HC Deb 16 March 1826 vol 14 cc1379-88
The Chancellor of the Exchequer

said, that after the very ample discussion which the subject of the Small-note Currency had recently, undergone, and after the decided manner in which the House hart expressed its opinion on the general principle of the policy of making the basis of our currency more practically metallic than it was at the present moment, he should think it unnecessary to trouble it at any length on the present occasion. He confessed that the more he applied himself to the consideration of the subject, the more he had become persuaded that there was no substantial ground on which it could be maintained, that the other parts of the United Kingdom ought to be put on a different footing from England, if it were right to adopt this system at all.

But he was ready, notwithstanding, to admit, that there might be, with respect to Ireland, and particularly Scotland, circumstances of difference which it was requisite the House should take into consideration before they proceeded to any legislative enactment. He certainly felt that, in matters of this kind, in which the feelings of any large portion of the community were so strongly entertained, and so decidedly expressed, as the opinions and feelings of Scotland had been with respect to this measure, it was but conformable to the course the House was in the habit of following, to give a fair and reasonable opportunity to those who thought their interests likely to be affected, of proving the injurious manner in which they conceived they would be affected by the proposed extension of the measure, and, on the other hand, to enable those who held an opposite opinion to prove that there was, in fact, no ground for apprehension or complaint. It appeared to him, therefore, that the most prudent and effectual mode of attaining the object of all parties would be to allow a full, free, and unreserved consideration to be given to the subject before a select committee. It certainly did so happen, that in former committees which had sat on the subject of the currency, although they had gone fully into the general question, as between Bank paper and gold, this particular point, the small currency, was not debated, and certainly, as it affected Scotland, the question was not at all adverted to in the report of the committee of 1819; and that branch of the subject had undoubtedly not undergone that sort of investigation which the importance of it justly entitled it to. With regard to himself and those who agreed with him in the general opinion he had ventured to pronounce on this subject, he would say it was not fair to charge them, either as respected Ireland or Scotland, with taking up the consideration of this question improperly. In discussing the subject hitherto, it had been over- looked, that the very first measure of restriction upon a small-note currency had been framed with exclusive reference to Scotland; for, in the year 1765, an act passed, declaring that the circulation of small notes in Scotland, under the value of twenty shillings, was incompatible with the prosperity of the country. The measure now in contemplation had only for its object, an extension of that principle. It could not, therefore, be maintained, that a measure which promised benefit to the United Kingdom, and the principle of which was admitted by Scotland on a former occasion, without a murmur, could now be injurious to that country, and ought to be resisted. With respect to Ireland, he should only say, that it did not appear to him that there existed there so strong an objection to the measure. Indeed with reference to that country, the question was different; for it oddly enough happened, that the only time at which the Irish parliament had thought proper to prohibit a small-note currency, was in 1799, after the Bank of England had been restrained from cash payments. In 1804, an act of the imperial parliament restored to the bankers the power to issue small notes. He was at a loss, therefore, to conceive on what ground the measure could be objected to. However, as there seemed to be a general impression, that the subject should be thoroughly investigated; as he was confident that the more it was investigated the more it would be approved; and as it was obvious that we should arrive at a more satisfactory conclusion, by a mode which would prevent discussion, and consequently avoid exciting angry passions, which, on every account, it was most desirable should not be called into action, he would move "That a select committee be appointed, to inquire into the state of the circulation in promissory notes under the value of 5l. in Scotland and Ireland, and to report their observations and opinion thereupon to the House, with reference to the expediency of making any alteration in the laws now in force relating thereto."

Mr. Hudson Gurney

said, though he felt that it was the desire of the House not to enter into any general discussion of the subject at that time, yet he could not sit there and hear the proposal for a committee made, without expressing his opinion of the great inconvenience which the appointment of these committees must always produce, from the general uneasiness and unsettlement of men's minds, which they invariably occasioned. The bullion committee of 1810, and the committee of 1819, were of this most pregnant instances; and he most sincerely wished that, without any committee at all, his majesty's ministers had come to the determination of leaving Scotland in. quiet, till they had ascertained how their new system had operated in England. It was quite evident, that if gold were to be supplied to take the place of paper, every extension of surface was increase of difficulty, and increase of the pressure on England, from whence the gold must be drawn, as well as on Scotland. In the present situation of Ireland, there could certainly be no wisdom in adding to embarrassment there; and he could conceive no reason whatever for enforcing simultaneously this uniformity of system, whether ultimately desirable or not. It ought to be remembered, that Scotland had gone on, for more than a century, under its present banking system, whilst England had a specie circulation; and no inconvenience had ever been known to arise to either country from that diversity of custom. Something of the same nature had taken place here. The mere introduction of a golden circulation into the districts surrounding the metropolis had occasioned so great a pressure, that the small notes had been continued to the country; and from this difference of circulation, he had never heard that any practical inconvenience had arisen. In fact, the Scotch system of paper credits, dangerous in itself, in his opinion in the extreme, and of paper currency to meet them, had so interwoven itself with every transaction between man and man, in that country, that he must repeat, in his view, it was, at the present moment, of the greatest possible imprudence to agitate the question, before the experiment had been fairly brought to issue in this country, in the first instance.

