§ Order for Committee read.
§ THE CHANCELLOR OF THE EXCHEQUERSir, as some modifications have been made in this Bill, perhaps it will be as well that I should describe how it stands at present. The starting point, I think, in any discussion of this character, must be the Act of 1844, previous to which we were in a chaos of unsound principles and dangerous practice. That Act, however, laid down a complete system for the regulation of the issue of paper money. The principles on which it proceeded were four—first, that the paper money of the country should proceed from one single source; secondly, that the issue of that paper money is the prerogative of the Crown, consequently, that the profit attaching to it should form a legitimate portion of the public revenue. In the third place, that it is the duty of the State to see that the paper money was so secured to the noteholder that it might be accepted in the manner in which paper money is intended to circulate without doubt or question, and with perfect security against loss on the part of those who might so accept it. The fourth condition of the issue of paper money is that which is most clearly expressed in the Act itself—that an absolute and rigid limit should be placed upon the issue of that paper money except so far as it is adequately secured by being represented by a corresponding amount of bullion. Of these four objects the last is absolutely and finally secured by the Act of 1844. The object of this measure is distinct. We desire to place Parliament, so far as the issue from a single source is concerned, in such a position that it will be able, after the expiration of a moderate time, to deal with these questions freely and without 1248 prejudice. We do not ask Parliament to announce the adoption of any principle, or to add anything in that respect to what was done by the Act of 1844. With regard to the other two questions contemplated by the Act of 1844, as attendant upon the normal system of issue—namely, that the issue of bank note paper should be productive of revenue, and that the payment of the notes should be secured to the holder, our view is somewhat different. Under the present system of issue it has been found that the machinery provided by the Act of 1844 for the purpose of absorbing private issues has to a great degree failed. If the process of absorption were to go on at the same rate only at which it has proceeded for the last twenty-one years, some centuries must elapse before it is completed. It is not desirable obviously to postpone the object of the Act for so long a period, and as regards the productiveness of the issues to the revenue it is plain that under the law as it at present stands that principle is rather acknowledged than carried into effect. The amount paid by" the issuers of private bank notes was an acknowledgment, perhaps, of the principle, but it was an acknowledgment within limits so narrow, amounting between the payment for composition and the payment for licences to less than one-half per cent, that it should be regarded as but a very partial application of the principle. It is provided by the Act of 1844 that, as private issues are absorbed after the payment of a regulated compensation, which was supposed would only endure for a limited number of years, the whole profits of these issues should pass to the State; but the proportion of issues that have lapsed has been so moderate that very limited effect has been given to that principle. We propose by the present Bill that for a term of years, which will be fixed, as far as regards the banks which may conform to this Bill, a payment of £1 per cent shall be substituted for the present payment of 7s. per cent, together with a certain moderate annual charge for licences on the issue of notes not very easy to calculate. Larger profits might have been asked for, but the main object of the Bill is not so much to open an additional source of revenue during the term of years specified as to fix a point at which Parliament should be at liberty to deal with all the points which appertain to the soundness and security of the system of 1249 the issuing of bank notes. I have, therefore, no scruple in asking for a reduction of the percentage which we at first required. There is another point in regard to which it is still more important that Parliament should adopt a measure which would place it in a position to act freely in these matters, and that is the question of the security of the noteholder. There is no occasion to speak either of the high character borne by the private issuers in general or the prudence of their transactions ordinarily, but at the same time painful instances which occur from time to time remind us of our duty to contemplate a system of complete security of bank issue. One instance in particular of recent date, and which it is not necessary to name, has tended to bring the subject home to the public mind. The object of this Bill is not so much to obtain immediately any great end as to lay the foundation experimentally of a system under which, so far as regards the issues of the banks which may accept the provisions of the Bill, it shall be brought easily and by a quiet process of voluntary operation within the power of Parliament to deal satisfactorily with the important subject of private is sues. I may be asked, what is to be the position of the banks which will come under the Bill, and what is to be the position of those which will not come under the Bill? With regard to those banks which come under the Bill, it would be impossible to give them any rights beyond those j which will be conferred upon them provisionally, and which will determine with this Bill. Anything beyond that belongs to the great and important subject of the regulation of the principle of issue; and my desire is satisfied, provided we shall secure for Parliament, as I think we shall secure for it by this Bill, a free, unbiassed, and untrammelled consideration of that subject at some time—a time which will come some years hence. When that