RELATING TO THE BANK OF ENGLAND.

HC Deb 02 February 1808 vol 10 cc232-52

No. I.—Copy of a Letter from the Chancellor of the Exchequer to the Governor and Deputy Governor of the Bank. Downing-street, Dec. 23, 1807.

Gentlemen; The Paper, which I have herewith the honour to transmit, contains the Outlines of such an Arrangement as it appears to me, upon the most deliberate consideration of the Second Report from the Committee on Public Expenditure, it would be my duty to propose to the Bank of England. The principles referred to in this Paper, the facts stated, and the proposals deduced from them, are, as you will perceive upon its perusal, in substance the same as those which I have stated, and endeavoured to impress upon you, in the several conferences with which you have already honoured me upon this very important subject. My object, in making this written communication, is, that you may be enabled to consider at your leisure, the expectations, which, in my present view of the case, it appears to me I am entitled to maintain, and bound to uphold on the part of the public; and the grounds on which these expectations rest. At the same time, it is my wish to have it distinctly understood at this early stage of the business, that, sanguine as the expectation of the public may be with respect to the advantages to be derived from a new arrangement with the Bank, and however satisfied his majesty's government may feel that, to the extent stated in my proposals, such expectations are not unreasonable in the present state of affairs; and, considering the present profits of the Bank, nothing can be more remote from the intentions of government than to press these expectations to the infringement of any existing contract or engagement, or beyond what a fair interpretation of those engagements might appear to them to justify.—Your own discretion will point out to you to what extent you may feel it necessary, in the present stage of the discussion, to consult with other gentlemen in the Direction upon the subject of this Paper, and to impart its contents to them. It is only necessary for me to add, at. present, that I shall at all times be ready to receive, with the utmost attention, any observations which you or they may have to offer on the subject, and that I shall abstain from requesting of you to submit any regular proposal to the Court of Directors, or to the Court of Proprietors at large, until I shall have received, and maturely considered, whatever remarks and suggestions may occur to you, or the gentlemen with whom you may advise, in consequence of the present communication. I have the honour to be, &c. S. PERCEVAL.

No. II.—Copy of a Paper inclosed and referred to in the Letter from the Chancellor of the Exchequer to the Bank; of the 23d Dec. 1807.

The Proposals founded on the Enquiries and Report of the Committee of Public Expenditure, and which are now made to the Bank, May be classed under three heads: 1st. Unclaimed Dividends.—2d. Charges of Management of the Public Debt.—3d. Balances arising from Deposits of Public Money in the hands of the Bank.

1st. UNCLAIMED DIVIDENDS.—As it appears by the Report of the Committee, that the Unclaimed Dividends amounted at that period of the year 1806 at which they were at the lowest, namely, on the 8th July, to 986,573l.; and that at the lowest period of some antecedent years they had not fallen below 900,000l, it is proposed to appropriate to the service of the ensuing year, under which similar provisions to those of the act of 1791, c. 33, the sum of 500,000l.. in addition to that of 376,739l.. advanced under that act; provided the balance shall not be reduced below 100,000l..; and this will be merely carrying into effect the principle which was acted upon in 1791. No reasonable objection seems likely to occur to this proposal, and it therefore appears unnecessary to go more at large into this part of the subject at present.

2d. CHARGES OF MANAGEMENT OF THE PUBLIC DEBT.—Referring upon this part of the subject, on the one hand, to the facts stated in the Report, and on the other to the provisions of the act of 1791, c. 33. and of 1800, c. 28, without feeling it necessary in this stage of the business, and in this proposal, to advert in detail to the one or to discuss the other, it is conceived that the following scale and plan of allowance for the Management of the Public Debt, would lead to an arrangement under all circumstances liberal towards the Bank, and equitable towards the public.—Taking the Debt Unredeemed, as it stood on the 5th of January last, at upwards of 550,000,000l.. it is proposed to reduce the Charge of Management upon it from 450l.. to 340l.. per million; and that all additions made to the debt above 550,000,000l.. shall be managed at the rate of 300l.. per million. On the other hand, it is proposed, that in the event of the Unredeemed Debt being at any time reduced to 400,000,000l.. the rate of allowance shall then be raised to 400l.. per million: and at or below 300,000,000l.. to 450l.. its present rate, per million.—When it is considered that in the year 1786 it was proposed to reduce the Management upon a debt of 224 millions only, from 560 to 360 per million, and that it was actually reduced to 450l..; and that it is now proposed to apply this last rate of allowance to a debt of 300 millions instead of 224, it will hardly be contended that with reference to the principle only of the projected Scale,, the proposal contains any thing unfair towards the Bank, while it is evident that it in no degree departs from the liberal principle upon which government was at that time disposed to act. It must also be recollected that in the year 1786, when the reduction in the Management took place from 560l.. to 450l.. per million, the country was in profound peace, with every prospect of its long continuance, and with a Sinking Fund established for the gradual extinction of the then debt, consequently that the prospect of the yearly diminution of the debt was probably taken into consideration when the allowance was fixed at 450l..; and though we have no records upon the subject, it appears not unlikely that it was the prospect of this diminution which induced the minister to allow 450l.. per million, instead of 360l. which had been computed to be fully sufficient upon a debt of that magnitude, and strongly recommended by the Commissioners for Auditing the Public Accounts, upon whose report of the 18th February 1786, the reduction appears to have been proposed. In point of fact, a considerable reduction, in the allowance for Management must have taken place between 1786 and 1793, since which last period the pressure of war upon the country has increased the debt in a proportion exceeding that of five to two, without any diminution being effected in the rate of Management. To this it is hardly necessary to add, that if a decreasing debt of 224 millions in 1786 could bear a reduction of 110l.. per million, it can scarcely be considered a hardship if a further reduction to the same amount is made in 1808, upon a debt of 550 millions, still annually increasing in amount with the protracted difficulties of the country; especially as the reduction is accompanied with a security to the Bank against the contingent, but it is to be feared, distant prospect of its reduction below certain stated amounts. To this view of the subject must be added the sum of 805l.. 15s. 10d. per million, for receiving the subscriptions to the Loan, a source of considerable annual advantage in time of war, and always in proportion to the annual increase of debt by such Loan; by which increase the more permanent allowande for Management is also so much augmented. Upon the supposition of the above scale being adopted, no alteration is proposed to be made in the above allowance.

