How did Edward III finance the conflict with France in its initial stages? Financing the Hundred Years War, c 1336-1340
As tension between England and France escalated the stark reality of the situation in England was that the crown quite simply could not afford to engage in war. The view of the period, summed up by the monk John Bromyard c1360, was that war ought to be affordable. In late 1336 through to the early 1340s, this was not the case in England. So how was Edward III able to wage war in this period?
Direct and Indirect Taxation
There were several means of raising revenue available to Edward III and his council in this period. Direct taxes on property, or the sale of goods was one method. Loans were options, from wealthy men such as the Hull merchant William de la Pole, or the Italian banking societies run by families such as the Bardi, or Peruzzi’s. Local taxes could be charged on the entry of goods into a market, though this was largely undertaken for local expenses. Indirect taxation, usually most lucrative, were also adopted. These were the customs duties of the day and were regularly granted by Parliament in the form of wool subsidies, or other stated items, which typically were set at one tenth, or one fifteenth of the goods value. Fines, the sale of wardships, and selling of royal property or goods could also generate income.
Lines of Credit
When the threat of war was raised to the level of it being a probability, rather than possibility, Edward III faced a financial predicament. Direct and Indirect forms of taxation had already been granted by Parliament, and all of it had been used on the War with Scotland and the ongoing costs of the Royal household. A new tax could be asked for but collecting it would be slow and the amounts generated would simply not cover the costs of a long war with France. In addition to this issue, the King had already utilised sources of credit within England and from continental sources. For those lines of credit to be extended would require confidence in the King of England’s ability to make repayments. That, could only be achieved by making repayments on time, providing securities on rearranged credit terms, and through demonstrating prudence with regards expenditure. The first of these points required new sources of funds. The Second point required the use of valuables from the royal collections. The third would take time and be eased through military successes that would make the investments seem worthwhile.
Finding new sources of revenue was therefore the King’s priority as preparations for war began in the autumn of 1336. The first instalment of repayments of loans from backers in the Low Countries and Germany were due before the end of 1337. These sources of credit were also the very people with whom Edward III intended to make military agreements. It left him with little choice but to try and change repayment terms and make at least part of the payment to show that he could repay loans and paying for the cost of the intended war.
Crown debts in the Low Countries
The total owed to the nine largest creditors in this region was £124,000. These creditors were: Emperor Lewis of Bavaria, Duke John III of Brabant, Count William II of Hainault and Holland, Margrave William of Juliers, Count Reginald II of Guelders, Ruprecht, Count Palatine of the Rhine, Thierry, Lord of Valkenburg, and the counts of Berg and Loos.
Income from tax was inadequate for this and the new subsidies would neither return funds on time, or in sufficient value, to pay anywhere near this amount. In the period in which Edward was attempting to arrange repayments of his debts and generate income to wage war, he received £6000 from William Norwell, the Keeper of the King’s Wardrobe, and a further £7795 from Thomas Hatfield, Receiver of the King’s Chamber. The latter were the crown revenues from wool subsidies raised in the period. [Source of records: Norwell’s Book of Particulars, E. 36/203. E. 36/203 p. 335). E. 159/120, recorda, Easter, m. 10 v.]
Servicing a Medieval Debt
Tax simply would not earn the King revenue to spend on warfare. A considerable amount of the income derived from Direct and Indirect Tax never even reached the Treasury. That is not due to malpractices, or fraud. It is because a substantial proportion of income derived from these sources was already allocated to the repayment of loans. Wool Subsidies, for example, would be paid at the port of embarkation but often directly to an agent of the Bardi or Peruzzi banking societies, or to those of William de la Pole. The same was true of direct taxation, with some areas sending the funds direct to finance the crowns debts. Collectively these three providers of credit received roughly £38,000 between October 1338 and January 1340.
