HC Deb 16 February 1824 vol 10 cc157-65

On the motion, that this bill be read a second time,

Mr. Davenport

rose to give to it his most decided opposition. The country had grown great and had flourished under the present system of law: where, then, was the necessity of altering it? Besides, the alteration proposed would be particularly disastrous to persons with small landed estates, and would absolutely ruin all those who had bought them ten years ago, when land was high, and when there was no objection to leaving part of the purchase money unpaid upon them. This bill might raise, but it could not lower, the present rate of interest; and as he felt more for the borrower than he did for the lender, he could do no less than move, as an amendment, that this bill be read a second time this day six months.

Mr. Bransby Cooper

rose to second the amendment. The laws for the regulation of the interest of money, which it was the object of the bill to destroy, were, he said, in consistence with the whole of the English laws which had reference to employments in which chance was concerned. The same principle applied to insurances. In the preamble of the bill, there were no arguments in its favour. He thought it much better that the interest of money should be regulated by the present laws than, that all those salutary provisions should be swept away.

Mr. Hume

said, after the observations which had fallen from the hon. member who spoke last, he should be sorry that the bill should go to a division, without some explanation being afforded of the mistake he had fallen into. The hon. member had said, that the Usury Jaws were consistent with the laws of England. Now, the whole tendency of modern legislation, as of the ancientlaws, was, to give the greatest freedom to bargains, and, to all sorts of mercantile transactions. The greatest benefit that had been conferred upon the country by any administration for the last thirty years, was that which had resulted from the enlightened policy of the present administration, in breaking down the absurd restrictions with which commerce had been previously shackled. The hon. member had referred to insurances; and it certainly did surprise him, that any one should adduce a reason which would lead to a result so contrary to that which he aimed at. There was no law to prevent underwriters from taking any premium on a policy which they might agree on with the insured. The analogy of the Usury laws indeed, should lead them to fix certain rates of insurance, without reference to circumstances; as, for instance, that the premium to the West Indies should be 5 per cent, to the East 7, and so on, which should never be varied according to the vessel, or to the season, or to a state of war and peace. The opposition to this bill was dictated by an erroneous view of the interests of the borrowers of money; whereas it was evident, that the freedom of contract was as advantageous to the borrower as it was to the lender, in the same manner as the freedom in policies of insurance was beneficial to the underwriters and to the insured. What would their situation be if, according to the idea of the hon. member, the rate of premium were fixed, instead of varying, as it now did, from 1 to 50 per cent? He agreed that in the cases of contracts for lending money as in other contracts, they should be such as could bear to meet the public eye, and that fraud and deception should be punished; but this they would be under the common law. He entreated the House, therefore, to press forward this measure, as the season for passing it was peculiarly favourable, at a time when the ordinary rate of interest was at between three and four per cent, and thus much below the rate fixed by law. The country was much indebted to the hon. and learned serjeant, for his perseverance in urging forward this bill, and he hoped he would now reap the reward of it.

Sir J. Wrottesley

said, he should take leave to say a few words on the subject before the House, which was one of the moat important that could be agitated, especially to the landed interest. The measure now before them was, to sweep away the laws which had been sanctioned by the experience of years. During that time, the uniform practice of the government of this country had been to prevent extortion and usury, by enacting those laws which some individuals now wished to be repealed. This country, instead of being injured, had been greatly benefitted by the Usury laws. Since the period of the last act, that of queen Anne, there was no country in which capital had accumulated to so great an extent as it had done in England; and yet they were now called upon to repeal laws, which brought the whole capital of the country into the metropolis. If they were repealed, it ought not to be on mere theoretical grounds: some practical good should be pointed out as likely to be effected by the measure. He contended, that those laws had done no practical injury to the landed interest. In times of distress, it was true, they borrowed money at a great disadvantage. But, it should not be forgotten, that when they gave redeemable annuities, those annuities might, in time, be taken up. The persons who now lent money to the landed interest at 3½ per cent, would, if those laws were repealed, change their demand with every fluctuation. Now they would have four, now five, how six per cent. In short, there would be no certainty in the money market. If, in time of distress, the landed interest could borrow money at 5 per cent, what would become of the commercial interest? In proportion as the security they had to offer was worse than that afforded by the landed interest, would the lender demand a more exorbitant rate—not less, perhaps, than ten or twelve per cent. In fact, the mercantile and manufacturing interests would be reduced to the utmost distress, if those laws were repealed. Let the House also consider the situation in which the government would be placed. During the last war, whilst the mutiny at the Nore was raging, when the Bank Restriction act was passed, and when the public funds were under 50, no difficulty was experienced in borrowing money: but he was convinced, if those laws had not then existed, that government would not have been able to raise the money which was absolutely necessary to carry on the affairs of the nation. They would not have had that preference in the market which they ought always to have; and they would have been compelled to pay an interest of 10 or 12 per cent. If, therefore, the repeal of those laws was calculated to starve the merchant and manufacturer, and to beggar the government, the House ought to throw out this bill, and that, too, by such a majority as would induce the learned gentleman never again to bring it forward.