3dly. BALANCES ARISING FROM DEPOSITS OF PUBLIC MONEY IN THE HANDS OF THE BANK.—The facts as to the amount of these Balances, as stated in the Report of the Committee, can admit of no difference of opinion; and it appears not impossible that the Bank may, upon further consideration, be induced to concur in the inferences drawn from those facts with respect to the profit arising from such balances, unless, whilst it is candidly admitted on the part of the Bank, "That the amount of Public Balances deposited at the Bank, is always followed by a corresponding issue of its Paper; and that the Bank derives an interest or profit from every issue of such Paper." The Bank should at the same time, be prepared to shew that gratuitous deposit of Public Balances, or, in other words, Bank Notes withdrawn from circulation and returned the Bank, without, at the same time, withdrawing from thence the security, or terminating the interest upon which they were originally issued; and which notes so withdrawn, are replaced in the circulation by a corresponding issue of new notes upon new securities bearing new interests, do not afford profit in an exact proportion to the combined amount of these new issues, and of the rate of interest on these new securities. The following plan, therefore, of a direct and proportionate participation in those profits so derived, is proposed as more simple; and likely, from its not interfering with the established course of business either at the Bank or at the Exchequer, to be more satisfactory than the other arrangement, which will be hereafter detailed, as the alternative to which recourse might be had for rendering the profit of those balances available to the public, in case this proposal should not be preferred by the Bank. The Proposal is, that the Bank should, on or after the 5th April next, advance for the service of the year 1808, and without interest, a sum equal to one half of the average amount of the, public balances which shall then appear to have been deposited in the Bank in the course of the year terminating upon that day; subject, however, to the following understanding and conditions:—1st. That for the object of this arrangement, the whole amount of Unclaimed Dividends should be considered as forming part of the balance in the hands of the Bank: 2d. That, from the half of this balance to be lent to the public, the following deductions should be made: 1st. The whole sum actually lent to the public on account of Unclaimed Dividends; and, 2dly, 1,200,000l.. being the value in capital or the difference between the interest now paid for the 3,000,000l.. advanced in 1800, and the interest at 5 per cent. on the same.—3dly, That an average of the balances in the hands of the Bank, in like manner, be taken on the 5th of April 1809; and, in case such average amount shall be less than it, had been for the preceding year, the Bank shall be entitled to interest at the rate of 5 per cent. per annum, on the moiety of the difference between the balances of the two years: on the other hand, should it be greater, the Bank shall advance, without interest, one half of the excess for the service of the year 1809, and so on for future years during the war.—4thly, That this arrangement should continue upon the scale and principle now proposed, only during the war, and for one year after the conclusion of a peace; within which period it is conceived it would be just to the Bank as well as proper on the part of the public, to have this part of the plan again under consideration, and to modify it according to the change of circumstances which would follow from the restoration of peace.—At the same time the principle of the arrangement appears so equitable and unobjectionable, as connected with the present wise system of keeping public money of every description in the Bank, that the only modification which now occurs, as likely to be necessary on the return of peace, is, that, if the average amount of these balances should be then much diminished, the public ought to be contented with a less proportion of the advantage derived from them; and, perhaps, if one half appears reasonable upon so large a sum as 10 millions or upwards, two-fifths might be deemed an adequate proportion upon a balance not more than 8, nor less than 6, and one-third upon a balance fluctuating between 6 and 4 millions; below which it is conceived there is no prospect of its being at any time reduced.—If, however, the Bank should not, upon reconsideration, feel the truth and accuracy of the conclusions drawn by the committee, respecting the advantages derived, from the use of the public balances, and should continue of opinion that they are not productive of profit to them, upon which supposition, the Bank can have no objection to a plan which would give to the public the advantage of making use of those balances without interest, instead of paying interest for money to a similar amount; it is then proposed, that, instead of the growing receipt of the exchequer in bank notes being daily withdrawn by the Bank, or remaining deposited in the exchequer, it should be rendered available to the daily wants of the public in the following manner; namely, that the proper officers for the issue of exchequer bills should, out of any bills in their hands granted by parliament for the public service, deposit daily in the tellers chest at the exchequer, a sum of the said