This was not necessarily unwelcome news for the king. Some of it was tied to ongoing provision of credit. William de la Pole is perhaps the best example of how this worked to the advantage of the King and the merchant. In his role as the Mayor of the Antwerp Wool Staple, Pole was able to generate some £110,000 for the King between June of 1338 and October 1339. This gave the crown readily available funds at a time of urgency. In return, the King enabled Pole to recoup monies from customs duties, with ‘The last trials of Sir William de la Pole’ by Fryde, 1962, suggesting that 77% of the credit provided to the king by him was repaid via duties and royal goods by December 1340. Representatives of the Bardi and Peruzzi received in the region of £18,000 in the same period from the duties. In short, Edward III used the Antwerp Wool Trade as security for an emergency loan and turned over tax collecting to agents of those whom he owed money to until such time as they were repaid. It solves a cash flow crisis on the one hand but removes an ongoing revenue stream on the other.
The Bardi and Peruzzi Banking Societies
These new loans from William de la Pole were still well short of the amount that was required for even the first instalment of repayments to the major sources of credit from the Low Countries and Germany. Other sources had to be found. The Bardi and Peruzzi’s were the first source. £82,000 was borrowed from them between September 1336 and December 1337 [Source of records: Warrants for Issues of the Exch. of Receipt].
The problem that the King now faced was that whilst he had been able to borrow large sums in a brief period of time, it was simply adding to the overall burden of debt. The amounts being borrowed, even when combined with funds send by the officers of the King’s Household, were simply not enough to cover the day to day expenses of the crown and repayments of the debts: debts for which interest was being charged. It was unsustainable and required changes.
Wool Contracts – Monopolising Wool Exports to Secure Revenue
The solution needed a combination of new taxation arrangements and another short term series of fund raising. The former saw the introduction of a monopoly for the export of wool being introduced, via the creation of a contract that allowed only licensed merchants to trade with stipulations as to where they should disembark and trade. Enforcing this arrangement allowed the sale of contracts and regulated the amount of wool being exported which would increase the price and therefore repay debts at a faster rate or be used as collateral against additional sources of credit. The need for new credit was due to the time that the new wool contracts would take to generate income. To enable the new loans, the King turned again to William de la Pole, Bardi and Peruzzi’s but, with these Italian banking societies experiencing some difficulties in 1338, also to a broker called Monte Florum.
Failings of the Wool Contract
The Wool Contract enabled the renegotiation of some repayment plans. The contracts totalled some £200,000 worth of wool, to be sold via the Antwerp Staple. Yet by July 1338 just £19082. 10s had been raised via this means and used to address the debts accrued by the King. Edward had expected some 20,000 sacks of wool to have been sent to Antwerp under these arrangements. When Edward III arrived in Antwerp, he discovered that by that date just 1584 had arrived. This effectively meant that the King of England was penniless and the mechanism that had intended to solve his financial problems was, in its failing, simply making matters worse. In total the February wool levy resulted in 2072 sacks reaching the continent. Over half went directly to the bankers from whom Edward had borrowed. The remaining income was £6145. The second wool levy arrived in November. The fleet that carried the shipment of wool also carried an Embassy tasked with renegotiating the King’s debts with the royals and nobles of continental Europe. After the Italian bankers had taken their share, the cargo yielded £9361 for the crown. Which was a problem. The Embassy was dealing with the Holy Roman Emperor and some of his most influential nobles. A debt of £60000 to Louis of Bavaria was massively in arrears, with just £12,000 paid. Other nobles too had large debts that they expected Edward to repay.
Using Wool to Service Debts, Source Material
The Calendar of Close Rolls includes references to the manner in which wool was utilised for the servicing of the king’s debts. This example, from August 1340, shows the way in which wool was transferred and the values that were given to the product at that time.
Enrolment of indenture made between the king on one part and Matthew Canachoun and Tysard Garat merchants of the other part, testifying that 66,000 florins less 18 florins, at 8s. apiece being 9,897l. 6s. are due to the merchants and for damages of the non payment of that sum at Midsummer last, for four months following, to wit aat 346l. 10s. the month, 1,886l., and for money in default of the assignment of 2000l. made to them, 764l,. and for 10,000 florins which they lent to the king in parts beyond for wool which they had for him, 1,500l., the total being 13,547l. 6s. for which debt they hold themselves contented with 500 sacks of wool which they will have of the merchants of the Bardi and Peruzzi, of the price of 8,000l.; and it is agreed that they shall have wool in divers counties which shall be taken for the king’s use…
Calendar of Close Rolls 1340, August 25th. Berkhamstead. CCR v5. Membrane 47d. Page 622.
