The King's City

by Don Jordan

  Like the Eyles family seat, many great country houses were bought or built from the profits of the slave trade‡ Paradoxically, some slave traders were philanthropists. The international cloth wholesaler Edward Colston used a fortune partially made in the London slave trade to renovate churches and build schools and almshouses in Bristol and London. Colston was born in Bristol and his family moved to London when he was still a child. Apprenticed to the Mercers’ Company to learn the cloth trade, Colston later developed a successful trade with Spain, Portugal, Italy and Africa. In the mid-i6oos his trade with Africa involved trading cloth for slaves; when his brother Thomas died, Colston inherited a sugar refinery in Bristol, giving him a further tie with the transatlantic slave trade.

  The fortunes made by Colston and others were very considerable for their times. According to Richard Ligon, who visited Barbados in the late 1640s and wrote about the sugar business, the profit in relation to outlay was enormous.4 The annual net profit from a 500-acre estate, after deducting costs of £1349, was £7500, launching the estate holder into the company of the super-rich. Some of these estate holders lived on their sugar plantations; others stayed at home and ran their enterprise from their London office.

  While the newly reformed Royal African Company reinstated its slave business, conflict with the Dutch loomed once more. A large section of Parliament supported another war, believing it was the only way to attain the longed-for trade supremacy. The Earl of Shaftesbury, the Lord Chancellor, was in favour of renewed conflict, but only if the King agreed to a new Act of Parliament supporting religious toleration. Shaftesbury saw the Dutch as enemies in trade but as an exemplar in terms of religious tolerance. He wanted nonconformists to have the same rights as Anglicans. Charles agreed to the tradeoff.

  There remained the problem of paying to re-equip the fleet, which had been mothballed for some time. Even with the secret French money, the problems facing the Exchequer had hardly changed in a decade: the country ran an expensive foreign policy predicated upon foreign wars, the King ran a spendthrift household and the economy suffered inflation owing to the South American gold that was flooding into European economies via Spain.

  On top of this, the collection of taxes was inefficient. Over many years, a haphazard network of freelance collectors had developed that was not up to the job. Each collector, or farmer, was appointed directly by royal patronage, or else bought their position from someone who wished to retire from the post. The system provided income in an unpredictable way because of the temptation for dishonesty. There was also a clear conflict of interest: many tax farmers had a sideline as individual moneylenders to the Crown.

  A start had been made on the problem by bringing the collection of customs duty under the control of Crown Commissioners in 1671. This went some way to plugging the vast hole in the Exchequer’s finances. No move had yet been made on the lucrative field of excise duty, or tax on certain types of domestic consumption. It was little wonder the Crown consistently looked for loans from the city’s bankers.

  The following year, 1672, Charles sought new loans from the City, requesting £1.5 million from the Lombard Street merchant bankers and the Cheapside goldsmiths to equip eighty-two ships of the fleet to sail against the Dutch. But distrust had been building for some time between the Exchequer and the City. This partially arose from the fact that the City men were by nature mostly Parliamentarians, while the King’s antipathy to Parliament had grown rather than abated. There was in addition constant friction between the needs of the Crown and the ability or willingness of the City to provide. In the background lay endless disputes over claimed discrepancies in goods supplied and the ability or willingness of the Exchequer or the Navy Board to pay up on time. As clerk at the Navy Board, Samuel Pepys – doubtless on the fiddle himself, for he amassed a fortune in gold – complained about the honesty or lack of it among his colleagues and their suppliers.5

  With such a background, Crown and City were wary of one another. On top of this, the bankers had doubts about probity inside the highest levels of government. They were right to be suspicious. Charles had the habit of funding his mistresses out of customs and excise, from money earmarked for the navy or on occasion taken directly out of the Exchequer’s strong rooms. He had already made Barbara Palmer a farmer of several taxes, thereby ensuring the money went straight to her rather than to the government.6 As the King and his family – in particular his brother, the Duke of York – habitually lived beyond their means, bankers were able to charge extortionate rates of interest, as high as 20 or 50 per cent. Partly because of this, Charles had run up enormous debts.

