The history of the English fiscal system affords the best known example of continuous financial development in terms of both institutions and methods. Although periods of great upheaval occurred from the time of the Norman Conquest to the beginning of the 20th century, the line of connection is almost entirely unbroken. Perhaps, the most revolutionary changes occurred in the 17th century as a result of the Civil War and, later, the Glorious Revolution of 1688; though even then there was no real breach of continuity.
The primitive financial institutions of early England centred on the king's household. In other words, the royal preceded the national economy in importance. Revenue dues collected by the king's agents, rents, or rather returns of produce from land, and special levies for emergencies formed the main elements of the royal income which gradually acquired greater regularity and consistency. There is, however, little or no evidence of what modern governments recognise as financial organisation until the 11th century. The influence exercised from Normandy, which so powerfully affected the English rulers at this time, tended towards the creation of records of revenue claims as well as a central treasury.
Following the Glorious Revolution, control of finance passed more and more to Parliament, which together with the decline of the importance of land rents as a source of income from about the time of the Wars of the Roses led to different forms of taxation.
Systematising finance With the union of England and Normandy under William the Conqueror, the idea of settled administrative methods became fixed and of special importance in the financial sphere. The systematising spirit, so characteristic of both the Norman and Angevin kings, produced the Exchequer with its judicial and administrative sections and its elaborate forms of account and control.
But even before this, the Domesday Book had carefully recorded all sources of revenue. William I of England initiated a policy which was followed by his successors despite the serious difficulties during the anarchy that subsisted during Stephen's reign. Despite a few vestiges of Old English practices, the Exchequer was primarily a Norman institution.
The picture presented by the Dialogue of the Exchequer () is that of a comprehensive system which secured the receipt of royal income by providing a thorough audit of accounts. Thus the Exchequer sought to increase the crown's revenue..
The history of the English fiscal system affords the best known example of continuous financial development in terms of both institutions and methods. Perhaps the most revolutionary changes occurred in the 17th century as a result of the Civil War and, later, the Glorious Revolution of 1688; though even then there was no real breach of continuity.
Royal and feudal prerogative Although feudalism was, in one aspect, a powerful instrument for the division of political authority, the particular form in which the Conqueror introduced it to England nevertheless enabled the fiscal rights of the crown to be established more strictly than was possible under previous conditions. First, the actual property of the crown was better administered as each royal manor became subject to the new system of accounting. Secondly, the king's various claims or dues took on a more feudal character, thus receiving stricter legal definition and, thirdly, the higher judicial organisations assisted the expansion of court fees while, above all, the increased authority of the state made the receipts from trade more profitable.
Sources of revenue in the High Middle Ages Broadly, the sources of revenue fall under the following heads: The royal demesne (i.e. estates managed by the crown), which was distributed throughout England, derived in part from the possessions of the old English kings. These were increased by confiscations following the rebellions during the reigns of the early Norman kings and by the doctrine of escheat which stated that untenanted land reverted to the king (terra regis) under his allodial right. Over fourteen hundred manors appear as royal demesne in the Domesday Book. The royal forests, placed under special forest laws, yielded little revenue except in the form of offender penalties. Rural tenants who held by socage at first paid rent in the form of produce from the land, but this was gradually substituted by cash payments. As the royal demesne was favourable to the growth of towns, the rents derived from urban tenants became a valuable part of the demesne's yield. The revenues of the towns were frequently farmed-out which resulted in the crown receiving from the firma burgi ("farm of the burgh") a fixed and secure annual payment. The "feudal incidents" were feudal rights of the king as the overlord of his tenants-in-chief, which included the claim to knight-service, the three regular feudal aids and payments of feudal relief on succession to a fief, as well as the profits from wardships and marriages, together with escheats forfeitures. The yields from these sources varied with the power of the king and were kept within bounds by the resistance of tenants as shown in the demands of Magna Carta (1215). The administration of justice was a lucrative prerogative of the crown. Suitors had to pay not only for the hearing of their cases but also fees for obtaining writs. Additionally, amercements and compositions increased receipts from this source. Vacant religious offices. As much of the kingdom's land (and therefore its wealth) was held by the church under tenure from the king, the opportunity afforded by keeping sees, abbacies and priories vacant (sede vacante) enabled the king to redirect their revenues to himself, under a doctrine akin to a temporary escheat. Exchequer of the Jews. Until their expulsion in the 13th century, Jews were a highly profitable source of royal revenue. Being under the absolute control of the crown, due to their obligation to obtain royal licence in order to trade as money-lenders in the kingdom, they could be taxed at will either by taking percentages of their property (e.g. in one instance, one-fourth), or by exacting levies for offences, actual or alleged. The establishment of a dedicated Exchequer of the Jews is an indication of their fiscal value. Direct taxation formed an extraordinary or occasional source of revenue. The Danegeld was succeeded by the carucage, and scutage developed from the commutation of the feudal tenure of knight-service from actual military service into cash payments. Customs and dues claimed at the ports which were small in amount but which nevertheless contained the germ of the fully developed customs system of later years.
