29 April 1842
Peel's Free Trade budget

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Prime Minister Robert Peel personally draws up the 1842 budget to tackle Britain's £2 million deficit and to reduce artificial restrictions on trade. He reintroduces income tax, which has previously been levied only in times of war. Peel brings it back as a temporary measure, setting it at seven pennies in the pound for people earning over £150 a year. It proves so effective at raising money for the government that it is repeatedly renewed and has been with us ever since.

The budget also abolishes many trade tariffs (see free trade). Peel agrees with the Manchester school of northern industrialists that import duties on raw materials such as iron and cotton make British production costs too high and damage trade relations with other countries. By the end of 1845, more than half the existing 1,200 tariffs have disappeared and others have been drastically reduced. As Peel hopes, this stimulates production in Britain's factories, and makes goods cheaper, so helping exports.

Meanwhile, arguments rage over whether to retain import duty on corn (a term that covers all grain), as enshrined in the Corn Laws.

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