IRISH BANK RESTRICTION BILL.—

HC Deb 13 February 1804 vol 1 cc474-87

Mr. Carry

rose to move the order of the day for the House to resolve itself Into a Committee upon the Irish bank restriction bill.—On the motion being put that the Speaker do now leave the chair,

Lord Archibald Hamilton

rose to recall the attention of the House to the notice he had given on a former day, of his intention to move the introduction of a clause, imposing an obligation on the Directors of the Bank of Ireland to restrain the further issues of notes—The noble lord then proceeded to state, that it was not his intention now to propose the clause to which he had alluded. He had made it his business to examine into the subject with the greatest care, and he had endeavoured to ascertain the sentiments of persons the best informed on matters connected with the situation of Ireland; and the result, of his inquiries had been, a conviction that it would, for the present, be expedient not to press the motion. He begged leave, however, to be indulged with making a few observations, to shew that he had not taken up the idea without due consideration, or without endeavouring to avail himself of every means of correct knowledge on a subject of such was importance and in terest. The present situation of the paper currency in Ireland was one which ought to excite the utmost vigilance and anxiety. It was a subject to which he had felt it his duly seriously to call the attention of ministers and of the House. The measure of restriction generally, he could not help thinking a great national evil. It struck him not only as a great but a growing calamity. It was an evil to the termination of which there was held out no reasonable prospect. It had, in the first instance, been introduced during the continuance of a war, but he could not admit, as a matter of course, that war was in itself any justification for so dangerous an expedient. We had seen it renewed during peace, and now that, unfortunately, the country was again plunged in war, there was as little hope as ever of its being abandoned. The consequence of these repeated renewals of the measure of restriction had been, that the paper currency of Ireland had increased to a most alarming extent, and the evils attendant on this increase had been manifested in a proportionate degree. There evils he had long reckoned great, but the farther lie extended his researches, the more was he convinced, that they were greater than he had, in the first instance, conceived. He needed not rest any assertions on the subject of a too widely circulated paper currency on his own authority. The doctrines of Adam Smith on this point were clear and explicit, and such an authority could not be lightly regarded. Depreciation was the necessary and constant result of such extensive circulation of paper. At the lime the Bank of Ireland Restriction Bill passed the Irish House of Commons, the amount of bank notes issued was 600,000l., and at this moment he found that their amount was not less than 2,700.000l. Thus there was, by the measure of restriction, an increase to the amount of two millions. On the other hand, what was the proportion of the gold coin to be balanced against this quantity of paper money? When he allowed it to be about a million, he was sure that he went as far as any hon. member could desire. In stating its amount in this manner, he rather overrated it than estimated it below its real extent. At this time the price given fat gold coin in Ireland was considerably higher than? the standard price of bullion. Gold coin rose in price exactly in proportion as paper currency was depreciated in value. Betwixt Dublin and Belfast, though there was not a distance of more than a hundred miles, there was a difference of exchange to the amount of ten per cent. Hut the Heel of the depreciation of money was felt still more strongly on the rate of exchange betwixt this country and Ireland. For a number of years, the rate of exchange betwixt London and Dublin had fluctuated from 8 or 9 to 16 per cent, to the disadvantage of Ireland. But now the loss was far more considerable. It was as high as 17, 18 and even 19 percent. In some, instances it was not less than 20; and thus an Irish gentleman who came to attend his duty in Parliament, found, at the end of his journey, where he had allotted 500l. for his expenses, that 400l. only were really to be received. This was a view of the subject which could not fail to make a very powerful impression, and shewed in the clearest point of view what was the consequence of protracting the measure of restriction. On this point he should have felt himself very happy at receiving any information from the right hon. member who brought forward the motion, as to the probable period when the bill would be discontinued. He would be glad to be. told, under what circumstances it was that the payment in cash were to be resumed. It was not easy to ascertain what was to be the situation of the country when the restriction should be removed. It was evident that the payment of cash would not be resumed without a certain degree of difficulty and danger. There would in all probability be a run on the bank for some time, and consequences of a serious nature might be experienced, unless means were taken to counteract them. The longer, however, the restriction was continued, the greater would be the eventual danger, and the more difficult would it be to counteract it. From a retrospect of the past, the hope of the removal of the restriction could not be sanguine; and he appealed to the candour of those gentlemen who voted for the bill at its first introduction, whether they would have given such a vote, if they had then looked to this protracted continuance of the bill. He conjured gentlemen to think seriously on this point, and to use every exertion to procure a remedy for a very alarming evil.—The subject of the Irish silver currency was well worthy of their attention. He appealed to the right hon. gent, whether it was not in a situation absolutely disgraceful and degrading. He had felt it his duty to make these few observations, and hoped that those whose duty it was to look more particularly into the affairs of Ireland, would lose no time in devising some means for curing the evils now necessarily connected with the currency of that part of the united kingdom.