  When Charles wanted to take on new debt to fund the war, the question of the fate of previous loans was raised. The bankers, together with many in the House of Commons, wanted to know how loans totalling £5 million to date had been spent. A row ensued, during which the City asked to see the books. This was unheard of. The Exchequer refused. No wonder: according to Secretary Pepys, £2.3 million was unaccounted for. For the Crown, there was the feeling that the City was being neither flexible nor supportive, for was not the war being fought for the benefit of the merchants against their adversaries in the Dutch East India Company?

  Five years had passed since the previous war had ended in humiliation on the Medway Since then, opinion in London had shifted away from war with the Dutch. In the intervening years, lacking protection from a depleted navy, English overseas trade had greatly suffered. City merchants feeling the pinch were in no mood to bankroll a spendthrift king making war when it would have been advisable to steer a more pacific course. The City had no way of knowing about the provisions of the secret Treaty of Dover, under which Charles was bound to support Louis XIV in his war against the Dutch United Provinces.

  The City’ refused the loan. The Exchequer went bust and the King defaulted on his loans. (He was not the first king to do so. In the previous century, Philip II of Spain had defaulted on his debts no fewer than four times, ruining many of his German bankers before finding new ones in Italy.) The caution and greed of the bankers had collided with the profligacy and bellicosity of the Crown. Charles cut payments to the City on some £1.4 million of outstanding loans of held by the bankers and goldsmiths. This became known as the Great Stop.§

  With the Great Stop, Charles’s intention was to continue paying interest but cease all repayments on the principal sums for a year. The thinking was that during that time, the war would begin and, against previous experience, a quick, glorious victory would be won. Following that, financial pressure would ease and payments could resume. When the war became protracted, the Exchequer kept up interest payments for some months, after which it stopped paying anything at all. A year later, another stop was declared. The capital sum owed would finally be added to the national debt in 1705.

  The Great Stop had a ruinous effect upon the City, bringing down many goldsmiths and bankers, including leading financiers. Bankers such as Sir Francis Child, founder of a famous banking dynasty, who did business solely with private clients, were unaffected. But Robert Viner’s position was particularly parlous. His appointments as goldsmith to the King and banker to the Exchequer laid him open to especially large defaults, lie had the greatest personal sum, at least £400,000, owed by the Exchequer. This colossal amount was one-third of the total owed to the City by the Crown, or, to put it differently, one-third of the total annual income settled by Parliament on the King at the beginning of his reign. Viner was paid some money immediately after the Stop, perhaps because of his personal friendship with Charles, and seems to have evaded out-and-out bankruptcy. He also had income from other sources, being a farmer of taxes. Nevertheless, he had to compound with his creditors (i.e. offer to settle by paying back a percentage of the money owed, at a certain amount in the pound). Ultimately, in recompense, the government awarded Viner an annuity of £25,000, a small sum in comparison to his losses. No doubt Charles was behind the deal.

  It wasn’t just bankers who were ruined; their deposito
rs were, too, reducing many in the city, including numerous small investors, to bankruptcy. John Evelyn was incensed that widows and their children suffered from the Stop. The longstanding rift between Court and City widened into a chasm. The City now had reason to see the royal court as antithetical to its views and habits. Sir John Lawrence, London’s hero during the plague, became very vocal on behalf of the ruined bankers, expressing the outrage felt in the City over the actions of the Exchequer. The City now feared some form of royal backlash, perhaps even a military takeover that would overthrow its self-government and impose rule directly from Whitehall.

  Sir John, who was a leader of the Country Party, smelled a rat.¶ According to the anonymous compiler of the Account of the Aldermen, Sir John – anxious to forestall any move by Charles to clip the city’s wings – put pressure on those in the City who supported the King, citing all the affronts and indignities imaginable upon all those persons that have been willing to venture their lives and estates in any military employment for His Majesty’.7

  Referring to the Crown’s refusal to pay its debts, Bishop Gilbert Burnet wrote of the Great Stop that ‘the trade of bankers is totally destroyed’ by ‘this dishonourable and perfidious action’. The default on payment of capital, which was to last one year, was enough to take the major lenders under. But not all were ruined; their fate would depend on how disposable the Exchequer felt each creditor might be. Just as Viner was destroyed by his closeness to the Crown, the merchant and financier Sir John Banks was saved by his close connections with the Navy Board. During the Second Anglo-Dutch War, Banks had lent large sums of money to the Exchequer at what were said to be high rates of interest. As with other merchants-turned-financiers, Banks was heavily exposed to any default by the Exchequer, yet escaped ruin.

