§ Mr. Alderman Thompson
observed, that the alterations and restrictions imposed upon the Bank of England, by the Bill before the House, were neither necessary nor equitable to the Bank itself. The Bank of England was in future to be limited to an issue of 14,000,000l., whereas its capital consisted of 16,500,000l., namely, 11,000,000l. lent to the Government, 3,000,000l. representing the value of the Bank Stock held by the proprietors, and 2,500,000l. the amount of the reserved sum, commonly called "the rest." He was at a loss to conceive why, with a fixed and tangible capital of 16,500,000l., the Bank should be limited to an issue of 14,000,000l., seeing that it was at all times quite competent to support a circulation of 2,500,000l. more, and, indeed, had a fair claim to this amount. He had originally understood the right hon. Baronet (Sir R. Peel) to say, in introducing the measure that a discretionary power was to be lodged with the Government, in the persons of the 1309 First Lord of the Treasury, the Chancellor of the Exchequer, and the Master of the Mint, enabling them to authorise the Bank to increase its issues to a certain extent in case of need, and he should have been perfectly satisfied if that power of extension had been limited to an issue of 2,500,000l. But he had since unfortunately discovered, that no such safeguard had been provided, and that the right hon. Baronet had wholly omitted to give any such liberty to the Bank to increase its issues in cases of emergency. The Bank of England was placed in a most disadvantageous position with respect to the circulating medium and the standard of value. Throughout all Europe, and, indeed, throughout all the world, the standard of value and the universal circulating medium was silver, whereas the Bank, being obliged to pay its notes in gold was alternately subjected to violent fluctuations in the quantity of bullion contained in its coffers, and, in so far as the present Act was concerned, it would have a double effect upon the transactions of the Bank of England as a restrictive measure. It was said that the Bank of England could increase its issues under certain contingent circumstances: but how was that provision made by the Bill? If a country bank of issue failed for 90,000l., the Bank of England would immediately increase its issues to the amount of 60,000l. which would still leave a deficiency in the general circulating medium of 30,000l. and, if this were to be of frequent occurrence, the consequences, both to trade and commerce, would be extremely inconvenient. The fears and prognostics of those who had already referred to the objections above stated were made light of; and it had been stated that the country could very well afford to see 4,000,000l. of gold taken out of the general circulation so long as the Bank of England had 8,000,000l. in its coffers; but he differed entirely from this opinion, and he must observe that he was not single in his sentiments upon this subject; at the same time, he felt it to be incumbent on him to observe, that although he had formed these opinions after an experience of seventeen years as a Bank director, he did not put them forward in that place in his capacity as connected with the Bank, but in the more general character of a Member of that House; nor did he desire it to be inferred in the most remote degree that his opinions represented those of the Court of Directors as a body.
§ Mr. W. Williams
was not surprised at 1310 the opinion put forth by the hon. Member opposite, considering he had been so long a Bank Director, nor did he consider his dissatisfaction at the measure before the House as anything extraordinary. It was to be expected that the hon. Member would object to any check being placed upon those exclusive privileges which had so often brought difficulty and distress upon the people of England. The desire of the hon. Member to extend the issue of Bank paper from 14,000,000l. to 16,500,000l., was quite natural; but the expectation was, he hoped, groundless; for the right hon. Baronet had stated, when the measure was first brought forward, his intention to adhere to the principles which he then laid down, and he relied on that determination. The right hon. Gentleman had, in accordance with his declaration in that speech, brought in a Bill, and had since expressed his determination to adhere to it without change. This measure would, he considered, carry out the principle of the Bill of 1819, and if it had accompanied that Bill it would have prevented those disastrous fluctuations in the value of money and property of every kind by the mismanagement of the paper currency, which had brought ruin, distrust, and misery, upon so large a portion of the people of this country. It was calculated that the stoppage by the Bank in 1797 sent 35,000,000l. of coin in gold and silver out of this country. Again, at various periods when the Bank of England after a high issue of paper money had been