Finance: free trade and the tax structure
In 1843, the Conservative Prime Minister, Robert Peel, appointed Gladstone President of the Board of Trade whereupon he found himself having to engage with the free trade debate. Persuaded by the argument in favour of free trade, he wanted to see a gradual reduction of tariffs and provided financial evidence to support tariff-reform budgets in 1842 and 1845.
In a Peelite-Whig-Liberal coalition, under the leadership of George Hamilton-Gordon, Earl of Aberdeen, Gladstone became Chancellor of the Exchequer in 1852. In his first budgetary speech, he promoted the free trade campaign by reducing one hundred and thirty three tariffs and abolishing another one hundred and twenty three. This was compensated for by a seven-year continuance of income tax (lowering the threshold at which the tax was levied) and an extension of succession duty (a tax placed on the acquisition of property when it is transferred from a deceased predecessor to another successor).30
The Crimean War prompted him, in 1854, to raise income tax and other, indirect taxes. Condemnation of the government's handling of the conflict led to the resignation of Aberdeen and his ministers. Gladstone subsequently became Chancellor of the Exchequer in Henry John Temple, Lord Palmerston's government, but soon resigned. He did not return to the exchequer until 1859, again at the invitation of Palmerston, this marking his final political break with the Conservatives. A major achievement of Gladstone's in this period was his bringing of public accounts under Treasury control - in the words of H.C.G. Matthew, “plac[ing] free trade probity, balanced budgets, and retrenchment at the heart of British public finance”.31
In his budget for 1860, the shilling duty on corn was retained but all other protective tariffs were abolished. Indirect taxes were greatly reduced. It therefore became, by design, politically difficult for central government to increase expenditure.
