The Great Stop of the Exchequer or Stop of the Exchequer was a repudiation of state debt that occurred in England in 1672 under the reign of Charles II of England.

Under Charles II the state finances were in such a grievous condition that the Crown found itself no longer able to honour its debts.^[1]

Throughout the 1660s, state expenditure had been running ahead of the taxation and revenue that Parliament was prepared to authorise. To bridge the gap, the Crown departments increasingly sold more and more debt to the leading London goldsmith bankers, secured against first call on the following two years' revenues. This was an attractive investment for a gilded circle of preferred bankers, who could make annualised returns of 8 to 10% or more by buying the debt at a discount, at a time when interest payments were capped by law at 6%. The debt was also readily assignable, making it relatively liquid, so bankers could trade it between themselves, or sell it on to private investors. But as a larger and larger proportion of the state's anticipated revenue became pre-committed in this way, its room for independent manoeuvre became narrower and narrower.

The stop came suddenly and unexpectedly on Tuesday 2 January 1672. Payments were suspended upon:

any warrant, securities or orders, whether registered or not registered therein, and payable within that time, excepting only such payments as shall grow due upon orders on the subsidy, according to the Act of Parliament, and orders and securities upon the fee farm rents, both which are to be proceeded upon as if such a stop had never been made.^[2]

The period of the stop was to be one year, ending on 31 December 1672. In the interim the king intended that interest would be paid to all those who were owed payment of outstanding bonds that had become due "at the rate of six pounds per cent".^[3]

A letter from Richard Langhorne to Lord Hatton on January 6 gives additional background on the causes and effects of the stop:^[4]

• A total 82 ships were to be prepared for sail "in the cause of national defense", i.e. to attack the Dutch Republic in the Third Anglo-Dutch War.
• The bankers of Lombard Street were asked for an 'advance' (loan) to the king to finance the fleet, they refused to make the loan.
• Due to the pressing need for money the king and his council resolved to find the money for the fleet by cutting other parts of the treasury's budget – money that had been allocated for the repayment of bonds and securities were to be spent on the fleet and only interest paid with no repayment of principal that year.
• There was great disruption and damage to the financial markets: "I believe it certain that the trade of bankers is totally destroyed by this accident".^[3]

The outstanding obligations in all were later estimated to come to £1,211,065.^[5] This was similar in magnitude to the king's entire ordinary revenue for 1671–2, including customs, excise, and hearth tax (but excluding additional special revenues granted by Parliament: £378,000 in 1671–2).^[6]

The short-term consequences of the stop were disastrous. Gilbert Burnet wrote that "the bankers were broken, and multitudes who had put their money in their hands were ruined by this dishonourable and perfidious action".^[3] This seems to have been only a slight exaggeration: the goldsmith bankers were heavily hit, and some of the most prominent, including Edward Backwell and Robert Vyner, went bankrupt. Danby, the Lord Treasurer, promised them compensation, but this was never forthcoming,

One important legacy of the Great Stop of Exchequer was the founding of the Bank of England in 1694. The primary purpose of the bank was to raise and lend money to the state: a loan of £1.2 million was made to the government; in return, the subscribers would be incorporated as The Governor and Company of the Bank of England with long-term banking privileges including the issue of notes. The royal charter was granted on 27 July through the passage of the Tonnage Act 1694.^[13]

Public finances were in so dire a condition at the time that the terms of the loan were that it was to be serviced at a rate of 8% per annum, and there was also a service charge of £4,000 per annum for the management of the loan.

The founding of the Bank of England put an end to defaults such as the Great Stop of the Exchequer. From now on, the British government would never fail to repay its creditors.^[1]

Kenyon argues that the stop was a failure simply because it had never been tried in England before. The French and Spanish governments periodically repudiated their debts without undue difficulty; but from the time of Elizabeth I the English Crown had earned a reputation for paying its debts, and in spite of Charles II's notorious extravagance and carelessness about money, the City of London was quite unprepared for the stop.^[14]

The king himself came to regret it as a "false step".^{[citation needed]}

• Shaw, William A. (1908). "Introduction: Part One". Calendar of Treasury Books, Volume 3, 1669-1672. His Majesty's Stationery Office – via British History Online.
• Shaw, William A. (1908). "Introduction: Part Two". Calendar of Treasury Books, Volume 3, 1669-1672. His Majesty's Stationery Office – via British History Online.
• Browning, Andrew (1930). "The Stop of the Exchequer". History. 14 (56): 333–337. doi:10.1111/j.1468-229X.1929.tb00584.x. JSTOR 24400948.
• Richards, Richard David (1929). "Chapter III: "The Stop of the Exchequer"". The Early History of Banking in England. London: P.S. King & Son. OCLC 802047567.
• Richards, Richard David (1930). "The 'Stop of the Exchequer'". Economic History: Supplement to the Economic Journal. II: 45–62. doi:10.1093/ej/40.Supplement_1.45.
• Horsefield, J. Keith (1982). "The Stop of the Exchequer Revisited". The Economic History Review. 35 (4): 511–528. doi:10.2307/2595405. JSTOR 2595405.
• Milevsky, Moshe (2017). The Day The King Defaulted. London: Palgrave Macmillan. ISBN 978-3-319-59986-1.