FINANCES, in political economy, de note the revenue of a king or state.
In former times, when the whole re venue drawn from the people, by a few taxes, was considered as the personal property of the sovereign, the purposes 'o which it was applied depended on his uiscretion, or that of his minister. As few princes were inclined, in times of peace, to provide for the extraordinary charges of a state of warfare, these were defrayed by extraordinary contributions from the people, which ceased with the occasion. Few sovereigns possessed suf ficient credit, either with their own sub jects or foreigners, to contract debts, so that, at the conclusion of a war, there was no occasion for a greater expendi ture than before its commencement, and the revenue drawn from the people re verted to its former state. It is the sys tem of defraying extraordinary expenses by borrowing the money, for which an annual interest must be paid, and of suf fering the debts thus incurred to accu mulate, by which the sum to be annually paid is continually increasing, and the expenses of every war are rendered far greater than those which preceded it, that has swelled the revenue and expen diture of most of the nations of Europe to an enormous magnitude, and caused their systems of finance to become com plicated and oppressive.
In Great Britain, where the system of running in debt, or, as it is commonly termed, the funding system, has been carried to a greater height than in any other country, its natural attendants, enormous taxation and expenditure, have made equal progress; and it is probably owing chiefly to the publicity which is given to all matters of finance, so that every person, with little trouble, may know how all the money raised for the public service is expended, that the peo ple have been induced to submit to taxes, which both from their nature and amount would have appeared incredible to their forefathers.
The English system of finance rests on the produce of the various taxes which have been imposed at different periods, the aggregate amount of which, after deducting the expenses of collection, together with a few small articles, which cannot properly be called taxes, forms the whole of the public income : this income is annually appropriated to the several branches of the national expen diture, and when, in consequence of any extraordinary expenses, it is known that the income of the current year will be insufficient to meet all the demands upon it, it is usual to borrow the Mm necessary to make up the deficiency, either from individuals or public bodies, and to allow a fixed rate of interest on the money thus obtained, till the prin cipal shall be repaid, or till the period originally agreed upon shall have expired.