Mr. Carry

applauded in the highest terms the candour which the noble lord had discovered on the present occasion. The object to which he had called the attention of the House was one of the highest interest and importance, particularly to those whose, duty it was to watch over the interests of Ireland, He thanked the noble lord for the care which he had bestowed on it. He could declare for himself, and he believed he might add in behalf of all those gentlemen who represented Ireland, that they would at all times be happy to see Irish affairs discussed by gentlemen from all parts of the empire, and more particularly when they were handled with that temperance which the noble lord had evinced. As the notice of the noble lord was to be relinquished, he did not conceive that it would be regular for him to go into any detail on the topics which had been introduced. He would, however, make a few general observations. With many of the remarks of the noble lord he entirely coincided. The state of the paper currency of Ireland was doubtless deplorable in the highest degree, and nothing could afford him greater satisfaction than the prospect of any means of redressing evils, which all parties admitted to exist. A good deal had been said on the extent of paper currency in Ireland, and the conduct of the bank of Ireland had been described as highly reprehensible, because they had extended their issues of paper with such improvident liberality. It was true that Ireland was inundated with a profusson of paper, but this was not the fault of the Bank-Directors. They had no control over the issuing of notes by private banks of the metropolis, or by private banks in various parts of the country. It was by the possession of this control here, that the bank was effectually enabled to restrain circulation of notes beyond what appeared expedient. For the enormous circulation of paper money in Ireland, the Bank Directors were not fairly responsible; but there were positive circumstances to be adduced in their favour. In the year when the restriction first took place, the Bank received an addition of capital to the amount of half a million Previous to the restriction, specie had disappeared from year to year, and private bankers had been prohibited from issuing notes under five guineas value. The consequence was, that a new issue of small notes became necessary to fill up the defiencies occasioned by this prohibition. Additional issues of notes were further rendered expedient from the accumulation of taxes, and from a variety of local causes. In this state of things, the Bank Directors had issued notes to a great amount, but it did not follow that their con- duct in this respect was criminal. With regard to the prohibition against issues of cash being continued, it was not necessary for him to take up the time of the House. The noble lord did not oppose the motion for the House going into the committee; and, indeed, the principle on which the restriction was to be continued was the simplest in the world. Its continuance was absolutely essential, as long as the restriction continued in this country. To compel the Bank of Ireland to issue cash when the restriction continued here would be equally impolitic and unjust. It would, indeed, be an arrangement inpracticable. The bill for restricting the issues of cash by the Bank of Ireland, was, in fact, a bill auxiliary to, and co-existent with, the bill for a similar purpose here. The noble lord had asked him, under what circumstance he thought that this restriction should cease? To this question he had only to answer generally, that it would cease as soon as the restriction on the Bank of England should be removed. He did not mean, indeed, by making this declaration, at all to compromise himself on the subject. At present, he saw nothing in the state of Ireland which at all disposed him to think that this would not be the case. It was impossible, however, to know what unforeseen circumstances might prevent what he now thought an event that would naturally follow the termination of the restriction act in this country. He had already alluded to the large amount of paper currency issued by the Bank of Ireland, and the noble lord had contrasted this with the issues of the Bank of England, since the restriction act passed. It was supposed that the paper issued by the Bank of England was nearly doubled since the restriction took place; whereas the issues by the Bank of Ireland was four times greater than when the restriction bill passed. On this point he had to remark, that it was not a fairway of determining the criminalty or policy of these issues merely by their extent. in determining this question, the extent of the capital was to be materially attended to. In speaking of the extent of capital, the question turned on the nature and extent of security. On the other hand, if the propriety of these issues was convassed, the criterion must be of a different description. Nothing positive, appeared to shew, that the Bank Directors had carried their issues to an unwarrantable extent. In saying this, he wished the question to be left fully open to future discussion. The fact was that when the bill passed in Ireland, it was carried, as it were, by acclamation. No investigation took place of the situation of the Bank, or the conduct of the directors. The bill was carried through the House from a conviction, that it was rendered absolutely indispensible, after the passing of the restriction act by the Parliament of England. He had only to express a hope, that the motion might not be now retarded from any considerations of the general question, which it would be equally competent for every gentlemen to bring under discussion on a future day.

