ABSTRACT
The centrepiece of government legislation in 1842 was the budget, which Peel, as First Lord of the Treasury, rather than Henry Goulburn, as Chancellor of the Exchequer, introduced in this speech.
Peel promised to lay the ‘unexaggerated truth’ before the House of Commons. ‘I do this … because in great financial difficulties the first step towards improvement is to look those difficulties boldly in the face. This is true of individuals – it is true also of nations. There can be no hope of improvement or of recovery, if you consent to conceal from yourselves the real difficulties with which you have to contend.’
The boldest part of the plan was the introduction of an Income Tax levied at seven pence in the pound on those with incomes over £150 for a limited period of three years. This was designed to ensure that the government had a steady revenue stream (calculated at nearly £4m) in order to provide some stability. It was also a mechanism for offsetting any temporary decline in revenue arising from major revisions to the import tariffs paid on some 750 (out of about 1200) dutiable items.
The budget imposed upper limits on the amount of duties to be paid, comprising no more than 5% on imported raw materials, 12% on partly manufactured items, and 20% on fully manufactured items. There were also substantial reductions in the import duties paid on coffee and timber, the latter having been a particularly controversial issue during the closing days of Melbourne’s government. All the export duties on manufactured goods were abolished.
Peel’s peroration offered a call to arms in a period of unprecedented financial difficulty: ‘I think it is impossible to deny that the period in which our lot and the lot of our fathers has been cast – the period which has elapsed since the first outbreak of the first French revolution – has been one of the most memorable periods that the history of the world will afford. The course which England has pursued during that period will attract for ages to come the contemplation and, I trust, the admiration of posterity.’ This was an understandable strategy, given that the Income (or Property) tax had last been used as a means of raising government revenue during the wars with France between 1797 and 1816.