bills equal to the sum in notes to be withdrawn, and according to the same form and usages (as nearly as circumstances will permit) as now prevail in the daily deposits, made by the Bank, of exchequer bills belonging to them, in order to enable them to withdraw the notes from the chests of the tellers. The notes so withdrawn to be applicable to the public service, whilst the exchequer bills deposited would be security to the tellers and to the public. Such exchequer bills, so deposited, would not, so long as they continued in the tellers chests, bear interest, and this saving of interest upon these bills, is what would constitute the principal advantage to the public. It is intended that the deposit of exchequer bills by government should not, with respect to the receipt of the exchequer on account of the Consolidated Fund in any one quarter, amount to more than 5,000,000l.. nor interfere with the existing practice of the Bank to deposit exchequer bills of their own bearing interest for any sum which may be in the exchequer beyond that amount.—Under the operation of this plan, the receipt of the exchequer will, on the quarter day, consist of 5 millions of exchequer bills deposited by the proper officers of the exchequer, and bearing no interest, and the remainder either in bank notes or in exchequer bills, belonging to the Bank, and bearing interest for their benefit, which may (should they think proper) be deposited by them under the present regulations, as soon as the other deposit had amounted to the sum of 5,000,000l.. Out of this sum, or whatever sum short of it may have been so deposited by the proper officers of the exchequer, it is proposed to set aside, first, the quarterly charge upon the Consolidated Fund for the Civil List; such bills to be issuable under the direction of the lords commissioners of the treasury, at such times as it may be necessary to dispose of them for the purpose of paying the quarterly demands on the Civil List; and to bear interest only from the date of their actual issue. 2dly, The quarterly sum issuable to the commissioners for the reduction of the national debt, as well on account of the original million and 200,000l.. as on account of the Sinking Funds attached to the several loans since 1791, and of the dividends upon the debt redeemed up to that quarter, the whole being a charge upon the Consolidated Fund; such exchequer bills to be issued by the said commissioners in the course of the ensuing quarter, in such Manner as to provide them with the means of making their daily purchases, and to bear interest from the date of their issue only. idly. The surplus, if any, of the Consolidated Fund for the quarter applicable to the service of the year, to be issued, as wanted for the public service, in like manner under the sanction of the commissioners of the treasury. For the conversion into cash of any part of the 5 millions of exchequer bills, which would still remain unappropriated, it would be necessary to have recourse to the Bank; but, considering that the amount of this remainder could in no case much exceed two millions, and that it would generally be much less; that the total amount of exchequer bills to be issued by the treasury within the year cannot be increased; and that the average amount outstanding must be diminished by this arrangement, there seems no possible reason to apprehend that the granting of this accommodation (independently of their general disposition to accommodate the public interest) can be attended with any inconvenience to the Bank, or that it can ever lead to their being pressed to hold a greater amount of these securities than will suit their own interest. In point of fact, it must be obvious, that the only necessary ten- dency of this plan will be, to diminish the total amount of exchequer bills at any given time jointly in the hands of the Bank, and in the market. If the Bank continue desirous of holding the same amount which it now finds convenient to take, the period at which it will be enabled to procure them in exchange for its own notes, will be retarded, and, on the supposition of the Bank holding exchequer bills to the same amount as it now does, the quantity circulating in the market will be necessarily reduced.—Should this arrangement be preferred, it is proposed that it should be equally liable to be reconsidered within one year after the termination of the war.—It is only here necessary further to observe, that exchequer bills, exceeding what would be required upon this plan, to be deposited in any quarter, are, as the law now stands, payable into the receipt of the revenue, and consequently that, without any fresh legislative enactment, or without laying itself open, by any possible construction, to the imputation of trenching on the privileges of the Bank, government might, in transitu, exchange the bank notes received in the different departments of the revenue for exchequer bills, which would then be paid by the different receivers general into the exchequer. But the mode now proposed would be more simple in its execution, and less liable to interrupt that good understanding, founded on liberal principles, which ought. at all times to exist between the government and the Bank, and which it is certainly not less the interest, than it will undoubtedly be felt to be the duty, of both parties to maintain in the discussion a the present arrangements.