Mr. J. Smith

said, that the hon. baronet seemed to fear that the mercantile and manufacturing classes, and even the government itself, must suffer by the repeal of those laws. Now, without entering into much argument on those points, it might be enough to state, that the laws against usury had been done away all over Europe, and that no harm had occurred either to governments or to individuals; but, on the contrary, it was to be believed that the interest of all parties were much improved by that repeal. One or two circumstances had come under his own observation, which proved that those laws had occasioned the most destructive effects to families in this country, by compelling them to raise money by way of annuity. Money, like every other commodity, ought to be allowed to fetch its just value in the market. Now, if an individual wanted to borrow money, which, if these laws were not in existence, he might procure for seven per cent., he would be obliged, in his endeavour to evade those laws, to pay 13, 14, or even 15 per cent. The hon. baronet had only to refer to the evidence given before the committee, and there he would find those facts distinctly proved. The hon. baronet expressed some fears as to the situation in which the commercial body would be placed, if this bill passed. Now he (Mr. S.), as one of that body, must say, that he had not the slightest apprehension on the subject. He could solemnly assert, that he never had met a man for whose judgment he had any respect, who entertained a doubt on the question.

Mr. Grenfell

said, that the chief argument against the bill was, that the effect of the repeal of the usury laws would be, to raise the interest of money. Now, in Holland, there never had been any restraint on money dealings; and he could state from his own experience, as well as from history, that there was no country in Europe where the rate of interest had been and was so low as in the United Provinces. He hoped, therefore, that his majesty's government would countenance this measure, which was in perfect unison with the liberal course of policy they had recently adopted.

Mr. Huskisson

said, he had been a member of the committee to whom this subject was referred in 1818, and who had reported their sentiments to the House. The opinion he had formed in that committee he still entertained. Indeed, he had never varied from it. He need hardly say that it was entirely in unison with the object of the learned serjeant. He considered the Usury laws as only calculated to add to the difficulties of borrowing money, to increase litigation, and to encourage fraud.

The Chancellor of the Exchequer

said, that when this question was brought before the House last session he voted against the proposition, not because there was any advantage in the principle of the existing laws, against which, on the contrary, many arguments could be advanced; but because he was not prepared to say that the moment had arrived when parliament ought to repeal those laws. He did not think that the opposition to the measure was now so strong as it was last year; and if it were desirable at all that those laws should be altered, he conceived the present period was as good as could be selected.

Mr. Calcraft

said, it would be very difficult, he was aware, to defend those laws in point of principle; but, in point of practice, he must say that it would be dangerous, without a great deal more consideration, to alter those laws in a country where there was so general and so beneficial a distribution of capital, and where money was to be had at all times at a low rate of interest. If the learned gentleman with whom this measure originated thought, while government was in the market, that any change of the law would make the loan of money cheaper to individuals, he was very much mistaken. He believed the repeal of those laws would raise the price of money to government, instead of reducing it. Gentlemen seemed to suppose, that by carrying this measure, individuals would be saved from ruin, because they would not then be obliged to get into those annuity contracts under which so many families suffered: they believed that a complete end would be put to all ruinous money contracts. But it was utterly impossible to hope for any such result, unless, at the same time that those laws were repealed, they contrived to alter the conduct and temper of individuals. By repealing those laws they would facilitate the borrowing of money by extravagant persons, without conferring any advantage on the steady and industrious part of the community, whom they ought especially to protect. He was not on the committee—[The hon. member was here reminded that he was a member of the committee.] If he was on the committee, he had certainly forgotten the circumstance. He had, however, read the evidence; and if he had known that the learned serjeant's brat, which had been bandied about from session to session, was to have been taken up by government, he would have brought down that evidence, and proved that it did not bear out the view of those who supported this measure. No advantage had been pointed out that would at all warrant them in embarking on such a speculation. There was no country, not even Holland itself, in which wealth had so greatly in- creased as it had done in England, during the period when those laws were in operation.

