In England tallies were wooden sticks that functioned as instruments of credit and exchange in public finance. The Exchequer (treasury) began using tallies in the Middle Ages, and by the humor of history the use of tallies survived into the early nineteenth century.
A tally was a wooden stick with notches denoting various sums of money. A notch the length of a man’s hand denoted 1,000 pounds, while a notch the width of a man’s thumb denoted 100 pounds. A simple V-shaped notch represented 20 pounds. The handle of the tally remained notchless. In a credit transaction, the notched segment of the wooden tally was split lengthwise down the middle and the handle remained with one half of the tally. The creditor kept the larger half with the handle, and the debtor kept the smaller half, called the foil. The two halves would match or “tally.” The tallies were assignable, meaning creditors could transfer ownership of tally debts to third parties. In this connection tallies circulated as money.
Tallies entered into the British public finance system in two ways. First, a citizen owing taxes to the government might hand the Exchequer a tally, signifying a debt of taxes. The government would use the tally to pay for goods and services. The recipient of the tally presented it to the taxpayer who had the other half (the foil) and demanded payment. A second use of tallies in public finance occurred when the government issued tallies in payment for goods and services. In this instance the government was the debtor, and tallies originating from the government could be used in payment of taxes. Originally the government pledged future tax revenue from specific sources earmarked for redemption of these tallies. Later the government issued tallies to be redeemed from the general revenue. Tallies used as an instrument of government debt paid interest.
It was this second use of tallies that contributed to the growth of a primitive money market in London. Purveyors of goods to the government received
tallies, and discounted them—that is they sold them at less than face value—to goldsmith bankers rather than using them in exchange, a practice that reached its zenith in the seventeenth century. The goldsmith bankers, in turn, expected the government to redeem at face value at some date in the future the tallies that they had purchased. Later, the Bank of England also discounted tallies, creating an even more ready market in tallies and adding to their acceptability in exchange.
By the seventeenth century tallies were already an anachronism, but they were not officially discontinued until 1834. In addition to assisting the emergence of the London money market, tallies reduced the need for money minted from precious metals and eased pressure on the English government to debase the coinage to finance excess government expenditures.
Davies, Glyn. 1994. A History of Money.
Dickson, P. G. M. 1967. Financial Revolution in England.
Feavearyear, Sir Albert. 1963. The Pound Sterling: A History of English Money.