SCOTCH BANKS.

HC Deb 05 June 1845 vol 81 cc140-78

On the Order of the Day for the House to go into Committee on the Banks (Scotland) Bill, having been read,

Mr. P. M. Stewart

rose to oppose the progress of this measure. He knew of no adequate reason why Her Majesty's Government should have ventured to touch the present system of banking in Scotland, which was acknowledged to be one of the best, not to say perfect, establishments of the kind that existed. But this was no new attack on the monetary system of Scotland; and, although coming, as it did, before them, recommended by its merely negative character, it assumed not quite so dangerous an aspect as a more direct measure might have assumed: still its tendency was such as to make it the duty of every one connected with Scotland to express their opinion upon it; and if that opinion should be in accordance with the opinion of the people of Scotland, he was certain that it would be for the entire rejection of this measure. The system of Scottish banking had been supported by the opinions of the most eminent men of that country, from Hume down to the great authorities of the present day. While in other countries the greatest disasters had befallen the unsound system on which banking had been established, the Scotch system had been uniformly held up as a model to be universally adopted. He might quote the opinions of the right hon. Baronet himself on this subject; for when, in 1826, an attempt was made to interfere with the currency system of Scotland, the right hon. Baronet not only deprecated any change in that system, but even any inquiry into it. The Motion for a Committee of Inquiry was also resisted by all the great Scotch authorities on that occasion, and no one spoke so forcibly on that subject as the present noble Secretary for Foreign Affairs. He would not trouble the House with any quotations; but there was one uniform tone at that day deprecating all inquiry, as being calculated only to do evil. Since then, the banking system in Scotland had certainly not become worse. On the contrary, it stood now as then; and they had yet to learn what fault was to be alleged against it, and in what way it was proposed to amend that system. The proposition was objected to at the time by Lord Lauderdale; but the system went through the fiery ordeal of two Committees, and what was the result? Nothing could be so conclusive as the Reports of those Committees, both of Lords and Commons, in proving that mischief would ensue, and no good could be hoped for by meddling with the Scotch system of banking existing at that period. Up to this moment the Scotch Members had been perfectly silent upon the subject. And now, in the short period of an hour or two, they were called upon to discuss this important question, or still preserve the silence they had hitherto kept. He would say that the Scotch Members would be wanting in their duty to Scotland, if they sat by with their hands folded, and allowed any interference with the system of banking in that country. When it was proposed to abolish religious tests in the Universities of Scotland, they were told to wait and ascertain what was the opinion of the people of Scotland on that subject; but in reference to this question concerning the banking system, no opportunity had been given to consider what were the opinions of the people of Scotland respecting it. Up to the April meetings—the great county gatherings—there was nothing to be submitted to the people of Scotland upon this subject, except the opening statement made by the right hon. Baronet. It was, however, his firm conviction that there was not a single enlightened individual in Scotland before whom that statement might come, who would not respectfully, but firmly, deprecate any change in the present system of Scotch banking, unless much better grounds for such a change could be advanced than those which had been brought forward by the right hon. Baronet. Under that system, Scotland had risen from being a poor country to one that was comparatively rich. At the great Edinburgh meeting, the other day, there was only one dissentient voice to the general expression of opinion in favour of the Scottish system of banking. That one voice, it was true, was a noticeable one. It was nothing more than the voice of a retired goldsmith, who, in preferring gold to bank notes, might be fairly supposed to love the metal that had made him rich. It was the voice of the retired Speaker of that House—Lord Dunfermline. With that exception, but one feeling animated the people of Scotland, from one end of it to the other—namely, their attachment to one-pound notes; for, as the old poet said— From Maiden Kirk to John o'Groats, We all prefer the one pund notes. He wished to know why the system was to be applied to Scotland, and what were the results to be expected from it? One result he foresaw; for the ultimate aim of the right hon. Baronet (Sir Robert Peel) was, the suppression of all local and provincial issue, and to establish one national bank of issue. If he were mistaken, he hoped that the right hon. Baronet would say so, and he would never mention it again; if he were not mistaken, he begged the right hon. Baronet to consider how objectionable such a scheme would be in a financial and monetary, but especially in a political point of view. In the year 1840, which was the most disastrous year in Scotland, the circulation of the banks there was higher than in 1838, when there was great prosperity. The extreme circulation of notes in Scotland was 3,000,000l. or 4,000,000l.; and when there was a paid-up capital of 10,000,000l. and deposits to the amount of 30,000,000l., what was the object of the change? As an instance of the mischiefs this change would produce, he might refer to three banks of rising business in the city of Glasgow — the Clydesdale, the City of Glasgow, and the Edinburgh and Glasgow. They were represented by a capital of 15,000,000l., and their circulation under this Bill would be restricted to 320,000l. They were provident banks, and were, therefore, more valuable to the poor than to the rich; for a great proportion of the deposits was made up of the contributions of the lower classes. On these would fall the blighting influence of this Bill; and a country having a larger capital for the basis of banking transactions than any other country, in proportion to its population and wealth, would be limped and scrimped. Again, as the exchange days were Tuesdays and Fridays, and as the returns were to be made on the Saturday, all the exchange notes were out, and the parties would be liable to tremendous penalties. It would not be palatable to Scotland: it was objected to by the whole of Scotland; and this would be fully manifest before it went through another stage. It was an uncalled-for Bill; they could not make it better by aiming at an ulterior object; and if that object were not intended, he called on the right hon. Baronet to disavow it. Not a few of our best political economists had expressed a wish that the Scotch banking system should be applied to England, and some had held that to apply it to Ireland would be a remedy for many of the evils that arose out of her poverty. In the view he took of this subject, he was supported by the whole of Scotland; and upon this subject he wished to quote only one authority. That, however, was a great authority—the authority of the right hon. Home Secretary, in an opinion given when he was the political friend of many of those who still sat on the Opposition side of the House. Since (said Sir James Graham) we must have a free trade in corn, let us also have a free trade in money, and destroy that fatal connexion between the Government and the single chartered bank which facilitates the prodigality of Ministers, and invests an irresponsible body with the most delicate and important functions of State, the control of the circulating medium. That quotation was taken from the last edition of an admirable work by an old Whig, called Corn and Currency, which he heartily recommended to the study of the present Home Secretary. He did not intend to conclude with any Motion, but to protest most strongly against the measure.

