The Exchequer is the department of the English, and later British, state responsible for receiving, holding and accounting for public money. It emerged under the Norman kings in the early twelfth century as the body that audited the sheriffs who collected royal revenue, and it took its name from the chequered cloth laid across the table on which accounts were reckoned with counters. Over the centuries the word came to mean the national treasury itself, the government's central account.
The Exchequer is distinct from the Treasury, the ministry that today sets fiscal policy, though the two are closely linked: the minister in charge of the Treasury still carries the title Chancellor of the Exchequer. In the medieval period it also had a court that heard revenue disputes.
Exchequer in plain terms
Imagine a large household whose stewards collect rents from farms all over the country. Twice a year each steward must come to the house, sit at a big table and show exactly what he collected, what he spent on the owner's behalf and what he still owes. The table is covered with a cloth marked in squares, and coins or counters are moved across it so everyone in the room can see the sums add up.
The Exchequer was that table and the officials around it, working for the king. Every result was written down on long parchment rolls, and receipts were given as notched wooden sticks. In time the name stuck to the whole organisation, and then to the government's main account, much as "the bank" can mean both a building and the money held there.
Origins and name
The earliest known reference to the barons of the Exchequer dates from about 1110, in the reign of Henry I. The name comes from the medieval Latin scaccarium, a chessboard. The counting cloth worked as a kind of abacus: columns stood for pounds, shillings and pence, and counters placed in them let officials who could not easily calculate in Roman numerals follow the reckoning. The money of account was the pound sterling, a unit of account in which the sheriffs' debts were stated whatever coins actually changed hands.
The best early description of the system is the Dialogus de Scaccario ("Dialogue concerning the Exchequer"), written around 1179 by Richard FitzNeal, treasurer to Henry II, as a teaching text for new officials.
How the medieval Exchequer worked
The institution had two parts. The lower Exchequer, or Exchequer of Receipt, took in and paid out cash. The upper Exchequer, or Exchequer of Account, met at Easter and Michaelmas to audit the sheriffs and other royal accountants. Its main tools were:
- The pipe rolls. These were the annual audit records, kept as rolled parchment, which recorded what each sheriff owed and paid; the oldest surviving roll dates from 1130, and the series runs, largely complete, from the 1150s to the 1830s, making it a remarkable continuous ledger of state finance.
- The tally stick. A notched wooden tally stick, split lengthwise, served as a receipt: the payer kept one half and the Exchequer the other, so a forged or altered stick would not match.
- The counting board. The chequered cloth let the audit be followed by everyone present, a public check on the arithmetic.
Tallies could also be issued in anticipation of future revenue and passed to the Crown's creditors, which made them an early form of government borrowing and a forerunner of transferable debt instruments.
Courts, bills and reform
A judicial side, the Court of Exchequer, grew out of the audit and heard cases about Crown revenue, later attracting ordinary civil suits as well. Its judges kept the title Barons of the Exchequer. Under the Judicature Acts of the 1870s it became a division of the new High Court and was merged into the Queen's Bench Division in 1880.
On the financial side, the Exchequer began issuing interest-bearing Exchequer bills in 1696, short-term paper that became a regular way of financing the state and a forerunner of modern Treasury bills. An act of 1782 ordered the end of tallies once the officials then in post had died, and their use finally stopped in 1826. In October 1834 the burning of old tallies in a furnace under the House of Lords set off the fire that destroyed most of the old Palace of Westminster. The separate Irish Exchequer was merged with the British one in 1817, and the Exchequer and Audit Departments Act 1866 created the office of Comptroller and Auditor General to check public spending.
The Exchequer today
In modern British usage "the Exchequer" refers chiefly to the government's central funds, above all the Consolidated Fund into which most taxes are paid and from which government spending is drawn, with the account itself held at the Bank of England. The Chancellor of the Exchequer presents the annual Budget to Parliament and is responsible for debt management, tax and spending policy through HM Treasury.
The word survives in other countries that inherited English institutions, and historians of money study the Exchequer's records for evidence on episodes such as the Great Debasement under Henry VIII and the recoinage of 1696. Its long run of written accounts is one reason English public finance is unusually well documented.