compelled to contract its payments to save itself from difficulty, see the vast amount of bullion that had been lost. It was the excessive circulation of paper money by the Bank of England that had often generated speculation and high prices —prices advancing sometimes on articles important to the manufactures of this country nearly 100 per cent. The consequence had been, that we had imported beyond the extent of our exports, and the difference had been paid to the foreigner by the exportation of bullion. [The hon. Member gave a slight sketch of the variations in the quantity of bullion in the Bank coffers, and continued.] He believed that if we had favourable harvests for the next two or three years, this measure would give us a currency in bullion, and paper combined to a larger extent than had been the average since the year 1819. Was it not a remarkable fact, that 1311 this country, with all its commerce, had in circulation of gold and silver at the present moment not much more than 30,000,000l., whereas in France the amount in circulation was upwards of 100,000,000l.? He should wish to see introduced, changes in the Mint regulations, and full opportunity given to every merchant who imported gold of coining it at sums as low as 500l. That would increase the circulation of bullion in this country. [The hon. Member again referred to the statistics of the paper issues to demonstrate that they had a great effect on prices, and that the Bank had been involved in difficulties by improper management, and concluded.] He would ask hon. Gentlemen to compare the circumstances of that period with those of the present time, and he thought they must then be convinced that a high or low circulation of paper money was not without its effect upon prices. He should make no further observation, but to say that he hoped the Government would adhere to the Bill, for which he gave them his thanks, and which he should support. He had expected a good measure from the right hon. Baronet, but he confessed he had not expected that the right hon. Baronet would have dealt with the subject in so comprehensive a manner.
§ Mr. Masterman
said, that regarding the 14,000,000l. which were to be issued by the Bank of England on securities, he could not help urging again on Her Majesty's Government, that which living, as he did, among bankers and merchants, he was continually pressed to urge, viz., the alarm with which they viewed that provision of the measure as it stood. It was apprehended that that part of the measure must lead to such a contraction of commercial accommodation as must be highly inconvenient. It seemed to him to be the most expedient course to give the Bank a power of expanding that part of the issues, and such a provision commercial men had expected would have formed part of the Bill. He would suggest to the right hon. Baronet the consideration whether such a principle might not be still introduced into the measure, to continue the power for three or five years only. There was one objection to taking three months average of the circulation of the country bankers, because, as was well known, the circulation varied in amount considerably in different months of the year; and thus such 1312 an average would operate injuriously to the interests of particular country banks. The four years' average was much preferable.
§ Mr. Muntz
said, that after thirty years' blundering about the currency, it appeared that they were now about to be in Paradise. At least the hon. Member for Coventry (Mr. W. Williams) had told them so, but he had not told them what profits would he made, how they should pay the taxes, or what rents were to be. Whatever the right hon. Baronet might say, the question resolved itself into this —whether they could support a high price of corn and a low value of money together. The right hon. Baronet the other evening had said that the value of the pound sterling had always remained the same; but that was not the case; it had varied extremely since the reign of Elizabeth. But as to the right hon. Baronet's comparison between a pound sterling and a foot measure, he could not understand it. People in this country had never bought by any other than the foot measure. The hon. Member read extracts from the Report of the Bullion Committee, to show that Mr. Horner entertained the same view as himself, that there must be a relative price between corn, gold, and silver. Hon. Gentlemen, now-a-days, however, seemed to think they could have a low price of money co-existent with a high price of corn. That was the only point on which he was at issue with the right hon. Baronet, except his attack on the country banks, which he could not approve. Foreign trade was now done for merely a nominal profit, and hardly any occurrence would bring it to a lower ebb than that which it had already reached. He was so opposed to the measure that he moved that the House do resolve itself into the said Committee this day six months.
