§ The House went into Committee on the Bank Charter Acts.
having put the first Resolution, "That it was the opinion of the Committee, that it was expedient to continue to the Bank of England for a limited period the enjoyment of certain privileges now vested by law in that Corporation, subject to provisions hereafter to be made,"
said, he would not occupy the time of the House with any preliminary observations. He would proceed at once to state the object of his Motion, and to explain the grounds upon which he ventured to hope that the House might be induced to sanction the proposition which a sense of the vast interest at issue impelled him to submit to its consideration. In moving, that the consideration of this question be postponed until the next Session, his object was delay for the purpose of obtaining sufficient time for the mature and deliberate consideration of this most important question. He ventured to demand this delay upon grounds established by the Report of the Committee appointed last year to inquire into the expediency of renewing the Charter of the Bank of England. That Report stated, in the most distinct and unambiguous manner, that further inquiry and more ample information were necessary, before Parliament proceeded to the discussion of this most important question. The Report contained this remarkable sentence—"The period of the Session at which the Committee commenced their labours, the importance and extent of the subject, and the approaching close of the Session, will sufficiently account to the House for the limited progress of the inquiry, and for the incompleteness of the materials which have been collected for the purpose of forming an opinion." Now, the noble Lord (the Chancellor of the Exchequer) was Chairman of the Bank Committee, and as such, if he was not the father, he was, at least the sponsor of the Report, the Ian- 1307 guage of which was the language of the noble Lord; and therefore he could not but anticipate the support of the noble Lord on the Motion with which he should conclude. The noble Lord, in the Report of the Committee of which he was Chairman, had stated it as his deliberate conviction, that sufficient information had not been laid before the House for the purpose of forming an opinion; and would be then refuse his assent to a Motion having for its object the prosecution of that fuller inquiry, and the acquisition of that ampler knowledge, which he himself had pronounced to be essential? The noble Lord would not treat that House so lightly, or so stultify the Commons of England, by calling on them to decide without the materials for forming an opinion. Were a Committee appointed up stairs upon a turnpike trust or parish vestry, and to report that they were unable to complete their inquiry or to collect materials for forming an opinion, would the Chairman of such Committee venture to call upon the House to come to a decision even upon the most trivial and unimportant private Bill? Would, then, his Majesty's Ministers pursue such a course with respect to the renewal of the Charter of the Bank of England? Was it conceivable that they would call upon the House of Commons to decide, without the materials for forming an opinion, a question of the highest national importance? Incomplete and inadequate as was the Report of the Bank Charter Committee of last year, it was, nevertheless, highly valuable and important. It gave the House no information with respect to that which ought to be done, but it supplied the most ample information respecting that which ought not to be done. The evidence taken before that Committee contained the fullest proof and the most conclusive demonstration, that the control of the circulating medium ought no longer to be intrusted to the Bank of England. The competence of the witnesses who gave this testimony could not be questioned. These witnesses were the Governor and Directors of the Bank of England, who were examined before the Secret Committee of lust year, and who freely acknowledged that in I796, 1812, and 1819, their predecessors in office were ignorant of the elementary principles of money and currency, and caused, by their errors and mismanagement, ruinous fluctuations in the value of property. The present Directors, however, claimed for themselves the pos- 1308 session of superior wisdom; and seemed to assert, that subsequent to the great panic of 1825–26, they had seen cause to correct the errors of their former ways; and that, acting under the protection of science, and armed with the power of knowledge, they would now, through all future time, avert from the country calamities similar to those which the mismanagement of their predecessors had created. In examining the conduct of the Bank Directors with a view to ascertain their competence to regulate the circulation of the country, he would give them all the advantage of the change in the system of management for which they claimed credit. He would deal by them with perfect fairness, and would not travel back to visit upon the Bank the previous errors, before the new system of management had commenced. He would judge it by the conduct pursued subsequently to 1827, the period at which the Directors professed to have corrected the acknowledged errors of their former ways, and when the new system of management was brought into full operation. In order to determine whether the Bank of England, under its improved management, was competent to regulate the circulating medium of the country, it would be necessary to ascertain, in the first place, what were the actual effects produced upon the currency by the new system of management; and to examine, in the second place, into the soundness of the principles upon which this new system was founded. Now, with respect to the actual effects produced upon the currency, if hon. Members would be at the trouble of referring to the appendix of the Report, they would find that since the adoption of the new system the fluctuations in the currency had been quite as great as they were before its adoption. It would be seen by the appendix. No. 83, that on the 6th of January, 1827, the circulation was 18,300,000l., and that im the 21st of July following, it was extended to 23,800,000l., being an increase of 5,500,000l. This expansion of the currency was speedily followed by a more than corresponding contraction, and in December, 1831, the circulation fell to 16,700,000l. Thus it was proved, by their own documents, that the improved system recently adopted by the Directors had not the practical effect of giving steadiness to the currency. Upon their own showing, the amount of the circulation in July, 1827, exceeded by nearly fifty per cent, its amount in December, 1831; being a greater 1309 fluctuation than any which took place during the same period of four years pre ceding the 1821 panic. The lowest amount of circulation, from July, 1821, to December, 1825, was 16,000,000l., and the highest 23,300,000l., being a fluctuation something less than that which had been produced under the improved system of management. So much for the practical effects of that improved system, the adoption of which, by the Directors of the Bank of England, was deemed sufficient to obliterate the recollection of all former errors, and to atone for all the calamities of which those errors were the parents. The new system, as explained by Mr. Horsley Palmer, the Governor of the Bank, was this:—When the currency was full, as indicated by the exchanges being at par, the treasure of the Bank in bullion and coin was kept at one-third of its liabilities, including circulation and deposits; and from the level of fulness, as indicated by the foreign exchanges being at par, the currency is allowed to expand or to contract, according as the exchanges may become favourable or unfavourable. To explain this system by an example—if, when the exchanges were at par, the circulation issued by the Bank be 20,000,000l., and its deposits 10,000,000l., then, the whole of the liabilities being 30,000,000l., the Bank will provide itself with treasure to the amount of 10,000,000l. In this state of things, should a favourable exchange throw into the Bank an additional supply of gold, to the amount of 5,000,000l., the Bank, in paying for this bullion, would issue 5,000,000l. ol notes, and the circulation would be increased, from 20,000,000l. to 25,000,000l. On the other hand, were the exchanges to become unfavourable and to reduce the treasure of the Bank from 10,000,000l. to 5,000,000l., the Bank would not re-issue the 5,000,000l. returned upon it, in payment of the gold withdrawn, and the circulation would be reduced from 20,000,000l. to 15,000,000l. This was the new system of the Bank Directors, and they had adopted it, as stated by Mr. Ward, in order that they might not alter the King's coin, and in order to preserve the paper currency from any fluctuations greater than those which the action of the foreign exchanges would occasion, were the currency purely metallic. This was, without doubt, a good and a legitimate object, but the evil was, that under the system of the Bank Directors, its attainment was impossible. The working of thier system was directly the reverse of that which the 1310 intended. Its necessary effect would be to occasion fluctuations in the currency, greater to an indefinite extent than those which the action of the foreign exchanges would create, were the currency wholly metallic. It was obvious that were the currency wholly metallic, no fluctuations, no deep vibrations in the amount of the currency, could take place, while the foreign exchanges remained at par. But, under the vaunted system of the Bank Directors, calamitous fluctuations might occur while the exchangers remained at par, and while there was no drain of gold from their coffers. The Bank Directors had created a new element of fluctuation, and according to their improved system of management, the circulation must vibrate with every variation in the aggregate amount of those public and private deposits over which the Directors could have no control. But this was not the worst part of the improved system. Its rule to keep its securities level, to let the currency expand and contract with the flowing and ebbing of the foreign exchanges, regarding the period when the exchanges are at par, and when gold is neither drawn out nor paid in, as the level at which the reserve of bullion is to be equal to one-third of the liabilities. This being the mode on which the Bank regulated its issues, let it be sup posed, that the exchanges being at par, the Bank had 10,000,000l." of gold, its liabilities being 30,000,000l., nearly 20,000,000l. in notes' issued, and 10,000,000l. in deposits, Under these circumstances, let a deficient harvest or other cause turn the exchanges against them, and reduce the treasure of the Bank from 10,000,000l. to 5,000,000l., and then, in the first instance, the circulation would be reduced by 5,000,000l., as it would have been had the currency been wholly metallic. Now, if no circumstance occurred to render the exchanges again favourable, if the state of the cross, or any increased demand for imports, or diminished demand for exports, should prevent the influx of gold, and leave the treasure in the Bank, stationary at 5,000,000l., while the exchange was at par, then, in conformity with the principle upon which their issues were regulated, the Directors would have to reduce their liabilities from 30,000 000l. to 15,000,000l. But, as that portion of their liabilities—namely, deposits, over which the Directors have no control amounts to 10,000,000l., the circulation, were the principle to be strictly adhered to, must be 1311 reduced to 5,000,000l. Had the exchanges, instead of being unfavourable, been favourable, and increased the treasure in the Bank from 10,000,000l. to 15,000,000l., and then returned to par, the liabilities of the Bank, under the new system of management, would have increased to 45,000,000l. and should the deposits have continued stationary at 10,000,000l., the circulation would be increased from 20,000,000l. to 35,000,000l. Thus, if the improved principles of the Bank were to be adhered to, the flow and ebb of the exchanges above or below the central level would cause the circulation to vibrate between the deep extremes of 5,000,000l. and 35,000,000l. But he had not yet exhibited in their full absurdity, the improved principles of circulation discovered by the Bank Directors. It appeared by the minutes of evidence, (question 2,086), that Mr. Ward, the Bank Director, was asked, "You have stated, that in case you foresaw an unfavourable harvest, or other circumstance that was likely to turn the exchanges against the country, you would anticipate that, by acting upon the currency; do you think it right for the Bank to act upon the currency of the country, independently of the action of the public on the Bank?" Mr. Ward answered, "Although the exchanges might be at the present moment favourable, I should anticipate their becoming unfavourable, under the influence of a bad harvest, and I should prepare accordingly." He is then asked, "In what manner would you prepare.?" And he answers, "By shortening the amount of currency." The House would perceive that this was not quite consistent with the former answer of Mr. Ward, that "I do not presume to alter the King's coin, but always endeavour to bring the paper, as nearly as possible, to what the currency would be if no bank existed, and the currency were all gold." Now, if the currency were all gold, an unfavourable harvest, turning the exchanges against us, and abstracting specie, would, no doubt, inflict upon the country the evil of deficient circulation; but then, as gold went out, foreign corn would come in, and in suffering the evil of deficient circulation, the country would escape the still greater evil of deficient food. But not so under the improved management of the Bank. In order to avert an expected drain upon its coffers, the currency is contracted by anticipation, and the consequent fall of prices, which prevents the exportation of gold, prevents also the importation of 1312 corn. The evil of deficient circulation was inflicted, but the greater evil of deficient food was not thereby averted. The report, and the evidence furnished irresistible proof, that the power of regulating the currency ought no longer to be intrusted to the Bank of England. The new system of management adopted by the Directors, after the experience of the panic of 1825 and 1826, aggravated the evils it was intended to remove. The new mode of management was as vicious in theory, as it was pernicious in practice. The principle of anticipating the action of the exchanges upon the currency, by narrowing the circulation as often as a deficient harvest was foreseen, was a device for adding dearth to famine, and, as he would venture to affirm, at once the most erroneous and the most pernicious principle which it was possible for a bank of issue to adopt. Would his Majesty's Ministers ask, or the House consent, to renew the exclusive