time, arrives we shall have before us the principle on which our great bank statutes are framed. If we are not satisfied with them, it will be in our power to go upon another system; but if, as I believe will turn out to be the case, those statutes are vindicated by experience, it will be our duty to extend them and give them a further operation. I think we may readily see that this Bill will place these banks under no disadvantage as regards the other banks. If, when the operation of this Bill shall have come to a termination, it 1250 be the pleasure of Parliament to establish a single issue, as far as the privilege of these banks is concerned, that privilege ceases, and Parliament will be perfectly free to deal without embarrassment with the whole question. In respect to the other banks, Parliament will have to deal as it thinks fit, and I do not think that those privileged banks will be dealt less favourably with than the others. But so far as regards those banks which do not conform, considerable anxiety has been felt by members of the banking body, and I have endeavoured on the part of Her Majesty's Government to meet it by a proviso, which I propose to insert in the 6th clause. I do not conceive that by this Bill we shall establish any new right of the State as against those banks which think fit to conform, and on the other hand we shall not establish any new rights of those banks as against the State. The relations between them and the State are regulated by the Act of 1844, and by that Act they will continue to be regulated. I am led to believe that a very considerable number of the issuing banks will avail themselves of the privilege of this Bill; but whether they do or do not, is not the question. Those which do not will continue in their present position, but without the privilege. We know what that is. The Act of 1844 did not secure them the privilege and issue for any definite term, except it was for a term which long ago expired. At any time Parliament thinks fit it is free to legislate with respect to all the private banks of issue. Free to legislate it will still continue; bound to legislate it will not be. With regard to the two conditions of issue—first, the question of profit to the State, and next the security to the noteholder—in neither does the Bill at once attain its object. The payment to the State is smaller than what the Bank of England pays, and smaller still than that which it has offered to pay. Then, as to security to the note-holder, I think that the obvious and natural operation of the Bill will be that, under the power of transfer in it, the weaker banks will sell the privilege which they possess, and stronger banks will buy it; therefore the position of the noteholder will be improved, even during the term of the Bill. But I do not say that on either points—especially that of security to the noteholder—the Bill establishes a final system. I do not think it would have been possible in any Session since I have held office—certainly not in 1251 the present Session—to carry by a summary Act of Legislation the establishment at once of a compulsory and final system; and that being so, I am glad to aim at doing that which other financiers have been content to do before—namely, by the voluntary action of the parties, and by the adoption of intermediate and provisional measures, to lay the ground for coming nearer to the objects which all legislation on the currency ought to have in view. I think that by this Bill we do not give any shock to private rights or private interests, nor any shock to private feelings or private wishes. As regards the Bill in its original form, it is true that apprehensions which I thought needless were entertained. With regard to the present Bill, a document had been drawn up by a Committee representing the views entertained by a meeting of the whole issuing body of the country—by the joint-stock issuers and those who may more properly be called private issuers. In this document, which bears date the 31st of April, and is signed by Mr. Rodwell as hon. Secretary, the Committee state that, acting under the authority given them by a public meeting on the 19th of April, they unanimously approved the proposed Amendments and alterations in the Bill, and withdrew their opposition to it as altered and amended in accordance with the notices which I have placed on the table. Under these circumstances I hope there will be a general disposition on the part of the House to accept and adopt this Bill as one which removes many existing evils, and which, with regard to the re-construction or final" determination of our system of issue in this country, opens and prepares the way, and clears the ground, for a final settlement of the question. It must not be forgotten that the prime object of the Bill is the removal of the limitations placed on the private business of the banks—not on the business of issue but on that of banking. The framers of the Act of 1844, which was wisely and prudently constructed for its objects, finding in existence privileges which they were not willing to recognize as a permanent right but which they did not think it fitting peremptorily to terminate, left those privileges to the holders, under certain penalties which did not apply to issuing only, but to their trade as bankers. They were not to be permitted to have more than a certain number of partners; they were not to be allowed to do that which in the progress of monetary transac- 1252 tions has become a matter of great importance—namely, to transact their own business in London, even though it might appear to them that they could do so better than others could do it for them. This Bill, then, is a measure tending to that freedom of trade which we all agree in thinking desirable; and with respect to issue it is a preparatory and partial measure, doing good as far as it goes, and opening the ground for doing more good hereafter. I hope the House will accept it as modified; and with these prefatory remarks, I move that you, Sir, do leave the Chair.