No. III.—Copy of a separate Paper, enclosed in the Letter of the Chancellor of the Exchequer to the Bank, dated Dec. 23, 1807.

It being understood to be the wish of the governor and deputy governor of the Bank, as well as of those in the direction with whom they have consulted, that whatever proposal is made by government, it should, at least in the first instance, be founded upon a fair and equitable review of existing arrangements; taking into consideration the services derived to the public on the one hand, and on the other, the advantages accruing to the Bank, instead of such proposal being limited by a strict reference to the letter of any actual contracts or engagements;—this wish, which is certainly more liberal, and more be- coming to the character both of the government and of the Bank, has been carefully attended to in what has been proposed in the accompanying Paper under the head of Reduction in the Charges of Management. But as some conversation has already taken place respecting the arrangements made in this respect, as well by the Act of 1791, cap. 33, as by the Act of 1800, cap. 28, and as they are also referred to in the Report of the Committee on Public Expenditure, it may be necessary, perhaps, thus separately to offer a few short observations upon these engagements.—It cannot be disputed that by the Act of 1791, cap. 33, the Bank acquired a title to be paid at the rate of 450l. per million for the management of the then debt; and that this title remains to this day entire and unquestionable, with respect to so much of that debt as is not yet paid off.—The amount of debt existing on April 5 of that year, was 219,685,195. l.. the amount of debt redeemed by the operation of the then Sinking Funk and its accumulation, and by the redemption of the Land Tax, up to the 1st of Feb. 1808, is 78,939,669l..; leaving unredeemed on Feb. 1 next, 140,745,526l.. For the management of this debt, subject to the further reduction which will be daily effected by the above-mentioned Sinking Fund and its accumulation, and by the further redemption of Land Tax the Bank would have a clear right, under contract, to an allowance for Management at the rate of 450l.. per million; unless it should appear upon further investigation that the public have a right to deduct from the total amount of debt, as it stood in 1791, the total amount of debt since paid off and cancelled by all or any of the sinking funds, or other means the public has appropriated to that purpose:—a question which, when it is considered that, with a reference to any augmentation or diminution, the debt is considered as one account, and that, in point of fact, both the several debts and several sinking funds were consolidated in 1802, may, it is conceived, fairly admit of an argument; and in this case, the total of unredeemed debt to which this contract would apply, would be about 90 millions.—By the Act of 1800, cap. 28. it is enacted (inter alia) "That, during the continuance of the charter, the Bank shall enjoy all profits, emoluments, benefits and advantages whatsoever, which they now have, possess, or enjoy by virtue of any employment by or on behalf of the public," but with the following proviso, "subject nevertheless to such restrictions, rules and directions, and also to such other agreements, matters, and things, as in the said acts and charters (i.e. all former acts and charters) or any of them now in force, are contained or prescribed."—It is remarkable that the Act of 1791 is not specifically adverted to; it is only by the general words of reference to all other acts and charters, that it can be comprehended, and therefore it may be fairly argued that the specific rate of allowance for Management granted by that act, was not particularly under attention, for if it had been, it can hardly be conceived that it would not have been specially adverted to; and it is unquestionable that the proviso last mentioned, as much refers to the directions and rules and powers of agreement granted to the treasury, with respect to the allowance for management in the Annual Loan Bill, as to the Act of 1791. Their charter, therefore, reserving to them all the benefits which they then had by virtue of any employment for the public, subject to this proviso, must be understood to reserve to them the right of Management, but subject as to the amount of Management, to what the treasury may think reasonable.—If, however, notwithstanding this view of the case, and contrary to every expectation, the Bank were now to assert, and were enabled to make good a claim to be allowed at the rate of 450l. per million on such portion of the debt, as it stood on, April 5, 1800, as has not since been redeemed, there would remain at this moment about 250 millions only (the whole debt being 613 millions) to which any new scale of allowance could be applied. But if such a claim were insisted upon, and if the Bank were advised to stand upon the strict and literal execution of a contract, which, as far as it rests upon the act, of 1800, is only to be maintained (if tenable at all) by general implication and reference, whilst it must be obvious, that this same contract, by the continued and unforeseen operation of those very circumstances which create pressure and difficulty in the country, is become improvident and disadvantageous to the public, and, in the same proportion, over-productive to the Bank; and that their profits are in like manner greatly increased by many other transactions, necessarily incident to and growing out of that pressure and those difficulties; I should cer- tainly, under such a contingency, feel it to be no unreasonable expectation, and should be called upon by my duty to urge it to the utmost, on the part of the public, that for the above 250 millions, that part of the debt with respect to the allowance for the Management of which no specific contracts can be said to exist, such allowance should be confined as nearly as possible to the increased charge which may be supposed to be actually incurred by The Bank, in consequence of this addition to the debt of 1800; so as to obtain, if not immediately, at least within a short period, by the rapid diminution of the latter, an abatement equal to a fair and immediate average abatement upon the whole.—It is unnecessary to go into particular calculations upon such a subject; but it must be obvious that supposing the rate of allowance for the portion of the debt not subject to the supposed contract of 1800, to be managed at a rate as high as 300l. per million (a rate, which under the circumstances here stated, and with a view to an average, it would not be reasonable to expect), a very few years would elapse (probably not more than ten years) before the whole allowance for management would be less, under any given circumstances, than is now proposed, whilst the reduction of allowance would be still going on, so long as any of the debt of 1800 should remain, without any security to the Bank for an encreased rate, should the whole debt at any future period be reduced below certain stated amounts.