§ Sir R. Peel
said—I regret that in the present state of public business the hon. Member who has last addressed the House should think it necessary to endeavour thus to revive a discussion upon the principle of the measure, and in his attempt to raise that discussion I am not a little surprised to find that he should seem to expect that any one would now answer in detail objections to the measure; every one of which objections were answered five or six weeks ago. To argue this matter, therefore, with the hon. Member for Birmingham is quite out of the ques- 1313 tion, the more especially as it must be obvious to every one that his comprehension of the subject is wholly different from that of the public in general. [The right hon. Baronet referred at some length to the opinions of Mr. Muntz, as given before a Committee of the House and then continued.] The speech of the hon. Member might have had some meaning in the year 1818, but it does not apply to the state of things which exist in the year 1844, and the adoption of any such principle would be gross injustice towards all who are parties to this transaction. But, as I before said, I have no wish, I can have no wish, to prolong this discussion; my wish on the contrary is, that we should proceed immediately to discuss the clauses of this Bill. The House will not be surprised to learn that since the announcement of this measure several propositions have been laid before Her Majesty's Government. To all those we have given the fullest and most careful consideration; but we have declined to accede to any alteration that would be at all at variance with the principle of the Bill, and it would be a departure from the principle of the measure, if there were to be any addition to the issue upon security contemplated under this Bill, except in certain specified cases. If the Government, as has been suggested by my hon. Friend, the Member for Westmoreland, were to possess a discretionary power to increase the circulation, the pressure on them to bring that about, would at times be instant and extreme. After all, we must adhere to the principle laid down by Mr. Harman, in 1797, that the circulation of paper must depend upon the solvency of the issuing body. If a man possess land of the value of 1,000,000l. sterling, and he were allowed by law to issue paper to that amount, it is needless to observe that to that amount it would be a solvent issue, and, I may add, that such an issue would be in conformity with the principle of the Bill. But one of the objects that we have in view is, that the paper circulation should conform itself to gold — that it should fluctuate like gold—and that by those means it should be made to represent a value equal to that of gold. As an objection to this Bill, and as a reason why it should be altered, we are told that the Bank of England is worth more than 14,000,000l. —that it is worth 16,500,000l. Now, suppose it was worth 25,000,000l., is that 1314 any reason that we should go beyond the 14,000,000l. which we have specified? The Bank may be worth 16,500,000l., but that is not the question. We never assigned the sum of 14,000,000l. as representing the capital of the Bank, nor did we fix on that amount after looking at the bullion in the Bank; but Her Majesty's Government were of opinion that they could not safely allow any greater issue than that of 14,000,000l., and after the best consideration which they could bestow upon the subject they came to the conclusion that that sum must be their maximum. But then we were told that the Bank was worth 16,500,000l., and that Government might safely be entrusted with the discretionary power of extending the issue to that amount if a necessity arose. If we were to possess such a power a month would not be allowed to elapse before we should be called upon to exercise it. It would be held that the test of the necessity was the legitimate demands of commerce—there would be an immediate press on the Government to extend the issue—we should be told "Here are good bills—these are legitimate demands —the parties are all solvent—this is not fictitious paper—what can be the objection to extending the issues in such a case." To such a proposition as would vest such a power in the Government I gave a decided negative. I said at once that such a proposition was an evident denial of the principle on which we were proceeding. To extend the issues to the full amount of capital possessed by the Bank was one proposition, and to give the Government that discretionary power to which I have been referring, was another; to neither of these could I consent. I shall now proceed briefly to state those modifications of the measure which we have thought it necessary to make, and which we conceive to be perfectly consistent with the principle of the Bill. When it was brought forward on the 6th of May, it was thought expedient to select some definite period by the issues in which to regulate the future issues of country and joint-stock banks, and for that purpose, we proposed to take the average of the last two years, or the last three years. We have not thought it expedient to adhere to the period of two years, because it did appear that that might include the lowest amount of country circulation. Independently of 1315 this, it was said that that period would not famish an amount equal to the maximum which would be required for future circulation; and it was apprehended that we should derange many transactions by fixing too low an average. Then it was suggested that we ought to take the average of the last five years, which would include the year 1839, and to this proposition we did not accede; neither to that proposition by which we were recommended to take a single day as the rule, nor that which would have us take four years or three; but, on the contrary, we think we have chosen an average which will fairly fulfil the intentions with which we set out, with as little as possible of public inconvenience. What we propose to do is to take the average of the twelve weeks which immediately preceded the announcement of the measure. There would have been a difficulty either in two years or in four years, if we attempted to apply that principle indiscriminately to all banks. Some banks might with considerable show of reason object