privileges of the Bank of England, and place the value of all the property in the kingdom at the absolute disposal of an irresponsible body, who had proved themselves, as well by their practice as by their theories, to be utterly ignorant of the principles by which a bank of issue should be regulated? He must deny, that the Resolutions proposed by the noble Lord opposite would have the effect of preventing the evils which he had pointed out as resulting from a renewal of the charter, or counteract the evils which the existence of that monopoly had hitherto occasioned. He was inclined to think, that making Bank notes a legal tender, except at the place of issue, would be good, provided the main bank of issue were regulated upon just principles. But in what way could the adoption of these proposals of the noble Lord correct the practical errors which were committed by the irresponsible body by whom the affairs of the Bank of England were conducted? He thought he should be able to show, to the satisfaction of the House, that upon the principles according to which the Bank of England was conducted, the first effort of rendering their paper a legal tender would be, not an expansion, but a contraction of the currency. The obvious, he believed he might say the avowed, tendency of the plan of the noble Lord was to displace the paper of the country banks, and to give to the Bank of England and its branches, the whole circulation of the country. That would greatly increase the liabilities of the Bank; 1313 and as its reserve of treasure, when the exchanges were at par, must be equal to one-third of the liabilities, its gold must be increased in a corresponding degree. Now, how was the increased supply of gold to be obtained? No considerable portion of it could be drawn from the gold coin in circulation; because, small notes not being permitted without the gold coin, the business of the country could not be carried on. How, then, he would again ask, was the increased supply of gold required by the Bank to be obtained? The Directors, in their evidence, told them how. Mr. Horsley Palmer states, in reply to Question 809—"The Bank has only the means of obtaining an increased quantity of gold, if it be deemed desirable, by contracting its issues, thereby creating a scarcity of money, and consequent fall of prices." Then, let not those who deemed that an expansion of the currency would give a stimulus to industry, fall into the delusion, that the plan of the Government for making Bank of England paper a legal tender would have the effect of increasing the circulation. It would produce a contrary effect, and narrow the circulation, for the increase of Bank of England paper would be accompanied by a corresponding decrease of country bank paper, and the general aggregate result would be, not an expansion, but a contraction of the currency. The evil would not rest here. As the country bank paper was driven out of circulation, country banking would become less profitable; and in the smaller country towns and agricultural districts, the business of private banking, ceasing to be profitable, would be abandoned altogether. The mischief occasioned by the loss of credit, would exceed that produced by the contraction of the circulation. When a banker opened credit accounts with the farmers and dealers in his neighbourhood, the transfer of those credits, by means of bills and checks, might have the same effect as making payments in money or bank-notes; and thus it was, that cash credits in the books of bankers might form a part, and even the larger part of the circulating medium of the country. The plan of the Government would not only narrow the aggregate amount of Bank paper in circulation, but in the smaller towns and rural districts would destroy altogether, and without a substitute, that accommodation and credit which supply the place of money or currency, and form, in reality, a most important portion of the circulating medium of the country. He entertained 1314 the most serious apprehensions lest that part of the Government scheme which went to extend the operations of the Bank of England, and to supersede the functions of the country banks, should inflict upon all the great interests of the country, and particularly upon agriculture, a paralysis more severe and more enduring than that; which followed the resumption of cash payments. He ventured to hope, that he had now succeeded in establishing sufficient grounds for the motion with which he should conclude. He could not believe that the plan proposed for the renewal of the Bank Charter was one which the House of Commons would be induced to sanction. He could not believe that it was one in which, upon reflection. Ministers themselves would wish to persevere. He had a strong conviction, derived from much reflection on the subject, that the adoption of the measures proposed by Government for continuing and increasing the exclusive privileges of the Bank of England would inflict upon the country a periodical recurrence in aggravated forms of revulsions of trade, and of panics in the money-market, while, by the adoption of sound principles of banking and of currency, all these evils might be avoided, and very important advantages secured. At all events, he implored the House, not, on this most vital question, to legislate in the dark. He was convinced, that if the House should now consent to commit to this irresponsible body, for ten years, a trust which had been most unwisely conferred on them, the country would be visited with a recurrence of former distress, panics, and fluctuations in the currency. He should, therefore, move, "That the consideration of the question of the renewal of the Bank of England Charter should be postponed until the next Session of Parliament."
Mr. Poulett Scrape
seconded the Amendment. He said, that the question was one of vital importance to the whole community. It was universally admitted, that the banking system of the country was very defective; and surely when the Bank Charter was about to be renewed, was the time for inquiring into and remedying those defects. The Bank of England, though not the only, was the chief source of the circulation of the country. Five-sixths of the notes in circulation were Bank of England notes; and the whole amount of gold in circulation was supplied by the Bank of England. There could be no doubt, therefore, that the Bank of England 1315 had a complete controlling power over the whole circulation. There could be no question, therefore, that this controlling power must he blamed for those alarming fluctuations which had inflicted such great evil in this country dining the last twenty years. He would not enter into a history of those fluctuations; he would merely ask, were those evils the necessary consequence of every system of currency, or only of our peculiar system? He believed, that they were not inherent in all systems of currency, but only in our system. Those fluctuations had at one tune defrauded creditors, and at another plunged debtors in irretrievable ruin. He would notice a fallacy of those who supported the Bank: they compared it to the Mint, and concluded, because a monopoly in the one case was advantageous, that it must he advantageous in the other. But the two systems had no similarity. The one was a public office, the officers were responsible to the public, and paid by the public; the other was a private concern, quite irresponsible to any person but its proprietors. The public had no hold of the Bank of England. He knew, that it was said, that the Bunk Directors were men of honour and integrity, and it was precisely because they were men of honour and integrity that he said they were not responsible to the public. The Bank was altogether a private establishment, as was proved by the evidence and statements of the Directors themselves; the Directors being elected by the proprietors, and responsible to them; and he contended on this ground, that the Bank Directors, as men of honour and integrity, would attend to the interests of the proprietors, and not to the interests of the public. The hon. Member next referred to persons, who had been opponents of the Bank, and had been, he knew not how, miraculously converted, and who at the eleventh hour had become the advocates of the Bank. The hon. Gentleman also referred to the authority of Mr. Richards, to show, that that Gentleman spoke of the Bank of England as a public body; but it was public only when it suited its purposes to be so, and private when it wanted to refuse to have its accounts investigated. He did not deny the moderation of the Bank of England, inasmuch as it had only nearly ruined all credit, when it might have annihilated it. The Bank had only two or three times brought the country to the brink of ruin, when it had the power of irretrievably ruining it. So far he admitted its moderation. Its 1316 principles were those of its own interest, and they could only be prosecuted by a disregard of the public welfare. Its power was continually directed to alter prices, and its interest was frequently promoted by limiting the currency, and lowering the prices in all the markets of the country. Its power was infinitely greater than that possessed by the Legislature, and far exceeded in its extent and operation that power with which public opinion ever endowed any government. Over the Bank of England, which carried on its operations in silence and secresy, even public opinion had no control. The publication of its issues every three months, and then only the average of them, would be no control whatever. That the Government should, in this age, in the year 1833, continue this monopoly in the hands of a private company, was a most flagrant, a most crying public injury, a solecism in Government; such as was nowhere else to be found. Nothing could be 80 monstrous as to give into the hands of a private company the monopoly of all the money of the country—the indispensable means of carrying on all the trade of the country. Money was the vital element of our commerce, as necessary to that as air was to life; and what would be said if a monopoly of air was to be given to any body of irresponsible men? If the past practice of the Bank was adverse to this theory, he would care nothing for the theory; but, in fact, the practice of the Bank had been most pernicious to the country. If it gave us a safe, sound, and sufficient currency, he would disregard all theory. If the currency had been at all times equal in value, and invaluable in kind, he should be satisfied. But it was impossible to look back at the history of the country for the last fifty years, and not be convinced, that we had neither a safe, a sound, nor at all times a sufficient currency. Could that currency be called safe and sound which had been issued by a body which had been in a state of bankruptcy, and which was obliged to have recourse to the State to make the people take the paper of the bankrupt establishment? On more than one occasion, subsequent to the Bank Restriction Act, that establishment had again been on the verge of bankruptcy. That the currency was not sufficient was proved by the events of the last few years, when prices had been reduced twenty-five per cent, and industry had been paralyzed by the obstacles thrown in its way. He would not go into the conduct of the Bank 1317 in 1783 and 1793, though at both periods there were convulsions occasioned by the conduct of the Bank. In 1793, 100 country bankers stopped payment, although there were at that time no one-pound notes in existence. In 1797, the nation was on the verge of ruin, brought on by the conduct of the Bank, and it was only saved by the Legislature making the people take the notes of the bankrupt establishment. The Bank of England had made immense profits by its connexion with the public, and it might have been expected that the Bank should have contributed something to restore that sound state of the currency from which, for its own purposes, it had departed. What sacrifices had it made to return from paper to the metallic standard. He saw no sacrifices whatever. It had acted with a precipitancy uncalled for—it had acted in silence and secrecy to secure its own advantages—and it had inflicted immense evils on the country. In 1814, at the period when the treaty of peace was signed, and when the Bank was under the obligation to resume cash payments in six months, what was its conduct? When three months had elapsed after that event, what was the amount of bullion in the coffers of the Bank? That was known by the examination of the Bank Directors before the Committee of last year, and the whole amount of bullion in its coffers at that period was only 2,000,000l., while its liabilities amounted to 10,000,000l., and its notes in circulation amounted to 28,000,000l. Yet that was within three months of the period when it was bound to resume cash payments. How did it then proceed? Why, it went to the Government, and the Government told the Bank it need not trouble itself immediately, that time would be allowed it to make its preparations. How did it make those preparations? They knew, from the evidence of Mr. Horsley Palmer, that the Bank had no other means of obtaining a supply of gold than to restrict the currency and reduce the price of commodities. The Bank Directors avowed that they had restricted their issues to obtain gold, because they had no other means of getting it unless they chose to give 5l. 2s. per ounce for it, and afterwards circulate it at 3l. 17s. 10d. The Bank then had effected a great change in the currency, had lowered prices, and had in consequence obtained gold. It had openly and directly avowed, that it had reduced prices from twenty-five to thirty per cent for the purpose of getting gold, and 1318 making preparations for resuming cash payments. In 1818, the nation was prepared for the resumption of cash payments—we had gone through the preparatory stage of suffering, and a return to cash payments would then have been most advantageous. But, instead of doing that, the Bank obtained a Restriction Act for two years longer, whilst at the same time their coffers were filled with gold, of which gold they made no small profit. At this time prices were very high—the exchanges were against us, gold was going out of the country, and the circulation daily contracting. In 1822, however, the Bank worked up their bullion again to 11,000,000l.; but what had taken place in the interim whilst the gold currency was so materially diminished? Did the Bank meet the defalcation as they ought to have done, by issuing paper to supply the deficiency? On the contrary, they actually contracted the paper circulation at least six millions and a-half. So much for the manner in which the Bank had regulated the currency of the country. After thus starving the circulation, their subsequent relaxation was productive of most injurious effects, and led to those wild and extravagant speculations which so nearly destroyed, and so materially affected the commercial prosperity of this country. Not only did the Bank issue