No. IV.—Copy of a Paper communicated to the Chancellor of the Exchequer by the Governor and Deputy Governor of the Bank; in reply to his Letter and Proposals of the 23d Dec. 1807.

The Committee having taken into consideration the Proposals suggested by the Chancellor of the Exchequer; beg leave to return the following Answer, and Observations: They are of opinion, that a farther advance, to the extent of 500,000l. on account of the Unclaimed Dividends, May be acceded to on the part of the Bank; on similar conditions with the former advance.—The Committee, ever anxious to promote the interest of the public, as well as of their proprietors, are of opinion, that a reduction on the rate of management of the national debt, as proposed by the chancellor of the exchequer, may, with some modifications of no very great moment, be consented to on the part of the Bank.—In regard to the large sums of public money of the exchequer, and the balances of the public drawing accounts in the hands of the Bank; these, however Considerable at particular periods, must necessarily always be of an uncertain and fluctuating amount; for which reason, and for others continually operating in the great scale of their business of banking, the committee deem it impossible to ascertain, with any degree of precision, the profits that may be made, arising from the employment of those balances. But, on all accounts they are of opinion, that it would be highly imprudent for the Bank to make an advance to government in the way of loan of a capital sum of money equal to one-half of their presumed amount, even with the deductions proposed.—They therefore cannot recommend to their court, for the purpose of being brought before the court of proprietors, the first mentioned plan or proposal, in respect to those balances.—But, as the Paper suggests another mode, by which the exchequer itself may make advantage of the, public money paid into the exchequer; the Bank neither can, nor ought to make an objection thereto, or to any plan obviously intented for the benefit of the public, On the contrary, any facilities conveniently in their, power, the committee have no hesitation to say, the Bank will always with alacrity afford.—It should, however, be understood, that if this plan be adopted, the Bank should not be obliged at the end of every quarter to purchase, or take, on that account, exchequer bills to a larger amount than two millions.—The committee, however, are aware, that possibly it may not be altogether a desirable circumstance, in the management of this business in the Exchequer, to overturn the forms of office, and a system, that has been established and acted upon for a very great number of years; and that sometimes, what Seems tolerably easy in prospect, may not always be found perfectly so in practice. They, therefore, on their part, beg leave to suggest a proposal, which possibly may deserve the consideration of the chancellor of the exchequer, and be more acceptable, and eventually even more profitable to government, than the mode just mentioned. It is much less complex its nature, and demands no alteration nor innovation on the present practice, which is perfectly well understood. It consists only in the Bank paying a certain sum of money, annually, into the Exchequer, for the use of the public, on the condition, that the public money shall continue to be kept in the hands of the Bank, and the accounts between the Exchequer and the Bank continued according to the present practice. In that case, and on that condition, the committee are of opinion, they might conscientiously propose to their court to recommend the court of proprietors to pay into the exchequer, for the use of the public, the sum of £ annually, during the continuance of the war; and whenever the period of peace arrives, this Subject, and others of great moment, will probably require farther consideration.—The chancellor of the exchequer pleased to turn this suggest in his mind, and determine which of the two plans he shall prefer to propose to the Bank.—With respect to the quarterly issue for the Redemption of the National Debt, the committee are unanimous in most solemnly deprecating any alteration in the present mode of conducting that very important branch of the public business, or diverting any part of its funds, to any other purpose, than that to which by law they are appropriated, and which has so happily been enacted by the legislature. The system hitherto pursued has given universal satisfaction to the public, as well as to the stockholders, and has evidently been attended with the most beneficial effects on the public credit of the nation. —The committee have no object of profit in view from the quarterly issue of this money, which, they flatter themselves, can be no where safer than in the custody of the Bank. They look on this money as a sacred deposit, to be applied and paid only, agreeably to the terms of the acts of parliament in the daily purchases of stock by the commissioners, and to be employed or used in no other manner.

No. 1.—Copy of a Letter from the Chancellor of the Exchequer to the Governor and Deputy Governor of the Bank.

Downing-street, Jan. 11, 1808.

Gentlemen; In the several conferences and Communications which I have lately had the honour of holding with you respecting the expectation formed by me, on the part of the public, of an advance by the Bank for the public service, the particular grounds of that expectation have been discussed under three heads, namely:1st Unclaimed Dividends.—2dly. The Charge for the Management of the Public Debt.—3dly. Balances arising from Deposits of Public Money in the hands of the Bank.