§ Motion made, and Question proposed, "That Mr. Speaker do now leave the Chair."
§ MR. AYRTONsaid, that when this subject was first brought under the notice of the House by the Chancellor of the Exchequer, it appeared to him that some further information from the right hon. Gentleman was desirable, and he put a notice on the paper with the object of eliciting that information. He had listened attentively to the right hon. Gentleman on the present occasion; but he could not say that he was satisfied with the explanation which he had given the House with reference to the Bill, or to the Act of 1844 which was at the root of the matter. If the right hon. Gentleman's explanation of that Act were strictly accurate there might be sufficient apology for this Bill; but if the explanation were incomplete a great deal of the foundation of this measure must fall to the ground. Previously to the Act of 1844 private bankers possessed the right of issuing their own notes without limit, except in that part of the kingdom purposely reserved to the Bank of England, The Parliament of that day, not wishing to deprive them suddenly of a right which had grown up during a long course of years, entered into a contract with them by which they were to enjoy their monopoly for a further period of twelve years, on the distinct understanding that such extension was to be regarded as an ample compensation for the rights of which they were then to be deprived. This contract was the whole scope and object of the Act of 1844, so far as he understood it. The provision in that Act declaring that all compensations by the Bank of England to private bankers should terminate at the expiration of the twelve years clearly showed that the extension of the private 1253 bankers' monopoly was limited to that period, and that the exclusive right of issue during that period was to be the measure of their compensation. If that were the right construction of the Act, at the end of the twelve years the bankers, who had enjoyed this extraordinary and exclusive privilege during that period, had no claim upon the House in respect of the abolition of their rights. But the Chancellor of the Exchequer said it was the intention of the Legislature, in passing that Act, that at the end of the twelve years there should be but one exclusive source of issue, and he rather suggested that such exclusive source was to be the Bank of England. There was no foundation for such a surmise in the Act itself; then whence did the right hon. Gentleman derive his information relative to the intention of Parliament on the subject? For his own part, the inference he drew from the Act was that Parliament never intended that the Bank of England should be the sole source of issue. But, in any case, what was the position of the private bankers when the period assigned had elapsed? Why, the public were involved in the complexities of the Russian war, and in the face of those difficulties it was not found convenient to deal with the matter, which was accordingly allowed to stand over from year to year, and thus the bankers had enjoyed ten years of grace after the expiration of the extension granted. "Was it possible, under such circumstances, to say that they had any claim whatever to the monopoly of the issue of bank notes? That was the question for the House to determine, and, unfortunately, that was the one point to which the Chancellor of the Exchequer had not alluded. What possible right, had the private bankers to ask the House to grant them the exclusive right of issuing paper money in this country for fifteen years longer? The Chancellor of the Exchequer was bound to show that they were about to confer some extraordinary benefit upon the country, in return for the extension of the monopoly asked; but it rather appeared from the speech of the right hon. Gentleman that the benefit would be on the other side, and that the public were to be sacrificed for the good of the bankers. The Chancellor of the Exchequer was, however, entitled to ask any person objecting to his scheme what other proposition was to be brought forward in its place. There were two methods which 1254 might be adopted. In the first place, it might be said that the right of issuing paper money was common to all persons in the realm, and that one man had as good a right to issue it as another; that it was not an affair of the nation, and connected with the current coin of the realm, but a species of credit which every man had a right to enjoy, consistent with the liberty accorded to the subjects of the State. If they could devise a scheme in which any number of select and favoured people should issue bank notes, they could devise a scheme under which all persons could issue them. A scheme founded upon that assumption was, doubtless, open to very serious objections, still regulations might be adopted which would meet them in a large measure, and would afford sufficient security to the public against a false and fraudulent issue