The Great Crown of England used as Security on a Loan
It was a desperate situation as Edward was simultaneously attempting to plan a campaign against France. It resulted in desperate measures being adopted. The Great Crown was used as security on a previous loan. The Bardi funded the repayment of that loan to secure its release. It was then immediately used as security against debts to nobles. It bought some time, but over a relatively short period of time cost the English some £14,000 in interest payments alone. Another of the loans resulted in the embarrassment of the crown having to send the Earl of Derby as a hostage, held until such time as the debt was settled. This at a time when the Earl of Derby was supposed to be at the forefront of military planning for forthcoming campaigns.
The other desperate measure taken was the Dordrecht Seizure. The Embassy informed the contracted wool merchants of the situation. They noted that the merchants were at fault for having not provided the necessary amount of quality wool. Having failed to provide £200,000 worth of wool by November 1338 now meant that the Embassy would have to renegotiate and as a minimum would require £276,000 worth of wool from the contracted merchants no later than Midlent [22nd March 1339]. The wool merchants were not supportive in the eyes of the crown. So, King Edward ordered that the wool should be seized, with no recompense for the merchants, and used for crown affairs. It was a draconian act that angered merchants. It also did little to solve the problem. The seizure of wool raised a total of £68,139. 16s but much of this was squandered in the desperation to pay off debts: one example is of a debt of £4563 being settled with wool valued at £7464, a huge overpayment.
The Dordrecht Seizure could clearly only be a one off measure. And the concept of the wool contract had failed. Parliament therefore had to formulate a new means of ensuring ongoing revenue from exports of wool. The new method was to be a tax based on a percentage of the value of the wool. To be collected at embarkation, the levy was to be based on accurate measuring of weight and assessment of the quality of goods. It was a value added tax on exports.
Value Based Customs Duties
In time this system would prove to be an efficient means of charging duties: it is the basis upon which modern excise is charged. However, it faced problems in its infancy due to the urgency of the crown’s financial predicament. From August 1338, Edward III, many nobles, and their army, were in situ in the Low Countries. This was massively expensive. When overseas on campaign, the King usually covered the expenses. And in late 1338 into 1339, Edward III could not afford to do this. It led to some men returning to England, a blow to campaign plans. To minimise the risk of his campaign stopping before it started, he granted exemptions to the new wool tax to nobles who were with him in advance of the campaign. Whilst this enabled them to generate funds needed for payment, feeding, and billeting of men, it deprived the crown of revenues and flooded the wool market: 40,000 wool sacks were shipped from September 1330 to the spring of 1340.
Edward’s allies on the continent were eventually satisfied with arrangements. Repayments were agreed and another means of settling debts to European nobles used. This again deprived the crown of tax revenue though. Arrangements were made with the Hanse. It saw them contributing funds for the repayment of the nobles, with English customs duties being placed in Hanse control until the debts were repaid. Initially this was from two ports, soon changed to all English ports. Starting in May of 1340, this scheme required three years of the Hansards controlling English customs.
Edward III’s borrowing 1336-1340
The figures involved in this period are quite staggering. The sum of monies known to have been borrowed by the crown from December 1337 to March 1340 is £342,900. A further £41500 was borrowed in the remainder of 1340. At the same time, Parliamentary grants rose significantly. The grant of direct taxes for 1335-6 was four times the average for the earlier 1330s. That of 1337-8 for direct taxes was six times that of the early 1330s. Indirect taxation as discussed in relation to wool was a complex matter. There had been an attempt to levy a wool subsidy of 40/- on exports in autumn 1336. Arguments in Parliament over the legality of such a high tax, and whether it was a straight tax, or part loan, led to it not being passed into law until 1338.
That Edward III was able to afford a war was due to unprecedented levels of borrowing and taxation. Financial problems from before the crisis over Aquitaine were worsened by poor communication between the King and his Great Council and the occasions when loans were settled with goods of a far greater value. Credit was facilitated by English merchants such as William de la Pole: who despite having no military experience at all, was appointed a Banneret in recognition to his contribution to the war effort. Elsewhere, moving funds between lenders such as the Bardi and Peruzzi families and European nobles enabled an ongoing flow of borrowed money through the kings’ coffers.
The Great Crown was recovered from its status as security on loans in 1343.