The Emperor Charles the Sixth had issued a Pragmatic Sanction, by which he provided that his hereditary dominions should descend unbroken to his daughter, Maria Theresa; but no European State had yet consented to guarantee her succession. Spain, still resolute to regain her lost possessions, and her old monopoly of trade with her American colonies, seized the opportunity of detaching the Emperor from the alliance of the Four Powers, which left her isolated in Europe. She promised to support the Pragmatic Sanction in return for a pledge from Charles to aid in wresting Gibraltar and Minorca from England, and in securing to a Spanish prince the succession to Parma, Piacenza, and Tuscany. A grant of the highest trading privileges in her American dominions to a commercial company which the Emperor had established at Ostend, in defiance of the Treaty of Westphalia and the remonstrances of England and Holland, revealed this secret alliance; and there were fears of the adhesion of Russia. The danger was met for a while by an alliance of England, France, and Prussia; but the withdrawal of the last Power again gave courage to the confederates, and in 1727 the Spaniards besieged Gibraltar, while Charles threatened an invasion of Holland. The moderation of Walpole alone averted a European war.

While sending British squadrons to the Baltic, the Spanish coast, and America, he succeeded by diplomatic pressure in again forcing the Emperor to inaction; Spain was at last brought to sign the Treaty of Seville, and to content herself with a promise of the succession of a Spanish prince to the Duchies of Parma and Tuscany; and the discontent of Charles at this concession was allayed in 1731 by giving the guarantee of England to the Pragmatic Sanction.

As Walpole was the first of our Peace Ministers, so he was the first of our Financiers. He was far indeed from discerning the powers which later statesmen have shown to exist in a sound finance, but he had the sense to see, what no minister had till then seen, that the wisest course a statesman can take in presence of a great increase in national industry and national wealth is to look quietly on and let it alone. At the outset of his rule he declared in a speech from the Throne that nothing would more conduce to the extension of commerce "than to make the exportation of our own manufactures, and the importation of the commodities used in the manufacturing of them, as practicable and easy as may be." The first act of his financial administration was to take off the duties from more than a hundred British exports, and nearly forty articles of importation. In 1730 he broke in the same enlightened spirit through the prejudice which restricted the commerce of the colonies to the mother-country alone, by allowing Georgia and the Carolinas to export their rice directly to any part of Europe. The result was that the rice of America soon drove that of Italy and Egypt from the market His Excise Bill, defective as it was, was the first measure in which an English Minister showed any real grasp of the principles of taxation.

The wisdom of Walpole was rewarded by a quick upgrowth of prosperity. Our exports, which were six millions in value at the beginning of the century, had doubled by the middle of it. The rapid developement of the Colonial trade gave England a new wealth. In Manchester and Birmingham, whose manufactures were now becoming of importance, population doubled in thirty years. Bristol, the chief seat of the West Indian trade, rose into new prosperity. Liverpool, which owes its creation to the new trade with the West, sprang up from a little country town into the third port in the kingdom. With peace and security, and the wealth that they brought with them, the value of land, and with it the rental of every country gentleman, rose fast. But this up-growth of wealth around him never made Walpole swerve from a rigid economy, from the steady reduction of the debt, or the diminution of fiscal duties. Even before the death of George the First the public burdens were reduced by twenty millions.

The accession of George the Second in 1727 seemed to give a fatal shock to Walpole's power; for the new King was known to have hated his father's Minister hardly less than he had hated his father. But hate Walpole as he might, the King was absolutely guided by the adroitness of his wife, Caroline of Anspach; and Caroline had resolved that there should be no change in the Ministry. The years which followed were in fact those in which Walpole's power reached its height He gained as great an influence over George the Second as he had gained over his father. His hold over the House of Commons remained unshaken. The country was tranquil and prosperous. The prejudices of the landed gentry were met by a steady effort to reduce the land-tax. The Church was quiet. The Jacobites were too hopeless to stir. A few trade measures and social reforms crept quietly through the Houses. An inquiry into the state of the gaols showed that social thought was not utterly dead. A bill of great value enacted that all proceedings in courts of justice should henceforth be in the English language. Only once did Walpole break this tranquillity by an attempt at a great measure of statesmanship.

No tax had from the first moment of its introduction been more unpopular than the Excise. Its origin was due to Pym and the Long Parliament, who imposed duties on beer, cyder, and perry, which at the Restoration produced an annual income of more than six hundred thousand pounds. The war with France brought with it the malt-tax, and additional duties on spirits, wine, tobacco, and other articles. So great had been the increase in the public wealth that the return from the Excise amounted at the death of George the First to nearly two millions and a half a year. But its unpopularity remained unabated, and even philosophers like Locke contended that the whole public revenue should be drawn from direct taxes upon the land. Walpole, on the other hand, saw in the growth of indirect taxation a means of winning over the country gentry to the new dynasty of the Revolution by freeing the land from all burdens whatever. Smuggling and fraud diminished the revenue by immense sums. The loss on tobacco alone amounted to a third of the whole duty.