Between 1841 and 1846, Peel's government laid the foundations for free trade. It reformed the banking system and introduced important social reforms in the mines and factories. However, his government's Irish reforms upset the Party's Anglican supporters. In addition, his free trade policy threatened the Corn Laws, which were supported by landowners.
Financial and Economic Reform.
The Whigs left a deficit in government expenditure of £2 million.
Peel's first budget - In the 1842 budget, Peel increased revenue by reintroducing income tax. This had only existed as an emergency tax during the French Revolutionary and Napoleonic Wars. It was introduced at 7d (3p) in the pound on incomes over £159 per year. This applied to only a small section of the population. It was meant to be for a 3 year period but became a permenant feature of the tax system.
Free Trade - In the 1842 and 1843 budgets, Peel moved Britain further along the road to free trade by lowering tariffs (import duties). In 1841, there were over 1200 items on which tariffs were charged. Peel removed 600 items from this tax and greatly reducced tariffs on 500 others. These reforms boosted government revenue by increasing trade. The reduction of tariffs on raw materials made British manufactured goods cheaper. It also reduced the cost of living.
Bank Charter Act - In the Bank Charter Act 1844, Peel reformed the banking system, to bring stability to Britain's currency following financial crises in 1819 and 1826. The act ensured:
- No new banks could issue bank notes.
- When banks merged, they lost the right to issue bank notes to the Bank of England.
- All bank notes issued were backed by gold to provide confidence, except for £14 million, known as fiduciary issue.#
Bank of England - As banks merged, the Bank of England was the only bank in England that ended up issuing bank notes. This brought stability to the banking system during an important…