Sir R. Peel

I hope the hon. Gentleman will allow us to go into Committee with this measure. A late period has arrived, the 5th of June, and as it is of great importance that some progress should be made with this measure, I hope that the hon. Gentleman will content himself with entering his protest, and that he will not offer further opposition to the measure. The hon. Gentleman has not advanced a single argument against this measure; for he knows well that Scotland has been justly and favourably dealt with. The hon. Gentleman tries to raise a prejudice against the measure by saying tha it is the forerunner of the establishment of a single bank of issue. He tries to alarm Scotland by implying an opinion on my part that there should be only one bank of issue throughout the country; and that the circulation of Scotland should be extinguished, and the circulation of the Bank of England substituted in its place. Now, I will not permit this attempt of the hon. Gentleman to succeed. I never have given an opinion in favour of the establishment of a single bank of issue. If, indeed, I had to deal with the question as a res integra, I might establish a single bank of issue; but I know too well the difficulties in the way. I have had too many interviews with Scotch gentlemen not to be aware of the fact, that they would offer their most rigorous and determined opposition to a single bank of issue. I must, therefore, remove the apprehensions from the minds of the people of Scotland, that I contemplate that or any other interference with the mode in which the banking business in Scotland is conducted, or that any such interference is proposed by the present measure. The hon. Gentleman says that some doubt is yet entertained as to the success of the measure of last year. Every one who agrees with the hon. Gentleman will of course entertain such doubts. But let me tell the hon. Gentleman that it is quite clear he is of the old school of political economists, who think that the prosperity of a bank depends upon its paid-up capital. He says that certain banks have a paid-up capital of ten millions, and he proposes that their circulation should bear some proportion to its paid-up capital. Now let me say that nothing can be more unsound than that doctrine. There would be no security for the business of banking, if the principle were once admitted, that, without reference to the exchanges, without reference to investigation, and only by the establishment of a bank with a great amount of paid-up capital, there should be an issue of promissory notes. I dare say the hon. Gen- tleman would think that that was quite safe, if a bank with ten millions of a paid-up capital should issue five millions of promissory notes. Now I can assure the hon. Gentleman that that is not the principle on which banks are established; though, of course, all who consider that that is the true principle must predict the failure of the Bill of last year. Now, Sir, what is the position in which I, as a Member of Government, now stand? About six or seven years ago, you became alive to the amount of evil which was produced by the unlimited issue of promissory notes. The Chamber of Commerce in Manchester attributed exclusively the evils which manufactures and commerce suffered, from the Bank of England encouraging the issue of promissory notes. You became impressed with a sense of these evils and dangers; and you appointed various Committees to inquire into the subject. The opinions of those Committees were in favour of placing some restrictions on the issue of notes. I do not know that they recommended it in their Report; but few persons could have attended the Committee without being impressed with the policy and necessity of establishing some guarantee against the recurrence of these evils. In the course of last Session I brought forward a Bill for the regulation of the Bank of England, prohibiting the establishment of new banks of issue, giving them the privilege, up to a certain amount, of increasing their paper circulation; and this Bill was received, I will not say unanimously, but with the general sanction of the House. One part of that measure applied to England; but there was another part which applied to the other parts of the Empire, prohibiting there, also, the establishment of new banks of issue, and there was not a word against that provision from the Scotch bankers. They were content with the prohibition against the establishment of competing banks of issue. There was not one word of objection heard from them when they got a restrictive monopoly of the circulation of the country; but when I come to apply the remainder of the measure to these parties—when I ask them to provide securities against abuse, then hon. Gentlemen begin to object. [Mr. Stewart: I objected last year.] I never heard a word of objection when the prohibition of other banks was made; and remember, that was at a moment when many new banks, tempted by the great prospects of that period, were preparing to enter into the field of competition. Many such projects I found established—some of them had got their shares paid up, and their notes actually printed off, which were to enter into competition with the existing banks; while others again were in a state of great forwardness. I have attempted, without interfering with the general principles of banking as established in Scotland, to establish a principle with respect to the issue of promissory notes, which we have established over the whole of those respectable parties in England—the country and the joint-stock banks. I leave the House to determine whether or not this measure is too stringent and too unfavourable. I have protected the Scotch banks from competition—I have left them in possession of their present amount of circulation—I have permitted the amount of their promissory notes in future to be governed by their amount in the year that has elapsed, with a foreknowledge on their part that an alteration to some extent would probably take place, which was not afforded to the English banks, for they had no opportunity of learning the intentions of the Government. I have included in the year what is to determine the amount of their circulation, two periods when that circulation went to an extraordinary amount. The hon. Gentleman says that the measure is not known in Scotland. Sir, it was known before the meetings which took place last April. [Mr. Stewart; It was not known by the Bill.] No; it was not known by the Bill; but there is nothing in the Bill which is more unfavourable to them than what was contained in my speech when I explained this measure. These meetings took place; but there has not been a remonstrance from any one of these meetings. I believe the general sense of these meetings was that Scotland was treated as favourably as England. I believe they were under the impression that the measure was a perfectly fair and just one. But after that time the bankers held conferences together—large deputations came to London, and they have attempted to get as favourable terms for Scotland as they can. I believe that is the state of the case. There was a universal acquiescence in the measure at first; but now the bankers wish to get as favourable terms as they can. I think the terms are most favourable; I believe that they will operate for the advantage of Scotland; that it will be for the advantage of Scotland, as well as for the other parts of the country, to take precaution from such a state of things as the country formerly suffered from. [Mr. Stewart: Not Scotland.] I think I could show that Scotland has also, by abuses in its banking system, sustained great evils. I think I could show that there was a period when the country was not benefited by the facilities for credit which their system of banking afforded. The hon. Gentleman says that if there were the same system of banking in England that there is in Scotland, every thing would be prosperous. I say, Sir, that if there were the same system of banking in England as in Scotland, everything would be ruined. The reason why England is able to maintain its system of banking is, that England has adopted another course. A great country, having taken measures to secure a sufficient supply of gold, may permit, in a distant part of the Empire, with a more limited amount of commerce, a different system of banking to prevail with security. But the security of the system which prevails in Scotland rests in the amount of gold in England, and it is this which enables Scotland to dispense with an amount of bullion in proportion to its circulation; which, and not the solvency of the banks, ought to be the foundation of the promissory notes. I am not surprised that Scotland should wish to be exempt from this—I am not surprised that. Ireland should wish the same; and I do not say that it may not be possible, by taking the whole expense of maintaining a gold currency upon this part of the Empire, that another system may not succeed in other parts of the Empire. But I do say that it is just that the burden should be borne in equal proportions by all parts of the Empire; for I believe that that alone constitutes the real foundation of a safe issue of paper. I do not ask from Scotland that it should bear more than its fair share. I know the feelings that prevail in Scotland. I know that, generally, the banks in that country have been conducted in a manner most creditable to all connected with them; I think that their system is preferable to that which prevails in this country; but I see no reason why, in the use of an extended issue of promissory notes, the banks, with their immense amount of paid-up capital should not have a small amount of bonâ fide gold currency to provide for its future increase. That, Sir, is an outline of the measure. I think that Scotland has not been dealt with unfavourably. I hope that those who received favourably the details of a measure they offered to the country banks and the joint-stock banks in England, will admit, that after these Scotch bankers have got a monopoly of issue, and are freed from all competition, a just regulation of their issues ought to be applied, which, whatever the hon. Gentleman may think, I consider to be a point of policy, which, so far as I can judge, is confirmed by every day's experience that passes over the country.

Mr. P. M. Stewart

explained, that he did not hold the opinion that a bank was entitled to issue paper commensurate with its paid-up capital, but that such a capital was one element for consideration in the claim of a bank to extend its issue.

Sir R. Peel

had understood the hon. Member to express a hope that the three banks in Scotland would be allowed to have a currency more nearly based upon their immense paid-up capital.

Mr. Hume

said, there was nothing in this Bill binding the House to one bank of issue, and the discussion ought to be confined to what the Bill really stated. It was an absurd and obsolete doctrine that banks could issue notes as they pleased; it could not be done profitably; the paper would come in again directly, if sent out. When banking was free in Scotland (as it was before the right hon. Baronet interfered with it), there could not be an amount of paper issued for any period exceeding a few days beyond what the commerce of the country required, especially with the exchanges twice a week. But, owing to the peculiarities of that country, an increase took place at certain periods, when notes went into the Highlands to buy cattle; and Scotland would be injured if that expansion could not take place at certain times; the year's average would not meet this. The right hon. Baronet had stated that he would not deprive Scotland of her present circulation, but would only adopt the regulations necessary to prevent excess; but, unless the measure were modified to allow of an expansion of the circulation in October, the right hon. Baronet would be doing what he had promised not to do, and the banks would not be able to issue what they had been issuing hitherto. Subject to this remark, he (Mr. Hume) agreed that the currency of Scotland was adequate. Another defect in the Bill was in that part which provided for the amalgamation and union of two or more banks, allowing the new one to issue what was the aggregate currency of them all. Suppose one of those banks to fail—[Sir J. Graham: They never do]—perhaps the Ayr Bank, long before our time, was the last; but it was a possibility, and should be provided against—there was no provision for filling up that gap in the currency. The whole currency of the country would become, therefore, diminished and interfered with; whereas the right hon. Baronet contended that it would not be so. The alteration of the Bill in the two points he had mentioned would be satisfactory; and if so amended, he should be prepared to agree to the measure.

Sir W. Clay

understood that the circulation of Scotland was 3,000,000l., and that the paid-up deposits in the banks, which might be accounted in some measure a circulation too, was 30,000,000l.; while the bullion actually in Scotland was not more than 600,000l. or 700,000l. Now, suppose Scotland was an independent country, would it be safe to go on with such a state of things? He did not believe that any man would venture to say so, for the result would evidently be, in the adverse period of exchanges, that they must either alter their system, or suspend cash payments. The truth was, that Scotland leaned completely on the safer and sounder system of England. The holders of notes in Scotland knew that they could at all times find specie in the coffers of the Bank of England; and the holders of Scotch notes were anxious to derive profit from the issue of their paper—leaving it to England to provide the security. ["No, no."] His objection to the Bill was of precisely an opposite kind to that taken by the hon. Gentleman. Far from thinking that it interfered too much, he thought it interfered too little, with the Scotch system; and he deeply deplored the fact that the state of public feeling in Scotland would not permit the right hon. Gentleman to carry out his own principles of suppressing altogether the small note circulation. But, as he was of opinion that the measure was, on the whole, a good one, it should most assuredly have his support.