of paper money. In this era of free trade Parliament had no right to adopt this entirely new system of legislation, and to sell such a monopoly to a certain number of persons. If they adopted the measure as it stood, they would be reverting to the times when it was the fashion to legislate in favour of particular classes—a fashion which led to the adoption of the system of protection. This was not a question between Government and the bankers, but between the public, on the one hand, and the claimants of this exclusive privilege on the other. Then what claim had the bankers upon the public? They had not been stricken down as a large proportion of our population had been—the unfortunate victims of free trade—they were not in dire want, for they were the richest among the community; in fact, on no ground whatever could they ask Parliament to continue this unparalleled monoply. The second view which might be taken of the subject was that no private banks should issue paper money. That view might be a very reasonable one, for it might be policy for the State to issue exclusively paper money as well as coin. That was a principle which it might be very easy to defend, and which might be carried out in all its integrity. But the Bill before the House adopted neither of these principles. Instead of carrying out the policy of Sir Robert Peel it postponed that policy for fifteen years longer. The payment at present made by the bankers was in the nature of a stamp duty on bills of exchange, whereas that now proposed was a consideration for an exclusive 1255 monopoly. They now proposed to grant to these private bankers the right of issue for a term, for which they were to pay a rent of £1 per cent. This was a most objectionable proceeding. The Chancellor of the Exchequer had stated that if this Bill were passed no injustice would be done to those banks which did not come under its operation. But the practical effect of this Bill would be to suspend all legislation on the subject of banking and the issue of paper for the period of fifteen years. The present Session, the last of this Parliament, was peculiarly inopportune for the consideration of a question affecting so favourably a class of the community who were most influential at a general election. It was, therefore, extremely desirable that the Chancellor of the Exchequer should postpone this matter, and bring forward next year a comprehensive measure more worthy of his antecedents. He had heard with great regret the apologetic speech made by the right hon. Gentleman for these chartered monopolists. He had evidently found how difficult it was to conciliate monopolists having once fallen into their hands. He first of all told the House he should get a percentage of £2 5s. per annum for the privilige he had to dispose of under this Bill; then it fell to £1 5s.; and it was now down to £1. Such was the state of the auction in which he was exposing the public interests. It was, indeed, most lamentable. Far better withdraw the commodity altogether and wait for a better opportunity. Regarding the Bill with unqualified regret and with great disapprobation, he moved that its consideration be adjourned for one month.
§ Amendment proposed, to leave out from the word "That" to the end of the Question, in order to add the words "this House will, upon this day month, resolve itself into the said Committee,"—(Mr. Ayrton,)—instead thereof.
§ Question proposed, "That the words proposed to be left out stand part of the Question."
§ MR. AIDERMAN SALOMONSsaid, that he objected to the mode adopted of selling at that time of day privileges to any class of persons whatsoever. He believed that every one admitted that the Act of 1844 was a vrey wise measure, but they still might question some of the reasons on which that measure was supported. The Bill before them had two objects in view. 1256 One of them was to remove the restriction limiting private issuers to the number of six partners. That limitation was a part of the old monopoly of the Bank of England—long since abandoned by them—and was of no use to the public or to bankers themselves. Nothing was more desirable than that restriction should be removed. Another object of the Bill was not to limit country issues, but to extend them by allowing country issuers to become bankers in London, which they could not be at present. The right hon. Gentleman wished to remove that which he called an anomaly in the interest of free trade, and told the country issuers that if they paid 25s. and a commuted sum of £1 per cent he would give them the privilege of being bankers in London. But the right hon. Gentleman did not propose, as in the Act of 1844, that security should be given to the public for such issues. If they were to legislate at all for the country issuer, they ought to take a larger view of the question than had been taken by the right hon. Gentleman, and give increased security to the public while they extended the business of the bankers.