to that; they might affirm it to be an unjust average, on the ground that it would include the month of May, 1843. A country banker might say that at that time there had been a great failure of a banking establishment in his neighbourhood; that in consequence of that occurrence he had been obliged greatly to increase his issues for the purpose of supplying the void which that failure created—that the transactions in which he then engaged were perfectly satisfactory to the commercial, manufacturing, and landed interests in his vicinity, but that, nevertheless, it had led to a great extension of the issues of his particular establishment; and, in a word, if we took the average of the last two years we should have been wrong to the extent of 30 per cent. Besides that, if we found one bank doing as I have described, we might find another which had been supplying its customers during the same period by means of Bank of England notes almost exclusively; and thus the average on the two years would never have answered our purpose. Upon the whole, then, we thought that two years would not do justice to all parties, and so we have resolved to take the twelve weeks antecedent to the 27th of April. This is as nearly as possible the three months preceding the announcement of the measure. This, I repeat, was the nearest 1316 approach that we could make towards giving universal satisfaction; for, let us do what we might, there would be some one found to say that the arrangement did not suit his views, and that the average would not be fair as regarded his transactions; for no general plan could be made for every set of particular circumstances. During the three months that we have chosen, prices were about the ordinary level in manufactures, and commerce was in a comparatively flourishing state. The month of April is included within the period, and so likewise is the month of February. The months on which these average issues will be taken are, as I have already stated, the months of February, March and April, and they will, as I think, present a fair test of the whole year. No doubt some one may be found who will tell us that he did more business in October and September than in the months that we have selected, but it must be obvious to the House that we could not frame a measure capable of suiting every individual bank. Upon the whole, then, I should say, that taking the average from the twelve weeks previous to the announcement of the measure will do justice, and interfere as little as possible with the intention and principle of the Bill. Representations have been made to Her Majesty's Government that some inconvenience might arise from compelling banks to confine their maximum of issue to one single week. I do not see that much inconvenience would arise from compelling a bank with no branches to confine its issue within one week; but with respect to a bank which has numerous branches, it is possible that such an one might be subjected to considerable inconvenience. All we require is, that the fair maximum of issues shall not be exceeded —that it shall be kept within certain limits. We propose, therefore, instead of confining the maximum to a week, to extend that period to a month. Supposing, for example, that the maximum of a bank should be 100,000l., and that from transactions to be completed within the month,—suppose that within the month there should occur a fair, or something which had led in past years to an increased demand for accommodation—say to the amount of 106,000l.,—in that case, provided the Bank will limit its issues in the first three weeks of that month to 98,000l., and if in the last week the is- 1317 sues shall amount to 106,000l., so that the total average of the monthly period does not still exceed 100,000l., then in that case the Bank would not be subject to any penalty. That appears to me to be a just arrangement, more especially with respect to a bank which has branches. Then we do not propose that the account shall extend beyond the month. The average for each month must not exceed the maximum. Suppose there is a diminution in the issues within a given month; in that case, the Bank is not to be allowed in the month following to exceed the maximum of its issues in order to make up for the diminution in the preceding month. The Bill does not proceed to that extent; but we have reason to believe that it will prove exceedingly satisfactory to a great number of joint-stock banks and of private banks to extend the period from a week to a month. The only other point of the slightest importance, with respect to which Her Majesty's Government propose any modification, is to provide the period when this limitation of issue shall take place—which we think should be upon that day which, if I may say so, is the commencement of the year with joint-stock banks—the 10th of October. On that day their issues are renewed, and on the 10th of October next, therefore, we propose that the limitation shall commence. There is only one other point. At present there is a penalty for exceeding the issue of three times the amount of the excess committed. We propose, relying upon the good faith of the gentlemen who conduct country banks, that the penalty shall equal the amount of the excess; that is to say, those who exceed by 1,000l. shall be liable to a penalty of 1,000l. Now, after very mature consideration, these are the modifications in our proposal which we propose to make; we do not think that, in any degree, they endanger the principle of the measure, but that they are in themselves just and reasonable. I hope that we shall now proceed to consider the Bill in Committee, and, adverting to the proofs which Her Majesty's Government have shown to listen to modifications proposed for their adoption, that the House will not think that we are desirous to adhere to what we first proposed, when reasonable propositions are offered for our consideration. I trust that there will be little or no opposition to the progress of this Bill in Committee, and I proceed 1318 with the confident hope on the part of Her Majesty's Government, that this measure will continue to receive that cordial sanction and approbation of this House which is likely to have due weight and authority in the commercial world and throughout the country.