  John Banks was the son of a wealthy Maidstone woollen draper and attended Emmanuel College, Cambridge. In 1652, at the age of twenty-five, he joined a London syndicate supplying rations to the navy. Two years later he married Elizabeth Dethick, the daughter of a leading London merchant, and soon after became a shareholder in both the East India Company and the Levant Company. He was so highly thought of in London circles that in 1668 he was elected a Fellow of the Royal Society. Banks was one of a number of merchants and goldsmith-bankers who saw that the current system of providing loans and credit was insufficient to fund the growing economy. In a chance remark to Pepys he revealed that he had been considering the need for a national bank, saying that the Exchequer, sited as it was inside the complex of Whitehall Palace, would never be

  a true bank to all intents, unless the Exchequer stood nearer the Exchange, where merchants might with ease, while they are going about their business, at all hours, and without trouble or loss of time, have their satisfaction, which they cannot have now without much trouble, and loss of half a day, and no certainty of having the offices open. By this he means a bank for common practice and use of merchants, and therein I do agree with him.8

  Despite the need for a central bank, many competing interests prevented one being set up during Charless lifetime. The main impediment was Parliament’s fear that such a bank would allow the King to rule without Parliament, bypassing it to raise money in the form of city loans rather than taxes voted by Parliament.9

  When the crash came, Banks was treated favourably. How could it be otherwise? After all, the navy depended upon men like trim. Moreover, by the time of the crash, Banks and the Secretary to the Navy Board, Samuel Pepys, were firm friends. Pepys was godfather to the Banks’s eldest son, Caleb. The financier often had the Pepys family as guests in his fine town house in Lincoln’s Inn Fields or at his country estate, a former abbey at Aylesford, Kent, described by Pepys as mighty finely placed by the river; and he keeps the grounds about it, and walls and the house, very handsome: I was mightily pleased with the sight of it.’10 So quick had been Banks’s climb to the top of the London merchant class that he had bought the estate in 1657, when he was barely thirty years of age. It was hardly surprising that he was paid where others were not.

  However, once bitten twice shy: Banks was afterwards wary of doing business with the Stuart government, resuming his dealings only after the ascent of William III.11 He was not alone in hesitating to deal with the Crown. The city bankers who rose in place of those mined – men like Sir Francis Child and Sir Richard Hoare, who would later give their names to their private banks – avoided loans to the state.

  Despite the financial crisis, the build-up to war went ahead, orchestrated by Charles in fulfilment of his pact with the French. Only four years before, Charles had entered into an alliance with Sweden and the Dutch Republic against France, in order to prevent the French from invading the Spanish Netherlands, which lay between north-west France and the southern borders of the Dutch Republic (the United Provinces). There were those who had wholeheartedly supported the triple alliance; they included the Treasurer to the Navy, Sir Thomas Osborne (afterwards Lord Danby), who was of the opinion that the major threat came not from the Dutch but from the French. It was a view shared by Shaftesbury and others.

  Despite the contrary views in circulation, Charles set out to destabilise relations with the Dutch in order to create a pretext for war. He concocted a plot involving the diplomat Sir William Temple, who had helped to seal the triple alliance. Now Temple was instructed to antagonise the Dutch, with his wife Dorothy Osborne (Sir Thomas Osborne’s cousin) as the unlikely agent. While the Dutch fleet lay at anchor off Brielle, the royal yacht Merlyn, with Dorothy on board, sailed through it on the pretext of having to put into port for repairs. Under the then current protocol, foreign warships were to salute another nation’s royal vessel by lowering their flags and firing a fusillade of white smoke from their guns. Uncertain of the status of the Merlyn, the Dutch lowered their flags but did not fire a salute.