§ MR. CAVEsaid, he would not oppose the Bill at this stage, but he should like to say a few words, because, in fact, the principle of the Bill had never been discussed. On the second reading the House immediately rushed into a debate on the Act of 1844, from which, when once begun, it was always hopeless to recall it. Now, he thought this Bill required grave consideration, and that a more ample discussion of its provisions was necessary than was possible after going into Committee, fie did not object to banks of issue having offices in London; that was a question between themselves and their agents, and not one of public policy, lie was glad the Chancellor of the Exchequer had determined at length to maintain the sixty-five mile limit with regard to issues. His first proposal would have given these banks an unfair advantage over those which had not the same privilege, and, independently of profit, would have enabled them to advertise themselves, as it were, by means of their issues. If, according to Sir Robert Peel's statement, the withdrawal of private circulation within that limit would not have been felt in 1844 in consequence of the general use of Bank of England notes, still less would it be felt now, and surely we should legislate according to the requirements of 1257 the country, and not on the principle of making money by the sale of privileges, which would really be privilegiumin the bad sense condemned by writers on old Roman law. Whatever might be the intention of the Chancellor of the Exchequer, the Bill, even as amended, was a grave interference with the Act of 1844. The late Sir Robert Peel, the author of that Act, was one of those statesmen "who still rule our spirits from their urns," and it was almost treason to doubt many of his doctrines; but he never succeeded in convincing the country of the policy of the Act of 1844. Indeed, it was one of those questions, like matters of faith, on which it was easier to silence an opponent than to convince them. And on this particular point of paper issues there had always been a party which considered that bank notes should be left to the ordinary laws of supply and demand; that you should indeed insist upon the convertibility of the note, but exact no security, except, perhaps, in case of the Bank of England note, which was the sole legal tender. But the Chancellor was supposed to agree with the principles of Sir Robert Peel's Act, and to consider that the holder of a country bank note was not always sufficiently protected. He took, however, a very different course. Sir Robert Peel was anxious to get rid of the private issues, but he was opposed to violent change, and wished them to die a natural death. Hence he prohibited transfer of right to issue, and forbade any change in the constitution of the partnership, but though he specially stated he could not guarantee the continuance of the right, he fixed no limit. He proceeded rather by temptation to surrender the right; by insuring division and preventing combination, and by other disabilities which made the right burdensome. Certainly the effect was not so speedy as he had anticipated from various causes. Still the circulation, which was eight millions, was now reduced practically to six, and the midland counties had nearly abandoned the use of country paper. The Chancellor, with the same end in view, took an entirely opposite method. He seemed to think that division was strength, he therefore gave existing banks the power of concentrating, and fixed a time for their circulation coming to a sudden and violent end. Now, the first effect of this would be an increase in the issue of private bank paper, and in this way. Banks of issue were at present obliged to 1258 allow a considerable margin to avoid the penalty for over issue, so that while the authorized issue was seven and a half millions, the actual issue was under six; but if this right were concentrated in a few large banks, the necessary margin would be much diminished. Again, the private issues would be introduced into new places, and when people had become familiarized with them, they would be suddenly stopped, which was calculated to create the maximum of inconvenience. This was supposing the right would really terminate in fifteen years; but, long as this lease was—though shorter than the original proposal—how could they be sure of its termination? The right hon. Gentleman had on a former occasion given them his idea of the flexibility of Parliamentary compacts, and this might be changed one way or the other in a similar manner. There were minor details in the Bill which seemed objectionable. If the object was to throw open the traffic in issues, why not admit those banks which had not now the right to a participation? He thought the scheduled banks had reason to complain, as they had been induced to surrender a right which they might have parted with under this measure on far more advantageous terms. He had ventured, when the Chancellor made his preliminary statement, to question the propriety of making the right to issue an asset in the case of bankruptcy, and the reply of the right hon. Gentleman, that it was in the nature of a lease, had not convinced him; for, though a lease might, no doubt, be transferred, and was therefore a quasi-property, still, on certain contingencies, it became absolutely void and valueless. He was glad the Chancellor had now adopted the same opinion. The changes announced by the right hon. Gentleman were decided improvements, but he thought others were necessary. Several amendments were on the notice paper, and he earnestly hoped the Bill would not be adopted without the greatest caution and such other modifications as might be necessary to prevent the mischief which, in its present state, he feared it might occasion.
§ MR. NEATEsaid, on reference to the Act of 1844, he could not find any authority to support what had been stated by the hon. Member for the Tower Hamlets (Mr. Ayrton), that the private banks had a right to continue their issues under that Act. The object of the Act was to extinguish altogether the circulation of the 1259 private banks so far as it could be done consistently with right. The Parliament maintained its right to stop the issue, but not without compensation. The limit of the Act of 1844, as regarded the Bank of England, was ten years, but he did not say that that limit attached also to the rights of private issue. The private banks would go on from year to year till Parliament should choose to stop them, and Parliament would not stop them without taking their claims into consideration. The hope was that this circulation would gradually die out, and in order to increase that prospect the rights of transfer were denied, and no provision was made for the continuance of the right in the case of a certain number of partners being admitted. He could not say that the private bankers were in any worse position now than shortly after the passing of the Bank Act. If immediately after the passing of that Act, Parliament had exercised its extreme authority, great injustice would have been done to the private issuer.