Lord Henry Petty,

in a maiden speech, delivered his sentiments on the subject before the House to the following purport. He was convinced that his noble friend who introduced the subject was perfectly correct in the observations which he had made on the motion for going into the Committee, and thought him entitled to the thanks of the House for the manner in which he had brought it under consideration. Ho allowed, that the amount of the issues of paper money by the Bank, of Ireland was not itself a lair criterion, of judging of the propriety of this increased circulation. It was, however, a circumstance which could not fail to excite surprise, and certainly loudly demanded inquiry, that the issues of paper by the Bank of Ireland had been five times greater since the restriction bill had been passed than they previously were, whereas the issues by the Bank of England had, in proportion to the capital, increased only in the proportion of one-filth beyond what they were when the act was passed. It might be true, that the directors of the Bank of Ireland might not hold themselves subject to responsibility for this extraordinary increase of their paper; but, surely, that House was responsible, after committing to these directors a power as extensive as ever was committed to a public body, the power of manufacturing paper for national circulation. This was indeed a great delagation of authority, for all economists agreed that money was power. When such powers were delegated, it was, undoubtedly, the duty of Parliament, to see in what manner they were exerted, to ascertain what were the evils connected with the system on which they acted, and to adopt such remedies as appeared most adapted to their situation. He did not mean to say that this was a subject to be entered on rashly, or that the investigation of it did not require the utmost temperance and moderation. Still, however, he had no difficulty in declaring, that the discussion of it was highly expedient, and that this discussion might be attended with the most beneficial effects. It was a subject which ought strongly and deeply to impress the minds of the members of that House. The depreciation of paper in Ireland was constantly increasing, and must, as long as it existed, be productive of the most alarming consequences. The balance of trade must continue unfavourable to Ireland as long as the depreciation continued, and the merchant must continue to resort to the foreign maket instead of home manufacture. The present, depreciation could not be described as arising from any thing in the commerce of the country for the last year; because, during that year, the exports of Ireland had considerably exceeded the imports; but even if it were the case, it was an evil inseparable from the continuance of the restriction. As long as the merchants could obtain accommodation from the Bank by the issues of paper, and as long as the Bank found it advantageous to give this accommodation, no favourable change in the state of the exchange could be expected. The whole trade and property of Ireland was threatened with danger, if a change of system did not take place. This danger was already visible in a variety of circumstances. Since the time of the restriction, the Bank had encreased its dividends full one and a half per cent. At this time their dividends amounted to one and a half per cent.; and he was assured that this year they had determined to give an additional bonus of five per cent. Under these circumstances, the Bank had not only no motive to wish for the removal of the Restriction Act, but found it their interest to extend the circulation of their paper currency. He had to repeat, that, at this time, he thought it would be dangerous for Parliament to interfere without mature consideration; but the was most clearly of opinion that some strong measure ought without delay to be adopted. The, measure which struck him as being best calculated to prevent the growth of this evil, was a plan for compelling the directors to curtail their issues of paper money, and thus forcing the private bankers to adopt a similar practice. At present, the Bank of Ireland had no countrol over the private bankers, two of whom in Dublin issued paper to an amount as great as the whole of their paper circulation. His lordship concluded by again pressing the subject generally on the attention of ministers.

Mr. Vansittart

professed, on the part of His Majesty's ministers, the utmost readiness to adopt any measure that might appear calculated to remove the evil complained of. The noble lords themselves who lamented it so strongly, and who had pointed it out so-forcibly, suggested no remedy which was likely to be practical or effectual.