The history of the English financial system consists mainly of the different flows over time of the above exchequer receipts. For example, a sheriff was bound to account twice yearly at the Exchequer for the royal revenues of his county (the "county farm" or corpus comitatisLit: "body of the count, or earl"). During the century and a half that lay between the Norman Conquest and the granting of Magna Carta, this system operated well. Nevertheless, the character of the ruler affected the vigour of administration, both fiscal and general. For instance, the relatively popular Henry I and Henry II secured far better fiscal results than the unpopular and divisive kings Stephen and John, even though the collection of rents and profits from the royal demesne together with feudal and other dues continued as the mainstay of the revenue. However, indications of change are to be found, and the substitution of the carucage (or plough tax) for the Danegeld marks an advance towards direct taxation of land through its produce. Moreover, the introduction of scutage is not only further evidence of the same tendency, but also a step toward the development of a money-based economy to replace the earlier system of payments-in-kind. The tallage (or special levies) imposed on towns in the king's demesne at times of need appear to have been a doubtful exercise of the royal prerogative, albeit belonging scientifically to the same class as the Danegeld and scutage. Perhaps the most important advance made in this period was the beginning of taxation on movable goods, first applied in the Saladin tithe of 1189 later expanding into a general system.
In the reign of King John (1199–1216), the loss of Normandy and his concessions to the demands of the feudal barons set out in Magna Carta rendered financial re-adjustment inevitable. During the long reign of King Henry III(1216–1272), the enforcement by the barons of their privileges granted by Magna Carta acted on the fiscal system by checking the king's arbitrary use of tallages and, as a consequence, encouraged regular assessments of a tax on movables, which became more prevalent over time. The developing concept of necessity to obtain consent of tax-payers before imposition operated to encourage the establishment of bodies representing the various social classes. Indeed, the action of constitutional on fiscal development led to the transition from feudal to parliamentary taxation in its earliest forms.
Direct taxation Almost at the beginning of the age of parliamentary taxation, one of the older sources of revenue ceased, popular opinion having forced King Edward I to issue in 1290 the Edict of Expulsion which required the Jews to leave the kingdom. It is probable however that owing to the exactions practised on them, Jewish usurers had become progressively less profitable to the Exchequer. Certainly, the kingdom's general resources had so increased that their contribution became less important.
The first effects of parliamentary influence on the fiscal system were the abandonment of tallages on towns and the decline of scutage. Taxes on movables were assessed more systematically so that instead of using varying charges, ranging from one-fourth to one-fortieth, on different classes of goods, the tax was imposed at fixed rates of one-fifteenth on counties and one-tenth on towns (the "fifteenth and tenth" tax). Commissioners were appointed for each county to ensure stricter assessment and were supplied with special instructions as to taxable and exempt goods. This tax remained in force from 1290 to 1334, albeit the proportions imposed varied over time (e.g. an eighth and a fifth were granted to the king by Parliament in 1297, and a tenth and a sixth in 1322).
A more general influence was the growing national economy which led to greater activity on the part of the king as administrator which, in turn, increased the state's need for revenue. Although constitutionally the king was expected to live off his revenues, the force of events made this increasingly impracticable. Therefore, from being uncertain and indirect, taxation, especially that on movables, became certain and direct, absorbing older forms over time. Under medieval conditions, the collection of a general property tax presented serious difficulties in that, unsurprisingly, each local and borough authority tried to keep assessments as low as possible.