§ Mr. Hume
was anxious to see the plan of the right hon. Baronet carried out. He wished to inquire, however, of the right hon. Baronet, whether be intended to provide gold to answer the paper issues of the banks of the United Kingdom as well as of the Bank of England. If so, he thought all restrictions might be removed, provided all notes were made convertible at the Bank. He wished the right hon. Baronet to repeal the legal tender clause, and to require every bank to retain a portion of gold to answer its own notes.
§ Sir R. Peel
had entertained strong prejudices in favour of the plan of the hon. Member who had just sat down. Supposing, that having adopted his principle, and that free competition in banking combined with immediate convertibility on demand would secure an excess in issue, he would immediately consent to repeal the legal tender clause; but he feared if country notes were made immediately convertible, that that result would not follow, and that there would still be a stock of gold here; that country bankers being willing to depend on their own paper until a time of pressure came, when they would ask for it, the Bank of England would still continue to be the source to come to for gold. Scotland was an example of this. Practically Scotch notes were immediately convertible; but did Scotland keep a large supply of gold? On the contrary, Scotland was quite ready to rely upon England for gold, which it trusted to get from London in case of an immediate demand for it. For these reasons he was desirous of adhering to the principle already acted upon in this matter.
§ Mr. Wallace
concurred with what had fallen from the hon. Member for Birmingham (Mr. Muntz), and could not but think that the measure was much better suited to persons who had already well feathered their nests and had plenty of capital, than to people who were comparatively poor, and were striving to make their way. He believed we were on the eve of a bad harvest; and he feared that, combined with that circumstance, this 1319 measure would be severely felt by the poorer classes for some time to come.
§ Mr. Barnard
said, as the Bank were to be called on to make advances to the Government upon Deficiency Bills, how was that diminution of the circulation to be made up when the dividends were payable?
§ Sir R. Peel
said, the hon. Member need not sell out under any apprehension that there would not be gold enough to pay the dividends. Besides that, his right hon. Friend had adopted a plan for equalizing the amount of the deficiency Bills at different periods; experience had shown that there was no ground for the apprehension entertained by the hon. Member.
Sir W. James
had studied this question for a month, and had not yet been able to make up his mind, although the argument of the right hon. Baronet was so logically built up—syllogism on syllogism—that it was impossible to refute it. He feared that the mines of the world would not supply a sufficient quantity of gold if the principle of a metallic currency were fully carried out. The subject was so beset with difficulties to his mind that he should not vote at all.
§ The House divided on the question that the words proposed to be left out stand part of the question:—Ayes 205; Noes 18: Majority 187.
§ [It seems sufficient to preserve a record of the Minority.]
|List of the NOES.|
|Colborne, hn. W. N. R.||Seale, Sir J. H.|
|Collins, W.||Sibthorp, Col.|
|D'Eyncourt,rt.hn.C.T.||Taylor, J. A.|
|Duncan, G.||Trollope, Sir J.|
|Gisborne, T.||Turner, E.|
|Hastie, A.||Wakley, T.|
|Henley, J. W.||Wodehouse, E.|
|Newdegate, C. N.||Wallace, R.|
|Scott, R.||Muntz, G. F.|
§ House in Committee.
