Tally Stick

A tally stick was a length of wood, typically hazel or willow, on which notches were cut to record a sum of money or quantity of goods, and which was then split lengthways into two matching pieces held by the two parties to the transaction. Because only the two original halves fitted together exactly, along the grain and the notches, a tally was very hard to forge or alter. The English Exchequer used split tallies as its principal record of payments and debts from the twelfth century until 1826.

Tallies were used in many societies as a simple form of record-keeping, but the Exchequer tally is the best documented. It functioned as a receipt, a record of debt and, at times, a transferable claim that circulated in ways that resembled money.

When a sheriff or other official paid money into the Exchequer, a clerk cut notches across one edge of a stick to show the amount. The width and form of each notch indicated its value, from wide cuts for thousands of pounds down to small nicks for single pounds, shillings and pence, and the details of the payment were written on the sides. The stick was then split almost along its full length. The longer piece, called the stock, went to the payer as a receipt; the shorter piece, the foil, was kept by the Exchequer. At audit, the two pieces were matched to confirm the payment.

The process is described in the Dialogue concerning the Exchequer (Dialogus de Scaccario), written around 1179 by Richard FitzNigel, the royal treasurer. The Exchequer took its name from the checkered cloth on which accounts were reckoned with counters, while tallies provided the permanent ledger-like evidence of what had been paid.

The Crown also used tallies to anticipate revenue. Instead of paying a supplier or creditor in coin, the Exchequer could issue a tally "of assignment" directing a tax collector to pay the holder from future receipts. The holder could wait and collect, or sell the tally at a discount to someone else, so tallies came to be traded much like a bill of exchange or a short-term government note. In this sense they represent an early form of debt instrument and an example of money as a record of obligations rather than a physical commodity, a point often cited in debates about the origins of fiat money.

When the Bank of England was founded in 1694, part of its early capital was subscribed in tallies, and the Exchequer continued to issue tallies alongside newer paper instruments. Over the eighteenth century, Exchequer bills and other forms of paper money and securities gradually replaced them.

An act of 1782 abolished the use of tallies at the Exchequer, though it took effect only on the death of the officials then holding the relevant posts, and the practice finally ended in 1826. A large store of old tallies remained in the Palace of Westminster. In October 1834 workers were ordered to burn them in the furnaces beneath the House of Lords. The fire spread, and the old Houses of Parliament were largely destroyed, leading to the construction of the present Palace of Westminster.

Tally sticks illustrate several ideas that remain central to finance:

• Record-keeping as money: value was represented by a claim recorded on a token, not by a precious metal, much as modern commercial bank money is a record on a bank's books.
• Anti-counterfeiting by design: the matching halves made forgery impractical, a physical form of the verification later achieved by signatures, serial numbers and cryptography.
• Two-sided records: each party held its own copy of the same entry, a principle echoed in reconciliation between counterparties and, by some commentators, in shared ledgers such as the blockchain.
• Government credit: tallies of assignment show how a state could spend ahead of its tax receipts, a precursor to Treasury bills.

Tallies also avoided the need for a double coincidence of wants in dealings with the Crown, since a creditor could accept a claim on future revenue rather than goods or coin. Several surviving Exchequer tallies are held by the UK National Archives and other collections, and the word "stock", in the sense of a holding in a company or government debt, is often traced to the stock half of the tally.