Mr. Hawes

must again express his entire disapproval of this measure. No proof whatever had been offered that the banks of Scotland required any such restriction or regulation as that proposed in the pre- sent Bill. Upon what ground, then, was it to be applied? The Scotch bankers were content, and so were the people of Scotland; and it had not been shown that the existing system concerned any one else. Why, then, interfere? Did the right hon. Baronet mean to rest the present measure on the reasons assigned for restricting the operations of the English banks by the Act of last year? Surely, before the same remedy was applied, some evidence should be adduced that the same evils existed in the two cases. But it was not so. Whatever might be the defects of the Scotch system of banking, it was not liable to the abuses which, it was alleged, the English Bill was brought in to correct. And even admitting that what was good in one country might also be good in the other, it had yet to be shown that the restriction applied in England, would work beneficially even there. The right hon. Baronet, on introducing this Bill, observed that, as far as he might judge from experience, he had a perfect right to be satisfied with the measure he had adopted, and that its working had hitherto been decidedly in favour of its policy and justice. But he (Mr. Hawes) had given some attention to the operation of that Act, and he could not agree with the right hon. Baronet. He was not prepared to say that the circumstances of the past year had been such as fairly to test that measure; but so far as the experience of so limited a period enabled him to form an opinion, he considered that nothing had yet been done to show that it was likely to be of the slightest use, or, indeed, productive of anything but evil. It had not operated in the manner predicted by its advocate, nor did he see any probability of its warding off any of the evils of the old system, whilst it might produce much greater. Experience had not yet established the validity of the principle on which it was founded; it could not, therefore, be appealed to as justifying any extension of that principle. Its avowed object was to cause the bank-note circulation to fluctuate with the bullion in the bank—to increase and decrease constantly with it — and, in short, to regulate the exchanges by a self-acting increase or diminution of the notes in the hands of the public. But had any such effect been produced? He had examined the returns made by the Bank, and could discover no evidence of it. Whatever law the fluctutions obliged, it was certainly not the one laid down by the framers of the Act. Take the return of 21st September, 1844, a few weeks after the Act came into operation. The circulation was then 19,708,000l., and the bullion 15,158,000l. Four weeks afterwards the circulation had risen to 21,320,000l., an increase of 1,600,000l. But had the bullion increased too? No; that had not even remained stationary. It had fallen to 14,096,000l. So that while the circulation rose, the bullion fell, nearly to the same amount; which was exactly what the Act was intended to prevent. Similar results appeared in the variations, monthly and weekly, throughout the year. He need not go through them, and would only state, further, that in March last, when the circulation had again fallen to 19,700,000l., the bullion had risen to 16,200,000l.; showing conclusively, that the restriction had not produced any correspondence between the movements of the bullion and those of the paper circulation. It was also said that the measure would check speculation. But here the anticipations of its advocates had proved equally fallacious. During the past year, not only had there been no want of speculation, but it had prevailed to an extent to which there had been nothing similar in this country for many years. If an unparalleled extension of speculation in railways, in iron, and in projects, some of them apparently of the most visionary description, was among the evils to be prevented by these new restrictions on banking, they could not have failed more signally. He found, on reference to a list recently deposited in the Private Bill Office, that the amount which the public had already been invited and authorized to invest in railway and other projects, under the sanction of Acts of Parliament of the present Session, exceeded 128,000,000l. To this must be added a large sum for English capital invested in the numerous foreign railway schemes, besides a multitude of other projects advertised in the public papers, the nature and extent of which were not so easily ascertained. At the same time there was no contraction of the ordinary channels of employment for the capital of the country. He found the aggregate amount of exports and imports steadily and rapidly increasing. The official value of our imports in the year 1842 was 65,000,000l.; in 1843,70,000,000l.; and in 1844, 75,000,000l. He found the declared value of the exports of British pro- duce during the same years to have been, successively, 47,000,000l., 52,000,000l, and 58,000,000l. There had never, in fact, been a period in the history of this country during which there was a greater opening for the profitable employment of money; the Bank had never had stronger motives for exerting the power which the right hon. Baronet always assumed that a bank of issue possessed, of extending her circulation at will. Yet what had been her position during the last year? Not only had she failed to reach the limit imposed by the Act of last year, but she had at no time approached within 6,000,000l. of it; and consequently had never had less than that sum lying idle in the banking department. What imposed the limit in this instance? Not the right hon. Baronet's Bill; but that which, being once fairly established, as it is in this country, rendered any restriction unnecessary — the liability to pay in gold, which took altogether from the Bank the power of fixing the amount of its note circulation, and placing it in the hands of the public. It was the perfect convertibility of the notes which had produced this effect. [Sir R. Peel: Hear!] But this did not depend upon the right hon. Baronet's restriction. It existed as perfectly before. The public did not require more notes of the Bank; that was the true limit—the only one to be depended upon, and the only one that would ever be found to operate without doing more harm than good. He desired to be distinctly understood. He did not object to convertibility, or to any measure that could be shown to make it more perfect, prompt, or certain. On the contrary, he considered it the one thing needful; and objected to these restrictions because he believed that while they added nothing to the present security for convertibility, they were extremely likely to endanger it, and that precisely at the periods when it would be most needed. There was, then, no evidence to be drawn from our experience of the Act of last year to justify further legislation on the same principle. They might, he admitted, proceed further on the same grounds, but they could not appeal to the evidence of the past in favour of what had already been done. But they were going to extend the measure of 1844 to Ireland and Scotland; and he had now to address himself particularly to the Scotch Bill. Now what was the history, and what was the present state of banking in that country? Did it indicate any particular necessity for change—did it seem to call for modification or improvement — or was it such as to lead any reasonable man to suppose that any interference by the Legislature was likely to be of service? On the contrary, was it not well known that banking business in Scotland had always been conducted with unusual ability and caution; and with unparalleled and almost uniform success? Their banking system had suffered the severest shocks without failure. It had passed unharmed through the rebellions of 1715 and 1745—the crisis of the French Revolution — the panic of 1825, and the crisis of 1835–6 and 1839. They had been told, on the introduction of the measure for restricting the English banks, that in England, during the five years from 1839 to 1843, eighty-two banks had become bankrupt, and that of these twenty-nine were banks of issue. Of these eighty-two banks, sixty-six paid less than 5s. in the pound. He had referred to the returns for Scotland, and be found that in that country, during the six years from 1839 to 1844, only two banks had become bankrupt, one of which paid 9s. 3d., and the other 13s. 7d. in the pound. But what, he might be asked, was the peculiar merit of the Scotch system, which had rendered it so safe, and made interference so much less necessary than in England? In the first place, then, they had none but joint-stock banks. No restriction had, in that country, been placed upon the number of partners; and no privilege of any importance was possessed by one bank over another. They had not, therefore, been compelled, as we had been in this country, to choose between weak banks and none at all. The joint-stock bank system had there been allowed to take root and expand itself under free and open competition; and the consequence had been the attainment of a degree of economy and security in the use of the circulating medium far exceeding that in any other country in the world. And here he must observe, that had the attention of the Government, been turned to the maturing and completing of the joint-stock system in this country, it would have been much better applied than in devising restrictions for a system which had made itself a model for others, simply by having hitherto entirely escaped restriction. The great merit of the Scotch system, then, arose from the early and judicious adoption of the joint-stock plan, with numerous partners, and a large paid-up capital. Some striking advantages had also been secured by the manner of conducting their banking business. By establishing numerous branches, and extending the use of deposits, allowing interest on the deposit of very small sums, and encouraging the use of drawing accounts, the bankers had made it the interest of the public to promote a quick reflux of their notes. The notes accordingly remained but a short time in circulation, being constantly and rapidly reconverted into deposits bearing interest. In Scotland, the average period during which a bank note remained out was about ten days—in England from six weeks to two months. The effect of this plan of aiding circulation by deposits was completed by the bankers receiving each others' notes, and exchanging them throughout Scotland twice a week. Here was unlimited competition; and if the principles upon which the right hon. Baronet was proceeding were correct, they ought to find it accompanied with all, or at least some, of the evils which were the alleged foundation of the Bill now before them. But was it so? If it was, he could discover no indication of it. The Returns of the Scotch circulation exhibited an extraordinary regularity. Its variations were extremely regular; and through a series of years, embracing many instances of serious disturbance in the mercantile transanctions of the country, the circulation had evidently been but slightly affected by any other cause than the regular recurrence, at particular seasons, of rent-days, fairs, and other similar periodical occasions for increased circulation. From the date of the earliest Returns in 1833, to the present time, it had invariably been lowest in March, and highest in November, in each year. The difference in its amount at these two periods had been, pretty constantly, about 800,000l.; and the greatest fluctuation which was recorded in the whole period of the Returns exclusive of this amount, was about 470,000l., or 16 per cent. on the amount of the circulation. He need, therefore, scarcely say that it bore a very favourable comparison to the circulation of the Bank of England, the fluctuations in which, during the last five or six years, could not be estimated at less than 40 per cent. He had already referred to the comparative security of the Scotch system, and had shown that that afforded no ground for interference. It would not be said that the banking accommodation now afforded in Scotland was insufficient, for it was notoriously greater than was afforded anywhere else. Nor could it be said that it was too large, for the commerce of the country had thriven, and there had been no appearance of danger, and no complaint whatever from any one concerned. Nor could it even be asserted that the system had shown any dangerous tendency. For the last ten or twelve years its course could be accurately traced by the aid of Parliamentary Returns;—and what were the results? Why, exactly such as those who wished well to the country and its banking institutions would most have desired. They saw the number of bank offices, and the amount of deposits increasing with the population and trade of this country. But while these increased, they saw the number of competing banks, and the amount of notes in circulation, not increasing, but diminishing. In 1826 there were thirty-two banks, with a total paid-up capital of less than 5,000,000l. Now, there were only twenty banks, with a paid-up capital of fully 9,000,000l. In 1825, the bank notes circulating among a population of about 2,150,000, amounted to 4,680,000l. Now, with a population increased by at least half a million, the circulation seldom reached to 3,500,000l. And it was not too much to say that the trade of the country had been nearly, if not quite, doubled in the interval. Here again, too, a comparison with England was strikingly favourable. Judging from the most recent available information, it appeared that the proportion of bank offices to population was about twice as great in Scotland as in England. And, deducting the Scotch notes under 5l., which were represented in this country by gold, the bank note circulation, which in England averaged nearly 40s. per head on the entire population, did not, in Scotland, exceed 10s. per head. The explanation of this difference was obvious—it resulted from a better system of banking; and chiefly from a more extended use of deposit and interest-bearing accounts in Scotland. It was now proposed partially to carry the English system into Scotland. He believed the wiser plan would be to leave the Scotch system alone, and afford every facility, by the removal of existing restrictions, for the gradual introduction of the Scotch system into this country. Banking in England had been perverted from the first by the influence of monopoly. The right hon. Baronet had now introduced more monopoly; and, before he saw the effect, he wished to extend it to Scotland too, where, hitherto, they had escaped its evils. But his restrictions were founded upon false principles, and would be found ineffectual in practice. They might do great mischief; but they would not attain the object aimed at. The right hon. Baronet would find that whenever his Bill should actually restrict the accommodation required in one direction, it would very soon be obtained in another. He dealt only with banks of issue; he said, "Look after the bank notes, and the bills of exchange will take care of themselves." But to restrict notes would not restrict bills of exchange. Quite the contrary. It would give an undue stimulus to their circulation. This was showing itself in England, where the restriction on the issues of the country banks, operating in a time of great commercial activity, had already caused an increased use of bills of exchange, of small amount especially, as a medium for the advance of capital; if not, indeed, as a subsidiary circulation. The introduction of the same system of restriction or regulation into Ireland, was equally objectionable, though on different grounds. He could not see why an arbitrary restriction—an empirical rule—should be applied to the circulating medium of that country, unless they were prepared to contend that its commercial resources were already fully developed, and in a state of complete activity; and they were also in a condition to establish the exact proportion which the circulation of bank notes ought to bear to any given condition of trade. Were this so, there might be some ground for assuming that the precise period had arrived at which it was proper to limit the circulation for all time to come. But he did not anticipate that the right hon. Baronet would go quite so far as that. He had examined the Returns, and found, as he had expected, that the progress of Ireland, of late years, rather warranted the conclusion that she would, before long, require a considerable increase of banking accommodation, and probably, as in Scotland, of bank note circulation. From 1831 to 1841 the advance made in the number of the population was barely 5 per cent., or from 7,760,000 to 8,170,000; while, during the same period, the net produce of the Customs' duties levied in the ports of Ire- land, rose from 1,456,000l. to 2,244,000l. showing an increase of more than 50 per cent. The present system of banking in Ireland had all the faults of the English system; and it was peculiarly liable to the evils to be apprehended from the plan of restriction and regulation already established in this country. But with regard to Scotland, he considered the present Bill a most gratuitous and unnecessary interference on the part of the Legislature, which, if it operated at all, could only operate for evil. They had better, he repeated, take a lesson from Scotland, than seek to impose upon her the fetters which had been applied to our own defective system. Were a sound system of joint-stock banking established in this country, and the Scotch mode of management adopted, interest being paid on all deposits, and the use of drawing accounts extended, we should make a much more effectual provision against an excess of paper money, than by limiting the circulation according to the amount of gold in the coffers of the Bank. And if they were determined as they were doing, to keep up monopoly and restriction and all their consequences here, still he could not see why they should also be introduced into Scotland, where a system of free banking had so long existed, and certainly, as compared with that of England, had worked most successfully. Whatever might be said of the principles on which the measure was based, it was at least unnecessary with respect to Scotland, not a shadow of proof having been adduced that any of the evils supposed to be capable of remedy by such measures existed in that country. And were the banking institutions of Scotland as insecure and faulty as they were sound and well-conducted, he did not believe that this Bill could possibly effect any improvement. He wished it to be clearly understood that he did not entertain any doubt whatever of the absolute necessity of preserving the prompt and certain convertibility, at all times, of notes into gold. He considered that to be the only basis of a sound and safe paper circulation. But having secured that, which a properly regulated system of competition, such as already existed in Scotland, had been proved by experience to be best calculated to secure, he could not but consider all such interference as the present, on the part of the Legislature, entirely unnecessary, and partaking more of a fanciful love of uniformity, than a desire to be guided by the sound lessons of experience. It remained to be seen whether the laws regulating the trade in money were different from those regulating any other trade. Bank notes, bills of exchange, cash credits, loans, and advances on securities, were all merely methods of supplying the demand for money or the medium of exchange. If an Act of Parliament could exactly apportion the supply to the demand, secure the right amount, and prevent excess, then, indeed, further inquiry was called for, to ascertain whether an Act could not be framed to prevent excessive trading as well as excessive banking. Gold and silver, exports, imports, had all by turns been the subject of commercial legislation. But they had all, after long experience of the mischievous tendency of such legislation, been left to take care of themselves. Bank notes were now the favourite objects of our legislative watchfulness. He believed, however, it would be found that the old maxim of "laissez faire" was as applicable to banking as to any other branch of trade. He should, therefore, record his vote against the Bill.