  Charles now ordered the arch-schemer George Downing, ambassador to The Hague, to demand that senior Dutch admirals should be sacked for the insult visited upon the royal yacht. The Dutch refused. While French preparations for invasion went on apace, the diplomatic incident was used to cause a break with the Dutch and soften up public opinion in London. In April, using the Merlyn affair as an excuse, the British declared war. For the second time in seven years, Charles had used deceit to engineer conflict with the Dutch.

  * The cofferer, named after a coffer or strong box. was one position below comptroller and ran and paid the staff.

  † The house is today the main building of Devizes School.

  ‡ The playwright Alan Bennett would much later dub these country seats ‘houses of shame’.

  § There would he further defaults: the United Kingdom defaulted on its loans three times in the nineteenth century, and did so again in 1932 as a result of the financial crash of 1929.

  · The Country Party, which was expressly opposed to the Duke of York, later became known as the Whigs. It was in opposition to the pro-monarchist Court Party, which developed into the Tory party. ‘Whig’ was originally a pejorative term taken from the name for Scottish cattle raiders, while ‘Tory’ was a corruption of the Irish törmghe for bandit.

  CHAPTER 20

  WAR AND ENTERPRISE

  War began again on 6 April 1672. The Third Anglo-Dutch War was part of a wider European conflict involving France and other states. Despite the reluctance of London banker-merchants to pay to equip the fleet, the eighty-two ships for which Charles had sought finance were fitted out and supplied to sail against the Dutch in support of a French invasion. Louis XIV assembled a vast army to march north in order to deliver a knockout blow against the Dutch,

  On 7 June, a Dutch fleet of seventy-two ships, commanded by the brilliant Admiral Michiel de Ruyter, surprised the Anglo-French fleet of ninety-three ships, under command of James, Duke of York, at anchor off the Suffolk coast. As the Dutch came into view, the French made sail, moved away from the Dutch and did not fully engage in the action, leaving the English to go it alone. Vice-Admiral Edward Montagu’s command the Royal Jam
es was so severely damaged that he and his crew had to take to several sloops. When one of them sank under the weight of escaping sailors, Montagu, Samuel Pepyss patron, drowned. He would be given a hero’s funeral and buried in Westminster Abbey. Idle Dutch Admiral van Ghent, who had executed the raid on the Medway, was killed by cannon fire. A battle of savage intensity continued, with great losses on both sides. Twice, James had to change ships when his vessels were disabled. Finally, with the wind turning, conditions began to favour the English and the Dutch withdrew.

  The violent intensity of the battle was captured by the Dutch maritime artists the van de Veldes, a father and son team who went to sea to capture the action, becoming the first modern war reporters. In a painting by Willem van de Velde the Younger, we see ships enveloped in smoke and flames, men drowning in the foreground and a great ship of the line sinking with only its bow still visible. The entire scene is swathed in a dreadful, hellish orange light from the flames. The horror of seventeenth-century naval warfare is vividly captured in the painting; men of all positions from admirals to cabin boys could expect to be cut down by chainshot, blown to bits, burned to death or drowned. With the use of fireships and boarding parties, the wonder was that so many survived at all.

  De Ruyter’s plan to destroy the English and French fleets had been thwarted. In the meantime, a huge French army of 130,000 men led by Louis himself advanced with astonishing speed into Holland. The Dutch army fell back in disarray. To avert defeat they had to open a number of dykes and flood large areas of the country. With the French encamped on their soil, there was rioting as the Dutch blamed their prime minister, Johan de Witt, for the catastrophe.

  As an English army waited to invade Holland, two further major sea battles went badly for the English. Admiral Edward Spragge drowned in similar circumstances to those in which Montagu had died. Aggressive, attacking tactics employed by the Dutch thwarted an English plan to intercept and destroy the returning Dutch spice fleet. With the English fleet having suffered severe damage, an invasion force waiting in Kent was never able to sail. For the English, the war was becoming expensive and fruitless.