§ On the second Clause,
§ Mr. Newdegate
said, that having on a previous occasion alluded to his estimate 1320 of the contraction of the Bank Issues, and having stated he would adduce this on Committee, he now wished to state that after examining Parliamentary Returns he found, speaking in round numbers, that on the average of the last twenty-three years of the Bank of England, since the Act of 1819, had—
The right hon. Baronet assumed that the present amount of gold in the Bank would continue the same, and he based his issue accordingly on it—making a total issue of 30,000,000l., and considers, that of this, 22,000,000l. would be available for the active circulation of the Bank of England; but the present amount of bullion in the coffers of the Bank was nearly double that of the annual average for the last three-and twenty years, and as such being strictly an exceptional case he (Mr. Newdegate) argued that, to base the issue upon the assumption of its continuance was to place it on an unsafe foundation. The future position of the Bank in that respect might, with much more justice, be assumed at one-half of the present amount of bullion; and if that sum 8,000,000l. were added to the 14,000,000l. securities, the circulation would not practically be more than 15 or 16,000,000, though the total issue would be 22,000,000l., a figure more than 8,000,000l. below the average of the last twenty-three years, thus will the active circulation be diminished to an amount of between 3 and 4,000,000l. less than the average of the twenty-three years, and be rendered totally insufficient for the ordinary exigencies of the country; this too, taken without making allowance for the extra amount, which must hereafter lie dormant in the Bank coffers. The prices of all produce would be directly affected by such a contraction, and agricultural produce more especially; and he had no doubt that they would come down 18 or 20 per cent., beginning to fall when the change began to operate, and progressively diminishing afterwards with the restricted circulation. The whole question turned, in fact, on the amount of bullion the country had to look for. He (Mr. Newdegate) saw no reason to agree with the assumption of the hon. Member for Montrose, that the amount was unlimited. On the contrary, although he 1321 believed the quantity in this country very great, he also believed that the sum in general circulation was limited. There was before the Committee a proof of the actual amount in circulation since 1819; and there were no grounds to show that the necessity for the future would be less than it had been for the past. On the contrary, there was every reason to assume that an increase in its amount would be requisite to provide for the wants of an increasing population, and an extended traffic. The restriction which the Bill imposed would thus act in an increasing ratio on prices; and the pressure which it was sure to cause upon all classes of producers would be most grievous on the poorest class, who had but their labour to barter against the fixed payments. The prospect of a bad harvest was staring the country in the face; the exchanges might turn against England as they did before, and so reduce indefinitely the amount of bullion in the Bank; for there is every reason to suppose that, as the high amount of bullion in the Bank is unprecedented, it will not so continue; and then in every successive year would be felt the depressing influence of the Bill before the House for restricting the circulation. The main object of the Measure was to prevent the Bank of England acting as a Bank of support, a function which it had discharged almost to the salvation of the country on more than one occasion. When the exchanges turned against England, the demand for gold was of two kinds—namely, the demand for exportation, and the demand caused by a panic. The action of the Bank in supporting credit and allaying panic has hitherto proceeded thus. When the exchanges turn against this country, and the bullion is withdrawn from the Bank in any great quantity, a feeling of insecurity in credit soon shows itself at home—first by the bankers collecting gold to meet the exigencies of a run; thus they co-operate with the foreigner in drawing bullion from the Bank of England. The Bank then restricts her issues, and the feeling of insecurity extends rapidly to the public; they again, through their Bankers, draw more gold. But prices fall, and the exchanges cease to be unfavourable—at all events are checked in their downward progress. Their resuming a direction favourable, however, to this country, is a matter of time, whilst the panic keeps up a continual drain upon the bullion of the Bank. This is a secondary action, and the Bank commences more liberal issues of her notes, 1322 because she sees the exchanges are improved, and wishes to re-assure the country— for thus the internal drain upon her coffers will be stayed. By this system, the Bank serves as an index of exchange to those who are not so capable of judging of the real condition and probable direction of the exchanges; they prevent the panic— continued, if not caused, by ignorance— from further increasing the evil of diminished bullion; for, of that evil, panic is often as much the cause as the consequence. It was, in his opinion, most unwise policy on the