Mr. H. J. Baillie

said, that he should not have ventured to address the House, had it not been for the observations which had fallen from the hon. Member for the Tower Hamlets. The hon. Member seemed to suppose that the existence of the small note paper currency of Scotland, was in some way or other injurious to England; and he thus lent the authority and sanction of his name to that absurd cry which had frequently been raised, viz., why should Scotland be allowed to enjoy a privilege which had already been denied to England? In answer to that he would ask, why should Scotland not be allowed to enjoy this privilege, if it could be enjoyed without injury or detriment to England? But if the hon. Baronet the Member for the Tower Hamlets could show the House that the existence of this privilege in Scotland was injurious or detrimental to England, he, for one, would at once give up the question, and offer no further opposition to an assimilation of the currency of the two countries. But the fact was, that the question rested on totally different grounds as respected England and Scotland; and it was to that point that he wished to direct the attention of the hon. Baronet the Member for the Tower Hamlets and of the House. The people of England found by experience in 1825, that the system of banking which existed in the country was a vicious one, and that it was unsafe and injurious, not only to the community at large, but also to the banking interests themselves. The panic that occurred in the close of that year, and the numerous failures that took place in various parts of the country, clearly proved to the world that the provincial banks of England had managed their business in the most reckless manner. The ruin and misery that resulted at that time, not less than eighty banks having failed in the space of three months, clearly proved that some altertion in the existing system was necessary, and, accordingly, the Government of the day merely gave expression to the general feeling of the country when, in the Session of 1826, they introduced the Bill for abolishing the circulation of 1l. notes in England. That was the remedy which was called for by the public, and which the Government adopted, as appearing to them the most advisable and efficacious. But what was the case in Scotland? There they had a banking system which they believed to be as perfect as it was possible that any banking system could be; and even Mr. Jones Loyd, who, it would be admitted, was not very likely to be a partial witness, described it in his pamphlet as, apart from currency, a perfect system of banking. That system had now existed in Scotland for more than a century, through periods of panic and of commercial distress—in times of internal rebellion and of foreign warfare, and yet a suspicion had never been raised in the commercial mind of Scotland as to its utility and safety. He might be permitted to observe here that the banks of Scotland had never, like the provincial banks of England, abused their privilege of unlimited issue. It had been shown by the hon. Member who had spoken last, that on the average of the last two years the circulation in Scotland, for a population of two millions and a half, was never more than 3,000,000l., whereas in England, during the same period, with a population of 16,000,000, the circulation amounted to 30,000,000l. in paper currency, and to, he believed, about 30,000,000l. more in gold. That Scotland for the use of two millions and a half of persons, had a circulation of 3,000,000 sterling; whereas, England had nearly 60,000,000l. for a population of 16,000,000 So much in proof of the cautious manner in which Scotch banking had been carried on. With respect to the utility of that system, he might be permitted to allude to the great commercial prosperity of Glasgow, which during the last ten years had doubled her exports, great as those exports previously were. During the same period iron mines in the immediate neighbourhood of Glasgow had been brought into operation, producing not less than 1,500,000l. a year sterling; so extraordinary an increase of commercial and manufacturing prosperity, is without parallel in the history of civilization. This prosperity may, undoubtedly, be in part accounted for by the well known perseverance and industry of the Scotch people; but that industry could not have been brought into active operation, without the aid and assistance of a judicious and well-regulated system of banking. It was that system which the people of Scotland were so anxious to maintain. For his part, he confessed that whatever opinion he might entertain with respect to some of the minor details of the Bill, he would give his most cordial support to the measure brought forward by Her Majesty's Government; and be felt happy at having that opportunity of expressing, in the name of his constituents, his best thanks to the right hon. Baronet, that in dealing with this question he had not thought it necessary to disregard altogether the feelings, the opinions, and—if they liked to call them so—the prejudices of the people of Scotland in favour of the system to which they had been so long accustomed; but that he had, on the contrary, brought forward a measure which, while it would, on the one hand, give increased confidence and security to the public, would not, on the other hand, seriously interfere with the working of a system which the people of Scotland believed to have been mainly instrumental in promoting the prosperity and welfare of their country.