§ MR. BLACKsaid, this was so vital a question to the interests of this country that the House would not be doing justice to it by dealing with it in any partial or special way. There were a great many different opinions upon the system proposed by the Bill. All such matters ought to be submitted to the consideration of a body composed of the most experienced merchants and of those best acquainted with political economy and who understood most thoroughly the system of banking. Before any plan was adopted the Bill should be remitted to a Committee to consider what ought to be done. The main object of the Bill was very proper. It was intended, as he understood, to give facilities to those who dealt in money, and to merchants who were bankers, and who were at present restricted from having places of business in London. He could not see why bankers in the country should be prevented from having places of business in London, or what objection could be urged against adding to the number of partners those who were, perhaps, better qualified to manage the business than others, and thereby give greater security to the public. The object of the Bill, therefore, was good so far as it went in this respect, and ought to be supported by the House. There was another object of the Bill, that the whole of the paper issues should be confined to the Bank of England, or to some national bank. That was ob- 1260 viously the tendency of the Bill. It was dangerous to make any alteration in a matter of such vital importance without first making every inquiry into the circumstances of the case, and he thought the question ought to be thoroughly examined into by a Committee who were qualified to look into the matter. He denied that banks ought to be intrusted with freedom in paper issue as there was freedom in other departments of business, because while the latter was an affair of trade, the former would in reality be nothing more or less than coining money.
MR. HEYGATEsaid, he was of opinion that, while this measure had conciliated a few, it had excited opposition in many different quarters for many different reasons. The settlement which had already been come to by the House of Commons, by the Act of 1844, ought not to have been departed from unless that departure were called for by strong reasons of public necessity, and he would submit that in the present case the reasons adduced in support of a change were not sufficiently strong. A few applications from banks complaining of the restrictions under which they laboured might possibly have been made to the right hon. Gentleman the Chancellor of the Exchequer, but one or two applications were not sufficient to warrant their dealing with a subject so large and comprehensive in its character. In his own locality he might venture to say that the present measure had been received by all the country bankers with whom he had communicated with the most unmitigated feeling of distrust and dislike. They were perfectly satisfied with the Act of 1844.
§ MR. THOMSON HANKEYsaid, he could not see that the Act of 1844 was carried out or furthered in any way by the present measure. It would, on the contrary, rather retard the object which the Act sought to accomplish. There could be no doubt that by the spirit of that Act, Parliament was considered at liberty to deal with the question in 1855. A Bill was then introduced to render that Act permanent, subject only to a notice for its discontinuance. As the Chancellor of the Exchequer had explained, the intention of Sir Robert Peel and of the Act of 1844 was that there should be one issue within a limited time. He contemplated the final extinction of country issues, and that there should be one issue, but whether of a national bank or of other banks in England 1261 was a question to be considered by the Government of the day. But there was to be one bank based on the great principle of undeniable security, which had never been obtained up to that time. The principle, however, had never been carried out, because Sir Robert Peel had found the country bankers' interest in the House too strong for him, and he was unable to carry out what was a sound principle; therefore he carried out a part of it, holding out a hope that at the end of ten years the thing would finally end. The Chancellor of the Exchequer had shown that this was a slow process, but that was no reason why they should depart from a beneficial principle. He objected to giving another lease of fifteen years to country issues. He should like to see them put an end to. But if that was the desire, he hoped the present Bill would not be passed. If the Chancellor of the Exchequer were in office fifteen years hence he should be content to leave the matter in his hands; but that might not be. Let disabilities be removed, but he hoped the House would not perpetuate for fifteen years what appeared to be a most vicious principle. He should have no fear to let matters go on as they were; but if there was to be legislation at all, it ought to be to carry out the principles of the Act of 1844, which were to limit issues, to give security for the note, and to have one bank of issue only.
