On 18 March 1816 Lord Castlereagh wrote to the Prince Regent with news that no minister enjoys delivering. The House of Commons had voted against the continuation of the property tax, which was the income tax of the time, by 238 votes to 201. The government had lost by 37, having counted on winning by about 40. Castlereagh gave the Prince Regent his explanation in the words “numbers of the friends of the Government going away and some going against”, which is the one ministers always give. Then he did the sum. The defeat left the government “but 12 millions of clear revenue to meet this year’s expenditure of 30 millions.”

Pitt had imposed the tax in 1799, to fund the war against revolutionary France, at ten per cent on the larger incomes. It was widely abhorred, and it raised less than six million pounds against the ten million the government had hoped for. Everyone understood it to be temporary, and that word was the whole of its political bargain, since a tax that arrives with an end date carries a promise, and promises can be quoted back. The Peace of Amiens repealed it in 1802. Renewed war brought it back in 1803 at half the rate, collected at source and arranged in schedules, a design far more efficient than the original, and by 1806 the rate stood at ten per cent again. Then Napoleon fell, and Parliament was asked to keep a wartime tax in peacetime.

Britain answered with paper.

Petitions against renewal reached the House by the hundred in the space of six weeks. Farmers in Durham wrote that they had paid the tax through the war with “patience and cheerfulness”. The Corporation of the City of London sent its sheriffs, in their official robes, to present its own, a sight that is hard to vote against and harder to forget, and described the assessment process as an “odious, arbitrary, and detestable inquisition into the most private concerns and circumstances of individuals.” Henry Brougham, among the most effective speakers on the opposition benches, helped to turn the petitions into a campaign, and the critics reminded the House that the government had promised in 1799 that the tax would end with the war.

Vansittart, the Chancellor of the Exchequer, replied that no promise had been made. He went to the record for it. Pitt’s opening speech, he said, had declared that the tax should continue for one year of peace for every year of war, and Lord Henry Petty, who held the office in 1806, had made “no pledge of his own opinion respecting the permanency of the property tax in time of peace.” It was a lawyer’s answer to a crowd of farmers and aldermen, and the Commons took the petitioners at their word.

George Cruikshank etched the result that year as “The Death of the Property Tax!” Brougham, John Bull and the British Lion attack a hydra, and in the background the Prince Regent and his ministers are running away.

Victory had a price. For the next quarter of a century the Treasury lived on customs and excise, taxes that fell on ordinary consumers at the shop counter, whom an income tax starting at 60 pounds a year had never reached.

Then comes the story that attaches to the repeal. The records of the tax, so the account runs, were ordered burned in Old Palace Yard at Westminster, so that no future minister could be tempted to revive the machinery. One telling has Brougham, the tax’s arch-enemy, helping to stoke the fire. Another has the papers cut into pieces and pulped, a tidier end for a tax and a poorer one for a legend.

Hansard offers a date that sits awkwardly with all of it. On 3 May 1816, some six weeks after the vote, a member rose in the Commons to ask what the Treasury meant by a letter of 17 April, calling upon the surveyors of taxes for “full and complete copies of the assessment of every man’s income.” Those books were “accessible, not merely to the commissioners of taxes, but to every little petty clerk in the office”. The Chancellor of the Exchequer replied that no new orders had been issued on the subject, and another member gave notice that he would soon move that directions be given to the board of taxes “in order that they may take steps for the destruction of all such records.” A bonfire that had already burned would have spared everyone the motion.

A variant says that duplicate returns had been lodged with the King’s Remembrancer, an officer of the Exchequer, and survived in sacks until they turned up at the Public Record Office. Peel, who in 1842 found no old records to hand, suits the fire and spoils the sacks, since duplicates in a Remembrancer’s keeping would have given him something to find.

I would like the bonfire to be true, and I would not bet on it.

Peel needed money because he was cutting tariffs as Britain moved towards free trade, and the cuts reduced the customs revenue on which the Treasury had been living since 1816. In March 1842 he proposed the income tax at seven pence in the pound on incomes above 150 pounds a year, and it was only just, he told the House, “in the first instance, to limit the experiment to a period of three years.” A tax that Parliament might not have voted as permanent passed easily as an expedient, and the label carried it a long way.

Gladstone, in his first budget of 1853, spoke for four hours and forty-five minutes, fortified by sherry and beaten egg. He called the income tax “a mighty engine” and lowered the exemption from 150 pounds to 100, believing that a wider circle of taxpayers would build support for repeal. Then he gave the House a date: “Under this proposal, on the 5th April 1860, the income tax will expire.” The date was seven years off and comfortably far away. The Crimean War intervened. The date came, the tax stayed, and in 1860 he raised the rate. The tax now supplies roughly a third of government revenue, and in law it remains an annual levy that Parliament must impose afresh each year.

Economists noticed the habit a long time ago. Alan Peacock and Jack Wiseman argued in 1961 that a crisis lifts taxation and spending to a new level and that the totals do not fall back when it passes, and Robert Higgs found the same in the United States in 1987. Payrolls, pension schemes and mortgage affordability tests grow up around the new instrument, and removal costs every adjustment made in the meantime.

Across the Atlantic the Federal Reserve offers a younger specimen. Its balance sheet stood at somewhat under one trillion dollars before 2008, peaked at nearly 9 trillion in the spring of 2022, and when the Fed ended its run-off in December 2025 still stood at about 6.6 trillion, roughly seven times the old size. Since October 2008 the Fed has paid interest on the reserves that banks hold with it, and in January 2019 its Open Market Committee announced that it would go on operating with an ample supply of those reserves. The rescue has been moved into the operating manual, and the operating manual is a place where very few things are ever struck out.

Parliament in 1816 could end the tax, and the Commons used that power against the government’s open wish. The power remains, since the tax lapses unless Parliament renews it, and the House has passed it again in each year from 1842 to this one. A central bank balance sheet has no annual vote, and nobody stands in a lobby to be counted against it. The institution that decides when the emergency is over also runs the instrument, and has no vote to lose.

Each arrived as an expedient, and each now holds up too much to move.

In the general election of 1874 both Gladstone and Disraeli promised to abolish the income tax, Gladstone for the second time, having told the House in 1853 that it would expire. Gladstone lost to Disraeli.