Mr. C. Wood

said, he had not intended to address any observations to the House before going into Committee on the Bill, for the success of which he felt sincerely anxious; but after the objections which his hon. Friend had made to the principle of the Bill, he could not avoid offering some remarks on the subject of these objections. The hon. Gentleman commenced his speech by referring to the experience in the past year—of the effects of the Bill which had been made law in the last Session of Parliament. He (Mr. Wood) would agree that nothing had occurred to enable them to form any opinion as to the working of the Act. But it should be remembered that the monetary position of the country, during the last year or two, was utterly unprecedented. The right hon. Baronet had most properly availed himself of the favourable opportunity afforded by the state of the money market, and of the exchanges in 1844, to pass the measure of last Session; but they could not form a sound opinion of its effect, until the monetary position of the country came round to the ordinary state in which it had existed before the present posture of affairs commenced. Until then the Bill of the right hon. Baronet could not come fairly into operation, or be fairly tried There was only one conclusion from what had occurred since the passing of the Bill of last Session, on which they might be perfectly certain, and that was, that the right hon. Baronet would have been perfectly safe if he had fixed upon a lower amount of notes to be issued on security by the Bank of England, than that adopted. His hon. Friend the Member for Lambeth (Mr. Hawes) did draw a most extraordinary conclusion from the state of the money market for the last year. What were the anticipations and the apprehensions of the hon. Gentleman and of all who opposed the Bill of last Session, while it was pending before the House? Why, that the Bill was so restrictive, that it would impose so many impediments on trade, that all rise of prices would be prevented; and that the ordinary concerns of commerce could hardly be carried on: that a state of embarrassment and discouragement throughout the whole commercial world would prevail, which would produce the ruin of some, and the depression of all. But the charge which they now heard against the Bill was, not that it had caused embarrassment in the way before described, but that it had failed in placing any impediments whatever in cases where they were required, such as in the prevention of the gambling which had taken place in railway shares, as well in England and Scotland as abroad. In short, no one of the evil consequences which had been predicted at the time of the passing of the measure had, in point of fact, been caused by the operation of the Bill within the last year. His hon. Friend was certainly not very consistent in his speech; for when he had got a little further he admitted the fact that the effect of the measure on trade was, after all, exceedingly trifling. That admission went to upset the entire of the argument on which the hon. Gentleman had relied last year; but he (Mr. C. Wood) believed that it was much nearer the truth. His hon. Friend then repeated the argument which he had used on the third reading of the Bill of last Session. He again argued that legal convertibility of paper money into gold was all that was required to preserve the value of the currency. The hon. Gentleman stated that in this he agreed with the principles laid down by Adam Smith and Ricardo; but the principles which he laid down differed wide as the poles from those of the two eminent economists to whom he had alluded. He was surprised, after the experience which they had in this country, and still more in America, that his hon. Friend should argue so strongly in favour of this doctrine. As long as a note for one pound was practically convertible into a sovereign, the value of the note was certainly the same as a sovereign. But that was not the question. An inconvertible note might be of equal value with a sovereign. Convertibility was by no means necessary to maintain the value of a note. It was notorious that for a certain number of years after the Bank Restriction Act had passed, Bank of England notes were not depreciated, though they were inconvertible. Mr. Tooke, and others, stated that up to about 1804, there was no further difference between the paper and gold. That was caused by the conduct of the Bank itself, in purchasing gold at 4l. per oz., when it might have been bought at 3l. 17s. 10½d. The question really was, whether an over issue of paper legally convertible might not depreciate the value of the whole existing currency paper, and coin for a time, until the evil was corrected by conversion of the paper, or export of the coin, or both; and whether, before this process was completed, there might not occur practical inconvertibility of the paper, a complete suspension of cost payments, and a depreciation of the standard. Without referring to other cases, it was completely shown that all these consequences might take place, by what actually occurred in the United States in 1837. The paper currency was all legally convertible, and they had books with every provision that could possibly be adopted, in order to maintain the solvency of the banks and the convertibility of paper, and yet when the New York banks stopped payment, their example was followed by all the banks throughout the Union as quickly as the news could be carried by the mail coaches. A depreciation of 10 per cent. instantly appeared; but that could not be attributed to the stoppage, for it existed in cases where there was not the slightest doubt of ultimate payment. It existed equally before, from the enormous over issue of convertible paper, but was made manifest on the suspension of cash payments. What then occurred entirely overturned the theory and principle of his hon. Friend. He endeavoured, indeed, to escape from that conclusion, by attributing the event to the existence of small notes in America. No doubt, the small notes contributed largely to the over issue, but they were as much convertible according to law as the larger notes. Legal convertibility was the all-sufficient security on which his hon. Friend relied for maintaining the value of the currency; and when he shifted his ground, and attributed the suspension of cash payments in America to the existence of small notes, although they were legally convertible, he, in fact, abandoned his whole case; and his argument was particularly unfortunate on the present occasion, as small notes existed, and were to be continued in Scotland. It was the insufficiency of the mere legal convertibility of the bank note, under the Act of 1819, to preserve unimpaired the value of the standard, which rendered necessary the measure of last Session. In order to preserve the standard unaltered, it provided that the fluctuation of the paper currency should correspond with the increase or decrease which a currency of metallic coin would suffer under the same circumstances. This was stated as the correct principle given by a recent writer, Mr. Fullarton, who generally agreed with his hon. Friend. His words were— As a general principle, I am quite free to admit that the increase or decrease of a circulation of bank notes, from whatever cause it may proceed, ought to correspond with the increase or decrease which a currency of metallic coin would exhibit under the same circumstances. There were various modes of attaining this object; and one of the simplest certainly was through the agency of one bank of issue, on which his hon. Friend the Member for Renfrew had been harping, and which was the great bugbear of last Session; but any one who looked at the Bill before the House must perceive that it was completely at variance with the principle of having but a single bank of issue. In the first place, the issues of every existing bank in Scotland were preserved to them; but further, if such a principle were established, the bank selected would, no doubt, be the Bank of England; but the right hon. Baronet distinctly provided in his Bill that the notes of the Bank of England were not to be a legal tender in Scotland. The right hon. Gentleman, in his measure of last year, as in those of this year, proceeded upon the principle of effecting his object with the least possible disturbance of existing interests, and conciliating those who might not unnaturally have been his strongest opponents. With regard to the Bank of England, he adopted the beautiful and simple suggestion of Mr. Jones Loyd, in separating the departments of banking and issue; he limited their notes issued on security to 14,000,000l., and by fixing the issues of other banks at about 8,000,000l., the circulation of paper in England and Wales, on security, was limited to 22,000,000l,, and the remainder of the currency would be gold, or paper representing gold, actually held in the Bank of England. Now the lowest amount of the paper circulation at any one time was in December, 1840, when it was 25,000,000l. sterling; and therefore there could be no fear of the currency, gold, or paper representing gold, in the country being less than three millions at the very least; so that all fluctuations in the amount must necessarily take place in the metallic part of the currency, or in that which represented gold. In England, therefore, the principle of the right hon. Baronet was fully carried out, and it now remained to be seen how far this was done as regarded Scotland. In the first place, however, he must disclaim saying a word against the Scotch bankers. In the former discussion, he never made any allusion to the conduct of the English banks as bankers, and he had now no intention of imputing blame to the Scotch banks. On the contrary, he thought they had a right to the most favourable testimony to the manner in which they had performed their duty. He did not think it possible to overrate their merits; but he considered they were too much inclined to attribute all their successes to one or two measures. They attributed to their 1l. notes and cash credits all the advantages which, in his opinion, resulted from the general excellence of their system of banking. The Bill, however, only dealt with the issue of notes, and to that he should confine himself. He had already pointed out how in England the principle of making the fluctuations in the currency coincide with what they would be in a purely metallic currency, had been carried out by limiting the amount of notes issued on security, and by enacting that beyond that limit all notes should be issued on gold. The practical efficiency, however, of the measure entirely depended on the amount of the limit so fixed. In England, the limit was twenty-two millions; but if, instead of that sum, thirty millions had been taken, and all notes beyond that were issued on gold, the object would not have been attained, although, nominally, the principle could have been equally asserted. Now, in fact, what was done as regarded Scotland, was very much the same thing as if thirty millions had been the limit adopted in England. He did not underrate the value of having sound principle asserted in respect of Scotland; but, practically, the Scotch bankers, as a whole, would be utterly untouched by the Bill. The Scotch circulation for the year 1843, was about 2,730,000l., which was the lowest yearly average, and the limit was taken at 3,060,000l., considerably above the lowest yearly average, instead of being; as in England, considerably below the lowest monthly average. They had, besides, the most direct evidence of several Scotch bankers that the amount of the circulating medium was on the whole diminishing in that country; and there was every reason to suppose, that with continued experience and economy this would go on. The result was a considerable margin, within which the Scotch circulation might be increased without any reference to gold. Beyond this, by the arrangements in the Bill, the right hon. Gentleman gave the Scotch banks the opportunity of increasing the circulation of their notes beyond the amount specified, to the extent of the gold and silver coin, held at the head office of each bank. Now, the amount of Bank of England notes, and gold and silver coin, held by the Scotch banks altogether, had been estimated at one-fifth of their circulation. This on 3,000,000l. would be 600,000l. It was true that the whole of this was not held at the head office; but as their legal liability to pay in gold only referred to the head office, they might to a considerable extent concentrate their coin there. Assuming that they did this to the extent of one-half or two-thirds, the amount of gold so held on which they could issue notes, would, added to the margin to which he had already referred, enable them to increase the circulation by 500,000l. above the 3,000,000l., that is, to make an addition of one-sixth to their circulation. He might be told that this was no large sum; but it was a large sum in reference to the circulation of Scotland. It would not be so in England. The hon. Gentleman opposite had said, that the circulation of this country was between fifty and sixty millions, of which about thirty millions was in paper, and twenty millions in gold. Now, an increase of three millions upon fifty millions would be no great sum; but an increase of three millions in Scotland would be doubling the circulation. He need hardly say that on this principle—and it was the correct one—the increase that he had named was a most disproportionate increase on the circulation in Scotland. It had been stated that great difficulty would arise from the circumstance that the payments in Scotland, for the most part, look place at two certain periods of the year. Now, he did not think so little of the skill of Scotch bankers as to suppose that they could not make an arrangement for periodical payments twice in the year, without rendering it necessary to give them additional powers to increase the circulation. He was satisfied that this could be done by an arrangement between the different banks; so that only a comparatively small sum would change hands. For instance, at the clearing house in London, it was well known that millions were passed in a day by the payment only between the different bankers of a few thousand pounds. Indeed, as his hon. Friend had said, this often happened almost without the intervention of bank notes at all. Of course, he did not mean to say that there would be any great increase in the amount of the Scotch notes; but there was nothing in the Bill to prevent the increase of them to the amount of 500,000l., without a single sixpence in coin being held by the Scotch bankers more than they held at present. It might be well, in the opinion of some Gentlemen, to rely solely on the discretion of the bankers; but this was not the principle of the Act of last year, or the principle avowed by the right hon. Baronet. He must consider that principle as very inefficiently carried out in the present measure; and he could not but think that the right hon. Baronet felt it to be so when he had answered him that the measure was the same as that applied to the English country bankers, who beyond their limit could only issue Bank of England notes held on gold. They were not allowed to issue their own notes on the gold and silver already in their possession, as the Scotch bankers were. If that permission had been given to them, they might have issued about 1,300,000l. more than they could now; and no doubt they would have considered this a great boon. He did not advocate such a step; but it showed the great difference between the English and the Scotch bills. Something had been said about the different degrees in which the Bill would affect different banks; and, in all probability, it would be so. That had been the case in England, especially as regarded the Lincolnshire banks; and, indeed, no general measure could be framed, which would allow of such a variation as was claimed for one bank of 60 per cent., or which would not press more hardly on some than on others. The measure, taken as a whole, he must repeat, was a very lax application of the sound principle; and did not at all carry out the views which the right hon. Baronet had developed in his opening Statement. At that time, he referred to the great safety which, in his opinion, ensued to this country from the large amount of gold and silver in circulation; he saw nothing in this Bill that would tend in any way to increase the quantity of gold in Scotland. The right hon. Gentleman also stated the danger to the Bank of England, from its being exposed to a drain of gold on account of the Scotch banks. Hon. Gentlemen behind him seemed to consider this impossible; and he would, therefore, read the evidence of Mr. Horsley Palmer, given before the Committee of 1832. That gentleman said— The Scotch banks are banks of great credit and property; but whenever a demand arises upon them, they have not the means of meeting it without coming to the Bank of England. Even in the last fortnight, it is very currently stated, that the banks in Scotland had not the power of meeting the demand upon them. I believe Newcastle afforded some assistance; orders were also sent to Liverpool; and I know that a further supply went from London. In 1825, there were extensive demands made by the country bankers on the Bank—gold coin was sent out to every country town in the kingdom?—I believe so. Did not the banks in Scotland equally fall upon the Bank of England at the same time?—Certainly. He would go no further into other years; this abundantly confirmed the statement of the right hon. Gentleman, and yet there was nothing in the Bill which tended to avert this danger. Indeed, so far as the Bill went, the enactment that a Bank of England note should not be a legal tender in Scotland, went to increase it. The Bill gave a monopoly of the circulation to existing banks—it placed the Scotch currency in perfect independence; and, in return for this, it took no further or sufficient guarantee for its being issued, or conducted on sound principles. More, undoubtedly, ought to have been done in this respect. He would not have touched the 1l. notes, to which the Scotch people were so devotedly attached, and many of the objections to which would be removed if the system of issue was placed on a sound basis; but there were other things which might have been done without inflicting any hardship upon anybody. It had been stated that Bank of England notes and coin, to the extent of one-fifth of their circulation, was held by the Scotch banks. This might have been rendered imperative by law; it would have created no difficulty to the several banks. Much more than that proportion was actually held by the Provincial Bank in Ireland; and it would have been no bad precaution as regarded less solid establishments. Conformably to what was done in England, the banks in Scotland might have been required to issue Bank of England notes, or their own notes on gold deposited elsewhere than in their own coffers, if they wished to exceed the limits fixed on their circulation. This would have put the issues of the two countries on the same footing, and in conformity with sound principles. He did not believe that the several banks would have objected to some such regulations; and he was convinced that they might have been effected with- out in any way diminishing the accommodation afforded by the Scotch banks, or disturbing their usual operations. With the very large amount of gold now in the country, it was a most favourable opportunity for any measure of the kind; and such a facility might not occur again. He would not follow his hon. Friend into his observations on the Irish Bill, beyond saying that he was mistaken both in fact and in principle. He had complained of the check which would be imposed on the development of the natural resources of Ireland by limiting the number of banks, and by preventing the increase of the paper circulation beyond its present amount. Now, in the first place, the number of banks was not limited; and, in the next, the hon. Gentleman was the last person to maintain that the development of the resources of a country depended on an enlarged issue of paper; for the whole of his argument against interfering with the Scotch system of banking was based on his representation—which was perfectly true—of the manner in which they had contributed to the agricultural and commercial prosperity of Scotland, with a very unusually restricted circulation. In both respects, therefore, his hon. Friend was wrong; but it was much better to confine their attention to the Scotch Bill now before them, in the Committee on which several Amendments were to be proposed.

