The name is a euphemism and derives from the British Sovereign gold coins, often used in these payments, which bear an image of Saint George, the patron saint of England, on horseback slaying the dragon.
During the War of the Austrian Succession Britain kept Austria afloat by large subsidies owing to the Anglo-Austrian Alliance. Eight years later in the Seven Years' War they did the same for Prussia, who were now their allies against the Austrians. The Anglo-Prussian Convention signed in April 1758 guaranteed Prussia a payment of £670,000 a year.
In more recent times Lawrence of Arabia is reported to have made payments of these gold sovereigns to Arab soldiers during the Arab Revolt in return for their cooperation and he was nicknamed in Arabic 'Abu Khayyal' meaning 'father of the horsemen'..
During the Napoleonic Wars a number of European states were allied with the British against France. Britain, which had a large navy but a small army, was unable to deploy major forces on the European continent. As Britain was a wealthy commercial power, they were able to pay out millions of pounds to Allied nations, who could field much larger armies against the French. An example is the £1,500,000 paid to Austria to commit troops to the campaign against the French in the Netherlands in 1793, an expedition to which the British could contribute only men. Adjusted for inflation, this is equivalent to £273,000,000 in 2011.
Large sums were made available for the purpose, sometimes as formal subsidies and sometimes as bribes for European statesman. This was partly funded by the introduction of the Income Tax by Prime Minister William Pitt. Though the policy was extremely costly, it ultimately proved successful as a coalition of European nations eventually defeated France in 1814.