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How Britain Paid for War Bond Holders and the Financing of the Great War 1914–32

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How Britain Paid for War Bond Holders and the Financing of the Great War 1914–32 How Britain Paid for War Bond Holders and the Financing of the Great War 1914–32 Norma Cohen Queen Mary University of London in collaboration with the Bank of England Thesis submitted in partial fulfilment of the requirements of the Degree of Doctor of Philosophy (PhD) September 2019 0 STATEMENT OF ORIGINALITY I, Norma Elizabeth Cohen confirm that the research included within this thesis is my own work or that where it has been carried out in collaboration with, or supported by others, that this is duly acknowledged below and my contribution indicated. I attest that I have exercised reasonable care to ensure that the work is original, and does not to the best of my knowledge break any UK law, infringe any third party’s copyright or other Intellectual Property Right, or contain any confidential material. I accept that the University has the right to use plagiarism detection software to check the electronic version of the thesis. I confirm that this thesis has not been previously submitted for the award of a degree by this or any other university. The copyright of this thesis rests with the author and no quotation from it or information derived from it may be published without the prior written consent of the author. Signature: Norma Cohen Date: 22 September 2019 1 ABSTRACT This thesis identifies and analyses the sources of finance that provided the resources allowing Britain and its allies to achieve victory in the First World War. The research uses, for the first time, the previously unopened ledgers at the Bank of England containing the identities of individuals and businesses buying War Loans 1914–32. Using random sampling technique, the research tracks over 6,000 investors in three series of War Loan to form a picture of capital providers over the period. The thesis concludes that the nature of these providers changed significantly. At the outbreak of war, London-based wealthy individuals and financial houses disproportionately provided capital, but by the years 1919–32, the source had shifted to the English North East, North West, and Scotland. That geographic shift reflects, in part, the re-cycling of large profits earned on war industries during 1914–18 into safe government securities in the years after. Drawing on files at the Bank of England and the National Archives, this research concludes that despite the substantial wealth of domestic investors, Britain had to engage in a ‘battle for capital’ that included previously unthinkable levels of tax and the control of investment; controls including threats of confiscation and outright confiscation of foreign securities; a bar on new competitors in the capital markets; and ultimately borrowing terms so generous they weighed on Britain’s finances for a generation. Design of the largest group of securities was agreed between Treasury officials and some of its wealthiest financiers. Although much of the advertising and publicity drive to raise war finance was directed at the large working class and small savers, the research concludes that War Loan capital was overwhelmingly provided by Britain’s wealthiest investors. They were also the people who benefitted most from their holdings in the years to 1932. 2 CONTENTS STATEMENT OF ORIGINALITY .................................................................................... 1 ABSTRACT ........................................................................................................................ 2 CONTENTS ........................................................................................................................ 3 LIST OF TABLES .............................................................................................................. 7 ACKNOWLEDGEMENTS ................................................................................................ 9 CHAPTER 1 Introduction................................................................................................. 11 Britain as a Modern Fiscal State ................................................................................... 17 Organization of this thesis ............................................................................................. 21 Chapter 2: The Battle for Capital .............................................................................. 21 Chapter 3: Where did the Capital come from? Investors in Unnamed Occupations . 21 Chapter 4: Where did the Capital come from? Investors in Named Occupations ..... 22 Chapter 5 The Stark Geographic Shift ...................................................................... 23 Chapter 6: The War After .......................................................................................... 24 Chapter 7: Conclusion ............................................................................................... 25 CHAPTER 2 The Battle for Capital ................................................................................. 26 The Three ‘Fronts’ in the Battle for Capital .................................................................. 27 The first battle front: keeping capital out of enemy hands ............................................ 32 The second battle front: maintaining the value of sterling on the foreign exchanges ... 38 The third battle front: inducing investors to loan their capital to the war effort ........... 47 Conclusion ..................................................................................................................... 64 CHAPTER 3 Where did the Capital come from? Investors in Unnamed Occupations.... 67 The Distribution of Income and Wealth in Britain in 1914 .......................................... 69 Investors with no stated occupation: Women ............................................................... 74 3 Unmarried Women (Spinsters) as Investors .............................................................. 81 Married Women as Investors ..................................................................................... 88 Widowed women as Investors ................................................................................... 93 Men with no stated occupation...................................................................................... 95 Gentleman, Esquire and other Honorifics ................................................................. 95 Conclusion ................................................................................................................... 107 CHAPTER 4 Where did the Capital come from? Investors with a Stated Occupation .. 109 Classifying Occupations .............................................................................................. 109 The professions as a group .......................................................................................... 111 The four primary professions of clergy, law, medicine, military ............................ 112 Clergymen ............................................................................................................... 113 Medicine .................................................................................................................. 117 Military .................................................................................................................... 119 Law .......................................................................................................................... 121 Other educated professionals: finance, engineering, generic educated professions:125 Finance..................................................................................................................... 126 Engineers ................................................................................................................. 128 Educated Professionals ............................................................................................ 131 Manufacturers .......................................................................................................... 135 The Distributive Trades: Merchants, salesmen, brokers and retailers: .................... 137 Farmers and fishermen ............................................................................................ 143 Skilled Labourers and Tradesmen ............................................................................... 146 Conclusion ................................................................................................................... 151 CHAPTER 5 The Stark Geographic Shift ...................................................................... 153 Geographic distribution of War Loan and how it changed ......................................... 155 4 The Role of London ................................................................................................. 156 How government policy encouraged the geographic shift .......................................... 162 The lifting of post-war investment controls and capital re-cycling ............................ 172 Capital Recycling .................................................................................................... 179 Conclusion ................................................................................................................... 187 CHAPTER 6 The War After ........................................................................................... 189 Economic changes in Britain....................................................................................... 190 Britain’s post-war fiscal position: Paying for war .....................................................
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