Mr. Foster

expresed great satisfaction at the manner in which the affairs of Ireland had been taken up by the two noble lords who had spoken in the course of the bebate. With regard to the bill before the House, it was so necessary a consequence of the restriction bill, that he considered it impossible not to enact it. At the same time he could not help poking out some of the effects which it naturally produced in Ireland. The scarcity of specie in Ireland was well known: they had no gold in circulation but what was bought at a premium; silver there was none, He did not believe there was one real shilling to be found from one end of Ireland to the other; there was even a scarcity of brass, The effect which this want of gold produced upon trade was obvious. In the north of Ireland where payments were made ad in gold, it was necessary to purchase guineas at a premium of 2s. 4d. which was above 10 per cent. The linen manufacturers could; only buy their materials with guineas for which they paid this enormous price, which they were of course obliged to lay upon the price of their manufactures; this would render them unable to meet foreigners in foreign markets, and if some remedy was not administered the trade could not stand, In addition to all this, there was a duty of 4 per cent, upon the importation of the article. Another effect this measure had was upon the exchange of Ireland: this certainly was not a very easy subject to investigate, but it undoubtedly was the duty of Parliament to enter, as soon as possible, into an investigation into the state of the circulation in Ireland. He knew Parliament could not remedy this evil by a law, but it there were any artificial causes operating to produce this effect, they surely might be got rid of. He sincerely hoped the subject would be taken up, particularly by some gentlemen on the treasury bench, and he was sure the result would be favourable to the trade of Ireland, and consequently to the trade of the empire.

Mr. H. Thornton

said, this subject was certainly of great importance, but at the, same tune, he thought it was move simple than gentlemen in general seemed to imagine. It appeared to him clear, that the excess of paper circulation was the cause of the bad stale of exchange in that country. It had been stated in the. course of the debate, that there vas a difference of no less than ten per cent, in the exchange between different parts of Ireland, and it had been stated, that gold was purchased in the north, at a premium of ten per cent., and he was authorized to take this for granted, as it had not been denied by any gentleman. There was a material difference that gentlemen should all keep in view between the banks of England and Ireland: in Ireland there was no bank that took upon itself to manage and regulate the circulation of the country; whereas, in England it was perfectly well known, that the bank commanded the whole paper circulation of the metropolis, and regulated that of the kingdom. The bank of Ireland was instituted after a great deal or opposition, and the private banks succeeded in obtaining permission to remain in the same state that they were before the national bank was established, and consequently had the power of issuing their paper for the circulation both of the metropolis arid the country. In England, there was no bank in the metropolis that interfered with the paper of the national bank; though the paper issued by the private banks in Dublin was, he had no doubt, upon very good security, yet, as they were not now bound to pay their own paper in specie, it naturally most be their interest to have as much of their paper in circulation as they could. The great object, therefore, which he wished to obtain, would be, if possible, to limit the circulation of private banks: another remedy which he thought might be applied, would be to make Irish bank paper exchangeable for that of the bank of England. At all events, this was a subject that called for the most serious attention of Parliament; and he had no doubt but that upon investigation, some effectual remedy might be Found out. With respect to the bill now before the House, he did not mean to oppose it, but he thought its duration should be limiited to a short time, in order that the subject might necessarily be again brought under the consideration of Parliament. He would not take up more of the time of the House at present, except merely to repeat the opinion he had before advanced, that the bad state of exchange in Ireland, arose from the too great circulation of paper.

