Wars have a lot to answer for in Britain. One famous legacy that is still with us is income tax, which was first levied to pay for the wars in 1898.
But shortly before that, war was making the public nervous. A series of runs on the Bank of England, and the government’s need for gold to pay for the war left it dangerously short of bullion. By the end of February 1797, it had less than £1,000,000 left.
And so, on 2 March, it started issuing low denomination promissory notes – the pound note was born (along with a two-pound note).
Many people were suspicious. Money usually came in the form of coins, and they wondered if this new-fangled paper stuff was any good. But the prime minister, William Pitt, helped maintain confidence in the new paper money by claiming the bank had plenty of money, and there was no need to hoard coins, as the paper version was just as good. And London’s bankers and merchants stepped in to back the currency too, stating it was good for use in all financial transactions.
But not everyone was so enthusiastic. The playwright Richard Sheridan mocked the Bank and the way it had become an arm of the government, by describing it as an “elderly Lady in the City, of great credit and long standing”, who had “unfortunately fallen into bad company”.
The Bank acquired the nickname the ‘Old Lady of Threadneedle Street’ at this time too, coined by cartoonist James Gillray who depicted the bank as an elderly lady being ravished by the prime minster, with the caption, “Political Ravishment, or the Old Lady of Threadneedle-Street in Danger!”
The one pound note went through several transformations and eventually was taken out of circulation in 1984 and replaced with the equivalent coin used today. This left the £5 as the smallest note available.