. Retrieved from Online Library of Liberty: http://oll.libertyfund.org/pages/james-gillray-on-war-and-taxes-during-the-war-against-napoleon

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