a superabundance of notes, but they lent money in all ways, and to almost all applicants; and not only did they do this, but continued this improvident and injudicious course full twelve months after the exchanges were against us. The crash of 1825 was undoubtedly occasioned by the indefensible conduct of the Bank of England. Taking into consideration the circumstances which he detailed, he should most certainly object to the renewal of the Bank Charter monopoly on the terms proposed, and second the Motion of the hon. and gallant Member. He was indeed much surprised that his Majesty's Government, who had so long opposed monopolies, and advocated the principles of free trade, should now come forward to support so flagrant a monopoly. Lord Liverpool's Government would never have thought of such a thing. Lord Liverpool said, that he would as soon have thought of restoring the Saxon heptarchy as of renewing the Bank Charter. The letter signed by that noble Lord and the present Earl of Ripon, then the right hon. Frederick John Robinson, expressed the most decided hostility to such a renewal. The hon. Member proceeded to quote the opinions of 1319 Lord Liverpool, and adverted to the pamphlets of the right hon. Gentleman opposite (Sir James Graham), when he advocated the propriety of destroying what he termed a fatal connexion between the Government and a single chartered company—a connexion which facilitated the prodigality of Ministers, and invested an irresponsible body with the most delicate and important functions of the State. Another right hon. Gentleman, too, (Mr. Ellice) had maintained similar opinions, and had declared that the conduct of the Bank of England was directly opposed to the commercial interests of the country, and expressed a hope that the exclusive Charter of the Bank would never again he granted. He did not see the right hon. Gentleman now in his seat, but he should be most anxious to hear from right hon. Gentlemen opposite the reasons for their very extraordinary conversion. The Lord Chancellor, when in that House, had also maintained similar opinions. In the debate on the Address in 1826, that noble Lord deprecated confiding so great a power to twenty-four men—a power which exercised the most tremendous influence not merely over the money market, but over the fortunes of every family in the kingdom.* The right hon. Baronet (Sir James Graham) had said, in an admirable pamphlet—"Let us destroy the fatal connexion between Government, and that fatally-chartered Bank, which facilitates the prodigality of Ministers, and invests an irresponsible body with unlimited power." The opinions of the whole body of Whigs were to the same effect. All the great men of that party—Horner, Tierney, Macintosh, Grenville, and even others, Tories as well as Whigs—and all the great writers on Political Economy, supported the same principle. Looking, therefore, to the manner in which the Bank had hitherto exercised the trust confided to them, at the general condemnation which their conduct had met with, and the declared opinions, not only of his Majesty's present Ministers, but of men of all parties, he thought he was perfectly justified in the conclusion to which he had come. They had now a chance of escaping from the system which had so long oppressed them, and he would as soon think of reverting to it as of restoring the feudal system. Having once got his head from the lion's mouth, he should hesitate long before he* See Hansard xiv, (new series) p 39.1320 voluntarily placed himself in the same perilous position. The hon. Gentleman concluded by thanking the Committee for the attention which they had paid him, and declaring his intention to second the Amendment of the gallant Colonel.
§ Mr. Gisborne
said, that the very great interest he felt, no doubt in common with the rest of the House, in the question under discussion, induced him to rise to deliver his sentiments upon it. The question appeared to him to be simply this—whether the parties who had for so long a period managed the pecuniary concerns of the country were to continue to do so, or whether each individual having money transactions with another might conduct them according to his own wish, independent of the control of the Legislature? The hon. Gentleman who had just sat down had referred to a document which might with propriety be called an orthodox confession of faith, since it contained, like another confession, thirty-nine articles, and which had emanated from Fife-house, signed by Lord Liverpool and John Frederick Robinson. This document condemned the monopoly of the Bank; and it was not a little curious that a system stigmatized by Lord Liverpool's Administration as improper, on account of its exclusive privileges, should have been introduced for the purpose of consolidating it in the first Reformed House of Commons. Lord Liverpool and his colleague had no powers of prophecy, they could not foresee that the Unreformed Parliament would become reformed; how, then, could they have been expected to foresee that a measure so much out of fashion in an Unreformed Parliament was likely to become so extremely fashionable in the first Reformed House of Commons? And upon what grounds were they proceeding to establish this monopoly? Why, the Committee of the House which took evidence on this subject had declared their opinion, that there were not sufficient data to enable them to come to a conclusion as to the expediency of the renewal of the Bank Charter. This, then, was not, in their estimation, the right time to decide upon that question. But see how various were the opinions which were entertained with respect to this very point. The noble Lord, the Chancellor of the Exchequer, not indeed in any speech delivered in that House, but in a public document, had declared his wish to supersede the whole of the country circulation, and to substitute for it the circulation of the Bank of England;—in other words, to 1321 annul by slow and wasting means, the whole body of that circulation, which he was not quite competent to dispense with at once. But was the matter to be disposed of in that way? Did it follow that what was clear to the noble Lord was also apparent to others? The noble Lord might think this just and politic, but it was very probable that other persons would doubt whether it was either just, politic, or magnanimous. With regard to the provisions as to country bankers, they were comparatively unimportant; but he thought, that by compelling them to render accounts, they would in some instances create a strong inducement to falsify their accounts. The Government now proposed to annihilate Joint Stock Banks of Issue, although in 1826 the Government and the Legislature invited them to establish themselves for the purposes of circulation. All the points to which he had adverted—points requiring the most mature consideration—proved the necessity of postponing the consideration of the measure till next Session. It would be said, that it would be injurious to the public interests to leave a question of this nature unsettled—that it would suspend all the transactions between man and man. This was mere talk; he did not believe that a single man would refrain from either buying or selling in consequence of the postponement of the measure. No doubt the Bank Directors were extremely anxious to have the question settled, particularly on the terms proposed by the noble Lord, and would, with becoming gravity, represent, that the public interest would materially suffer if it should be allowed to stand over till next Session. There were now eleven Bills on the paper introduced by Government respecting which the House had hitherto received no information, and yet the noble Lord pretended, that this particular moment was the only fitting time for considering the propriety of renewing the Bank Charter. It was a question which ought to be brought on at the commencement of the Session. He had abstained from entering into any discussion respecting the merits of the question itself, and had only spoken of such points as bore upon the question of postponement; he hoped that other speakers would imitate his example, and keep to the question of adjournment.
§ Lord Althorp
said, that the hon. Members who desired the postponement of the question had not adduced a single reason to show, that the House would at any other period be better prepared to enter upon its 1322 consideration than I hey were at that moment. The gallant officer who commenced the discussion had, to be sure, said, that the fact of the Committee of Secrecy not having come to a decided opinion upon the subject was a reason for postponing it. Now, at the commencement of the Session he stated, that he did not intend to move for the renewal of that Committee, and also that he would bring forward the question of the renewal of the Bank Charter. If, then, hon. Members thought, that the House was not in possession of sufficient information on the subject, they ought to have moved for the re-appointment of that Committee. Though the arguments of the hon. Members were ostensibly addressed to the postponement of the measure, it was evident that they wanted to get rid of it altogether, and the success of the Amendment would, in truth, have that effect. Although the hon. member for Derbyshire wished to contine all who followed him to the simple question of postponement, he must be allowed to notice one or two points which had been touched upon in the course of the discussion. The hon. and gallant Member had asserted, that there were variations subsequent to 1827 in the amount of notes in circulation, to the amount of fifty per cent; but taking the greatest number during that period, and comparing it with the least, it would be found, that the fluctuation did not exceed ten per cent. The hon. and gallant Member asserted, that the rule of the Bank for regulating its issues was, to have always bullion to the amount of one-third of its notes in circulation. This was not the fact; for Mr. Horsley Palmer had stated, that the principle of the Bank was, to allow the drain of money by the state of the foreign exchanges to operate precisely as if the currency were metallic; consequently the amount of notes in circulation did not depend upon the amount of bullion, but on the securities in the hands of the Bank. The great object which the Bank ought to have in view was, to keep the fluctuations in the circulating medium at a minimum, by allowing the exchanges to act naturally and gradually on the circulation. It could scarcely be expected, that a period should ever arrive when fluctuation could be totally prevented; but the great object was to make these fluctuations the least possible. The gallant Officer said, that the effect of making Bank-notes a legal tender would be to extinguish the country banks. He was unable to discover any connexion between 1323 cause and effect in this particular. He had been either misunderstood or misrepresented in what he stated on opening this question to the House, and in his communications with the Bank. Some hon. Members seemed to think, that he had declared his intention to annihilate the country banks. He certainly did express his own opinion as to what would be the best system of circulation, and admitted, that the tendency of his measure would be to put an end to country banks of issue, but he had never stated, that he meant to annihilate them at one blow. He did not think that the measure would have the effect of annihilating the country banks, and he should be very sorry if it should produce any such effect. It was somewhat remarkable, that while the Joint Stock Banks complained of the measure as too favourable to the country banks, the country banks complained as loudly of the undue advantages which it would confer upon the Joint Stock Banks. The hon. member for Stroud also complained of the Bank of England as a monopoly; but it must be proved that the monopoly was prejudicial. It appeared to him, after giving the subject his best consideration, and after listening to the results of the experience of practical men, that it would be very detrimental to establish acompetition of banks in London, instead of one bank of issue. It was certainly a monopoly, but it remained to be shown that it was an evil. The hon. member for Stroud objected to giving the power of regulating the circulation to a body which conducted its proceedings in secret, and without being subjected to public opinion. He (Lord Althorp) was of opinion, that it was desirable, to avoid that, and, therefore, he proposed, that the proceedings of the Bank should be public, so that it could no longer be considered a secret body, and would have all its proceedings subjected to the revision of public opinion. The hon. Member asserted, that the Bank Directors were not responsible to any but the Proprietors. That was, no doubt, true in law; but in the present state of the public mind, it could not be properly said, that any body of men were independent of public opinion. He thought, that public opinion would place any set of men who acted improperly in a situation which would not be desirable to any man who wished to be considered respectable. He was disposed to coincide with much of what had fallen from the hon. member for Stroud, but he ought to have made some distinction between the acts of the Bank 1324 itself, and those of the Government and Parliament. He had admitted, that in the Bank Restriction Act of 1797, as well as in the return to cash payments in 1818, the Government and the Parliament had as much to do as the Bank, and had at least as much right to share the blame of these measures. He did not think it necessary to follow the hon. Member through all his observations. Government had endeavoured to take the best precautions in its power, by adopting what they considered, as far as they could ascertain, to be the best security against improper practices: and by taking publicity as the basis of their plan, they thought they had secured the best check on the proceedings of the Bank. He might take this opportunity of announcing an alteration which he intended to make in a part of the plan which he had before propounded. He had proposed to exact from the country bankers an account, of the amount of their circulation; but upon inquiry he found, that it was impossible to depend upon obtaining a correct account because there were no means of checking it and testing its accuracy. If, therefore, he were to persist in that part of his plan, it would operate as a mere restriction on country bankers without being productive of any benefit to the public. After abandoning that part of the measure, therefore, the only remaining parts which would affect the country bankers was that which rendered it compulsory upon them to compound for the Stamp-duty, instead of leaving it optional as heretofore. By this arrangement the public would obtain information of the actual amount of notes in circulation. The hon. Member was completely misinformed as to the quantity of country bank notes in circulation. A deputation of bankers had stated to him, that it was not above 4,000,000l., but he (lord Althorp) had reason to believe, that the actual amount in circulation was from 10,000,000l. to 12,000,000l. He mentioned this in order to show the absurdity of reasoning upon that point, or founding any argument upon it, till the actual amount of the country bank circulation was known. This wan not, however, the real question for their consideration. The question which they ought to consider was, whether they should be in a better situation for going into the consideration of the subject at any future period than they were at present. He admitted, that some people might be apt to exaggerate the danger of delay, still all must allow that delay was, if possible. 