BANKING (SCOTLAND) BILL. (Hansard, 9 June 1845)

§ Mr. F. Maule
proposed an Amendment to the effect, that the bankers be allowed to amend their Returns of circulation.

§ The Chancellor of the Exchequer
opposed the Motion, on the ground that it was identical in substance with one negatived on Friday.

§ Mr. Hume
supported the Amendment, and protested against any interference with the Scotch currency.

§ Sir R. Peel
was much disappointed at the manner in which the measure had been received. He certainly had thought that the right hon. Gentleman opposite would have seen, in his (Sir R. Peel's) exposition of this measure, a desire not to alter, but to preserve within safe limits, the system of Scotch banking.

§ Mr. Hume
understood, that the right hon. Baronet had determined not to make any alteration in the currency of Scotland; and he could not, therefore, allow this clause to pass without opposition. All he wanted was an explanation of the measure. If it was good it should meet with his support. The right hon. Baronet had stated that he wanted, in case of an overflow of paper money, to guard against the Scottish banks 242 drawing on the Bank of England. He did not believe that the Scottish banks ever drained the Bank of England, and should be glad to be enlightened, if the fact were otherwise.

§ Sir R. Peel
said, that when trade was good and speculation rife, there was generally a tendency to issue an increased quantity of paper where facilities existed. For a certain limited time the value of the paper would be kept up; but when a period of depression came, it would be incumbent to convert notes into gold; that could only be done by a sale of securities and obtaining gold, of which the only receptacle was the Bank of England. These remarks applied to the banks of Scotland, and were also equally applicable to the provincial banks of England. The value of the whole currency would be diminished; and it would soon be discovered that paper was issued to excess, and with such a simultaneous demand for gold from Scotland and England upon the Bank of England, great inconvenience would result, and commercial transactions generally would be greatly restricted and impeded. It was, therefore, sound policy to place some restrictions on the issue of notes.

Mr. Williams
thought, that in justice to the measure that had been passed last year, the Government were bound not to afford any greater facilities for the issue of paper money in Scotland or in Ireland. He remembered when the Bill of 1814 was reenacted in 1826, after it had been partly repealed in 1822; so far as regarded the circulation of one pound notes—he remembered the threat of the Scotch bankers on that occasion. They said, that they had an immense amount of property in the funds, and they would dispose of that property and get the amount in gold, and put the Bank of England in difficulty. That threat prevented the Government from suppressing the issue of one pound notes in Scotland. It was said that there were no failures in the Scotch banks. He remembered several failures. A short time ago, in consequence of the failure of a bank near Paisley, there existed the most intolerable distress, when the Paisley manufacturers were obliged to apply for charity.

§ Mr. Hawes
denied that the Scotch circulation was sustained during the time of the greatest drains by drawing on the Bank of England.

§ Mr. P. M. Stewart
considered this clause to impose a tremendous penalty. He wished to modify it. Supposing one, two, or three banks in Scotland issued short of the amount which they were by law permitted to issue, he would permit other banks to issue in excess to the same amount that those banks issued short. This would be the means of keeping up the full amount of circulation within Scotland, which, according to the Returns, would not be less than 3,061,000l. The Amendment he wished to propose would, therefore, by no means militate against the principle of the Bill. It had been objected that the difficulty of ascertaining the amount of issues by each banker would render his proposition impracticable. He did not think so. Nothing could be more easily carried into practice, if the House would adopt the principle. Supposing any bank or banks should discontinue business, and the remaining banks were not allowed to increase their issues, the object of the Bill, in wishing to maintain a circulation of 3,061,000l., would not then be carried out. He would therefore propose, that the following Proviso be added at the end of Clause 13:— Provided always, that such banker shall not be liable in such penalty, unless the aggregate amount of such monthly circulation of all the bankers in Scotland shall exceed the aggregate amount of the average circulation of all the banks in Scotland to be taken in manner herein provided.

§ Sir R. Peel
The hon. Gentleman talked of a tremendous penalty; but the penalty would be consequent on the amount of excess of issue; therefore, if the excess of issue should be small, the penalty would be small; and if great, the penalty great. What was done in the case of the English banks? Joint-stock banks in England were prevented from combining; but it was permitted in Scotland for any two or more banks to combine; and the aggregate amount of the issues of those banks so combined, was to be certified by the Commissioners. In case, however, there should be any excess in the circulation of any one bank, it was to be liable 244 to a penalty, the amount of the penalty to be in proportion to that excess. According to the Amendment proposed, every bank would be at liberty to extend its issues in proportion to the deficiency of the issues of other banks; but how were the bankers individually to know whether there would be an excess or a deficiency upon the permitted sum to be issued? Each banker would be trying to take advantage of any supposed deficiency of issue by other banks, in order to push out their own notes. How could they foresee whether the amount issued in the next month would be below or above the amount of their own return? Each banker would have to speculate upon this. Unless, therefore, with some such provision as that which this clause embodied, how could the system of banking in Scotland be established upon any principle? The hon. Gentleman (Mr. P. M. Stewart) had put a case that he supposed might arise—namely, that the issue of bank notes in Scotland would fall below 3,061,0001.; but, by permitting the union of banks in Scotland, effectual precaution would be taken against there being any such diminution. He did not think the case at all likely to arise; and, therefore, he was decidedly opposed to the Amendment of the hon. Gentleman.

§ Mr. E. Turner
thought that the banking measure in England had had the effect of making the work less profitable, but more comfortable, to bankers; and if there should be a consequent and ultimate falling off in the amount of issues, the question must be reconsidered, not only with respect to Scotland, but also with reference to England and Ireland.

§ Mr. P. M. Stewart
replied, that he considered the plan proposed was perfectly practicable. He would put the case of thirty customers coming to a young bank from the old bank. The old bank would decline to make issues to the same extent as formerly, because they would be unnecessary; but the other bank to which the customers went would require an increased circulation. This might be allowed; and yet the whole circulation of Scotland would be kept within the present limits. The only reason against his proposal was, that the amount of issue would be a matter of speculation; but he had received evidence that it might be securely allowed; the banks of Edinburgh and Glasgow would understand every week, whether one bank wanted more or less, and the individual 245 returns would be regulated accordingly. The hon. Member for Truro said that the English law had rendered banking less profitable, but more comfortable; as the notion came from the Land's End, it was evidently far-fetched. He would like to see the English measure tried in fair and in foul weather, before he gave an opinion upon it; but in Scotland, the proposed measure would prove detrimental, not only to the bankers, but to the landed and industrial people of Scotland; and the landlords and farmers of that country would not live long before they found where the pinch was.