Peter Walker: Back to 1694 ... Britain at the birth of the Bank of England





[Peter Walker has been a reporter for guardian.co.uk since late 2006.]

A country paying a heavy financial price for war in foreign lands, while at home people complain about duties on wine and beer and indulge their love for tea… Britain in 1694, the year the Bank of England was formed, might sound familiar, but it was an utterly different place.

It was overwhelmingly agricultural, and the population was less than 6 million – an estimate, as the modern census did not begin until more than a century later. Life expectancy remained under 40.

Following the so-called Glorious Revolution of 1688, which ousted the Catholic King James II, the Dutch-born William of Orange and his bride, Mary, ruled as joint monarchs, although the latter was to die of smallpox before the end of the year. A new law decreed that no Catholic could succeed them.

With the new monarchs came new conflicts, primarily in the Low Countries, and by 1694 a force of up to 80,000 men had already been battling French forces for six years, placing great financial pressures on a government trying to service what had recently changed from a royal debt to a war-swollen national debt.

The government was "scrabbling to get money from anywhere they could", according to Dr Perry Gauci, a historian at Oxford University. As well as increases to direct and indirect taxes, the government raised duties on a number of items. "Usually they kept away from the real essentials of life, like bread, corn, candles. But it mostly anything else: beer, wine, tobacco, you name it," he says.

With only about 15-20% of the population living in urban areas – predominantly London, now with a fast-growing population exceeding 500,000 – much of the country eked out an often sparse existence in the countryside, subsisting on basic items like bread.

There was an emerging, if still small, middle class, Gauci says, although the phrase had a different meaning to the modern day: "Almost the definition of being middle class is being above subsis­tence and having spare cash for small luxuries in diet."

This middle class was most visible in London, which, while still tiny by the standards of the modern city, had begun expanding along the Thames between the previously separate areas of the City and Westminster, and was emerging as a pre-eminent trading metropolis.

The shift away from the City had been in part prompted by the Great Fire of 1666, which consumed much of the area. Nearly 30 years later reconstruction was still taking place, with Wren's rebuilt St Paul's Cathedral three years away from opening.

The craze for coffee houses was by then sweeping the city, while tea was to remain a distinctly luxury item for several more decades. A year after the foundation of the Bank, the lapse of the Licensing Act sparked a rapid growth in newspapers.

And while the early Bank of England was "not a central bank in a modern sense", according to Albrecht Ritschl, professor of economic history at the London School of Economics, government financial policy already had a significant impact on people's lives...



comments powered by Disqus

Subscribe to our mailing list