Introduction

Undoubtedly, taxes increased in Britain during the 18th century. The Restoration achieved after the Glorious Revolution, contributed to the change from tax farming to direct collection of taxes by government departments. Thus, the po er of the government to collect and raise taxes increased significantly after the Glorious Revolution. !t is estimated that tax revenues rose tenfold in current prices in 1"1# and t ice faster than the taxation in $rance. The increase of tax revenues is lo er, but still significant compared to the rise of population and gro th of production, ma%ing the rise of taxation in Britain probably the fastest in &urope1. 'ould e say that these increased revenues of taxes ere used by the government to achieve e(uity and efficiency) The ans er is not necessarily. *tarting from the Restoration until +aterloo, central government rose taxes in order to cover the increasing demand of military expenditures. , long series of -mercantilist- ars made Britain not a -+elfare- state but a -+arfare- state. !n order to accomplish their -mercantilist- ars, especially against Revolutionary $rance, British governments after Restoration ere forced to ma%e a fundamental choice bet een loans and taxes. *o, Britain spent the money from taxes on ars, and during peace time spent the money to pay bac% the debt that had been created from these loans. !n this context of increasing taxes for ars and for paying bac% loans, e must consider the source of these taxes in order to conclude if they affected industriali.ation.

Sources of taxes
$irst, it is significant to mention that in general, changes in taxation system that occurred bet een Restoration and $rench Revolution did not provo%e ma/or political reactions, apart from some, among privileged colonials of 0orth ,merica.1 This is (uite a paradox but maybe derives from the fact that British people recogni.ed that they should ma%e some sacrifices in order to protect the empire from the $rench Revolution and limit the 2utch expansion policies. The three basic sources of taxes ere direct taxes 3taxes on private property, especially land, ealth and income4, indirect or excise taxes 3taxes on domestically produced goods and services, consumption4 and customs 3duties on imports4. !t is obvious that direct taxes affect mostly the upper classes, since property and ealth are very common in these social layers. 5o ever, taxation of aristocracy declined during the 18th century and did not rise until 6itt managed to introduce an income tax in order to face the national danger from 1"7"81"77. The reasons that aristocracy did not contribute to this increase of taxes ere mainly political, since elite as still very po erful during the period after Restoration and opposed to any direct taxes of parliament. 0ot until aristocrats had to confront 0apoleon did they pay higher taxes in order to protect their property rights in Britain. $urthermore, the taxation of imports changed together ith the change in their composition and origin. 9ore specifically bet een 1":: and 18:1 manufactured goods, as a share of total imports, declined from 18; to #; but at the same time ra materials rose from <#; to #=; and food stuff increased from 1"; to >7;.> *o, British taxation policies turned against foreign manufactured goods in order to favor domestic production. !n the same context, taxes for imports of ra materials that could not be produced domestically and ere necessary for the needs of British production ere taxed at a lo rate. !n fe ords this complex taxation system that has to do ith imports
1

R. 5arris, ?Government and the &conomy, 1=88818#:@ in R. $loud and 6. Aohnson eds. The 'ambridge &conomic 5istory of 9odern Britain, Bol. !, ch.8. 1 6.C. DEBrien, ?The 6olitical &conomy of British Taxation, 1==:8181#@, &c5R, <1, 1788 > 6.C. DEBrien, ?The 6olitical &conomy of British Taxation, 1==:8181#@, &c5R, <1, 1788

reflects the British policies to ards --foreign, friendly and imperial countries in an evolving international economy-- and at the same time as aiming to encourage domestic production. By the late 1"th century the burden of taxation as carried by domestically produced goods and services via indirect taxes but also from taxes on imports. !t is characteristic that direct taxation fell from >=; to 1#81:; of tax revenue, hile at the same time indirect taxation rose from 1=; to #:; of tax revenue. This system that emphasi.ed indirect taxes lac%ed only income taxes to be characteri.ed as modern. 5o ever, this system as severely critici.ed since poor people had to pay proportionally more indirect taxes. That led a lot historians to characteri.e the effects of this source of funds really regressive. 5o ever, 6itt the younger reali.ed that ealthier people should pay more indirect taxes through their preferences in products. Therefore, he defined the distinction bet een the -luxuries- and -necessities-. Dn this notion some products ere highly taxed and others ere not, according to hich category they fell into. !n other ords, poor people ere --punished-- hen they ere consuming --luxuries-- li%e tobacco and spirits but also they could have --cheap-- access to --necessities--. $urthermore, it is very important to mention that the burden of excises did not influence gro ing sectors of industry li%e cottons, oolens and metallurgy. Dverall, efficiency from these taxes may have been lost, but this discrimination bet een --necessities-- and --luxuries-- limited the conse(uences of indirect taxes. !n addition, the fact that lo taxes ere imposed on products that ere closely related to the industrial sector did not discourage their consumption. ,lso, customs ere imposed in such ay to encourage the domestic production in t o ays. $irst, the import of goods and services that could be produced domestically ere highly taxed and at the same time imports of ra materials that could not be produced at home ere taxed at a lo er rate. !t should be also highlighted that these high taxes secured the success of ars after Restoration, giving the opportunity to the industrial sector to gro via continuation. $rom the above it seems that high taxes imposed in such ay did not discourage industriali.ation. ,part from the sources of taxation it is important to mention ho the ability of the British state to collect and impose taxes led to the encouragement of industriali.ation.

From Glorious Revolution to Industrial Revolution

,s mentioned in the introduction, the change from monarchy coincided ith the transition from tax farming to direct collection by central government. This transition gave the privilege to government to raise taxes henever it considered it to be right and on this occasion government rose taxes to fund the involvement in 0apoleonic and Revolutionary ars. This ability of the government to raise taxes gave the impression to the mar%ets that government could raise the taxes in order to pay bac% any possible loan from them. 'onse(uently, government could borro more easily and this in turn led to the rise of bond mar%ets. British governments after Restoration, in order not to loose this ability of borro ing, or better their credibility, during peace time increased taxes to repay the debt. This gro ing government spending in loanable funds led historians li%e +illiamson to argue that government as cro ding out private investment. 5o ever, the fact that government retained its credibility led to the flourishing of financial mar%ets. Therefore, albeit the national debt increased from the policies of borro ing money for ars, government-s ability to repay the loans, had as a conse(uence the rise of financial mar%ets hich in turn financed !ndustrial Revolution. !n conclusion, Glorious Revolution gave the po er to 'entral Government to raise taxes hich helped governments to borro money hich resulted in the flourishing of bond and financial mar%ets hich in turn financed !ndustrial Revolution.

Conclusion
Governments after Restoration did not succeed completely in achieving their goals of e(uity and efficiency since some of the taxes ere not fair and ere really high. 5o ever, these taxes secured

the success of ars and thus the continuity of industriali.ation. ,lso, the measures of necessities and luxuries seemed to have balanced partly the loss of e(uity. 5o ever, e should consider hether the level of industriali.ation ould be the same even if the government had not imposed such taxes. This (uestion does not seem to have one commonly acceptable ans er, but in general taxes, if they did not encourage industriali.ation, did not prevent it.

Bibliography
1. R. 5arris, ?Government and the &conomy, 1=88818#:@ in R. $loud and 6. Aohnson eds. The 'ambridge &conomic 5istory of 9odern Britain, Bol. ! 1. 9. A. 2aunton, Trusting FeviathanG the 6olitics of Taxation in Britain, 1"778181< 31::14 >. 6.C. DEBrien, ?The 6olitical &conomy of British Taxation, 1==:8181#@, &c5R, <1,1788 <. 6aper 5andouts by Bictoria Bateman