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 the coming months to a complete survey of national necessities. During his second ministry (1841–6) Peel's attention was mainly occupied with the four subjects—finance, banking, Ireland, and the corn laws.

On 11 March 1842 he introduced the budget in a speech that ‘took the house by storm.’ During the five preceding years there had been annual deficits, averaging about a million and a half. The position was the more grave from the fact that these had been due more to deficiency of income than to excessive expenditure. It was therefore necessary to increase the revenue, four-fifths of which came from the customs and the excise. Additional revenue might be obtained from these taxes in one of two ways. The rate of charge might be raised, or it might be lowered. But the former method would make consumption so expensive, and therefore check it to such a degree, that the higher rate might produce a lesser revenue. If, on the other hand, the tariff were lowered, increased consumption would no doubt eventually make good the loss immediately resulting. But that recovery would be a matter of several years. In a great passage Peel addressed ‘an earnest appeal to the possessors of property, for the purpose of repairing this mighty evil.’ He proposed an income-tax for three years at sevenpence in the pound. This resource would not only make good the balance of revenue and expenditure, but it would also leave a surplus. This surplus was to be devoted to ‘great commercial reforms,’ and, above all, to the reduction of ‘the cost of living.’ In other words, the burden of indirect taxation was to be lightened. At this announcement the funds at once rose from 89 to 93. The prime minister in his closing words had appealed, not in vain, to the patriotism of the House of Commons, and his scheme was passed into law. The budget of 1845, opened on 14 Feb., was scarcely less momentous than that of 1842. In 1842 duties had been reduced on 769 articles, on the principle that the more nearly an article of import approached to the character of a raw material, the less should be the duty imposed. By 1845 it was found that these reductions in the rate of levy had almost been made good by the increase of consumption bringing more articles into charge. Peel, however, decided not to remit but to renew the income-tax for three more years, and to employ the considerable surplus thus provided ‘for the purpose of enabling us to make this great experiment of reducing other taxes.’ In one sense Peel had been long a free-trader. In the debates that preceded the downfall of Melbourne's ministry in 1841 he had said: ‘If by the principles of free trade you simply mean the progressive and well-considered relaxation of restrictions upon commerce, I can say with truth that there was no man in this house from whom Mr. Huskisson derived a more cordial and invariable support than he derived from me’ (Speeches, iii. 754). He held, however, that special circumstances prevented the application of this system to the sugar duties or to the corn duties. Accordingly, no less than 522 duties were now totally repealed, with the avowed object of giving ‘a new scope to commercial enterprise, and occasioning an increased demand for labour.’ Including 1846, the total number of duties reduced during the five years was 1,035, while 605 duties were totally repealed. When he left office in 1846 he had remitted taxation at the rate on balance of two and a half millions a year, yet had secured a series of surpluses; he had improved the credit of the country so much that the funds had risen from 89 to nearly 100; he had ensured for our trade the first position in the world, by enabling it to procure with unfettered ease the raw materials of commerce; and, finally, he had gone far towards accomplishing his great object of making this country a cheap place in which to live. His friend Guizot some years before had remarked his constant preoccupation with the condition of the working classes, and, indeed, it is not too much to say that Peel's finance was in one of its aspects a profound and far-seeing policy for the improvement of their lot.

But the measure of which Peel himself was most proud was his reorganisation of the banking system of the country, and particularly of the Bank of England. The speech in which he expounded his policy, on 6 May 1844, is a masterly survey of ‘the great principles which govern, or ought to govern, the measure of value, and the medium of exchange,’ opening with the question—What is the signification of that word, ‘a pound’? Turning to the practical side of the question, he asked how far a state should enforce proper principles upon banks. The reply he gave was, ‘we think that the privilege of issue is one which may be fairly and justly controlled by the state, and that the banking business, as distinguished from issue, is a matter in respect to which there cannot be too unlimited and unrestricted a competition’ (ib. iv. 361). Viewed more in detail, Peel's banking policy may be reduced to the following propositions: (1)