Generally, Charles II's problems did not arise from the Restoration settlement but from the lines of policy he chose to follow. Charles was given a generous financial settlement in 1660-61 of £1.2 million per annum, mainly from indirect taxation. This proved inadequate in the early years of Charles' reign, firstly because the parliamentary assessments had been incorrect or over- ambitious, secondly because of the decline in the yield of the revenues during a period of moderate economic depression, and finally because of Charles' own extravagance. Without the power to legally raise emergency taxation without parliamentary approval and a limited pool of long-term credit available to him, Charles lacked the financial means to follow an assertive foreign policy, even if he had intended on doing so. The well-established problem of parliamentary recalcitrance in funding wars abroad continued in Charles II's reign. Structurally the reign of Charles II needed an effective and dynamic administrative figure in the mould of Thomas Cromwell; yet it did not find one. Considerable change was needed in the centre of government. So too did Parliament require improvements in efficiency and management of business and discussion of debate.

Charles' feeling that the MPs returned in 1661 were as loyal as he would ever meet encouraged the King to perpetuate the Cavalier Parliament in near-annual sessions for almost eighteen years. The inefficiency of Parliament was in part the result of growing rivalry between the House of Commons and the House of Lords. The principal issue was the Lords' claim to presume jurisdiction of the abolished prerogative courts. A principal reason for the lack of parliamentary efficiency in dealing with business was the lack of a government programme or agenda - much of the time the Commons would debate what their agenda should be and what should be discussed. Though there were many embarassments for the crown - such as the defeat of religious toleration (1672-3), the suspension of interest payments on Crown loans (1672) or the political brawling in Parliament between Arlington and Buckingham (1674-5) - the only challenge to Charles' authority came with the Exclusion Crisis of 1678-81 (see next chapter for full details). The precipitant of political upheaval of several years, the Exclusion Crisis, caused by the revelations in 1678 of Titus Oates and Israel Tonge to Parliament of a Popish Plot, an alleged Jesuit conspiracy to depose the King and install the Catholic heir the Duke of York. The murder of Godfrey, the JP who took Oates' evidence, and the discovery of "conspiratorial" letters about the person of the Duke's private secretary heightened tensions. Several Catholic 'plotters' were executed in response to the revelations, which ultimately turned out to be a false alarm. The Plot was complicated with the revelations that Charles' chief minister the earl of Danby had negotiated with Louis XIV in secret to extract a pension for the King.

The political crisis triggered by the Popish Plot involved the efforts of the 'Country party' under Shaftesbury to Exclude the Duke of York from the succession in favour of Charles II's bastard son the Duke of Monmounth. However there were other issues at hand in the Exclusion Crisis, which constituted a challenge to the Earl of Danby's hold of power which came under a smoke- screen of fears surrounding French-style absolutist government. For the first twelve months of the Exclusionists' campaign, the target was not Charles or the Duke of York but Danby. Shaftesbury saw Danby's regime as much of a threat to English liberties as one under the Duke of York might be. In essence, Danby's principles were the very antithesis of Shaftesbury's. The Cavalier Parliament became increasingly hostile, passing the Test Act in 1678, which excluded all Catholics except the Duke of York from Parliament. Charles dissolved the Cavalier Parliament in 1679 and exiled the Duke of York to Brussels. The first Exclusion Parliament (1679) had a 2 to 1 opposition majority after the election, which was fought along party lines. Danby was made to resign and impeachment proceedings against him continued. Charles later gave Danby a royal pardon; the Commons ruled that this was illegal and the Lords imprisoned him in the Tower.

Though the Tories feared a return to the events of 1641 with the Exclusion Crisis, such comparison is largely superficial. It did lead to a renewed and lasting polarisation of politics, but civil war was unlikely - Scotland and Ireland were quiet, the memories of 1642-6 and more importantly 1649 and what came after it were an effective deterrent. The fears exploited by the Whigs were less intense than those of the 1640s; to coerce or scare Charles into agreeing to Exclusion the Whigs exaggerated the magnitude of their popular support. Charles was fearful of rebellion and it was natural for him to mistake the Whigs for republicans - as Charles saw it, once the Duke of York had been removed they would destroy the monarchy. Playing for time, Charles refused to agree to Exclusion, and allowed Parliament to investigate the Popish Plot. Initially the dominant figure of the Exclusion Crisis (1679-81) was the Earl of Shaftesbury,

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