part of the Government to remove that guardian influence from commerce and labour in this country; for the time might still arrive, as it did before, when the circulation would be altogether inadequate to the wants of the country, by reason of the drain for bullion, and there are no means for remedying this afforded by the Bill before the Committee. He did not see how the circulation could be maintained at the average of the last twenty-three years, should the Bill come into operation in its present shape. He could not help concluding from all these circumstances, that the Bill had not been sufficiently considered before it was proposed; and he certainly was of opinion, that it was not at all thoroughly understood by hon. Members. He believed that the fluctuations in value would be more violent than heretofore, and the consequent depreciation of price more detrimental to the labouring classes. Having endeavoured to show the House the effect of contraction of the Currency, judging from the experience of past years, he must be permitted to add his condemnation of the Measure, which, with its stringent enactments, he believed to be wholly unadapted to the state of the country. The hon. Gentleman concluded by saying, that he felt it to be his duty, as several hon. Gentlemen on his side (Ministerial) of the House were strongly opposed to the Clause relating to issues by the Bank of England, to divide the House. That Clause was like ossifying the heart of the human frame, which, when any additional quantity of blood should be propelled through the veins, would inevitably result in the bursting of the smaller vessels. Such being his strong conviction, he felt it imperative upon him to take the sense of the House upon the Clause in question.
Circulation 19,000,000 Deposits 9,000,000 Securities 22,900,000 Bullion 8,000,000 Surplus or rest 3,000,000
§ Mr. Newdegate
begged to explain, that, from being unaccustomed to the forms of the House, he had omitted to conclude with the terms of his Amendment, which was, that the words "securities upon 14,000,000l. be omitted, and that 22,000,000l. be substituted, as the average of the last twenty-three years." The hon. Member subsequently explained, that the Returns from which he had quoted were chiefly derived from the Parliamentary Return, No. 580, which had been delivered to the Members in June, 1842. He certainly had believed that Bank Post Bills had been included, and so they must be in future similar Returns, and so be taken into account. My statement (continued the hon. Member) has proceeded on the same premises as that of the right hon. Baronet, who, in his speech of May 21, made the following statement with reference to the present condition of the Bank:—Take the case at present; the Bank is possessed of great amount of bullion—not less than 16,000,000l. The banking department of the Bank of England is possessed of not less than 30,000,000l. of Bank notes, 14,000,000l. issued on securities, and 16,000,000l. on bullion; a great proportion of these Bank-notes will necessarily lie dormant in the coffers of the banking department, because it is not possible that more than 22,000,000l. can be made available for the supply of the legitimate demands of commerce.The right hon. Baronet here calculates that about one-third of the total issue of notes will be dormant under the present system; if, therefore, the bullion, instead of remaining hereafter at the present amount, falls to anything like the average of what it has been in past years—that is, 8,000,000l.—if the issues on securities made by the Bank, are absolutely limited to 14,000,000l., instead of 22,900,000l. the average of past years—and, if we deduct one-third for the amount of notes which will be dormant in the Bank, it will only leave 15,000,000l. available for the purposes of commerce, with no extra allowance for rest or surplus, an amount 4,000,000l. less than that which has hitherto been required for the natural commercial transactions of the country, as circulation of the Bank of England; and, if further we connect this with the fact, that the restriction of issue on securities is 1324 an absolute restriction, and connected also with the other restrictive provisions of the Bill, I do not think that I have overstated the amount of the contraction, when I estimated it at between 8 and 9,000,000l., on a circulation of considerably less than 40,000,000l., which, of late years, has been that of England and Wales. The probable contraction cannot, therefore, be estimated at much less than 20 per cent. in the whole. The right hon. Baronet observes, that during the first year of the period upon which I have taken the average annual issues of the Bank up to the present time, the Act of 1819 was not in full operation, this is true as far as it goes, for paper did rise absolutely to par with gold till 1821, but if you take the preceding year out of the calculation it will make an extremely slight difference in the result. The right hon. Baronet also observes, that the period since 1819 includes several years, during which our pound notes were in use. These notes were issued to meet contingencies, which I conceive we must anticipate as likely again to occur, and which must be met, if not by an issue of one-pound notes, by some relaxation of the Currency, of equivalent effect.
