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Feature: Tax and quacks – the role of tax in the development of modern medicine

29 Nov, 2011

The idea that someone might want to study taxation without a view to unearthing a loophole or two seems somewhat counterintuitive. That they might even enjoy it borders on baffling. But at the University of Exeter, Professor Chantal Stebbings finds it utterly fascinating. The reason? Because, she says, “Tax is the prism through which the cultural, social, humanitarian, political and economic values of any society are distinguished and revealed.”

As a tax magistrate for many years, she saw people’s natural antipathy to tax at first hand. “People think taxes are technical and boring and only to do with money. They don’t want to have to think about it and quite naturally they don’t like paying it,” she says.

“But, in fact, tax shapes so much of what we do. The way we live. Our behaviour and how we as a society interact. Every major revolution in the 19th century, the Boston Tea Party, the French Revolution, was caused by tax. Tax is absolutely there, when pretty much anything happens.

“That’s why – even though it seems a strange thing to say about tax law – I think it is incredibly exciting.” Professor Stebbings is Professor of Law and Legal History at the University of Exeter, and with Wellcome Trust funding, has been exploring the ways in which tax and medicine have shaped each other over the past three centuries.

Window tax

The inherent unpredictability of tax – and its propensity to have unforeseen and sometimes far-reaching effects outside the financial arena – first became apparent 150 years ago. In 1851, as a result of public and political pressure, the British Government reluctantly abolished its controversial window tax.

A Vision of the Repeal of the Window Tax. Credit: Wellcome Library, London.

“One of the things that’s striking about the history of tax and tax law prior to the window tax is that the absolute prime aim of tax was to raise money,” says Professor Stebbings. “The government decided whether a tax was successful or not, simply by the amount of money that it raised, and whether it was cheap to assess and collect.”

As she describes in her 2011 paper 1, the window tax introduced in 1695 fulfilled these criteria. Every house had windows, so the yield promised to be high. It also appeared straightforward to assess: tax inspectors didn’t have to go into people’s homes and invade their lives – they simply had to stand outside each house and count the number of windows.

The public had other ideas, and the window tax became one of the most hated taxes in English history. Inspectors counting windows were deemed ‘window-peepers’ and ‘repugnant to English feeling’. People tried to evade the tax by temporarily blocking up their windows with removable materials such as wood or by installing ventilation grilles.

The government dug its heels in. The Inland Revenue and court judges presiding over thousands of appeals insisted any hole in the wall of a house, however tiny (even if it was only the diameter of a pen) counted as a taxable window. To elude the tax, a window had to be permanently blocked up in the same materials (usually brick) the rest of the house was made of.

In the end, there was only one way to avoid it: to live in stifling darkness without light and ventilation. For more than a century, many people did just that. Eventually, in the 1830s and 1840s, the medical profession – then in its infancy – began to recognise the appalling public health consequences and contest the window tax on those grounds. This coincided with a more general movement for the improvement of towns and slum dwellings; doctors and social reformers teamed up and campaigned in Parliament for the repeal of the tax.

The government resisted, concerned (among other things) that a repeal would signal political weakness. Eventually, though, the tax’s political position became untenable, and it was abolished in 1851.

The success of the campaign highlights the importance of public consent to a tax. “If you have enough popular objection to a tax, if enough people think a tax is unfair and don’t want to pay it, then it just doesn’t work; it really is unsustainable,” says Professor Stebbings. “Margaret Thatcher couldn’t sustain the poll tax because of that.”

The window tax also marked the first time the social effects of a tax were discussed in an open forum in both press and Parliament – and its fundamental purposes beyond the purely financial were debated. The campaign to abolish the window tax also gave the emerging medical profession, which was seeking to establish itself as a respected professional body, a new role in fiscal policy.

Asylums and tax

Fiscal policy was starting to shape aspects of medicine in its turn. The County Asylums Act of 1808 and Lunacy Act of 1845 established statutory public asylums in every county to care for ‘lunatics’ (the correct term for people with mental health problems at the time).

Entertainment for the patients at the Middlesex County Lunatic Asylum, Colney Hatch, 1853. Credit: Wellcome Library, London

In her 2011 paper 2, Professor Stebbings explains that these were entirely novel institutions: in the past, ‘lunatics’ had been cared for by private or charitable organisations. The new asylums, therefore, had to work with the Inland Revenue to establish their place and status within the national tax regime. The outcome was to have a significant impact on the care and treatment of the mentally ill.