Mr. Keith Douglas

said, that parliament ought to show some deference for the petitions which were coming up from all parts of Scotland, in opposition to the proposed alteration of their currency. During the whole period of the Scotch banking system nothing had occurred to warrant the proposed interference in their concerns. The state of things which had arisen in England, and called for a change, sprung from the late panic, occasioned in part by the insolvency of some of the smaller bankers: but not so in Scotland, where the people were perfectly satisfied with the solvency of their bankers, and the accommodation which they afforded. In England, the evil to be corrected was, the too great extent of the small bank-note system; and the remedy to be applied was, the suppression of all notes under 5l. leaving their place to be supplied by gold. But then, it was said, that for uniformity's sake, the same system should be extended to Ireland and Scotland, and particularly to the latter; for if the small-note circulation were still upheld there, it must necessarily interfere with, and injuriously affect, the British gold currency, by being mixed up with it. Now, he denied that this could ever take place in the manner apprehended; for nobody in England would countenance the circulation of Scottish notes in preference to their own gold coin. The hon. member then entered into a brief history of the Scotch banking system since its establishment; and pointed out, that as no inconvenience whatever had been found in its practical operation, it was most unwise to meddle with it. As to the appointment of tile proposed committee, feeling the case of Scotland to be so strong, he should riot oppose it. All he hoped was, that the proceedings of the committee would be so directed as to avoid mischief. Care ought to be taken that, while they were investigating the system, no discredit was cast upon individual institutions. The subject in that point of view, Was one of extreme delicacy.

Captain Gordon

contended, that no good could arise from the appointment of a committee. The very circumstance of inquiry led to the presumption that there was something unsound in the Scotch System of banking. But, that that was not the case, he had the authority of the first lord of the Treasury and of the chancellor of the Exchequer, who now proposed the inquiry. They said in their communications with the Bank—"We have a further proof of the truth of what has been advanced, in the experience of Scotland, which escaped all the convulsions which have occurred in the money-market of England for the last thirty-five years, though Scotland, for the whole of that time, has had a circulation of one-pound notes, and the small pecuniary transactions of that part of the United Kingdom have been carried on exclu- sively by means of such notes;" and, in another part of the same communication—"The failures which have occurred in England, unaccompanied as they have been by the same occurrences in Scotland, tend to prove that there must have been an unsolid and delusive system of banking in one part of Great Britain, and a solid and substantial one in the other." And again—"In Scotland there are not more than thirty Banks, and these Banks have stood firm amidst all the convulsions in the money-market in England, and amid all the distresses to which the manufacturing and agricultural interests in Scotland, as well as in England, have occasionally been subject. Banks of this description must necessarily be conducted upon the general understood and approved principles of banking." With such authority for the excellence of the system, what necessity was there for inquiry? Were ministers persuaded that they had then formed an erroneous opinion? Had any new light broke in upon them since they penned these sentences? If not, what was it that they wished to inquire into? If it was into the actual currency of Scotland, every Scotch member could inform them, that it was paper. The only question, therefore, was, whether it was desirable to alter it? And that wag one of great magnitude. Scotland had prospered under the present system, and was prospering; and he thought that, with the unanimous voice of the country against any interference with it, it must be considered a strong measure. He regretted that the question had been agitated at all. It had already produced a considerable degree of distrust and want of confidence in the public mind, and would produce still more, if persevered in.

Mr. W. Dundas

thought, that government deserved thanks for its conduct on this occasion. He was astonished at the objections brought forward by some horn members to a committee of inquiry. That inquiry was not, whether the banking establishments in Scotland were in a solvent condition or conducted on sound principles, but whether the withdrawal of the one-pound notes would be hurtful to its interests. The members from the northern part of the empire thought that no evil could result from circulating them; but would others take their mere words for the fact? He looked with attachment to a system which had prevailed for upwards of a hundred years, and under which his country had prospered; but if that system were weak, he was willing to surrender it for a better. Feeling his case strong, he courted the fullest investigation. To dread it was a sign of weakness.

Mr. Home Drummond

was glad the chancellor of the Exchequer had so candidly admitted the existence of the feeling on this subject, which, be it right or wrong, most certainly did prevail in Scotland, and which, notwithstanding what had been said to the contrary, was so universal, and so strong among persons of all opinions on other subjects, that he did not think he could have been persuaded, in opposition to that feeling, to vote for any measure at present to alter the system of currency now established in Scotland, even if his understanding had been convinced of the propriety of the change; while it is admitted on all hands, that no paramount necessity calls for any immediate interference. To a committee of inquiry, however, he could have no objection, which could tend only to bring out the truth; and he was sure the Scotch banks had no reason to shrink from any investigation of their system. This was not a fit time to enter into details—that would be the business of the committee. But he could not allow this opportunity to pass, without observing, that he did not join in the complaints of which, of late, so much had been heard, as to the grievances of Scotland. He was much more inclined to boast of the advantages she enjoys. He desired for himself, and he believed he might say on the part of every Scotch member of that House, to disclaim all feelings of jealousy of English influence or English interference, [hear, hear]. He had never entertained such a feeling at any time, and never felt less inclined to entertain it, than at present. If we consider what Scotland was before the Union, distracted and impoverished by civil broils and dissensions, and borne down by oppression of every form and degree, and trace its history onwards to the present time, instead of a catalogue of grievances arising from her connection with England, we find a long catalogue of benefits and blessings, to which no Scotchman, who allows himself to think coolly on the subject, can look back with any other feelings than those of unmingled gratitude and respect for the wisdom and the bounty of the British parliament.