§ Sir R. Peel
said, that the point raised by this Amendment had been so often discussed, that it was really unnecessary for him to go over the subject again, or indeed to do more than express astonishment at the declaration of the hon. Gentleman, that the House was unprepared to decide a question which, in his judgment, had been so insufficiently considered. The hon. Gentleman seemed to entertain most erroneous views of the effect of this provision. If the Bill passed there was really nothing in it to preclude the Bank from doing all that the hon. Member desired, or even for issuing 28,000,000l. or 30,000,000l. of its currency, if it could find profitable employment for it. The Bill gave the Bank the power of issuing 14,000,000l. based upon securities, and 16,000,000l. based upon gold, and they had every reason to believe that if the Bill passed the circulation of Bank paper would not be confined to 14,000,000l., as the hon. Gentleman seemed to think, but would extend to 22,000,000l. or 24,000,000l., as he desired. The difference between them was not as to the amount the Bank should issue, but as to the basis upon which these issues should 1325 rest. If the Bank were to possess the power the hon. Member desired to give it, and if it exercised that power of issuing upon securities without having any gold basis to meet the issue, why the probabilities were that the Bank would be speedily ruined. In truth, the whole speech of the hon. Gentleman, if rightly understood, was not a speech against this measure so much as a speech against the metallic system. He thought, however, that the House would not be inclined to go with the hon. Gentleman in his desire to restore a currency without a basis, which in reality only created fictitious value, and when the bubble burst spread ruin over the country and deranged all commercial transactions. In his endeavour to support this question, the hon. Member had made use of some very erroneous calculations. First, the hon. Gentleman had included in his estimate of the Bank circulation all the Bank post bills issued by the Bank, and, secondly, that he had taken those years during which the Bank issued one pound notes. These were important errors; but he would not further occupy their time in meeting those objections. He thought the great benefit to be derived from the measure, was the prevention of those rapid contractions of the currency which they had experienced.
§ Mr. Kemble
believed that one beneficial effect of the Government Bill would be to prevent wild speculations in foreign railways. He did not mean to say that the present Bill would put an end to all speculation; nor was such a result desirable, for there ought to exist some moderate and wholesome speculation, though not those dreadful alternations of prosperity and distress which had existed. He thought the Bill calculated to produce more steadiness than had prevailed for a long period of time, and therefore it was entitled to the support of the House. At the same time, as the present was a great experiment, it would probably have been more satisfactory to the public if the right hon. Baronet had adhered to his original proposal, by which he retained to the Government the power of increasing the circulation to a limited extent. He at least had understood the right hon. Baronet so to have expressed himself.
§ Mr. C. Wood
could undertake to say that the only circumstance under which the right hon. Baronet had contemplated the exercise of such a power as that alluded 1326 to by the hon. Member was the withdrawal of country notes from circulation, when, with the sanction of the Government, the notes of the Bank of England might, in a certain proportion, be substituted. He thought, however, all discussion should be reserved on this point until they reached a subsequent Clause of the Bill. He supported the Government proposition, and should vote against the Amendment.
§ Mr. Newdegate
then proceeded to withdraw his Motion, in accordance with the suggestion of the hon. Member for Halifax; and said that, in what he had proposed, his object had been, that the power of the Bank to issue on securities, should not be limited to any amount of securities less than that upon which they (the Bank) had issued on the annual average of the last twenty-three years.
§ Amendment withdrawn, and the Clause as amended, was agreed to, as were also Clauses 3 and 4.
§ House resumed Committee to sit again.
§ The House adjourned at a quarter-past one o'clock.