Mr. Serjeant Onslow

certainly could not congratulate the hon. gentleman opposite on the strength of his memory, for he had undoubtedly been a member of the committee; and it was equally certain that he had attended it. It was scarcely necessary for him to make any observations on the objections which had been made to this measure, after what had fallen from hon. gentlemen opposite, and his right hon. friends near him. The hon. gentleman who seconded the amendment had fallen into a great mistake about the origin of the Usury laws. Much of his veneration for those laws seemed to be founded upon a notion of their great antiquity; but he would probably be surprised to learn, that the taking of interest for money at all was proscribed by our early statutes as being contrary to Christianity. This was the uniform language of our early statutes. It had been said by the hon. baronet opposite, that the landed interest would be borne down by this measure; that in ordinary times money might be readily obtained upon mortgage; and that in seasons of difficulty recourse might be had to the system of raising money by redeemable annuities. Undoubtedly redeemable annuities could be resorted to: they had, in point of fact, been resorted to; but at what rate of interest? Why, at the ruinous rate of 10, 12, 13, and 14 per cent., for two, three, or four lives. This was the remedy which the hon. baronet preferred; this was the ruinous expedient of which he was so much enamoured! Not only had this expedient been resorted to at a period of difficulty, but estates had been actually sold at a time when scarcely a purchaser could be found in the market. He was satisfied, that the repeal of the Usury laws would be so far from being injurious to the landed interest, that no class of the community would derive more essential benefit from that repeal than the agricultural class. The objections which had been made to the measure, on the ground of its being injurious to the commercial interest, were equally unfounded. As to the expedient of borrowing stock to replace it, it had been no less ruinous than that of resorting to redeemable annuities. An hon. friend near him had mentioned a case to him—and this was far from being a solitary instance—in which a person had lost 30 per cent by borrowing stock to re- place it. The object of his bill was, to place money contracts on the same footing as all other commercial transactions; to afford a full, fair, and open competition in the money market, and to allow persons to make their own bargains with respect to money, as they were at present allowed to make them with respect to all other commodities.

Mr. Baring

said, that, after the general concurrence of sentiment which seemed to prevail on this subject, it was scarcely necessary for him to trouble the House with any observations. He could not, however, forbear saying a few words on a subject of such importance, involving, as it undoubtedly did, a change in our laws of very considerable importance. But though it was a change of considerable importance, it was a change which would produce no immediate effect; and it was because it would produce no immediate effect, that he conceived this to be the proper time for legislating on the subject. They were not now legislating on the subject of fixing the value of money; and, perhaps, a more favourable opportunity of doing away with those laws had not occurred in the last half century. It had been said, that a vast accumulation of capital had taken place, notwithstanding the existence of these laws. The fact was, that the accumulation of capital had gone on increasing, because the Usury laws as far as capitalists and monied men were concerned, were wholly inoperative. The invasion of these laws was so easy, that the monied interest had never been affected by them. Not so, however, the agricultural interest; and it was not without surprise, therefore, that he found this measure most vehemently opposed by that very class of the community, which, above all others, it was most calculated to benefit—he meant the country gentlemen. He really hoped, if it were only for the advantage of hearing what could be urged against this measure and that an opportunity might be afforded of removing the prejudices which were entertained against it, that this bill would be suffered to go further. Even if it were not possible to remove the prejudices of the country gentlemen, and to satisfy them that the measure was calculated to promote their interests, nothing would be more easy, when this bill came into the committee, than to restrict its operation to all classes of the community, except the agricultural; so that it might not ex- tend to the loan of money upon mortgages. With respect to the interests of the merchant and the manufacturer, there could be no doubt of the utility of the repeal of these laws. It was equally certain, that the landed interest would be relieved, even above all other classes, by this measure; but, if they could not be persuaded of it, they might be exempted from its operation. What was the predicament in which the landed interest stood, during the whole of the last war, by the effect of the existing laws? While these laws were wholly inoperative upon capitalists, who could evade them, and upon the government who were borrowing at an usurious interest during the whole progress of the war, the landed proprietor could never raise a sixpence except by the most desperate usury, and while the rate of interest passed from 5 per cent to 5½ or 6 per cent with respect to other capital, it passed at once from 5 to 14 per cent with respect to landed security. The country gentlemen, therefore, were, in fact, more interested in the repeal of this measure, than any other class of the community.

Captain Maberley

said, the hon. member for Wareham had asserted that, the policy of this measure was not borne out by the evidence given before the committee. Now, he had within these few days referred to that evidence, and he begged leave to differ entirely from the opinion of the hon. member. He should give his cordial support to a measure, which he believed to be founded on the soundest principles of commercial policy, and in the expediency of which the most enlightened statesmen, as well as practical men, had equally concurred. He need only refer to such names as those of the late sir Samuel Romilly, the late Mr. Ricardo, Mr. Sugden, and Mr. Rothschild.

Sir W. de Crespigny

expressed his entire concurrence in the policy of the measure.

Mr. J. Martin

considered the Usury laws injurious to all classes of the community; but more especially to the agricultural interest.

The House divided: For the second reading 120. For the Amendment 23. The bill was then read a second time.