USURY LAWS REPEAL BILL. (Hansard, 4 August 1854)

§ MR. CAYLEY
said, it was his intention to move that the House resolve itself into Committee upon this Bill that day month. He must complain that the Bill had been introduced at this late period of the Session without any preliminary inquiry, and without any full and clear exposition of its grounds; and he maintained that there were many reasons why they should not proceed in this hasty manner to deal with a question of so much importance. This was not the first time that the same question had been brought under the attention of the House. There was 1342 an idea, after 1825, that in the panic which occurred in that year the commercial interests might have got money directly from legitimate resources, at a more reasonable rate of interest, if the usury laws had been repealed as regarded bills of exchange. An inquiry took place preceding the renewal of the Bank Charter Act, in 1832, and the Committee decided that it would be expedient to repeal the usury laws as far as regarded bills of exchange of three months and under. In 1833, a Bill was passed to that effect; but in 1836 another commercial panic took place, and in 1837 a Bill was passed to extend the law of 1833 to bills of exchange of twelve months and under. The question was again raised by Lord Lansdowne in 1841, upon which occasion the late Lord Ashburton stated that the relaxation of the usury laws had been of great benefit to the lender, but had not conferred an equal advantage upon the borrower. A Select Committee was then appointed to consider the subject, and that Committee reported in 1842, but refused to declare any opinion. The parties called before that Committee were all of them persons connected with the moneyed interest, with the exception of Mr. Cooke, of the firm of Truman and Cooke, large dealers in Mincing Lane, and of Mr. Graham, an official assignee connected with the Court of Bankruptcy. Mr. Cooke stated that in his view the relaxation of the usury laws had been extremely favourable to the capitalist, but extremely detrimental to the borrower, and he therefore considered that it had operated very badly. Mr. Graham declared that the relaxation of the usury laws had raised the rate of interest to those parties who had afterwards become bankrupts, or, in other words, to the most needy persons. But that was not all. In his evidence before the Committee which sat in 1847, Mr. Horsley Palmer, who had been Governor of the Bank of England, and who had recommended the Bill of 1844, which the Committee was then considering, stated that he had never known such fluctuations in the rate of interest and discount as had taken place since the passing of the Bill of 1844, and his statement was corroborated by Mr. Cotton and Mr. Tooke. Now, if the laws as regarded money were more free, it would be quite fair to contend that the capitalist should be at liberty to deal with his commodity as he might think fit, though reasonable doubts might be suggested whether money, 1343 considering all the functions it had to perform, did not differ somewhat widely from every other kind of property. But the laws as regarded money were not free. The monetary laws of this country were based upon the most restrictive system; and he must contend, from the evidence taken before the Committee of 1847, that the great commercial panic of that year did not arise from the operation of any natural law, but from the operation of artificial restrictions, invented and applied by the Legislature. Mr. Samuel Gurney stated before the Committee that the scarcity of money in 1847 was artificial and not real, and was caused by the absurd and whimsical provisions of the Bank Act of 1844. What was the House now asked to do? Why, it was asked to extend the system of legislation which was now connected only with bills of exchange and promissory notes to all transactions as regarded land. He maintained, however, that the Chancellor of the Exchequer had no right to put the landed interests into the same category with the unrestricted moneyed interests, until he had altered the laws which created artificial periods of scarcity and of pressing demands for money. The natural tendency of money was to become cheaper, and if Acts of Parliament, and not the natural laws of money, produced those periods of scarcity, they had no right to make the rate of interest free until they took the present restrictions away from money. Until they had reduced the expenses of the transfer of landed securities, it would be most unfair to put the poor yeoman or country shopkeeper in the same category with those the transfer of whose securities cost a mere trifle. The proposed repeal of the usury laws might suit the interests of Lombard Street, Threadneedle Street, and St. Swithin's Lane, but it did not necessarily follow that it would equally suit the interests of the commercial, manufacturing, and shop-keeping community, or that it would be equally advantageous to the landed, railway, and mortgage interests. The present Bill would most injuriously affect raily debentures and mortgages to a most enormous extent. They ought to make money free, if they made interest free, or if they kept money restricted, which was the effect of the Act of 1844, they ought to keep interest restricted too. The system now in operation was one which produced, by Act of Parliament, those periodical periods of scarcity 1344 which drove the industrial interests to Lombard Street for relief. Augustus was said to have found Rome brick and left it marble. The right hon. Gentleman the Chancellor of the Exchequer had found Lombard Street a limited monarchy, and he seemed to desire to leave it a grinding despotism.

MR. HUME
said, he agreed with his hon. Friend (Mr. Cayley) that any restriction, such as that imposed by the measures of 1844 and 1845, must be attended with unalloyed evils. His hon. Friend had spoken of the effect of the usury laws upon landed property; but had he forgotten that the witnesses examined before the Committee, of which he was a member, proved that the usury laws subjected landed proprietors to a rate of interest of occasionally as much as ten per cent? Before that Committee, and before the Committee of the House of Lords, the bulk of evidence showed it would be most beneficial to have free trade in money; and he hoped the time was not far distant when every one would believe as he believed, that, as in sugar and coffee, so in gold, individuals should be left to buy in open market at the current prices, without legislative interference. However, the subject was one that required great consideration, and upon that ground probably it would be better that the discussion should be postponed till next year, when the monetary question would be brought fully before the House.