Having most maturely considered every thing that has passed between us, in these discussions, I now feel myself enabled and called upon to make to you the following proposals, under each of the above heads; and I request that you will submit them to the Court of Directors, for their consideration and concurrence. 1st, That out of the Unclaimed Dividends a sum of 500,000l., shall be advanced for the service of the present year, under similar provisions to those contained in the Act of 1791, cap. 33, and in addition to the sum of 376,739l.. already advanced upon that account; but so as to secure that the amount of such dividends remaining in the Bank shall never be less than 100,000l.. 2dly. That the sums to be allowed to the Bank for the Management of the public debt, shall, from and after the 5th of April next, be regulated by the following scale: —When the total amount of debt unredeemed shall exceed 400 millions, and not exceed 550 millions, the Bank shall receive an allowance for management at the rate of 340l.. per million per annum upon the whole of such debt: and when the total amount of such debt shall exceed 550 millions, the Bank shall receive the allowance of 340l.. per million for such 550 millions; and for any excess of debt which may now exist, or may hereafter be created, beyond 550 millions, the rate of allowance for management shall be 300l per million for the Whole of such excess.— I have only farther to propose on this part of the subject, that the 4,000l. paid to the Bank by the Exchequer, under the denomination of "House Money," should be discontinued; but it is not my intention, if the above proposals are acceded to, to suggest any alteration in the established rate of allowance for receiving contributions to the loan or to the lottery.—The consideration of what may be the proper rate of management in the event of the debt unredeemed being reduced below 400 millions, may be reserved for subsequent arrangement when such an event may take place.—3dly. With respect to the Public Balances; although I have not been so fortunate in the several conferences which we have had upon the subject, as wholly to convince you, that the advantages derived to the Bank from the deposit of those balances, must be in proportion to their average amount I am not the less firmly convinced in my own judgment of the truth and accuracy of this position; and having, I think, succeeded in fully satisfying you, that a plan, the outlines of which I have had the honour of stating to you, might easily be devised, and with the sanction of parliament carried into effect by which these balances might, to a very great extent, be rendered productive of profit to the public; you must be sensible, that, however desirous I may be of avoiding to trouble you with any futher discussion of the mode in which, according to my judgment, advantage is derived to the Bank from the public balances, or of the precise extent to which those advantages are carried, it would be altogether inconsistent with my duty to the public, in the view which I have now shortly stated, to avoid pressing upon the consideration of the Bank, the expediency of ensuring to the public, in some shape or other, that reasonable degree of profit which they are entitled to expect, and which, as I have already observed, it is within the competency of parliament to secure to them, from the use of those balances. As, however, any plan for this purpose to which the Bank might not be a party, though free from objection in its principle, could not be carried into execution, without a departure from the course of business which has so long subsisted between the Bank and the Exchequer, I should on that account prefer an arrangement promising even something less of advantage to the public, which would leave this course of business in its accustomed channel; and, as I cannot doubt but that the Bank will concur with me in preferring to avoid any deviation from a long established system, it appears probable, that, from this and other considerations, it may be more satisfactory to them, as it will certainly be to me, that the one or the other of the following propositions, (unquestionably not formed upon any too sanguine view of the comparative profit which in another mode might be obtained for the public) should be acceded to by the Bank: viz. That the Bank shall, on or before the 5th of April next, advance to the public for the service of the year, a loan of 3,000,000, without interest, but the principal to be secured by exchequer bills payable twelve months after the ratification of a definitive treaty of peace: or, that the Bank shall, on or before the 5th April in the present and each succeeding year during the continuance of the war, and within twelve months after the termination thereof by a definitive treaty of peace, pay into the receipt of the Exchequer, there to be held at the disposal of parliament, the sum of 150,000l.. sterling.—In proposing this alternative in the mode of affording to the public that degree of aid which, upon the most moderate principle, and with a reference to the advantage that might otherwise be obtained, it appears reasonable to expect on account of the deposit of public money in the hands of the Bank, I feel it a duty at the same time to urge, in the strongest manner, the superior convenience and advantage which would accrue to the public service from the adoption by the Bank of the proposed loan, instead of an equivalent annual payment into the Exchequer. In stating this comparative view of the two proposals, and my decided opinion in favour of the advance by way of loan, I cannot doubt, from the general disposition of the Bank, that it will be a most powerful motive with the court to give a preference to that proposal; unless, from some reason of which. I am not aware, it should appear to them absolutely necessary for the interests of the Bank to confine themselves to an annual payment.—In order to prevent the possibility of any future misunderstanding of the principles and grounds on which the present arrangement, as far as relates to the deposits of public balances, is brought forward, I think it necessary to observe, that the proposal to confine the duration of the advance by way of loan, or of the annual payment into the Exchequer, to the period of the present war, and twelve months after the termination of it, is by no means to, be understood as an admission on my part, that, at the expiration of such period, the public will no longer be entitled to look to any advantage from the continue once of such deposits; but simply as a provision, by which the government and the Bank may be respectively enabled, under the change in the state of affairs which will then have taken place, (probably affecting the amount of public balances in the hands of the latter,) to consider of a new arrangement. And I have further to add, that, as the proposal I have now made is founded on the view I have taken of the present annual average amount of those balances, assuming that amount to be not less than ten millions sterling, I wish it to be understood that the present arrangement, if carried into effect, should not be construed to preclude his majesty's government (with the sanction of Parliament if necessary) from using in such manner as they might think proper for the public interest, and consistent with any existing engagement with the Bank, any excess of balance over and above the said ten millions, if it should appear that such excess were likely to be permanent and of sufficient magnitude to call for some application of it, by which, without interfering with the arrangement now proposed to the Bank, it might be rendered productive of advantage to the public; but without calling upon the Bank for any direct assistance beyond the amount now proposed; art assistance which, whatever difference of opinion may exist as to the circumstances by the operation of which they are enabled to grant it, will, I cannot doubt, upon a fair consideration of the whole case, appear to be entirely consistent with those principles of equity and mutual liberality, which ought to prevail in the adjustment of so important an arrangement, growing out of the extensive transactions existing between the public and the Bank. I have the honour to be, &c.