Lord Castlereagh

would make but a few observations, in reply to what had fallen from the hon. member who had just sat down. It seemed to be the opinion, on all sides of the House, that the measure before it should be passed into a law, as the restriction of the issues of specie in England rendered a similar restriction unavoidable in Ireland. He did not, however, consider the subjects which had been introduced into the discussion, as at all connected with the limitation of the operation of the measure. They formed a question which might be taken up as a subject of separate inquiry, if the investiga- tion should be deemed expedient. As to what had fallen from the right hon. gent. (Mr. Foster), be could not go so far as to say he differed altogether from him, though he certainly entertained doubts of the justice of his positions. The question was of extreme delicacy, and of the most abstruse nature; and it was of considerable consequence to ascertain clearly, whether the evils allowed to exist, were capable of a parliamentary remedy. The House should not lightly over-slate the impression it had of the nature and extent of those evils. Considerable disadvantages would follow from carrying such an impression beyond the truth, or what the fact would bear out. The right hon. gent, had stated, that the rate of exchange was considerably greater between Dublin and London, than between the north of Ireland and London, and that the depreciation of the paper currency had been the cause. He doubted himself that fact, though he concurred with his right hon friend, that the great issue of paper, tending to depreciate its value, was not to be charged altogether upon the bank of Ireland, as the private banks were equally liable to the observation. There were sill good reasons to conclude, that the evil complained of arose not more from a depreciation of the value of paper, than from a rise in the value of gold above its just standard. He agreed with the right hon. gent. (Mr. Foster), that the commercial transactions in the north of Ireland were carried on with gold. The habits and feelings of that part of the kingdom continued the same as when both the national banks paid in specie, and, therefore, when no gold was issued, when the ordinary means of obtaining it were cut of by the restriction, the effect was, that while they continued to carry on their business by means of gold, they were obliged to pay the price set upon it by those who had it in their possession. As the demand for guineas increased, they of necessity acquired a greater local, factitious value; and while the restriction continued on the banks, and the apprehension from invasion induced those possessing specie to hoard it up, the fact could not be otherwise. He thought so strong an imputation should not be cast rashly upon the bank, which, like all other public companies, depended principally on its credit, as to suppose, that it had abused the discretion vested in it, by increasing its issue of paper to such an extent as to depreciate the value of paper ten per cent.—As to the effect on the industry of the north, he looked upon that to be a question of great delicacy. He could not, however, conceive, that it would have the effect of embarrassing the linen manufacturers in foreign markets. If gold were necessary in a bargain, the bargain must necessarily be delayed till the gold could be procured, and in ail cases of bargains prospectively made, the terms must necessarily be regulated according to the medium of the purchase. The medium in this case being intelligible to both parties, no inconvenience could be felt by either; and whatever advance was made to the producer, was necessarily charged upon the consumer. It was not so with regard to contracts previously existing, as in the case of rent. There it would make a considerable difference to the landlord, whether paid in specie or paper, while such a difference existed in their relative value. He had risen merely to state his doubts, whether the premium of 2s. 4d. was occasioned in that part of the country, so much by a depreciation of paper, as by an extraordinary rise in the value of gold, and he stated thus much as doubt, rather than as difference of opinion. He had also some doubts whether any remedy can be applied, and he was sure Parliament would be much embarrassed in restraining private banks. As to the state of internal industry, there appeared to him no ground for gloomy apprehensions. He remembered, when in the Irish government, that the constant complaint was of the discount paid for specie, particularly by the soldiery; now the soldiery were increased, and the industry of the country formed another drain on specie, while the means of; procuring it were altogether cut off. The case might be made a subject of special inquiry, but was not in the present instance fairly under the consideration of the House.

Mr. Foster,

in explanation, staled, that the linen bleachers were obliged to give 2s. 4d. for every guinea, in order to have gold for payment to the linen weavers, and this amounted to 10 per cent, on the manufacture, more than before the restriction. He should mention a fact in the recollection of the noble lord, which would illustrate that observation. About four months ago, the linen manufacturers held a meeting at Armagh, which they afterwards adjourned to Dungannon, for the purpose of bringing bank of Ireland notes into circulation, in which they had failed, though the meeting had been attended by above one hundred of the most respectable manufacturers, and they had agreed unanimously in their resolution, to remove this incumbrance of ten per cent, over and above the four per cent, on exportation. This charge must unavoidably affect the foreign markets, for while Irish manufacturers continued subject to it, there can be no question that they will be undersold in any market where they have a competition with German, Prussian, or Russian manufacturers, not subject to such an impost, He should add one remark, that the discussion, though irregular, had already produced some advantages. Many things had come out, which would lead to future discussion. The bank of Ireland was a respectable company, and ought not to have an imputation cast upon it without investigation, or an opportunity of justification. Another point regarded the private banks. These circumstances called for investigation. Much light had been acquired; much more would be thrown on the subject by future discussions. It would be for the House, in its wisdom, after mature and full investigation, to apply the necessary remedy. If no remedy should be found practicable, Parliament would have the consciousness and satisfaction of having done its duty; and the unfortunate sufferers would submit with resignation to evils for which the legislature could devise no remedy.