§ COLONEL EDWARDSsaid, that country bankers looked upon this measure as an act of confiscation—as much an act of confiscation as it would be to take a man's rents from him. They generally disapproved of it, regarding it as uncalled for as a piece of legislation that would unnecessarily disturb the existing order of things, and do more harm than good. If the hon. Member (Mr. Ayrton) persisted in his Amendment he would go into the lobby with him. He protested against this sort of Government interference when it was not required. Until he came into the House that night he never heard that the country bankers generally assented to this Bill. He did not believe that they did assent to it. This he knew, that the principal bankers in his constituency—many of them—declared that they did not approve of the Bill, and wished him to give it all the opposition in his power. The bankers of Hull and York, from whom he had had many communications on the subject, also disapproved of the measure.
§ SIR CHARLES WOODsaid, he was sure the hon. Member for Peterborough would acquit him of any unfriendly feeling towards the Act of 1844. He fully admitted all the advantages which that Act had conferred upon the country, and if he thought the Bill proposed by his right hon. Friend would in any way tend to impair the usefulness of the Act of 1844 he would be the last to support it. It was true that Sir Robert Peel in 1844 did contemplate the extinguishment of the country issues, but at that time it was more easy to propose than to carry out such a plan, and he was therefore compelled to proceed more guardedly by gradually undermining rather than by putting a sudden end to them. The Act of 1844 attained a great good, but not the whole of the good contemplated by Sir Robert Peel. The measure which Sir Robert Peel then passed was intended to encourage country banks to enter into compositions with the Bank of England, whereby the notes of the latter establishment should be substituted for their own issues, his object being undoubtedly to have but one national issue. What he did was to prevent the great mischief that might arise from the country banks improperly increasing their issues. There was no doubt that Sir Robert Peel contemplated a revision of the Bank charter at the end of ten years. The state of affairs which was brought about by the Act of 1844 was an unlimited continuance of the country | issues to the amount then in circulation until Parliament came down with a new Act. This step had not yet been taken. Now, the question arose upon application being made to his right hon. Friend for some facilities to bankers beyond the sixty-five miles circuit. His right hon. Friend proposed to give these banking facilities, but also proposed that, in consideration of these banking facilities being given, the right to issue notes should absolutely cease at a given time. At present the country banks had an unlimited lease of issuing notes, unless Parliament should interfere, but under this Bill they would only have a limited lease, and the right of issue would absolutely cease unless Parliament should interpose to prevent the termination of the lease at the expiration of a period of fifteen years. He thought that in this respect the Bill would be a great step towards carrying out the principles of the Act of 1844, and therefore he could not hesitate to give it his utmost support.
§ SIR STAFFORD NORTHCOTEsaid, he desired to make an observation with regard, not to the principle of the measure, but as to the position in which they stood in reference to it. The question was not as to the course they should take with respect to the provision of the Bill which gave the lease, but whether they should go into Committee on it at all. He put it to the hon. Member for Peterborough—admitting for the sake of argument all that he had stated—whether it was desirable to allow matters to go on exactly in their present condition by refusing to go into Committee. The whole argument against proceeding with the Bill resolved itself into this, that country bankers were bankers of issue, and should continue to hold that position; but as they were bankers of issue he contended that it was important on behalf of the public to obtain all possible security for the validity of their issues. Was it not desirable, seeing that there was no immediate prospect of dealing with these banks this or next year, to put them on the best and most secure footing possible, instead of allowing them to die out to the mischief of the public? By going into Committee, an opportunity would be afforded of discussing the provision, of which notice had been given by the hon. Member for Greenwich (Mr. Alderman Salomons). A provision ought to be introduced, obliging these banks of issue to give security for a whole or a part of their authorized issue, and if this were done, a great step in advance would be gained in securing the validity of the country issue. He hoped the House would go into Committee upon the Bill.