Mr. Bouverie

observed, that the Bill for the regulation of the banking system had given satisfaction in this country, because it was felt to be required by the circumstances of our monetary system in England; but the case was different with respect to Scotland, where no such regulations were, in the public opinion, required, and no similar inconveniences and losses had been sustained by the system of banking adopted in Scotland. It could not be a matter, therefore, of surprise that the project of the right hon. Baronet, if applied to Scotland, should be met by decided opposition. They had introduced a new theory, and an experiment, in respect to the monetary affairs of this country; and they might yet learn to their cost, as the United States of America had unfortunately done, that the interference of the Legislature in matters of trade and commerce was not always productive of the beneficial results calculated upon by the promoters of that interference. The system, as far it had been tried, had not stood the test; for out of thirty-seven weeks during which the experiment had been made, there had been twenty-seven weeks during which the amounts of the issues of bank notes had varied in an inverse ratio to that which had been fondly anticipated and expected. It, perhaps, had been deemed by the right hon. Baronet that a period when, as had been found to be the case last year, the rage for speculation had never been equalled since the time of the Mississippi scheme, was the proper time to introduce some restrictions upon the issues of our banks. But the result would, in the end, prove that it was utterly impossible to prevent the extension of paper credit in proportion to the demands of our trade and commerce, irrespective of the restrictions imposed by the Legislature. Whenever the crisis which all apprehended and wished to guard against should arrive—and arrive it must—the result must be, that your bullion would find its way over the water, and your repressive system would be found to be wholly inoperative. If the House entertained doubts as to the soundness of the principle which it had adopted in legislating upon this subject, let the system be tested by watching its operation, before they rashly attempted to apply the same principle to the banking system in Scotland. His objection was the stronger, because he was persuaded that frequently it would be found to be inoperative as a means of repressing and controlling the issues; and where it was found to be operative, its tendency would be often mischievous.