“The asylums really fought their corner against the Inland Revenue as it then was to carve a place out for themselves in the tax law regime. They did everything they could to get out of paying tax, legally, as much as they could, so that they could carry out their central purpose,” says Professor Stebbings.

The big question, she says, was whether to tax asylums as prisons (i.e. institutions with the purpose of protecting the public from the insane by locking them up), which would give them certain specific tax exemptions, or to tax them as hospitals, whereby they became charities and had charitable exemptions instead.

The debate – whether the asylums were custodial or curative for tax purposes – fed into a wider medical debate: should lunatics be locked up for the public safety, or should lunacy be acknowledged as an illness to be treated and cured?

Ultimately, the judges decided that asylums were hospitals, entitled to charitable tax exemptions. Coinciding with their establishment as hospitals within tax law, there was a move within the medical profession during the 19th century towards treating lunacy as an illness, rather than a crime.

Tax and quacks

Attempts by the medical profession to establish themselves as a respected professional body were undermined by a national fondness for ‘quack’ medicines – the subject of Professor Stebbings’ latest investigation into the history of tax and medicine.

Doctor Bossy, an itinerant medicine vendor, selling his wares on stage, 1792. Credit: Wellcome Library, London.

With a Wellcome Trust History of Medicine Research Leave Award, Professor Stebbings has recently begun studying the impact of tax on the development of the pharmaceutical industry and the medical profession in 18th- and 19th-century England.

Quacks with no formal training in medicine began to capture public imagination – and hope – from the 17th century onwards. They sold miraculous ‘cures’ for every possible ailment, including tuberculosis and cancers, keeping the ingredients of their remedies (some of which were extremely toxic) secret. Their promises to cure made them popular with people from every social class: short-sighted Queen Anne even knighted her quack tailor-cum-oculist William Read.

Unfortunately for the quacks (but fortuitously for the public and the medical profession), in their bid to attract public attention they also caught the eye of the Inland Revenue. Ever looking out for new ways to raise money, in 1793 the revenue boards decided to slap a stamp duty on ‘quack medicines’ – and in doing so, they offered unexpected (and unwitting) support for the medical profession.

As with the window tax, their aim was solely to raise money. The new tax required quack doctors to buy a licence to sell a particular medicine, plus a stamp to put on the actual medicine packet to prove the tax had been paid (‘stamp duty’). Selling or buying unstamped medicines incurred big financial penalties.

Once again, a tax was to have wider effects on medicine. Professor Stebbings believes the new tax on quacks had a profound and lasting influence on both the development of pharmacy and the regulation of medicines.

“The medicines that were taxed, that had to bear this stamp, were the ones sold by quacks with secret ingredients. In effect, it was the secrecy that was stamped,” she says. If the components were known, the medicine was exempted from the tax. The effect was to encourage transparency: if people didn’t want to come within this tax regime, they were forced to disclose their medicines’ ingredients. This, in turn, improved the regulation and quality control of medicines.

The tax is also likely to have given chemists and druggists a financial incentive to get properly qualified, which at the time would have been through a period of formal apprenticeship, under either a civilian physician or a surgeon in the army or navy.

It also helped the orthodox medical profession establish itself as such, since one way for any profession to gain recognition is to claim special status in tax law. By making qualified chemists and physicians exempt from the tax, the law assumed (and formally recognised) that a body of qualified professionals existed – precisely what the medical profession wanted.

Before she starts to explore the subject in more depth in September, Professor Stebbings will pursue a related, personal interest in the birth of the pharmaceutical industry. Her great-grandfather emigrated from Ireland to the South of France at the end of the 19th century and set up a pharmaceutical shop in Nice, to cater for the English and American aristocracy who wintered there.

“That’s why I have the name I have, because my family’s French. We have lots of old papers from the business showing how successful such enterprises were and their relations with manufacturers such as Burroughs Wellcome in their early years.”

  • The outcome of the Tax and Quacks project will be a book published by Cambridge University Press in 2014, entitled ‘Tax, Medicines and the Law: From quackery to pharmacy’.
Penny Bailey
Further reading

1. Tiley J (ed). Public Health Imperatives and Taxation Policy: The window tax as an early paradigm in English law. Studies in the History of Tax Law, Oxford: Hart Publishing, 2011. [Read extended summary here]

2. Stebbings C. An Effective Model of Institutional Taxation: Lunatic asylums in nineteenth century England. J Legal Hist 2011;32(1):31-59.

Image Credits:
Top: Professor Stebbings in a reconstructed early 20th century chemist’s shop at Flambards Victorian Village in Helston, Cornwall.
Others: Wellcome Images
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