1325 to be avoided; and all would allow, that it was impossible, considering the immense interests at stake, that those interests might not be injured by being hung up in suspense. Of such force was that argument considered by gentlemen connected with the banking affairs of the country, that one hon. Member had urged strongly upon him (Lord Althorp) even last Session the necessity of a speedy settlement of the question. It was then, however, utterly impossible to lay the plan of Government before the House; but he (Lord Althorp) thought, that should any delay now take place, after the Government plan had been promulgated, the consequences might be even worse than if the plan had not been promulgated at all. Hon. Members seemed to think, that the plan of government involved a breach of faith to the Joint Stock Banks; and they quoted the opinion of the Government, in 1826, in support of that statement, and to show that the Government of that day had given the greatest encouragement to Joint Stock Banks. That, however, was not the question at issue. The question for the consideration of the House was, whether it was advisable to lay such restrictions on the country banks as should be considered necessary to ensure the safety of the public. If those banks were not on a sound foundation, it was undoubtedly the duty of Government to take steps to place them on a better footing. He would, for instance, suppose that a Joint Stock Bank had a nominal capital of 1,500,000l., of which only 15,000l. were paid up; no one would say, that such a bank ought to be permitted by the Government; yet, under the present state of the law, such a link might exist. He, therefore, said, that it would be desirable to place such restrictions upon those banks as would place them on a sound and safe footing. It might, to be sure, be said, that people ought not, and would not, trust banks which were in such a situation; but it was well known, that the first warning generally given on such occasions was the bankruptcy of the bankers, and every one was aware how the affairs of the country were paralysed, and the credit of other bankers affected, by such failures. He therefore thought, that on every account it was desirable, that such restrictions should be placed on banks as would ensure the public safety. He hoped and trusted, that the House would not agree to the proposition of the hon. and gallant member for Bolton. They were then in as proper a situation to take the subject into con- 1326 sideration as they could be at any future period; and keeping of a question of such importance in suspense might prove injurious to the best interests of the country.
said, that the present question, for no other reason that he could imagine, except because it was exceedingly complicated and difficult to decide, was almost the only one of any importance which the noble Lord had not got rid of by alleging that it was impossible to consider it in the course of the present Session. In vain had hon. Members brought forward propositions of the deepest interest to the community—such, for instance, as the proposed repeal of the Corn-laws; the noble Lord's cry was constantly "Postponement." Now, however, at the close of the Session, he had found out that the public interest required this question should be disposed of without delay. Was it possible, he asked, at that advanced period of the Session, when Ministers themselves were exerting all their influence with their friends to postpone their motions for the present, to bestow upon this momentous question of the renewal of the Bank Charier that attention which all its importance, in reference to the monetary and commercial dealings of the country demanded? The question was of itself of a most complex character, but in addition, the noble Lord's scheme contained other topics of great practical importance, each of which would require as much time for a proper investigation as could then be possibly exteuded to the whole of his measure. There was, first, the important question of increasing the paper circulation of the Bank of England; there was next the still more important question of making the notes of the Bank of England a legal tender for the notes of country bankers. Then there was that part of the noble Lord's plan which avowedly went to extinguish, not, it was true, at one blow, but gradually, not only all our country banks, but those joint-stock banks which were established in 1826, on the faith, and, indeed, pressing solicitation, of the Government and the Legislature; and there was besides the question of the terms of the bargain which the noble Lord had made with the Bank of England on the part of the public—questions which, on the face of them, involved the most controversial and important principles of our monetary system, and thence involved the well-being of our manufacturing, agricultural, and commercial interests, which, as they stood in the noble Lord's Bill, in- 1327 volved conclusions contradictory to those doctrines of political economy to which Ministers were pledged; and which, moreover, involved the important questions of a fixed, a fluctuating, a high, or a depressed standard of value, not to take into account the question of the usury laws, a free trade, and a paper, versus a metallic currency; all which the noble Lord called upon that House—in truth a too obsequious one to his beckon—to dispose of, as if they were so many trifling details of some measure not affecting the great interests of the country. But would that House obey him? If it did, would the country be satisfied with its conduct? Let them consider the effect of making Bank of England notes a legal tender for country notes, and only payable in gold at the Bank of England building itself. He would say nothing then of the policy or propriety of making a legal tender without the authority of a Royal Proclamation, but he would appeal to those practically conversant with the currency question, whether the effect of placing any obstruction between the issuer of a note paying in specie, and the completion of the payment had not the effect of lowering the standard of value in proportion to the amount of the obstruction? Then see the effect of this result upon the payment of debts contracted before the standard was thus lowered. Was it not defrauding all the creditors of the kingdom to the amount of the depreciation? Couple this result with the consequences not only of increasing the monopoly power of the Bank of England with all its abuses, but of extinguishing those Joint-stock Banks which were established on the faith of Parliament. The noble Lord proposed to give to the Bank of England the sole right of circulating paper, not only to the exclusion of country bank paper, which had grown up with the prosperity of the country, but of the paper of the Joint-stock Bankers, which the Legislature only seven years ago had introduced as an improvement. In 1826, the system of Joint-stock Banks had been adopted as an improvement, and now they were called upon to change that system and adopt another improvement. Was there to be no end to those changes? Was the currency perpetually to be tampered with? Was the country to be the eternal victim of all those rash innovations and capricious changes, and tamperings with our monetary system, which any meddling hasty blundering Chancellor of the Exchequer might, in his self-complacent wisdom or folly be in- 1328 duced to introduce? He was sure that the over-issues of the Bank of England in the year 1823–24, and their subsequent rapid contractions, were the origin of the mercantile calamities of 1825, and not the issues of the country bankers. Though this was an undeniable fact, yet the noble Lord now called upon them to increase the issues of the Bank of England, and thus injure the commerce of the country, by increasing their monetary monopoly. Then look at the bargain which the noble Lord had concluded on the part of the public with the Directors. The noble Lord took great credit to himself for reducing the payment to the Bank for the management by 120,000l. a-year, which sum, said the noble Lord, multiplied by twenty-one years, (the period of the renewal of the charter), will give the public a total saving of some 2,600,000l. But on what data had the noble Lord made his calculations? Why, the artful statements of the Bank Directors themselves, the major part of which had no connexion whatever with the management of the debt. He was prepared to show that the noble Lord was in so favourable a position respecting the Bank, that he might have easily saved the public 6,000,000l. instead of 2,600,000l. The noble Lord was in a great error in calculating the amount of remuneration for paying the public creditor. The noble Lord took every million of the capital of the debt as his basis; while the fact was, he should only have considered the actual monies which would pass through the hands of the Bank for the payment of the debt. Now, this sum was in round numbers 30,000,000l., and the question for the noble Lord to consider was, what would be a fair rate of commission upon the payment of this sum? Now, he appealed to every man acquainted with the money-market whether the very highest rate of commission for such payments was not 5s. per cent; indeed, there were many who maintained that 2s. 6d. per 100l. was quite sufficient; but he would take it at 5s., and, at that rate, it would be seen that 67,000l. odd would have been ample remuneration for the payment of the debt, or, taking it in round numbers, say 70,000l., instead of the larger sum of 120,000l. which constituted the reduced sum of the noble Lord. Then, a great reduction ought to have been made in the payment to the Bank for its trouble in the transfers of stock. The Bank was at no expense, and at but little trouble, in cases of transfer of stock, for the individual transferring was 1329 obliged to employ a broker, and the Bank had only the trouble of registering. 30,000l., then, would have been ample remuneration for this trouble, which, with the 70,000l. for the management of the debt, would have been ample payment to the Bank, while the public would have saved a considerable sum annually. In addition to this, he asked, why should not the public have the benefit of the 4,000,000l. odd of balance which the Bank kept in its hands, and which belonged not to it and the use of which would in itself be a remuneration for the trouble of paying the public creditor? In all this he had omitted taking into consideration the remuneration which the public was in fairness entitled to receive for the great additional privileges which the noble Lord's measure would confer on the Bank—as he wished to avoid embarrassing the question. But the public was entitled to this compensation, and the question was, what should be its amount? He was not ready just then to answer the question positively in the affirmative; but he felt authorized to assert that the exclusive monopoly which the noble Lord proposed to confer on the Bank would enable it to add 6,000,000l. to its paper circulation. In the first place, he assumed that, as the Bank of England notes would be a legal tender for country notes, the country bankers, who now kept gold to meet their issues, would be compelled to keep Bank of England notes to the extent—he could not speak positively, but took 4,000,000l. to be about the mark. And was the public to derive no advantage from this privilege? He was sure that the Bank needed no consideration from that House, for that in their very minutest dealings the Bank Directors paid themselves and reaped large profits at the expense of the public. Look at the single item of charge for the building in which the national creditor was paid his dividend. They charged the public 25,500l. per annum for this building, under the pretence that it had originally cost them 550,000l. during the period of high prices. But was the Bank of England to be an exception to the fluctuations of the market—if it purchased at high prices was the public to pay the difference when the prices fell? But mark how carefully these gentlemen guarded their own pockets, when called upon to contribute towards the public expenditure. They rated and charged the public 26,500l. per annum for a part of their building. What would the House think when he told 1330 them that they rated their whole building (including this 550,000l. part) to the Assessed-taxes at 1,700l. Did not this fact speak volumes? They were told by the right hon. Secretary for the Treasury that the reason why houses were apparently so disproportionately rated for the Asscssed-taxes was, that for the very costly ones no tenant could be procured, and that they were therefore rated at what they would let for. It was quite fair to say that large houses in the country ought not to be rated according to their original cost, because it would be impossible to find a tenant to occupy them at a proportionate rent; but the case was quite diffrerent as regarded the Bank. A tenant could be found—the country, in fact, might be said to be the tenant, for it paid the rent. He should consider it only fair and just that the Bank should take a rent proportioned to that at which they were rated. He would not, however, go into the subject at greater length. He merely rose to object to the House coming to any decision on such an important subject at that period of the Session, when Government, night after night, were calling on Members to postpone other important questions as the Session was drawing to a close, and it would be impossible to get through with them. That the question had not been brought on sooner Ministers only were to blame. Why had they not brought it forward sooner, and not leave a question of such importance till it was quite impossible to settle it satisfactorily? Mr. Pitt, when he renewed the Charter in 1800, recommended the renewal, on the ground that the Bank had been of great service in encouraging the industry of the country and promoting commercial prosperity, and that there could be no doubt about the propriety of upholding a system which had worked so well. That, however, could not be said now. Times were changed, and it was the bounden duty of the House to take time to consider these changes, and all the complicated hearings of the question. He should therefore support the Amendment.