Mr. Muntz

said that, differing widely, as he was known to do, from the right hon. Baronet with reference to the currency of the country, he confessed he was surprised that the right hon. Baronet, having determined upon the principle which ought to regulate the monetary system of the country, did not carry out that principle further. The principle of the measure was a fixed standard with a bank note payable in coin upon demand. It was an anomaly, certainly, to find the 1l. notes allowed to be in circulation on one side of the Channel, as in Ireland, and not on the other. In respect to Scotland, it was in one respect a mere question of expense; as there must be a new issue of 5l. notes to take up and absorb the greater part of the 1l. notes, the residue being unnecessary to be paid at once, in gold or in bullion. He confessed he could not see how any authority in the State, or even how the Legislature, could justify its interference in matters of credit generally, and say that bankers should not be at liberty to put into circulation a note or notes, so long as it is redeemable by a payment in the precious metals. So far, therefore, he should content himself with saying that he considered the condition of this country, with respect to the monetary system, a false one. He would agree with the right hon. Baronet, that all money in circulation should be money at a fixed value; but he would by no means agree that the Legislature had been, or could be, justified in fixing a strict limit to private credit in the instance of banking. Time, perhaps, alone would show who was right in the conflicting opinions prevailing upon the subject of our monetary system. The late Bill regulating our banking system, had made the condition of the banking system such as it now was; but he would not hesitate to say that, whenever the crisis came, and began seriously to operate upon prices, they would find that, despite all these precautions, the pressure upon the banks would be felt so seriously, that it would render this or any similar measure altogether ineffectual.

Mr. F. T. Baring

asked, did the right hon. Gentleman imagine that he and those with whom he generally acted would have agreed to the Bill relative to banking passed last year, if they had not reckoned upon the principle of restriction of issues being carried out with respect to other monopolies, more particularly the bankers of Ireland and Scotland? He admitted the value of the principle upon which the Bill of last year on this subject was founded; but he was not prepared to acquiesce in the attempted inference of the right hon. Secretary for the Home Department, that a very large portion of the beneficial changes we were now enjoying, were the fruits of its adoption into our monetary system. Though disposed to give credit to the Scotch for the prudent sagacity they had displayed in the general conduct of their banking affairs, he was not inclined to leave to themselves the conduct of the whole monetary affairs of that country, liable, as they must be, to great changes, occasional pressure, and inconvenience. From Returns furnished to the House, the House might discover that the Scotch bankers had not always managed their issues with a prudent reserve, and a reference to the actual money and bullion known to be in the coffers of the Bank of England. The February of 1837 was remarkable in the monetary history of this country, for the lowness in the amount of coin and bullion in the possession of the Bank; and it appeared that from February, 1834, through the next three years, up to February, 1837, the Bank had sustained a loss, on withdrawal of bullion, to the extent of between 5,000,000 or 6,000,000 of the precious metals. What had the Scotch bankers been doing during this period? Had they made a corresponding diminution in their issues of bank notes? On the contrary, they had, in spite of the alarming diminution of bullion in the Bank of England, made an increase of their issues to the extent of 106,000l. Up to August 1, 1839, when the Bank had in money and bullion only 2,244,000l., the Scotch bank issues still went on increasing, though only to a small extent. Thus it was proved, that whilst there had been a diminution of the precious metals in the hands of the Bank of England of nearly seven millions sterling, the bankers of Scotland had gone on increasing their issues of paper. He admitted that the evidence of the bankers stated that this occurred from reducing their discount. What he had advanced, showed that the Scotch banks did not carry out their principles. In a subsequent period the interest was further reduced, but then this was with no view of reducing their circulation. His argument was this — if Government admitted their principles to be good, they could not satisfy themselves that the banks of Scotland would carry those principles into effect. He admitted he concurred with the hon. Member for Halifax in this, that Government, in this instance, had not carried their principles in the case of the Scotch banks, into as good effect as in the case of the English banks. The Bill, he admitted, did some good; and the only reason why the right hon. Baronet had not dealt with the question with the same vigour which he had dealt with the English question, was on account of the opposition he had encountered, and the national prejudces he had to deal with; and these were his best excuses for not having made the Bill more efficient.

Mr. Ross

said, the Irish bankers had not yet had an opportunity of submitting to the House the hardships of their case; but the arguments urged on behalf of the Scotch banking system would apply with tenfold force to the case of the Irish banks.

Mr. J. Oswald

said the people of Scotland were of opinion that the right hon. Baronet (Sir R. Peel) would have acted wisely in abstaining from any interference with their system of banking. They well knew, however, when the right hon. Baronet interfered with monetary affairs in England, that his measures would not slop there. He did not wish to oppose the Motion for going into Committee, but he would reserve the case of the Scotch bankers until the House was in Committee.

House in Committee.

On the first Clause,

Mr. Bannerman

moved the Amendment of which he had given notice, that the words— Said period of one year preceding the 1st day of May, 1845," be omitted, and to substitute the following words, "period of four weeks immediately preceding the 7th day of December, 1844.

Sir R. Peel

said, he was very sorry that it was out of his power to accede to the proposition of the hon. Member. If he had substituted thirteen months instead of four, the case might have been wholly different; but he had taken the maximum instead of the average as a criterion. The object of an arrangement such as this, should be to enable bankers to make provision for an increased issue without providing an additional quantity of gold; and that arrangement, he thought, would give all the advantages which the hon. Member opposite seemed to require. He repeated his regret that he could not accede to the Motion; for he could discover no reason to induce him to depart from the principles which he had laid down with respect both to the banking system of Ireland and Scotland.

Mr. Hume

contended that the right hon. Baronet interfered with a system which had been entirely free previous to his interference; and that he had interfered with it in direct violation of the pledges which he had given to the House. He believed that, although the transactions of business in Scotland increased daily, there would be a smaller amount of currency required to conduct those opera- tions than had ever before been the case. He should, on the ground he had stated, support the Amendment.

Sir R. Peel

There never was, Mr. Greene, a more unfounded assertion than that that which the hon. Member for Montrose has made, in stating that I have broken faith with those who are interested in this Bill, and have proposed alterations in it which render it different from the measure, the principal features of which I originally stated to the House. I am able to show that the hon. Member is not more correct in his assertions upon this point than he sometimes is with respect to other matters. I shall only notice that part of the hon. Member's observations which refer to my not having kept faith with the Scotch bankers in relation to this Bill. The language which I made use of in bringing forward the subject was the following:— I propose, then, both in Scotland and Ireland, to ascertain the average amount of the issues of each bank for a definite past period. I propose to permit the continuance of that amount of circulation, without any restriction whatever; to apply there the principle which was applied to the English banks. You demanded from them no deposit of security; you demanded from them no tenure of gold. You permitted them, without inquiry and without restraint, to issue the permitted amount, only taking security that the remainder should be issued in gold. I propose to apply the same principle to Scotland and Ireland. The question then arises, what is the period to which the average shall be limited? I propose, in the case both of Ireland and of Scotland, to ascertain the average from the period which has elapsed since the announcement of the measure of last year, that is, from the 27th of April last. That will be a period of thirteen lunar months. The variation is very great in Scotland at different periods of the year. In May and in November the amount of the issues exceeds the amount of the issues at other periods. I believe that, so far as Scotland is concerned, it would be a matter of very great indifference whether you founded your average upon a review of two years, of one year, or of six months. Whether you took in two periods of extraordinary issue, or whether you took in one, in the one case taking twelve and in the other six months, the amount of the circulation would in each case be nearly the same. I said also distinctly that I proposed to take the average of the thirteen lunar months before the 27th of April next; and I went further—I said I would endeavour to give the best estimate in my power as to the amount of circulation at that time in Scotland. Here is my paper from which I read the amounts. I said that the aggregate average circulation of the Scotch banks on the 27th of April, 1844, was 2,714,000l.; that on the 25th of May it was 3,041,399l. Whereas, the amount at which I have estimated it is 3,061,000l., making a difference of 20,000l., and being by so much more than the amount at which I had previously estimated the circulation. I now appeal to the House whether the hon. Member has any justification for the charge he has brought against me.

Mr. Hume

said, that he might turn the tables on the right hon. Baronet, and ask him how often he had followed the advice which he had given him from that side of the House? He would take the right hon. Baronet's observations as a joke.

Mr. Dennistoun

said, that he did not understand the hon. Member for Montrose to have made any charge of a breach of faith on the part of the right hon. Baronet; but when the right hon. Baronet stated the nature of his plan, he intimated that the actual circulation of Scotland should be maintained, and that so long as the banks there did not raise the amount of their issues they should not be compelled to hold specie against the notes in circulation. But what did the right hon. Baronet now say? If he would tell him that, without being under the necessity of keeping gold in their coffers, the Scotch banks would still enjoy the average circulation of the present period, he should be perfectly satisfied.

Sir R. Peel

The average circulation of the Scotch banks for the last year, consisting of thirteen lunar months, is estimated, as I have already stated, at 3,061,000l. The banks, therefore, are entitled to issue a circulation of 3,061,000l. during the whole year. But during the next year, there would be, as there had been in previous years, two periods at which an extraordinary issue would take place, particularly in one week, owing to the amount of business transacted in that time. The issue of that week would not, however be, taken as an average; but it would merge in the issue of the four weeks of the lunar month of which it formed part. The banks would not be able to issue more than 3,061,000l., according to the monthly average, unless they had a reserve of gold to meet the excess. They must show a reserve of gold equal to the excess above the monthly average.