SP. PERCEVAL.

No. II.—Copy of a Paper intituled,

"Resolution of the Court of Directors."

14th Jan. 1808. Resolved, That the proposal of the Chancellor of the Exchequer, to take 500,000l. from the Unclaimed Dividends, in addition to the former sum of 376,739l. be acceded to by this court.

Resolved, That in respect to the rate of Management, the following scale be proposed:

On 600 millions at 340l.. per million.

—	13	Do.	300	Do.
—	400	Do.	450	Do.
—	300	Do.	500	Do.

Resolved, That in respect to the 4,000l. for management, allowed by the first charter, it is not expedient to make any alteration in that allowance being part of the 100,000l.. per annum continued from the foundation of the Bank.

Resolved, That the Court of Directors do accede to the proposal of the Chancellor of the Exchequer, to lend, for the use of government, 3,000,000l.. on exchequer bills, without interest, during the war; provided it is stipulated to be returned within six months after the ratification, of a treaty of peace, and under the complete understanding, that all transactions between the public and the Bank shall be continued in the accustomed manner, even though the amount of public balances should exceed the sum of ten millions.

No. III.—Copy of a letter from the Chancellor of the Exchequer, to the Governor and Deputy Governor of the Bank.

Downing-street, Jan. 15th, 1808. Gentlemen; The liberal disposition which has been in infested by the Court of Directors, to concur in the principal arrangements which I have thought it my duty to suggest for their consideration, has afforded me great satisfaction.—While I feel convinced that my proposal has not lost sight of the public interest, the manner in which it has been received by the Bank confirms me in thinking that it has not proceeded without a due consideration also of the fair and reasonable interests and expectation of that respectable corporation. Under this impression, I am strongly inclined to give way to the suggestions of the Bank in the minor part of the arrangement, and will therefore accede to the scale of allowances therein proposed for the management of the public debt, so far as it applies to present circumstances, or to such as can be expected to occur within any short period.—In this view, therefore, I shall not object to the alteration by which it is proposed that the allowance to be paid by the public for management, shall be at the rate of 340l. per million upon any amount of debt between 400 and 600 millions inclusive, instead of limiting that rate of allowance to any amount between 400 and 550 millions, as I had intended; and according to this arrangement, the reduced rate of 300l.. per million will be allowed upon any excess of debt now existing, or which may hereafter be created, above 600 millions, instead of commencing from the amount of 550 millions.—But with respect to the proposal for increasing the rate of allowance for management to 500l.. per million, in case the unredeemed debt should be reduced to 300 millions I am persuaded that upon reconsideration the Court of Directors will agree with me in the difficulty or rather the impossibility, of my proposing to parliament, at this moment, to grant a higher rate of allowance upon a debt of 300 millions, than was granted by law in 1791 upon a decreasing debt of 220 millions; and I trust that they will consent to withdraw this part of their resolution. In stating this, I by no means intend to undervalue the reasons which may be urged to shew that circumstances may perhaps have occurred to render some encrease not unreasonable; but the event which would bring these circumstances most properly under consideration, is, I am afraid, removed to such a distance, that the court of Directors will, I hope, find no difficulty in agreeing with me to wave the discussion of this point for the present.—With respect to that part of their Resolutions, by which the Court of Directors agree to advance "3,000,000l. on exchequer bills, without interest, during the war, provided it is stipulated to be returned within six months after the ratification of a definitive treaty of peace, and under the complete understanding that all transactions between the public and the Bank shall be continued in the accustomed manner, even though the amount of public balances should exceed the sum of ten millions;" the proposal to limit the repayment to six months instead of twelve, after the ratification of a definitive treaty of peace, is an alteration in the arrangement from which I do not feel myself disposed to dissent, as this abridgment of the term has probably appeared of importance to the Court of Directors.—With respect to the understanding under which the court is willing to lend the sum of 3 millions, I have only to observe, that, subject to this advance, it never was my intention to attempt, during its continuance, any alteration in the course of business between the Bank and the Exchequer, or to propose to withdraw from the Bank any account now by law directed to be kept there. This explanation will, I trust, be entirely satisfactory to the Court of Directors: and I have only to add, that subject to the modification now proposed respecting the management, I shall be ready to submit to parliament, to sanction an agreement, founded in every respect upon those resolutions. I have the honour to be, &c.

