One treasury, one set of books: Pombal's Real Erário of 1761

On 11 January 1762, thirty-eight men took office in the new Real Erário, the Royal Treasury of Portugal. At their head stood Sebastião José de Carvalho e Melo, Count of Oeiras, the king's chief minister, who took the post of Inspector-General without pay. Below him were a Treasurer-in-Chief and his scrivener, three general treasurers with their scriveners, four general accountants with sixteen clerks, four tellers, four ushers and a porter.2 sources2 sources

Their rules had been printed a few weeks earlier. Money came in and went out only "at the mouth of the chest", the law said. The moment a tax farmer or royal receiver handed over a sum, the Treasurer's scrivener wrote it on the left-hand page of a numbered book, with the date in the margin, the payer's name and where the money came from. Payments out went on the right-hand page. The strongroom had three keys: the Treasurer kept the first, his scrivener the second and the general accountant for Lisbon and Estremadura the third.1 source1 source

Every Saturday the Treasurer drew a summary from the accountants' books and took it to the Inspector-General, so that the king could be shown the state of the treasury every week. Under the old system nobody could even work out how much of the crown's money was free to spend, so this was new.2 sources2 sources

Portugal's crown accounts had been kept since the Middle Ages by the Contos, later called the Casa dos Contos. Its roots went back to the reign of King Dinis in the late thirteenth century, and it received its first regulations in 1389 under João I. By 1761 it employed 102 people at the Terreiro do Paço, the riverside square of the royal palace.3 sources3 sources

Its problems were old ones. Particular revenues were assigned to particular expenses, so only scattered leftover balances ever reached the centre, at different times. Pensions, favours and grants were handed out by several councils with no central control. Different bodies sent payment orders to different treasurers, so nobody could work out how much money was actually free. Many posts were owned as property and passed down in families.1 source1 source

The earthquake of 1 November 1755 brought things to a head. The shaking, the tsunami and the fires that followed (told in our article on the earthquake) destroyed most of the Contos' records; some accounts say all of them. Raising money to rebuild Lisbon then showed how little the old office could do to stop unauthorised payments.2 sources2 sources

The disaster also made Carvalho e Melo. Appointed Secretary of State for Foreign Affairs and War in 1750, he took over the Secretariat of the Kingdom in 1756 and in practice ran the government. By the end of the decade he had crushed his opponents: rioters in Porto in 1757, the Távora and Aveiro nobles executed in January 1759, and the Jesuits expelled that September. King José I made him Count of Oeiras in 1759.2 sources2 sources

Reform of commerce and teaching came first. A Board of Trade, the Junta do Comércio, was set up in 1755, merchants' books were regulated in 1756 and a school of commerce opened in 1759. The treasury came last. As one historian of the reforms put it, with internal opposition brutally crushed, Carvalho e Melo now had time to change the country's administrative machine.3 sources3 sources

The Carta de Lei was dated at the Palace of Nossa Senhora da Ajuda on 22 December 1761, signed by the king and countersigned by the Count of Oeiras. It was registered the next day and published in Lisbon on 29 December. A second law of the same date redefined the Conselho da Fazenda, the council that leased out the crown's taxes and contracts.2 sources2 sources

Its preamble argued that the courts of Europe had learned, from many grim experiences, that splitting revenues among many offices only served to annihilate them. It blamed the long lawsuits that delayed every receipt while the palace, judges and soldiers had to be paid on time, and the many receivers and treasurers who hid their frauds in the confusion.1 source1 source

Title I then abolished the office of Contador-Mor and the Contos do Reino e Casa "as if they had never existed", with all their posts, procedures and strongboxes. From then on every tax farmer, receiver and collector had to bring what he collected to the new General Treasury and hand it to the Treasurer-in-Chief, on pain of losing his contract or office.1 source1 source

A decree of 30 December 1761 dealt with the leftovers. Receivers' accounts opened since the earthquake were to be settled under the Inspector-General, and every book and paper still in the Contos was to be inventoried and moved to the new treasury's archive. The old office's staff were not simply sacked: they kept their salaries until they found other posts or retired.2 sources2 sources

The Inspector-General was to preside "in my place, as my lieutenant", in the law's words, answering directly to the king. Below him the treasury was split by geography into four contadorias, or accounting offices, each run by a general accountant with four clerks. Each had a daybook, a ledger and subsidiary books for every customs house, tax and contract it supervised.2 sources2 sources

The schedule of ledgers reads like a map of the empire's economy. It lists books for duties on slaves and ivory in Angola and on slaves sent inland to the mines, the fishery in Pará, sugar in Pernambuco, cattle tithes in Rio Grande do Norte and whaling off Bahia, Rio de Janeiro and São Paulo. The Rio de Janeiro office also kept the books for the royal fifth of the gold and for the diamond contract.1 source1 source

Title XII set the method. The handling of such large sums, the law said, could not be left to the habits of whoever ran each office.1 source1 source

Twice a year, by 10 July and 10 January, each general accountant had to deliver a balance of what his office had received, spent and held in cash, on pain of suspension. The Inspector-General then had the Treasurer's cash book balanced against the four accounts and watched the tellers count the coins in the strongroom. If all was correct, the record went to the king.3 sources3 sources

The law demanded general accountants with "the indispensable science of mercantile calculation", who understood and practised double entry. Their clerks needed only to write the books cleanly, in the hope that they would learn enough to succeed their chiefs. Such people were scarce in Portugal.1 source1 source

Jácome Ratton, a merchant whose memoirs were published in 1813, recalled that in the mid-eighteenth century only three Portuguese firms kept double-entry books, each with a foreign partner. Two of the Erário's first accountants, António Caetano Ferreira and Luís José de Brito, came from those firms. All four general accountants were merchants Pombal trusted, though three of the twelve senior officials below Pombal came from the old Contos.2 sources2 sources

