ABSTRACT
WHEN William ofOrange landed at Torbay in November 1688 bringing with him - as contemporaries alleged - the secret of running the state over head and ears in debt, English government borrowing of different kinds already had a long and tangled history dating back to the Plantagenets. For most of this period its reputation had been unsavoury. Tostart with, the very idea of lending money was suspect. As late as the seventeenth century borrowing tended tobe regarded as an index of necessity, and lenders as those who took advantage of necessity. This was the line of thought behind the prohibition of usury until the sixteenth century, and the subsequent establishment of maximum rates of interest for loans between private persons.t These Statutes did not bind the Crown, which was free to offer whatever interest its creditors demanded. But this in turn seemed shocking to contemporaries, who thought that the state was being drained by leeches. There were also more specific reasons for the uncertain reputation of public borrowing. Although its form changed considerably between the war loans of Edward I I I and those of the Commonwealth, it had certain common characteristics. First, the Crown seems always to have been actinginhaste and therefore at a disadvantage. Money had tobe found, and found quickly. This explains why, secondly, interest was always stiff and frequently exorbitant. Third, and following from this, the Crown always had great difficulty in paying the interest, which had often to be funded in the principal, thus creating a growing snowball of debt. Lastly, no clear distinction was drawn between short-term debts and long-term ones. Public loans were shadowed by the
40 lenders' expectation of early repayment. This was the natural result of the absence of an effective market in which lenders could sell their claim on the state for a capital sum. It was therefore impossible to divide borrowing into anticipation pure and simple, regularly paid back from incoming revenue, and long-term borrowing in which the state would undertake to repay the principal with interest over a number of years. Failing this basic distinction, it was no wonder that subtler gradations, like ranking short-term debts in order for repayment, could not be introduced. Thus English government borrowing down to the seventeenth century tended to be a hotchpotch, with creditors either pressing for payment or running up claims against the state at compound interest. The only way out of the quagmire was the sale of royal land or, as in the I 6sos, satisfying public creditors by giving them forfeited estates in Ireland or elsewhere.