Lord Castlereagh,

in explanation said, that the loss sustained by the linen manufacturer of Ireland, in consequence of being obliged to pay a premium of 2s. 4d. for a guinea, was somewhat ideal, as he was enabled to indemnity himself for that loss, by drawing upon his credit either at Dublin or London.

Mr. Curry,

in explanation, said, that his Majesty's ministers had not been wanting in their duty with respect to the circulation of Ireland, as with their concurrence he brought in a bill last session to put a stop to the circulation of what were called silver notes in that country. In order, however, to give the Irish members an opportunity of discussing the subject, the bill was not to take effect till the first of January in the present year. The members from that country were, however, precluded from attending by their military duties, in consequence or which a bill was brought in, in the present session, to suspend the operations of the former bill, in order to give the Irish members an opportunity of amply and fully discussing the state of the circulation in Ireland.

Mr. Johnson

meant merely to point out one fact which would put down completely all the ingenuity which the noble lord (Castlereagh) had employed to get rid of the remark of the hon. gent, opposite (Mr. Thornton), that the excessive issue of paper had depreciated so greatly its value in Ireland. If the noble lord's statement were just, then it would follow, that gold had risen as paper had fallen, and 5 per cent, would be the proportion in both cases. Bullion, which might be coined into specie, could be procured in this country at par, and conveyed to Ireland at less than one and a half per cent. The enhancement of gold above that charge, therefore, he contended, was attributable solely to the excessive issue of paper. The hon. gent, thought that the House should, by limiting the operation of the bill to a short period, impose on itself the duty of resuming the subject, rather than by extending its operation, leave the revival of the question to the industry or discretion of individual members.

Lord Castlereagh

denied that he had fixed any proportion. He had only maintained, that there were grounds to suppose the discount, or rate of exchange, was attributable to two causes, the diminished value of paper, and the increased value of coin. If gold is coined, as it certainly might be, from bullion, then must they come here to find the market price of bullion. This he believed to be above the standard coin of the country. To this price, such as it might be, must be added the expense of coining and carriage.

Lord Dunlo

entered his protest against the suggestion of the hon. gent, opposite (Mr. Johnson), that the duration of the measure should be limited to a shorter period than was proposed. He knew not where the hon. gent, had learned that bullion could be conveyed to Ireland at so small an expense. He remembered a transaction some time since, when considerable difficulty was felt on an occasion of procuring part of a loan from this country, before a contract for the conveyance of the bullion could be effected. Three per cent, had, in some instances, been refused by several monied persons, though the contract had been afterwards concluded at two per cent. Being on his legs, he congratulated the House on the temper and moderation with which the discussion had been continued, and he trusted that the matter would not rest there, but that a Select Committee would be appointed to investigate it thoroughly. When that should be undertaken, he hoped that the investigation would be general, and comprehend the silver coinage; for he concurred with his right hon. friend, that there was not a single genuine mint shilling in Ireland. He thought that the act of last session for prohibiting the issue of silver, or small notes, had been judiciously suspended, because the responsibility of bankers was a better security to the public, than the base coin in circulation.

Mr. Alexander

agreed that the silver currency was wretched. Considerable inconvenience had been felt from the circum- stance that paper was not considered a legal tender, and the courts even had not ventured to decide the question. The landlords in (he north of Ireland insisted on gold, while those in the interior, in the southern and western province, were satisfied with bank notes. If the landlords of England were, pending the restriction on the bank, to insist on gold iii payment of their rents, he contended that the same inconveniencies would be felt in this country, and to the same extent, as are now felt in Ireland. Another circumstance which contributed greatly to the increase of the circulation of paper was, that the bank of Ireland discounted at one per cent, under the legal interest, whilst the private banks, by discounting at the legal interest, had thereby an advantage of 1 per cent. The consequence was, that they kept discounting offices in parts of the country, even the least commercial, and deluged the. kingdom with their notes.—The question was then put, that the Speaker do leave the chair, and the House having gone into the Committee, the blanks were filled up, and. the report ordered to be received to morrow.