Pombal himself had probably met double entry in London, where he was envoy from 1738 to 1743. In a letter of 1742 to Cardinal da Mota, then the leading minister of João V, he discussed the method and its advantages for English trade. The statutes of the trading companies he founded around 1760 required double-entry books.2 sources2 sources

His longer answer was a school. The Aula do Comércio, paid for by the Junta do Comércio, took its first students on 1 September 1759. Boys over fourteen who could read, write and count sat an entrance exam, with preference for merchants' sons. The three-year course covered arithmetic, exchange, weights and measures, insurance and, last of all, double-entry bookkeeping.2 sources2 sources

Its first teacher, João Henrique de Sousa, was a tailor's son from Setúbal who had learned bookkeeping in the Lisbon houses of two Florentine merchants and worked in Buenos Aires and Rio de Janeiro. He taught only the first course. In January 1762 Pombal made him scrivener to the Treasurer-in-Chief, the post that set up the Erário's bookkeeping.2 sources2 sources

Graduates went on to the Junta do Comércio, the chartered companies and the Real Erário itself. One modern study concludes that without them Pombal could not have organised the public accounts at all.2 sources2 sources

The Erário was tested at once. In May 1762, during the Seven Years' War, a Spanish army invaded Portugal; French troops joined it in the summer. That September the crown revived the décima, a tax of a tenth on incomes first levied in 1641 to defend the Restoration, and the Erário collected and accounted for it.1 source1 source

In those years customs duties made up about a quarter of crown revenue, the crown's own property and rights about two-fifths, and the décima about an eighth. Whether the new system raised more money than the old one would have is much harder to say. The Contos' records were lost in 1755, Brazilian gold output had been falling since mid-century, and the war of 1762 changed the crown's needs at a stroke.2 sources2 sources

The crown, at least, was pleased with its method. A law of 21 February 1766 opened by praising "the notorious usefulness" of the new method to the royal treasury and placed under it the property confiscated from the Távora conspirators of 1759 and from the expelled Jesuits, which had been scattered among other offices. Pombal later wrote that running the treasury had required, in great part, "the mercantile style observed in the houses of great commerce".2 sources2 sources

The model spread, though rarely in full. Treasury boards in Bahia (1765) and Rio de Janeiro (1768) adopted new accounting rules, and officials and copies of the 1761 law were sent out from Lisbon. Most colonies used a simplified receipts-and-expenses system; only Angola had full double entry imposed, after 1772. The royal mint in Lisbon switched to double entry in 1773.2 sources2 sources

Control, though, ran in one direction only. Just four people could see the whole picture: the king, the Inspector-General, the Treasurer-in-Chief and his scrivener. The general accountants knew only their own office, and officials were forbidden to reveal what moved through their chests.2 sources2 sources

Manuel Benavente Rodrigues, who rebuilt the Erário's balances for 1765, 1798, 1816 and 1823 from its ledgers, concludes that accounting was put at the service of centralism and secrecy. He found the books far better kept while João Henrique de Sousa was there than without him. He also doubts the Pombaline story of accounting darkness before 1759: the men appointed in 1762 had learned double entry in merchant houses long before the Aula or the Erário existed.2 sources2 sources

Pombal left office in March 1777, after José I died, but the Erário outlived him. João Henrique de Sousa drew up a reform plan for Queen Maria I and became Treasurer-in-Chief in 1781. Accused of embezzlement in 1786, he was tried and cleared, but his enemies had him dismissed in 1787, and he died the next year.3 sources3 sources

War with revolutionary France strained it badly. From 1796 the treasury borrowed from the public through small bonds, the apólices do Real Erário, which from 1797 circulated as Portugal's first state paper money. When the court fled to Brazil, a law of 28 June 1808 created an Erário in Rio de Janeiro "with the same prerogatives" as those set out in the law of 22 December 1761.2 sources2 sources

The liberals ended it. During the civil war between the liberal Pedro IV and his absolutist brother Miguel, Mouzinho da Silveira, Pedro's minister of finance, abolished the Erário by Decree no. 22 of 16 May 1832 and replaced it with a Tesouro Público. Lisbon was still held by Miguel's forces, so the old treasury carried on until a decree of 14 September 1833, after the liberals took the capital.3 sources3 sources

With the Erário went its bookkeeping. Portuguese public accounts went back to single entry in the nineteenth century, and the Aula do Comércio was closed in 1844 and folded into the Lisbon lyceum.2 sources2 sources

Portugal's Court of Auditors, the Tribunal de Contas, counts the Erário in its own family tree: Casa dos Contos from 1389 to 1761, Erário Régio from 1761 to 1832, then the Tesouro Público, the Conselho Fiscal de Contas and, from 1849, the Tribunal de Contas. Under different names since, it still checks how public money is spent.1 source1 source

The bookkeeping argument of 1761 came back too, slowly. For most of the twentieth century public accounting was mainly a matter of tracking the budget. The POCP plan of 1997 combined budget, asset and cost accounting in one system, and Decree-Law 192/2015 created the SNC-AP, adapted from international public-sector standards, to put the state's accounts on an accrual basis.1 source1 source

Portuguese historians of accounting call the eighteenth century the golden age of their subject, for the first book on double entry in Portuguese, the Aula do Comércio and the Erário. They weigh the Erário differently. Delfina Gomes and her co-authors see it as the first step in bringing double entry into Portuguese public administration; Benavente Rodrigues stresses an absolute monarchy keeping its accounts where only four men could read them.2 sources2 sources