§ MR. WILKINSON
said, that these usury laws were originally intended to benefit the landed interest exclusively; but they could not any more regulate the price of money in the market than they could the price of hay or any other article of commerce; neither could they compel persons to lend their money, whether they would or not, at any fixed rate of interest.

§ MR. MALINS
said, that the usury laws having been repealed as regarded personal securities, it would be perfectly ridiculous to attempt to reimpose them. But how stood the case between land and personal property? If a person deposited a quantity of sugar or coffee as a security for a loan of money, the lender of that money might legally take 40 per cent interest for its use; but, as the law now stood, if a person lent a sum of money on security of land, it 1345 would be illegal for him to receive more than 5 per cent interest. If he sought to recover more, the contract would he vitiated. The question then resolved itself into a distinction between the two kinds of property, personal and landed property. Was it right to make that distinction? Now he wanted to know whether it afforded any protection to the owners of land? So far from it, he believed it to be a great detriment and a great injury to the land, because the value of property depended much on its facility of transference from one to another. In consequence of the state of the law they had money panics, and the rate of interest bad run up, within the last forty eight hours, to 54 minimum. They knew that in 1847 the minimum of the rate of interest was 8 per cent. When money was suddenly wanted, and the borrower had nothing but land to offer as a security, by the law that was the worst description of property that could be held, because it was illegal for the owner of that land to give more than 5 per cent for the money, while, if the same party had had goods, he could have got money readily, being at liberty to give whatever rate of interest might be required of him. The lenders of money turned away from land, and lent their money on personal security at 8 and 10 per cent. So far, therefore, from benefiting land by these usury laws, they imposed a great injury upon it; they rendered it the least available of any species of property in the money market when the professed object of the law was to make it the most available. So far, therefore, from conferring any boon upon the landowner by these laws, they were putting restrictions upon him. It was said by the hon. Member for the North Biding of Yorkshire (Mr. Cayley) that this measure would be very detrimental to the small landholders. He confessed he was unable to see that. The small landowner either got his money or not; if his security were available he got it, if it were not available he did not. It was quite a mistake to suppose that land was the only available security. He had himself been engaged in a case where a young man had, upon personal security, given 30 per cent interest, and to which the Court of Equity saw no objection, since the Legislature had established the law that upon personal security, unaccompanied by a deposit of deeds relating to landed property, the parties were at liberty to make what contract they pleased. The result of his experience and 1346 of his observation in his profession was, that instead of the proposed change in the law doing any injury to the land, it would confer a great benefit upon it. Any measure which assimilated the law affecting real and personal property was, in his opinion, a good law, and therefore he gave his most cordial support to the present measure. It would have the effect of doing away with a great many lawsuits in cases where money had been borrowed, and in which no questions could possibly have arisen if land security had not formed a portion of the transaction.

§ MR. SPOONER
said, he objected in the first place most particularly, to the time at which the Bill had been brought I forward. At this late period of the Session it was utterly impossible the subject could receive that attention which its importance required. In the second place, he objected to the Bill because it was intended to alter that which had been the established law for a very considerable time, and that in so altering it they would affect bargains which had been made under the existing law, which could not be done without inflicting injury on some persons who were parties to those bargains. He was apprehensive that the proposed change of the law would very seriously injure one class of persons—he meant the small landholders throughout the country. They Lad purchased their property on certain terms, and had borrowed money for the purpose of effecting the purchase on certain terms. Now, what would be the effect of this law upon them? There were in all parts of the country solicitors who, as soon as this law came into effect, would say to their clients who had lent the money to these freeholders, "You see that the value of money is raised by this new law, and you must raise the interest on the money you have advanced to these persons, and not be content with 5 per cent." He had no doubt that a great deal of this sort of thing would go on among the smaller holders of land in this country. Upon that ground, therefore, he objected to the Bill. Again, who, he would ask, had called for this Bill? Had the necessity for making such a great change been proved? On the contrary, the measure was totally unasked for, and was altogether a voluntary change from a system which had lasted for many years. He considered it dangerous at any time to make these changes, but more especially so at the present moment, when they were in a state of war, and 1347 when it was impossible at any one moment to know what would be the state of the money market or the rate of interest. By this measure they would subject a large body of persons who were now exempt from those changes, without notice, to become liable to all the influences and fluctuations which would necessarily take place in the money market when the provisions of the Bill came into operation.

§ MR. HENLEY
said, he considered that, as the small landed proprietors almost invariably paid the full rate of interest, that rate would be increased if this Bill were passed. There had been many transactions on the faith of the interest on land not being greater than 5 per cent, especially in the case of members of freehold land societies, and the repeal of these laws would, therefore, injuriously affect those persons.

§ THE CHANCELLOR OF THE EXCHEQUER
said, after the experiments they had already had, and after the cautious manner in which the change had been introduced with respect to other securities, he thought the time was come to take a decisive step, either to confirm or abolish these laws. This Bill would tend to promote freedom of trade in money, and as it had been unanimously passed by the House of Lords, without objection or alteration, he confessed he should be very sorry to see anything done which might have the effect of interrupting the House of Lords in that career, and which would do no credit to that House.