in
expecting England to provide money in lieu of the troops which her War
Office failed to raise. Austria also solemnly covenanted to repay the
loans; and her neglect to do so occasioned a bitter dispute which long
held the two Powers apart. Pitt also refused her request for a loan in
the year 1797. As far as possible, he discouraged the raising of war
loans in London. Early in 1796 he did so in the case of Portugal from a
fear that the export of bullion would impair credit.[445]

At that time a novel expedient was shaping itself in his mind. On New
Year's Day he drove Sir John Sinclair from Dundas's house at Wimbledon
up to town; and on the way the baronet suggested the raising a great
loan on easy terms by an appeal to the loyalty of Britons.[446] The need
of some such device became increasingly apparent; for sinister symptoms
began to appear amidst the alarms of the autumn of 1796. The threats of
invasion led the Ministry to propose a special levy of 15,000 men to
reinforce the army, of 20,000 irregular cavalry, and of 60,000
supplemental Militia (18th October). These expenses, in addition to the
ever growing demands for the public services, involved a deficit of
L18,000,000. It was most important to raise this sum promptly in order
to uphold the credit and display the loyalty of the nation; for, as we
shall see, Pitt had recently opened negotiations for peace at Paris in
the hope that the late successes of the Austrians both in Italy and the
Rhineland (which proved to be only temporary), would induce the
Directory to accord fair terms to enemies who thus evinced their energy
and vitality. After consultation with the officials of the Bank of
England, he decided to raise the required sums, not by means of
"contractors," but by appealing direct to the public. Accordingly, on
1st December, he adopted the unusual course of appealing to the Lord
Mayor and the Directors of the Bank of England to encourage in every
possible way the raising of an extraordinary loan of L18,000,000. The
rate of interest, 5 5/8 per cent., seems somewhat high in the case of a
"Loyalty Loan," especially as Consols rose from 53 3/4 in September to
57 in November; but competent authorities agree that it was not too
high.[447]

The response was most gratifying. The Bank subscribed L1,000,000, the
Directors in their private capacity further contributing L400,000.
Similar feelings were displayed in the City and in the provinces.
Before the hour of 1