§ Sir Henry Parnell
had been a Member of the Bank Committee of last Session, and was bound to declare that the whole of its inquiry and evidence was ex parte and one-sided. The Committee proposed to itself to inquire first into the expediency of renewing the Bank Charter—next as to the terms of the renewal—and next to inquire into the present system of country bank- 1331 ing; evidence to be heard in reference to all three points. But the fact was that no evidence was heard, it being agreed that the witnesses in favour of the Bank of England should be first heard, save that of Bank Directors, and London traders and bankers interested in the continuance of the present system of Bank monopoly, with the exception of three or four witnesses who questioned the advantage of that monopoly. The character, indeed, of the witnesses was sufficient as to the evidence which might be expected from them, it being impossible it could be otherwise than ex parle. He was himself the only Member of the Committee who was opposed to the renewal of the Charter the hon. Member who spoke last not going all his length of opposition, and he was prepared with witnesses to depose as to the injurious operation of the Bank monopoly. But these witnesses were not examined nor indeed were any examined save those he had mentioned. He was told it was too late a period of the Session, and that the examination should be postponed till next year. He therefore was obliged to yield particularly as his noble friend (Lord Althorp) told him that the inquiry would be renewed during the present Session. It happened that he was not a Member of that House when, at the commencement of the Session, his noble friend announced his determination not to renew the Committee of Inquiry. If he had been, he most certainly would have reminded him of his promise, and insisted on going on with the examination of the witnesses for and against the Bank monopoly. On the face then of this deficient inquiry, they were called upon to legislate on a most difficult and momentous subject on ex parle and one-sided evidence, without any opportunity being afforded them for inquiring into the mischievous consequences of the Bank monopoly; and whether and how far the public would be injured by its being continued and without any opportunity to inquire whether the conduct of the Bank in reference to the public was of a character calculated to inspire them with confidence in arming it with additional powers over the public welfare. In point of fact, there was the same necessity for a Committee of Inquiry now as, this time twelve months, when his noble friend appointed that on the partial and interested evidence collected by which they were then called upon to sanction a most extraordinary measure, He really knew not on what grounds his noble 1332 friend could refuse this inquiry; for even as a question of policy, the public would be better satisfied with the proceedings of a Committee than with the single act of Ministers, even though the object and result were identical. A Committee could much better deal, on the part of the public, with the Governor and Directors of the Bank than the noble Lord. The Governor possessed advantages in a correspondence with the noble Lord, which he could not avail himself of against the public, if sifted before a Committee. Would a Committee have, in April, made proposals like those of the noble Lord to the Governor and Directors merely to be abandoned before the end of a month? Then, with regard to the question of renewing the charter, the noble Lord had told them, that he was himself satisfied that such renewal would be advantageous to the public. The noble Lord might have good reasons for his opinion, but it was right that Parliament and the public should be enabled, by inquiry, to judge of their validity. He held strong opinions of quite an opposite tendency to those of the noble Lord: he maintained, that experience was decisive against the evil of all monopolies; and were it only to inquire how far, and in what most efficient manner, the free trade principle could be applied to the Bank of England, he would vote for the gallant Member's Amendment. In addition to these theoretic objections to the present proceeding, he begged hon. Members to bear in mind that the collateral measures of the noble Lord were entirely new and his own, and not at all borne out even by the ex-parte evidence of the Committee of last Session. Were hon. Members, therefore, prepared to adopt those measures without inquiry? had they heard any ground for the proposed conversion of Bank of England notes into a legal tender? If they were influenced by the authority of the best writers on the subject, he could tell them they were to a man against such a project, which, indeed, had no advocates save anonymous writers of very limited capacity. He was prepared to contend that the result of making Bank of England paper a legal country tender would be the establishing a paper currency throughout the country, with its consequence, gold and sovereigns bearing a high premium. He was also prepared to show, that the noble Lord's projected Joint Stock Company system would be neither more nor less than a perfect bubble. While, on the other hand, the proposition to do away with 1333 the existing Joint Stock Banks would be a positive breach of public faith, they having been undertaken at the instance of the Legislature and the Government. They had been eminently successful as a financial experiment, and no proof had been given of any fault of conduct which could warrant the proposed restrictions. Before such changes were made in our national policy, it was the duty of that House to institute the fullest inquiry, and the noble Lord was bound to prove his case, before he called upon them to act upon his own, it might be, even wise opinions. The proposition to make Bank of England paper a legal tender, to establish Joint-Stock Companies, and to repeal the usury laws in certain cases, were points not immediately connected with the question of the renewal of the Charter of the Bank of England. These were all experiments, and, he besought the House to consider the manifold evils which might arise from hasty legislation on these subjects. He wished for time to consider whether these changes were necessary, and he should, therefore, give his vote in favour of the Amendment proposed by the hon. and gallant member for Bolton.
§ Mr. Richards
, feeling the inconvenicnce which must result, either from legislating without due inquiry on this important subject, or from leaving the question unsettled and undecided, after the Ministers had come down to the House and proposed their plan, was in a state of great uncertainty with respect to the way in which he should give his vote. He agreed with the hon. Member who had just spoken, that sovereigns would be at a premium in every country town at any distance from a branch bank, if the Government plan passed into a law. He was not, however, one of those who conceived that much inconvenience would arise from this circumstance, because he believed, it would bring into use a large amount of silver. He considered that part of the noble Lord's plan which related to Joint-Stock Banks to be very important. Now, it must be in the recollection of the House, that several years ago the people were not only allowed, but even invited by the Government to form Joint-Stock Banking Associations, which were described as being more firm and less liable to insolvency than banking companies composed only of two or three members. These banks had been the means of effecting a great deal of good throughout the country. The people had confidence in them, be- 1334 cause they were generally well acquainted with the parties composing them, and they knew that each of the partners was liable to an unlimited responsibility for the debts of the concern. What, then, could induce the noble Lord to make this uncalled-for attack on country banks? In the town which he represented there existed a banking establishment, with the nominal capital of 200,000l., but of which sum only 20,000l. had been actually paid up. This banking company had been productive of the greatest benefit to the neighbourhood. They were content with small profits, and were willing to do the public business at a cheap rate; but was that any reason for the Government destroying the establishment.? If the noble Lord's plan passed into a law, this company would have to subscribe fifty per cent upon their nominal capital—that was 100,000l. which they would be compelled to place either in real securities or Government securities. Now, it was obvious, that it would be contrary to every sound principle of banking for them to invest their money in real securities, inasmuch as they could not, in that ease, command the use of it in times of emergency and panic. They had the authority of Adam Smith upon this point. A bank, called the Ayr Bank, was once established in Scotland, on the principle that it would lend money to any persons, no matter whom, provided they could give adequate security. Adam Smith said, at the time, that the principle was a bad one; and the truth of his opinion was proved by the event; for, in two or three years afterwards, the bank stopped payment. The only alternative was to vest the property of the bank in Government securities. If the 100,000l. was so invested, when the Government securities were high, it was obvious that the first cannon-shot fired might reduce the sum to 60,000;l. leaving the partners in the bank sufferers to the amount of a third of the money so invested. Thus a batik now yielding a profit of 600l. a-year, would then be carried on at an annual loss of 400l. He believed the plan of the noble Lord would lead to the sudden extinction of those banks; and he (Mr. Richards) called upon the noble Lord not to destroy the hopes of those who, on the faith of Acts of Parliament, had invested their money in those banks. He was ready to prove, that those banks were beneficial, not only to the shareholders, but to the people of the neighbourhood in which they were established. 1335 He called upon the noble Lord therefore, not to proceed in any hasty legislation against those Joint-Stock Companies. He felt the extreme inconvenience of leaving the country in a state of uncertainty on this question; and, notwithstanding that he felt great doubt and difficulty in voting against the introduction of this measure, yet, under all the circumstances, he would, certainly, give his vote for postponing the question till next year.
Sir Matthew White Ridley
said, that the question was, whether they should take the subject of the renewal of the Bank of England Charter into consideration at present, or postpone it to a future period. Though he thought that many of the Resolutions were contrary to his interests as a country banker, he did not consider it in that light, but looked to it as a great measure, in accordance with the interests of the country. At a future stage, he would endeavour to show that some parts of the measure were prejudicial to the public interests; but the subject having been now introduced, and having excited from one end of the country to the other the deepest interest and attention, he thought that nothing could be more prejudicial to one party or the other than delay. He was quite sure, that the interest of all parties would be best consulted by the House coming to a clear and decided opinion on the main principles of the Resolutions. Though the period of the Session was late, and there was a great deal of business on hand, yet there would be plenty of time to discuss the principles of the Resolution, in order that the country might know what were the feelings and intentions of Parliament respecting them. Nothing could be more prejudicial to the country bankers than to leave them in a state of suspense for nine or ten months respecting the opinion of Parliament on this question. He would not then enter into the Resolutions, but in supporting the Motion for their considering them and voting against the Amendment, he must be understood as not pledging himself to vote for all the Resolutions themselves. He reserved to himself the right to discuss and oppose them in Committee.