Mr. Dennistoun

Suppose the issue in one month was to amount to 330,000l., does the right hon. Baronet mean to say that the banks in Scotland are not obliged to hold specie for the surplus?

Sir R. Peel

The banks can issue to the amount of 300,000l. a month without holding specie; but if they issue in any one month 310,000l., all the specie they would be required to hold would be 10,000l.

Mr. Dennistoun

said, that the difference between the circulation in Scotland at the periods referred to by the right hon. Baronet was as 3,000,000l, to 4,000,000l., owing to the increase in the business transactions at that time of the year. What he complained of was that the right hon. Baronet had taken the minimum of the circulation as the standard by which to regulate his measure. It was well known that the Scotch bankers had made the smallest returns that they possibly could of the average amounts of their respective circulations. But if they had known what the intentions of the right hon. Baronet in obtaining those returns had been, they might very easily and with perfect good faith have shown an increase in their circulation of half a million. It was too bad to take advantage of their innocence.

The Committee divided on the Question that the words proposed to be left out stand part of the Question: — Ayes 84; Noes 59: Majority 25.

List of the AYES.
Acland, Sir T. D.	Clay, Sir W.
Adderley, C. B.	Clerk, right hon. Sir G.
Aldam, W.	Clive, hon. R. H.
Bailey, J., jun.	Cockburn, rt. hn. Sir G.
Baillie, Col.	Collett, J.
Baillie, H. J.	Colvile, C. R.
Baring, rt. hn. F. T.	Corry, rt hon. H.
Barrington, Visct.	Cripps, W.
Baskerville, T. B. M.	Curteis, H. B.
Beckett, W.	Damer, hon. Col.
Boldero, H. G.	Darby, G.
Bowes, J.	Davies, D. A. S.
Bowles, Adm.	Deedes, W.
Boyd, J.	Denison, E. R.
Bramston, T. W.	Douglas, Sir C. E.
Brisco, M.	Duncombe, hon. A.
Broadley, H.	Escott, B.
Brotherton, J.	Fitzroy, hon. H.
Bruce, Lord E.	Flower, Sir J.
Buckley, E.	Fremantle, rt. hn. Sir T.
Buller, Sir J. Y.	Gaskell, J. Milnes
Cardwell, E.	Gill, T.
Carew, W. H. P.	Gordon, hon. Capt.

Goulburn, rt. hn. H.	Nicholl, rt. hon. J.
Graham, rt. hn. Sir J.	Palmer, G.
Greenall, P.	Patten, J. W.
Hamilton, W. J.	Peel, rt. hon. Sir R.
Herbert, rt. hon. S.	Peel, J.
Holmes, hn. W. A. C.	Pringle, A.
Hope, hon. C.	Round, C. G.
Hope, G. W.	Smith, rt. hn. T. B. C.
Hotham, Lord	Somerset, Lord G.
Hughes, W. B.	Stuart, H.
Jermyn, Earl	Sutton, hon. H. M.
Jocelyn, Visct.	Tennent, J. E.
Knight, F. W.	Thesiger, Sir F.
Lennox, Lord A.	Trench, Sir F. W.
Lincoln, Earl of	Wellesley, Lord C.
Lockhart, W.	Wood, C.
Mackenzie, W. F.	Wood, Col.
M'Geachy, F. A.
M'Neill, D.	TELLERS.
Meynell, Capt.	Young, J.
Neeld, J.	Baring, H.

List of the NOES.
Acton, Col.	Mackenzie, T.
Arbuthnott, hon. H.	Maher, N.
Archbold, R.	Martin, T. B.
Baine, W.	Maule, right hon. F.
Blake, M. J.	Morris, D.
Blewitt, R. J.	Muntz, G. F.
Bouverie, hon. E. P.	Murray, A.
Bowring, Dr.	O'Connell, M. J.
Brooke, Sir A. B.	O'Conor Don
Bruce, C. L. C.	O'Ferrall, R. M.
Campbell, Sir H.	Ogle, S. C. H.
Chapman, B.	Oswald, J.
Corbally, M. E.	Paget, Col.
Crawford, W. S.	Plumptre, J. P.
Dalrymple, Capt.	Rawdon, Col.
Dennistoun, J.	Redington, T. N.
Drummond, H. H.	Roche, E. B.
Duff, J.	Ross, D. R.
Duncan, G.	Scott, hon. F.
Esmonde, Sir T.	Smollett, A.
Ewart, W.	Somerville, Sir W. M.
Ferguson, Col.	Spooner, R.
Ferguson, Sir R. A.	Stewart, P. M.
Ffolliott, J.	Stewart, Lord J.
Forster, M.	Traill, G.
Hallyburton, Lord J. F.	Trelawny, J. S.
Hastie, A.	Wawn, J. T.
Hawes, B.	Wemyss, Capt.
Hepburn, Sir T. B.	TELLERS.
Hindley, C.	Hume, J.
Jones, Capt.	Bannerman, A.

The Question again put that the first Clause stand part of the Bill.

Mr. Dennistoun

moved to leave out the words "head office or principal place of issue of such banker;" so as not to confine the bankers' issues by the amount of coin exclusively at his head office. It was understood at the meeting of the Scotch bankers with the right hon. Baronet, that the limitation which his Amendment went to remove was not to be pressed.

Sir R. Peel

could not agree to the Motion

The Committee divided on the Question that the words proposed to be left out stand part of the Question:—Ayes 80; Noes 35: Majority 45.

List of the AYES.
Acland, Sir T. D.	Gaskell, J. Milnes
Bailey, J., jun.	Gill, T.
Baillie, Col.	Gordon, hon. Capt.
Baillie, H. J.	Goulburn, rt. hon. H.
Baring, rt. hn. F. T.	Graham, rt. hn. Sir J.
Barrington, Visct.	Hamilton, W. J.
Baskerville, T. B. M.	Henley, J. W.
Beckett, W.	Hepburn, Sir T. B.
Boldero, H. G.	Herbert, rt. hon. S.
Bowles, Adm.	Holmes, hon. W. A'C.
Bowring, Dr.	Hope, hon. C.
Boyd, J.	Hope, G. W.
Bramston, T. W.	Hotham, Lord
Brisco, M.	Hughes, W. B.
Broadley, H.	Jermyn, Earl
Brotherton, J.	Jocelyn, Visct.
Bruce, Lord E.	Kirk, P.
Bruce, C. L. C.	Lennox, Lord A.
Buckley, E.	Lincoln, Earl of
Buller, Sir J. Y.	Mackenzie, W. F.
Campbell, Sir H.	M'Neill, D.
Cardwell, E.	Meynell, Capt.
Clay, Sir W.	Nicholl, right hon. J.
Clerk, rt. hon. Sir G.	Oswald, J.
Clive, hon. R. H.	Peel, rt. hon. Sir R.
Cockburn, rt. hn. Sir G.	Peel, J.
Collett, J.	Pringle, A.
Colvile, C. R.	Scott, hon. F.
Corry, rt. hon. H.	Smith, rt. hon. T. B. C.
Cripps, W.	Somerset, Lord G.
Curteis, H. B.	Stuart, Lord J.
Damer, hon. Col.	Stuart, H.
Darby, G.	Sutton, hon. H. M.
Davies, D. A. S.	Tennent, J. E.
Deedes, W.	Thesiger, Sir F.
Douglas, Sir C. E.	Trench, Sir F. W.
Drummond, H. H.	Wellesley, Lord C.
Duncombe, hon. A.	Wood, C.
Escott, B.
Fitzroy, hon. H.	TELLERS.
Flower, Sir J.	Young, J.
Fremantle, rt. hn. Sir T.	Baring, H.

List of the NOES.
Archbold, R.	Jones, Capt.
Baine, W.	Lockhart, W.
Bannerman, A.	Maule, right hon. F.
Blake, M. J.	Morris, D.
Bouverie, hon. E. P.	Muntz, G. F.
Chapman, B.	Newdegate, C. N.
Crawford, W. S.	O'Connell, M. J.
Duncan, G.	O'Ferrall, R. M.
Esmonde, Sir T.	Ogle, S. C. H.
Ewart, W.	Rawdon, Col.
Ferguson, Col.	Redington, T. N.
Ferguson, Sir R. A.	Roche, E. B.
Forster, M.	Smollett, A.
Hallyburton, Lord J. F.	Somerville, Sir W. H.
Hawes, B.	Stewart, P. M.

Trelawny, J. S.
Wawn, J. T.	TELLERS.
Wemyss, Capt.	Hume, J.
Wyse, T.	Dennistoun, J.

Clause agreed to. Other Clauses agreed to. House resumed. Committee to sit again.