Mr. Maurice Fitzgerald

said, he had not, on the one hand, been insensible to the disadvantages of the proposed alteration of the law with respect to Ireland, at the same time that he did not participate in that spirit of resistance, or rather of rebellion, which had been raised against it from certain quarters. He did not mean rebellion in the usual sense; he meant a rebellion of paper against gold, which had broken out in Scotland [a laugh]. At all events, if not rebellion, there was certainly a very marked seditious spirit manifested in the appeal that was made to to the Scotch to oppose the alteration of the law. But, he owned he had not looked with any degree of apprehension to this expression of feeling, principally because he had no great faith in the permanency of the resistance that would be made to it—an opinion which was justified by the returning symptoms of loyalty that began to exhibit themselves in the northern part of the kingdom. He was glad, however, to be able to vindicate his countrymen from any participation in the resistance which had been carried to such an extent in other quarters, notwithstanding the inflammatory suggestions which had been offered to their minds. This forbearance, he owned, might be attributable, not so much to the steady principle of loyalty, as to the blundering disposition of his countrymen; who, as that ancient historian said of them, "never rebelled at the right time" [a laugh]. The paper of England and Ireland was different. In the former, it was vitiated from various causes, and that vitiation had led to remedial measures: in the latter, the same difficulties had occurred several years ago; and the consequence was, that the circulation of the country was now restricted, and inadequate to meet the necessities of the country. Of all the Banks which existed at that time, only nine remained, and of these, few issued their own notes. The paper in circulation was that of the bank of Ireland, which was safe and unobjectionable, and therefore, in so far as the question related to the circulation of Ireland, no one could deny that it was good. Some new banks had lately been established, and they were constituted on the same principles as those of Scotland. He was not, however, an advocate for an excessive circulation of paper. He was no admirer of the principles of those modern philosophers who sat around him. He abhorred and detested them. He did not object to the principle of a gold currency, but he did not see that there was any necessity for applying it to Scotland. The case of Ireland in 1799 had been alluded to; and he would say, that she had been greatly benefited by the conduct of her parliament in that instance; but in 1804, their act was overturned in a wanton manner, and another substituted, which permitted the re-issue of small notes—a re-issue totally uncalled for, except by those who were interested in the circulation of small paper. He was then in office, and was the only individual who had stood up in opposition to it. He had then stated, that in Ireland, a bank had been set up by an apothecary and a captain of dragoons. What might have been the capital of the apothecary he knew not; but the sale of the captain's commission was all that he could muster on the occasion. The consequence was, that in two years afterwards he saw an advertisement calling in their notes to the amount of 490,000l. The mischief produced by their failure, was incalculable. But though his early feelings were in favour of a metallic currency, he must consider well, before he gave his sanction to the intended measure, whether it would be possible to bring it into action without deranging the commercial system. Those who thought that the paper currency of Ireland and Scotland could be replaced by gold, without producing much inconvenience, were greatly deceived.

Sir C. Forbes

considered the motion unnecessary and uncalled for. The system as it existed was quite satisfactory. The hon. member for Montrose had alluded to several publications on the subject, but he considered it below the dignity of the House to spend half hours and hours in discussing the merits of anonymous publications, whether signed by Malachi Malagrowther, or any other fictitious name. He had read none of them, and therefore could not be swayed by any thing the authors advanced. He would not, however, vote against the motion. He approved so highly of the plain, downright, John Bull statements of the chancellor of the Exchequer on most occasions, that he would not now oppose him, though he disagreed with him as to the necessity of the measure.

Mr. Alderman Wood

considered that there was no necessity for inquiry with regard to Scotland. If the hon. baronet would change his sentiment, and vote with him, he would divide the House on the question. If an inquiry must be instituted, let it embrace the whole kingdom.

Mr. T. Wilson

agreed, that where the system was admitted to be pure, it was unnecessary to institute an inquiry. It was not usual to call a man to the bar of the House for the purpose of inquiring into his good conduct. The argument of good conduct was the worst that could be made in support of the motion. The necessity of inquiry implied that something wrong was apprehended. Much injury had already been done to the English banks by the measures of the government; and the inquiry might inflict the same on the Scotch. It was, if he might use so homely an illustration, tantamount to giving a dog a bad name.

The motion was agreed to.