§ Sir Robert Peel
said, that he hoped he should not be thought guilty of disrespect towards the House if, at the commencement of this important discussion, he expressed an anxious hope that, for the sake of the character of the House, and the satisfactory adjustment of this great ques- 1336 tion, they were prepared to discuss it with patience, at least without manifesting that reluctance to hear speeches on matters of detail, which was sometimes manifested, in as much as every interest—the commercial, the manufacturing, and the agricultural—was deeply involved in the settlement of this important matter. In fact, there was no one question to which they could devote their time with more advantage to their constituents and the country at large, than that of placing the paper currency upon a permanent and satisfactory basis. The immediate question was, whether they should approve of the first Resolution—namely, that the Bank Charter should be renewed, or whether they should postpone the consideration of the whole subject to another Session. He was decidedly of opinion, that they would be abandoning their duty if they consented to postpone the question. It was impossible, however, for him to state the grounds upon which he had come to this conclusion, without adverting to other parts of the plan proposed by the noble Lord. He was prepared to affirm the first Resolution, declaring the expediency of renewing the Bank Charter, because the whole of the evidence taken before the Committee appointed to inquire into the subject last year, satisfactorily proved, as far as the authority of that evidence went, that it was expedient for the public interest, that there should be but one bank of issue in the metropolis, in order that it might be enabled to exercise an undivided control over the issue of paper, and give facilities to commerce in times of difficulty and alarm, which it could not give with the same effect, if it were subject to the rivalry of another establishment. The Bank of England was at least as well constituted as any other bank for the purpose of conducting the public business of the country; and he gave his assent to the proposition that the charter be renewed, not with reference to the interests of the Bank, but because it had been proved that the interests of commerce required that there should be but a single bank of issue in the metropolis, and that the Bank of England should be that Bank. He was also prepared to affirm other parts of the Resolutions. On the whole, he thought it desirable to assent to the 5th Resolution, which declared the expediency of repealing the usury-laws in certain cases. He believed, that the effect 1337 of the Usury-laws in restricting liberal accommodation in times of commercial panic was most injurious; and he thought, that by permitting bankers to obtain full interest on their money, the Legislature incurred no risk of endangering the welfare of any class by preventing loans at the accustomed rate of interest; but, on the contrary, would supply the means of giving relief to commerce in times of difficulty. With respect to the terms which the noble Lord had made with the Bank, as involved in the fourth Resolution, he had nothing to remark, because it appeared to him to be a matter of very subordinate consideration. He had no desire to make a long discursive speech upon every topic which the Resolutions embraced, and therefore he should postpone, for the present, any reference to the manner in which they might affect country bankers, and joint-stock banking-companies now established. The Resolutions applying to them did not form an essential part of the noble Lord's plan for the renewal of the charter of the Bank of England; he would reserve, therefore, his right to discuss them at a more convenient opportunity. What would be the effect on the public interest, if country bankers were to be so far restricted, that they could not continue advantageously to carry on their business, he was not prepared to discuss at the present moment; but there was one portion of the noble Lord's propositions, not necessarily forming any part of the plan for the renewal of the Bank Charter, to which he was not prepared to give his assent—namely, the proposal contained in the second Resolution, to make the Bank of England paper a legal tender in all commercial transactions. He had not heard, in the whole course of this discussion, any reason whatever assigned for this measure. It was very difficult to predict what might be the consequence of such a vast change in the existing law and practice of the country; and that man would be guilty of great presumption who should be bold enough to say, that the consequences must, of necessity, be prejudicial. But the onus of proving the pernicious effect of such a measure did not lie with the opponents of the noble Lord. The noble Lord was bound to show conclusive reasons for the alteration of the existing law, of which he had heard with the greatest surprise. The noble Lord had not, however, been pleased to advance a single argument in justification of his Re- 1338 solution. As far as authority went on this subject, he thought, after the removal of the restriction on the Bank of England, it had been an admitted axiom in the science of currency, that paper-money, by whatever authority issued, should be convertible into gold. Every one must recollect, that Mr. Burke, when comparing paper-money in England with the French assignats, said, that "Our paper is of value in commerce, because, in law it is of none; it is powerful on Change, because, in Westminster-hall it is impotent. In payment of a debt of 20s., a creditor may refuse all the paper of the Bank of England." This opinion concerning the principles of paper-money was shared by Mr. Huskisson, who, in 1819, opposed a proposition to allow engagements to be discharged in Bank of England paper, alleging, that he would never consent to allow one country banker to discharge his obligations by the paper of another banker. At present, all paper issued by the banking establishments of this country was liable to be exchanged for gold. But what was it the noble Lord proposed to do? To make all promissory notes, all debts, and even the deposits placed in banks, payable by Bank of England notes. He could not foresee all the consequences of that alteration, but he could not consent to it, unless the noble Lord showed him that some great evil was to be averted, or some positive advantage to be gained by it. The noble Lord would doubtless tell him, that periods of panic occasionally occurred, when the currency of the country was exposed to danger in consequence of the great demand for gold; but he trusted that the House would recognize the clear distinction between a commercial and a political panic. An instance of a commercial panic occurred in 1825, and of a political panic, in the month of May in the year 1832. Those panics arose from two different causes, and their effects were different. Since 1825, there had been no instance of a commercial panic, because precautions were then taken to prevent the main source of it by abolishing the 1l. and 2l. notes; the circulation of which notes had the effect of banishing gold from the country, of causing a rise of prices, and of encouraging that undue speculation, to which a rise of prices caused by excessive paper issues will infallibly lead. What, then, was the noble Lord's motive for proposing to make Bank of England notes a legal tender? Did he. 1339 apprehend a commercial panic? It appeared, he believed (though he spoke not from accurate knowledge, for he was not a member of the Committee); but it appeared, he understood, from the evidence taken before the Committee on Trade and Manufactures, that though great profits were not obtained, the trade and manufactures of the country were in a flourishing condition; and they were flourishing, because they were conducted upon a sound basis; the immediate convertibility of paper into gold being a sufficient check against excessive issues and undue speculation. But perhaps the noble Lord wished to guard against the recurrence, and the effects of political panics; and did the noble lord really think that any measure founded on those Resolutions would answer that end? Political panic owed its origin to very different causes from commercial panic. It was not produced by any undue stimulus given to trade; but by apprehensions that the institutions of Government were in danger, and that the Bank of England, being connected with the Government, might consequently be unable to meet its engagements. This was the case in May, 1832, at which period, in many parts of the country, the notes of country bankers were considered at least equally as good as the notes of the Bank of England, and in some cases were preferred to them. He admitted that there was a difficulty in devising means to prevent the occurrence of political panics, but he thought that the proposition of the noble Lord would totally fail in effecting that object. When once the people doubted the stability of the Government, they would naturally entertain doubts of the stability of the Bank of England. They would then, as a matter of course, demand payment in gold for the notes of the Bank of England; and if such demand were made simultaneously and universally, there was no doubt that the directors of the Bank would not have a sufficient quantity of gold in their coffers to meet it. The inevitable consequence would then be national bankruptcy. Did the noble Lord, in his plan, take any effectual precaution against political panic? He had been told, that in Dublin, the paper of the Bank of England was actually at discount in May, 1832. A banker in that city paid 600l. or 800l. to one of his customers in Bank of England notes. But in consequence of the agitation and alarm 1340 which then prevailed, a doubt was entertained (an absurd one, certainly), of the stability of the Bank of England, and the banker was offered a considerable premium to take back the notes, and to pay in gold. Nothing could be more absurd on the part of the person who received the notes; but in transactions of this kind, the apprehensions of ignorant and fearful people must be taken into account, for from the contagion of such apprehensions arose all the danger and all the difficulty. Against this, it was their business to guard, by every means in their power; but he very much doubted whether the step which the noble Lord proposed to take, would, in any respect, be a protection against the recurrence of political panic; because the ultimate tendency of the noble Lord's plan was, to substitute for country paper, the paper of that Company who were the bankers of the Government, and to diminish the quantity of gold in circulation, by providing a much less expensive substitute. Thus, the plan of the noble Lord, far from providing any security against political panics, would in fact be likely to render them more certain and more disastrous. He had heard it asserted, that nothing could be more insecure than our present system of currency. He entirely dissented from that statement. If they were to have a system of paper money at all, founded on a basis of the precious metals, he doubted whether they could have one placed on a better footing than that which existed at present. It did not give any security against a political panic; and what system could? But it guarded the country, as effectually as the nature of things admitted, against a commercial panic. Country bankers, now, had the option of discharging their engagements in gold, or in the paper of the Bank of England, with the consent of the holders of their notes; but to meet the difficulty of a political panic, the noble Lord proposed to pass a law to enable the banker to pay, and to compel the customer to take the paper of the Bank of England. Was it possible to correct erroneous impressions by Statute-law, or to inspire confidence by compulsion? Before he proceeded further, he wished to know whether it was intended that the branch banks of the Bank of England should pay, in gold, the paper issued by the Bank in London? [Lord Althorp: No.] He, then, understood that the branch banks could only be com- 1341 pelled to pay in gold, that paper which they themselves issued; and that all Hank of England paper issued in London, would only be payable in London, and not at the branch banks. He did not consider that part of the measure at all calculated to gain public confidence. The noble Lord roust be fully aware, that when a panic occurred, a great demand for gold took place, and he endeavoured to prevent it by making Bank of England notes a legal tender, not imagining that the holders of them would take the trouble to send them to London to get them cashed, or to a branch bank forty or fifty miles distant; and this was the security which the noble Lord thought an effectual one against a political panic. The noble Lord had argued, that the Bank of England, having no control over the issue of the country bank notes, had consequently no control over the exchanges; and for the purpose of altering this state of things, he proposed to extend the circulation of Bank of England paper. In order to ascertain what weight ought to be attached to this argument, it was necessary to compare the amount of the country bank notes with the amount of Bank of England paper in circulation. Was it fitting to make an alteration in the monetary system like that which was proposed, without looking at the proportion which the country bank paper bore to the paper of the Bank of England? One hon. Gentleman had estimated the amount of Bank of England paper at five-sixths of the whole circulation of the country. This estimate appeared unduly large; it probably could not be correct; but, supposing that the country bank paper amounted to one-fourth or one-fifth of the whole paper circulation, could its effect on the exchanges be so great as to render it necessary for the House to give the Bank of England the proposed control over the paper circulation of the whole country? But, would the control of the Bank of England over the whole paper circulation of the country be so immediate as the noble Lord expected? Supposing that the noble Lord's plan was successful, and that country bank paper was banished from the circulation, would not the Joint Stock Companies and other banking establishments require from the Bank of England a guarantee to give them a certain amount of bank-notes? The time might arrive when these several establishments would 1342 feel it necessary to avail themselves of their credit with the Bank of England, and precisely at the same moment the Bank of England might find it desirable to restrict its own issues for the purpose of correcting an unfavourable exchange. At one period, the Bank of England, acting on the principle of a commercial company, and desirous of making the largest profit possible, might deal very liberally with the Joint Stock Companies, and guarantee them a large amount of notes, and by that guarantee, the Bank must abide, however prejudicial it might be at the particular moment to the country, He therefore was not prepared to admit the policy of giving the monopoly of the paper circulation to the Bank of