SP. PERCEVAL.

No. IV.—Copy of a Letter from the Chancellor of the Exchequer to the Governor and Deputy Governor of the Bank.

Downing-street, Jan. 19, 1808. Gentlemen; Referring to the several communications which I have had the honour of holding with you, and to the correspondence which has passed between us, on the subject of an arrangement to be formed between the public and the Bank; and especially to the proposals which I transmitted to you on the 11th instant; to the resolution of the Court of Directors of the 14th instant, suggesting certain alterations in those proposals; and to my letter of the 15th instant, consenting in part to those alterations;—I think it proper, in order to remove every possibility of misunderstanding between us, briefly to recapitulate the terms of the arrangement, which I have expressed my readiness to submit to parliament, in case it should meet with the final concurrence and assent of the Bank.—Under the three following heads; viz.

1st. Unclaimed Dividends. 2d. Allowance for Charges of managing the Public Debt. 3d. Public Balances kept at the Bank.

I have proposed;—Ist. That the Bank shall now advance out of the Unclaimed Dividends in their hands, the sum of 500,000l.. for the use of the public, in addition to the sum already advanced out of that fund pursuant to the Act 31 Geo. III. cap. 33, and under similar conditions; provided always, that the amount of such dividends remaining in the Bank shall not be reduced below 100,000l.. 2dly. That for the management of the public debt, the Bank shall henceforward be allowed as follows: 340l.. per million per annum, upon the whole of the unredeemed debt, whenever it may amount to 400 millions, and not exceed 600 millions.—300l. per million per annum, upon the whole amount of any excess of Debt unredeemed above 600 millions; the said 600 millions continuing in such case to be managed at the aforesaid rate of 340l.. per million per annum.—450l.. per million per annum, upon the whole unredeemed debt, whenever it may exceed 300 millions, and not amount to 400 millions. And that with respect to the rate of allowance which it may be proper to fix for the management of any debt less than 300 millions, it has been deemed advisable to defer the consideration of that subject until the actual diminution of the debt may be such as to require some determination upon it. 3dly. That the Bank shall, on or before the 5th of April next, advance for the public service in the present year, 3,000,000l.. by way of Loan, without interest; the principal to be secured by exchequer bills, to be deposited in the hands of the Bank, payable at the expiration of six months after the ratification of a definitive treaty of peace.—And it is understood that during the continuance of this advance by the Bank, no alteration is to be proposed in the general course of business between the Bank and the Exchequer, nor any regulation introduced by which the accounts now by law directed to be kept at the Bank, shall be withdrawn from thence. I have the honour to be, &c. SP. PERCEVAL.

No. V.—Copy of a paper, intituled, "Resolution of the Court of Directors, on Mr. Perceval's Letter of the 19th Jan. 1808, and Recommendation thereof to the General Court."

At a Court of Directors, at the Bank, on Thursday the 21st Jan. 1808, the following Letters from the Chancellor of the Exchequer being read, viz.

"Downing-street, Jan. 15, 1808. Gentlemen, The liberal disposition," &c.— "Downing-street, Jan. 19, 1808. Gentlemen, Referring to the several," &c.

The governor acquainted the court, that the committee of treasury having considered the said letters, recommend, that the terms proposed in the letter of the 19th inst. be complied with.—The court agreed thereto.—Resolved, That the chancellor of the exchequer's letter, of the:19th inst. be laid before the general court; and that the governor be authorized to inform the proprietors, that this court is of opinion, that the proposals contained in the said letter be acceded to.

No. VI.—Copy of a Paper, intituled, "Resolution of the General Court on Mr. Perceval's Letter of the 19th Jan. 1808."

At a General Court of the Governor and Company of the Bank of England, held at their public Office in Thread-needle street, on Thursday the 21st Jan. 1808, the following Letter from the Chancellor of the Exchequer being read, viz.

"Downing-street, Jan. 19, 1808 Gentlemen, Referring," &c.

The governor further acquainted the court, that the court of directors, having taken the said letter into consideration, are. opinion to recommend to this court comply with the proposals contained in the said letter.—The question was then put, That the proposals contained in the above letter, be complied with on the part of the Bank? And carried in the affirmative.