England; and if the noble Lord's plan should be adopted, he very much questioned whether the Bank of England, by guaranteeing a certain amount of notes to the Joint Stock Companies and country banks, and thereby placing so much of its circulation out of its own control, would be able to exert an immediate power over the exchanges, or provide the moans of safety in cases of difficulty and limes of political panic, as at present. He was afraid that one of the consequences of the proposed measure would be to diminish the amount of the gold in circulation, to cause a difficulty in making small payments, and to lead to a demand for the re-issue of one and two pound notes. In consequence of gold being equally diffused throughout England and Wales, country banks were rendered secure. Instead of the present system of having gold equally diffused throughout the country, and held by country bankers for the purpose of meeting their engagements, would it be safer to allow it to accmulate in the coffers of the Bank of England, or its branch banks, from which it could only be drawn by presenting at the different banks their respective notes? In Scotland and Ireland a small paper circulation existed; but nothing could be more fallacious than to infer, that because such a currency was safe in those countries, it must be beneficial in England. The small note currency of Scotland and Ireland was upheld by the gold which circulated in this country, which was sufficient to sustain the superincumbent mass of English, Irish, and Scotch paper. But if we introduced the Scotch system into England, 1343 there would not be security for our paper circulation even for a month. That which was good as a medium of circulation in Scotland to the extent of 3,000,000l and in Ireland to the extent of 2,000,000l would, in England, where it must extend to 30,000,000l, utterly and completely fail. The noble Lord said, that his plan would not diminish the amount of gold circulating in the country, and yet the plan of the noble Lord gave every private banker a direct interest in discouraging the circulation of coin. If there was an over-issue of paper, it fell back on the bankers again from whom gold was demanded. Now, there were 400 private bankers in the country. [An Hon. Member said: 500.] He would take the number at 500. The noble Lord was going to close 500 sources from whence gold is now issued to the holders of paper who had confidence in that paper, because it was so readily convertible at will. A great difficulty he was persuaded would be felt in making-small payments from the deficiency of gold; and though the noble Lord would, of course, be very unwilling to issue 1l. and 2l. notes, there were other ways of accomplishing that end. There was no law against issuing notes for 5l. 10s., or for five guineas. Here then was a mode of supplying the deficiency of a gold circulation. There might be notes of 6l. and a man who had 1l. to pay might give 6l. and receive 5l. in return, or with notes of 5l. 10s or 5l. 5s. he might pay 10s. or 5s., receiving back a 5l. note. He believed that something of the kind occurred even in Ireland, where the issue of notes for 35s. and 25s. banished silver from circulation. Thus the inconvenience arising from the gradual disappearance of gold, would not at first be sensibly felt. Partial remedies, such as these to which he had been referring, would be resorted to, and he should not be aware of the full extent of our danger until after the gold coin had disappeared and some cause or other led to a general and simultaneous demand for it in exchange for paper. The noble Lord denied, that he contemplated the depreciation of the standard or increased facilities for paper issues. But his plan was supported by those who contemplated both these results, as the consequences of it, and without such support founded on such motives the noble Lord's plan had no chance of being carried. The noble Lord might consider that, by establishing 1344 the monopoly of the Bank of England, through facilities given to Joint Stock Banks to circulate its notes, and by the destruction of the country banker, he was producing an advantageous state of things; but he doubted it. [Mr. Hume: Hear! hear!] On that point he was glad to find that the hon. member for Middlesex agreed with him, if in nothing else. Let them suppose, that by encouraging the monopoly of the Bank of England, it was enabled to drive the country banks out of the field; for, although the law would still permit the establishment and continuance of private banks, yet it was quite clear, that Companies might be formed on so extensive a scale, and with such privileges, as to make it impossible for private individuals to compete with them. It was known that Companies had considered it profitable to sacrifice a part of their capital for the purpose of ruining an individual trader. It was possible, then, that the ultimate effect of this plan would be so far to injure the trade of the country banker as to make it impossible for him to carry on his business. Now, provided security were taken against their paper being issued in excess, there was great advantage in permitting the issue of paper by solvent country banks. They had a more intimate knowledge of the farmers, and retail dealers in their neighbourhood than could be obtained by any Joint-Stock Bank, or by the agents of the Bank of England. They could, therefore, deal out credit more liberally than the Bank of England. They could, from knowing the character of parties, accept personal security, and thus give to an industrious and enterprising man that accommodation which the other banks would not afford without real securities. Country bankers could issue paper on cheaper terms than Joint-Stock Banks. What objection, then, could there be to the country banks issuing their paper, provided that paper was convertible into gold? He doubted, therefore, if they would gain the object they had in view—of giving advantages to the agricultural and commercial part of the community by a measure which might destroy the country bankers. He doubted, if it were wise, supposing that such would be the effect, to destroy country bankers. All these were considerations which ought to have weight with the House before they came to any determination, and particularly before they came to any Resolution, de- 1345 claring that the Bank of England notes should be a legal tender, He repeated, that he did not agree with the noble Lord, that those who opposed his system were bound to point out the disadvantages of adopting it. The noble Lord should demonstrate the evils of the present system and the advantages of that change he proposed, before he called on the House of Commons to alter that which it ever had been, with the exception of the period of the Bank Restriction Act, and which he should ever contend ought to be, the principle of the law—namely, that those who circulated paper engagements, undertaking to pay certain sums of money, should be bound to give in exchange for those promises a definite weight of the precious metals. Before the noble Lord departed from the great principle of making a man responsible for what he promised—before the noble Lord exonerated him from discharging his debt in the standard coin of the realm, the noble Lord was bound to make out a very strong case. The noble Lord proposed to go further than the Bank Restriction Act, of 1797. That Act did not make Bank of England notes a legal tender—it only deprived the creditor for a time of a summary remedy against the debtor on the tender of Bank of England paper. The parties were still responsible for the payment. The noble Lord proposed not only to protect the parties against summary process, but gave them their discharge altogether on tendering the paper of the Bank of England. That paper was to be legal payment also, not only for public taxes, but for all deposits and all debts. To this measure, considering it a departure from the principle of the Act of 1819, and from the true principles which should govern a paper currency, he could not give his support.
§ Lord Althorp
thought, he had already stated the reasons why he asked the House to agree to these Resolutions. The right hon. Gentleman assumed that he proposed this plan in order to avoid political panics. If, however, the right hon. Gentleman recollected the evidence given before the Committee of last Session, he would recollect that all the witnessses, without any exception, gave it as their opinion that it was not possible by any means to guard against political panics. That, therefore, was not his object. He did not expect to guard against them. He never had supposed it possible to guard against political panics. The object he had 1346 in view in making the proposition was this—all the persons who gave evidence as to the cause of commercial panics agreed in this; that, at the very time they take place, all the bankers who issued notes were obliged to provide themselves with coin in proportion to the demand likely to be made on them. To do that the country bankers took care not only to collect all the coin possible in their own neighbourhood, but they Made large demands on the metrpolis for coin. The consequence was, that there was this internal drain on the Bank of England for gold at the very moment that there was also a large drain on it from abroad, in consequence of the exchange being against us. There were thus two drains on the Bank—the internal drain, and the drain from abroad. It appeared, therefore, to him, that it would be a great advantage if he could get rid of one of those drains; and for that reason he had proposed this change. The right hon. Gentleman seemed to think, that the 500 banks now kept a reserve of cash, but the evidence did not altogether bear out the supposition of the right hon. Baronet. It was given in evidence before the Committee last year, that the country bankers generally kept gold in proportion only to one-twentieth of their liabilities. They possessed all of them convertible securities; and whenever they were pressed for cash, these securities were sent to London, and coin required for them. He did not see, therefore, that his plan would have the effect of driving the coin out of circulation, though he readily admitted, that, if one-pound notes were issued, they would drive the coin from circulation, Experience had proved, that paper and coin of the same denomination could not circulate together; but if the paper were of a higher denomination than the coin, it would not supersede the use of it, and both might circulate together. The right hon. Gentleman argued as if the country bankers seldom got coin from London, but he believed, that the country bankers seldom collected much coin from their own neighbourhood, but rather drew it in large sums at once from London. The right hon. Gentleman said, that the plan would be supported as tending to depreciation—lie had not proposed it, with that view. He agreed with the right hon. Baronet that depreciation was most undesirable; but he did not see, looking at the state of the country—looking at the facility of communication with every part of it—he did not see how it was possible 1347 for a different value to exist for paper convertible into gold, and gold, in any part of the country. He felt convinced, that the facility of communication would keep the convertible paper and the metallic currency every where at the same value. He could not conceive it possible that there should be any difference of value of these two articles in any part of the country. The right hon. Gentleman said, that it would entirely annihilate the country bankers; but he (Lord Althorp) could not conceive that such would be the effect. It would only make the country bankers circulate the Bank of England notes, lodging proper securities. If the Bank of England took care that the amount of the; securities remained about the same, there could be no great variation in the amount of the issues. The effect would be the same as if the Bank discounted the bills of other dealers. Certainly, it would give the Bank a more complete control over the circulation than at present, should any occasion arise, when, from the competition of banks, or other circumstances, there might be an increase of circulation. He was in hopes that the plan would supply great additional accommodation, and at the same time he believed, that it would prevent fluctuations in the currency, and, consequently, danger to the; country. It was well known that at the very time when the exchange first tuned against this country, the demand for accommodation increased, which the country banks, little affected by the rate of the Exchanges, were ready to supply. The consequence was, an increase of paper got into circulation, when it ought to be diminished, and great fluctuations, and great danger ensued. He concurred with the right hon. Baronet in his opinions of the Scotch system, which did very well as long as the Scotch bankers had the stores of the Bank of England to apply to. That system owed its safely to the bullion kept in the Bank of England. He concurred with the right hon. Gentleman, that if the Scotch system were spread into England, it would place the country in great danger. He had been required, he thought, to explain, and therefore he had done so immediately after the right hon. Baronet.
had no objection to the first part of the plan, but he had great objections to establishing local banks with partners of limited responsibility. He had also great objections to make to that part of the plan which went to make Bank of England notes a, legal tender. It was 1348 founded on an erroneous principle, and was, in his opinion, pregnant with danger. He believed, that it would not decrease the demand for gold in panics, but would increase it; and as the country bankers would then have none, and would only have Bank of England notes it would much increase the danger. He entirely concurred with the right hon. Baronet opposite, in thinking, that making Bank of England notes a legal tender would not prevent a run for gold. There would be many simultaneous demands on the Bank, and the consequences would be serious.
said, whether the plan proposed by the noble Lord were for good or evil, he had come to the conclusion, that it was necessary at once to consider the question. Whether the plan would enlarge or contract the currency he did not know, but he knew that to leave upon the country the incubus of uncertainty would be injurious to the interests of commerce. He could not, therefore, consent to the Amendment for postponing the discussion. He felt, also, bound to add, that the House had ascertained a sufficient number of principles to enable it to proceed to a decision, without the necessity of further inquiry. When he first perused these Resolutions, he thought that they would have the effect of giving a stimulus to the circulating medium. But he had since found that they contained sedatives as well as stimulants, for in retired parts of the country the circulation would be contracted—producing distress and loss in the agricultural part of the county. He should, therefore, oppose some of the Resolutions, but he should think it has duty to vote for now considering the subject.
had followed this subject closely, and had attended diligently to its history, and he could not reconcile it to himself to allow it to go to the vote without offering a few observations to the House. There was a great diversity of opinion on this subject; and as it was one which might be discussed without party views, those differences should convince the noble Lord, that the opposition to his Motion was honest, and founded on conviction. It was impossible to look at the question, and not regret the period of the Session at which it was brought on. It was now past Midsummer, and it was brought forward for the first time. It was impossible to see what went forward in that House—at least nobody acquainted with the House, but must know that this was a season when 1349 hardly any subject could be urged which could fairly attract the attention of the House. One-half of their time they were counted out, and the other half they attended so reluctantly, that it was almost physically impossible that any important business could be adequately discussed. If all the cases before the House, if all the subjects under discussion, were to be fairly and adequately discussed, he did not sec bow they could get to the end of the Session for several months. There was not only the Bank question, but there were five or six other questions of almost equal or greater importance, and no decision had been come to on any of them, further than agreeing to some general principles. There was the question of the West Indies, and of voting 20,000,000l. ["question, question!"] He did not see why the hon. Member called "question!" but, certainly, if every person who attempted to address the House on the subject under discussion were to be interrupted, he saw no means of getting through it. The question before them was undoubtedly of great importance, and he was referring to the fact, that half a dozen other questions of equal importance had been brought before them, as a reason why this might be delayed. He contended that the Bank Committee had not inquired into all the subjects connected with the renewal of the Charter—had not inquired at all into the bargain made with the Bank—had not inquired into the mode of dealing with country bankers; and therefore he was of opinion, that they were not then ready to discuss those matters. He thought it would have been proper to postpone this question, had the Government in the first instance resolved to do it; but as it had been discussed, and as the Resolutions had been proposed, that gave the matter a new aspect, and made him say, it ought to be settled at once, for otherwise they might shake the confidence of the country. Certainly, the essential parts of this question ought now to be settled. The immediate question they had now to decide was, whether the first Resolution should be agreed to. That Resolution was, "That it was the opinion of this Committee that the Bank Charter should be renewed." On that subject he believed, that the opinions of all the witnesses had been in favour of the renewal. The universal opinion was, that the Hank was a useful institution, had been honourably conducted, and that it would be injurious to the public to establish any other bank of issue in the neighbour- 1350 hood of the metropolis. The right hon Baronet, the member for Dundee, who had attempted to make out the reverse of that proposition, had entirely failed in doing so. So far then it seemed, that the first Resolution was established. He had a few observations to make on the second Resolution, on which the right hon. Baronet, the member for Tamworth had made a speech, which, had produced, like most of his speeches, a great impression on the House. He himself must say, that he thought it was a judicious proceeding to make Bank paper a legal tender in the country, and in the country banks. He had long thought, that a measure of that sort would be beneficial. It was not that be thought it possible to bring paper altogether into competition with specie, but it was because be entertained a strong suspicion, that such a measure would have the effect of placing the currency on a safer foundation, and maintaining the par value of the coin. It would, in fact, he only doing that by law which was now done by individuals, for their private convenience. At this time, though a man was liable to pay his debts in gold, he did, in fact, pay them by a cheque, yet no one thought that that custom was injurious to the safety of public credit, although the cheque was, in the first instance, paid in paper, and that paper circulated before it was converted into gold. The great object, indeed, of this country was to preserve, in its paper currency, a power of quick convertibility into gold. He saw no possible danger, but great benefit, from such a measure. If there was a general panic, and all the public concurred in making a run for gold, injury to the public must, under the present state of currency, necessarily arise; for there was no state of currency that could stand such a shock, But that case—the case of a political panic—was of rare occurrence. In the case of a commercial panic, the state of things was totally altered, and there were ten of the latter for one of the former. It was against the latter, therefore, that they ought chiefly to attempt to provide; for the former was pretty well beyond their power. With respect to a commercial panic one example was worth fifty arguments. In that of 1825, the panic arose—not from any unfortunate state of foreign exchanges with reference to this country, but from a want of confidence in the bankers of the country; and the run was upon the Bank of England, but not for gold; for the run was put an end to by 1351 payments in bank paper. It seemed to him, therefore, that the second Resolution might be with propriety adopted; and he could not hesitate in declaring, that he concurred in it With respect to the bargain made by the Government with the Bank, it was said by some Gentlemen, that the interests of the country had been sacrificed. If that were so, the Bank could hardly make a sufficient compensation; but it was not. He must admit, that he thought the Bank had had a little the advantage of the noble Lord on this occasion, or rather that the noble Lord had not made all that he could in the bargain. But then it was said, that the Bank, in the management of their own business, did not attend to the interests of the country, but of themselves, and always acted with a view to their own profit, in preference to every other consideration. He could only say, that when he was connected with the Bank, which was long ago, that was not the case, nor did he believe that it had ever been so since; but that all questions decided by the Bank Directors, who took, as they were bound to do, proper care of the interests of the institution over which they presided, were so decided with every possible view to the public advantage. Indeed, they would take but a shallow view of their own interests if they did otherwise. Those who thought otherwise were wrong; and he believed, that a body of men more honourable in their personal character, or more fit to be trusted, it would be impossible for any combination of law to produce. With respect to that part of the noble Lords Resolutions which related to the country bankers, he wished the noble Lord to consider whether he could not put it off till the next Session. That part of the Resolutions formed no part of the agreement with the Bank of England; and the noble Lord might consider whether it was not possible for him to pass the rest of the Resolutions, and postpone that part of the plan to another time. He, himself, had always been rather favourable to Joint Stock Companies; but if these branch banks were to drive out the smaller banks, he should think that the consequences of such a measure were greatly to be dreaded. The smaller banks gave accommodation which great establishments could not do—they went into petty details with the farmers and smaller traders in their neighbourhood in a manner which the larger banks could not, and would not imitate—and they acted in that was much to the 1352 benefit of the country. He should also propose to the noble Lord to adopt the following alteration in the wording of the Resolution. As it now stood, it declared, "that it is the opinion of this Committee, provided the Bank of England shall be bound by law to discharge its notes in gold." Why the Bank was bound by law so to discharge their notes; and the words ought to be "so long as the Bank shall continue to discharge its liabilities." He should only now add, that he should prefer the Resolution, if the payment were to be confined to London.
§ Sir Francis Burdett
said, he had a strong impression not at all conformable to the views adopted in the Resolutions generally; but he was inclined to vote for the two first, and he did not think that doing so would pledge him to support the rest. He should, therefore, give his assent to the first and second Resolutions. The right hon. Baronet, who had attempted to show that the principle of free trade ought to be applied to this system, had failed in the object of his argument; for those reasons which operated generally most adversely to the granting of monopolies might here be cited in favour of this particular monopoly. The objection to monopolies generally was, that they restricted the circulation of goods and enhanced their value. That was the very object up to a certain extent, which ought to be sought after with regard to paper currency, and therefore the general reasoning against monopolies did not apply. He was friendly to what he might term a relaxation of the currency, if that could be effected, as he thought it could, without danger to the public. He thought it might be effected in the present instance. The commercial panics which were so much to be dreaded were usually caused by the impossibility of controlling the issues of the country bankers, but he thought that that control would be established by this measure. The two first Resolutions might then be agreed to, and the others discussed afterwards.
§ Mr. Hume
said, that after an expression in the speech of the hon. Baronet opposite (Sir Francis Burdett), he could not remain silent, more especially when he remembered the vote they had lately given against the depreciation of the currency. The hon. Baronet talked of "a relaxation of the currency." Why, what was a relaxation of the currency but a depreciation of the currency? If that was to be the effect of these Resolutions, he should oppose them. He agreed 1353 with the arguments of the right hon. Baronet below him (Sir Robert Peel), and believed that the result of the whole plan would be to produce a depreciated currency. Yet what had the noble Lord said on that subject not long since? Why, that a currency ought not to be maintained but on the principle of perfect convertibility. If that principle was not maintained—if we were to have a depreciated currency, we should be descending the ladder again. He believed that the bargain the Government had made with the Bank was improvident for the public, and looking at that, and looking at the fact that the Bank-Notes were only to be convertible in London, he could not consent to adopt the noble Lord's Resolutions. He should certainly vote for postponing the consideration of the Resolutions to another Session.
§ The Committee divided on the Amendment: Ayes 83; Noes 316—Majority 233.
|List of the AYES.|
|Aglionby, H. A.||Hoskins, K.|
|Andover, Lord||Hume, J.|
|Astley, Sir Jacob||Hutt, W.|
|Attwood, M.||Irton, r.|
|Bainbridge, E. T.||James, W.|
|Baldwin, Dr.||Lester, C.|
|Baring, F.||Lowther, Lord|
|Beaumont, T. W.||Lowther, Hn. Colonel|
|Berkeley, G.||Moreton, Hon. H.|
|Biddulph, R.||Morison, J.|
|Blackstone, W. S.||Nagle, Sir R.|
|Blake, M.||O'Brien, C.|
|Blamire, W.||O'Connell, J.|
|Bowes, J.||O'Connell, M.|
|Brotherton, J.||O'Dwyer, A. C.|
|Brocklehurst, J.||Parker, Sir H.|
|Bulwer, H.||Parnell, Sir H.|
|Butler, Colonel||Peel, Colonel|
|Calvert, N.||Pigott, R.|
|Cayley, E. S.||Potter, R.|
|Chaplin, Colonel||Plumptre, J. P.|
|Chaytor, Sir W.||Richards, J.|
|Clayton, W. R. C.||Rickford, W.|
|Duncombe, Hon. W.||Roche, W.|
|Evans, G.||Romilly, F.|
|Faithfull, G.||Ronayne, D.|
|Fellowes, Hon. N.||Ruthven, E. S.|
|Fielding, J.||Rutliven, E.|
|Finn, W.||Scholefield, J.|
|Fitzsimon, C.||Scott, Sir E.|
|Forester, Hon. C.||Scrope, P.|
|Forster, C. S.||Shawe, R. N.|
|Galway, J. M.||Stanley, E.|
|Gaskell, D.||Strutt, E.|
|Gisborne, T.||Tancred, H. W.|
|Godson, R.||Tayleur, W.|
|Guest, J.||Trelawny, W. L.|
|Hawkins, J. H.||Tyrell, C.|
|Vesey, R. N.||Williams, Colonel|
|Wallace, T.||Williams, W. A.|
|Welby, G. E.||Torreus, colonel|
|Whalley, Sir S.|
§ The Main Question was then put,
§ Mr. Poulett Scrope
protested against the original Resolution, but his speech was drowned by loud cries of "Question!" "Divide!" "Adjourn!" "Oh, oh!" and sundry expressions of impatience. After trying for some time to obtain a hearing, the hon. Member moved that the chairman do report progress.
§ Mr. O'Dwyer
declared that be was a member of the Political Unions so much abused in that House, but in no Political Union had he witnessed such uproar as he had just heard. [Great interruption] This was a question which deeply affected the interests of the Empire, and it was monstrous that hon. Members should come down to the House apparently with a determination not to listen to what was said, and to drown everything in uproar. [Marks of grate impatience.]He cared not for these interruptions, but he must say, such a, question ought to be debated at least with decency.
§ Lord Althorp
objected to adjourning before passing the Resolution. This was certainly a question deserving serious consideration; but after the House had been so long addressed on the subject us it had been, it was not surprising that it should exhibit some symptoms of impatience.
§ Motion to report progress withdrawn.
§ The first Resolution was agreed to; and the House resumed. The Committee to sit again.