§ MR. HUBBARDsaid, that the security of the public in the limitation of a paper issue, and in the application of the profits which might accrue, were conditions which could not be too largely insisted on. He agreed with his right hon. Friend who introduced the Bill as to the House being perfectly free to deal with that subject. But, that being so, where was the necessity of entering now into a sort of compromise which tied up the hands of the House for fifteen years to come? This was not a general measure affecting the issues of all banks, but was a mere Permissive Bill to meet the convenience of one particular bank; but his right hon. Friend offered the same convenience to other banks which might follow in its train. In his own opinion, very few banks 1264 indeed would follow in the train of that one particular bank. He therefore deprecated the proposed legislation. The right hon. Member for Stamford wished to go into Committee in order to consider the Amendment suggested by the hon. Member for Greenwich (Mr. Alderman Salomons); but if a certain compact had been entered into by the Chancellor of the Exchequer with all the important issuing banks, it was clearly not in his power to re-adjust the terms he had made, and to go into Committee to rectify the Bill would be a delusion. If the Government interfered in that matter and gave any further sanction to the business of private issue, its first duty was not to share the profit, but to protect the public. He was in favour of the public having a sure and available medium of currency, and of security being given for a certain portion of the issue. Seeing that that was the last year of the Parliament, and that they would not be able now to deal satisfactorily with the question, they could not do better than postpone the whole matter.
§ MR. GOSCHENsaid, the country bankers had opposed that measure very strongly, because they saw in it the thin end of the wedge; but he supported it himself because he admitted that it was the thin end of the wedge. It was desirable gradually to get rid of the private issues; and as a friend of the Act of 1844 he supported the Bill, because the result would be that it would put an end to private issues altogether. When the period of twenty-five years appeared in the Bill, he felt a strong objection to it, and he had put an Amendment on the paper for substituting ten years. He now supported the measure because it placed a limit—although, he was sorry to say, rather a distant one—to private issues. The most valuable parts of the measure were the provision fixing a term when the country issues should cease, and the tax of £1, which involved an important principle, as showing that the State claimed the right to deal with the currency.
§ MR. AYRTONsaid, he would withdraw his Amendment, and leave the House, if it chose, to divide on the main Question.
§ Amendment, by leave, withdrawn.
§ Main Question put, and agreed to.
§ Bill considered in Committee.
§ (In the Committee.)
§ Clauses 1 to 4, inclusive, agreed to.
1265§ Clause 5 (Power of Banks of Issue to obtain Exemption.)
§ MR. ALDERMAN SALOMANS moved the omission of certain words of the clause, which repealed in respect of banks of issue, undertaking to pay the percentage on its issue, the provisions which restrict the number of partners to six, and prohibit them from having a house of business or issuing their notes within sixty-five miles of London. He said that it was for the public interest that banks of issue should be strengthened by an increase of partners, and that we ought rather to offer them every facility for doing so than to make it onerous on them by making the addition a subject of charge. The hon. Member proposed to omit the words imposing the condition.
§ THE CHANCELLOR OF THE EXCHEQUERsaid, that the proposal of the Government was to remove certain banking disabilities on condition of the issuers placing themselves in a position more conformable to the Act of 1844. The proposal of the hon. Member would tend to remove this hold upon the banks.
§ Amendment withdrawn.
§ Clause agreed to.
§ Clauses 6 and 7 agreed to.
§ Clauses 8 (Issue of Banks accepting Conditions of Act to continue till 1st January 1875.)
§
THE CHANCELLOR OF THE EXCHEQUER moved to leave out down to "longer," and insert—
If, on or after the 1st day of January, 1879, notice shall be given by the Commissioners of the Treasury, by publication in the London Gazette, to all the banks issuing notes in respect of which such percentage as aforesaid is payable, requiring the termination of such issues, then, unless Parliament shall otherwise determine, the said issues shall cease on the 1st day of January, 1880, or at the expiration of one year, from the said notice, as the case may he.
The effect of the Amendment was to accomplish what the executive Government and the gentlemen connected with banks equally thought convenient—namely, that a distinct notice should be given to enable them to make preparations for the change. As to the policy of the Act there could be no mistake. It turned altogether on the fixing of a particular term when Parliament shall think that the Executive ought to be invested with full power to direct that the issues in question should cease. He had not a doubt that the notice would be given in the spirit of the Act, and by
1266
this clause parties would have the opportunity of calling the attention of Parliament to the question. He did not anticipate that any discussion would take place on the Amendment, fixing as it did the precise time beyond which no right could survive.
§ MR. THOMSON HANKEYsaid, he agreed with the clause as first proposed by the Chancellor of the Exchequer, but altogether disagreed with the Amendment. He had intended to move in the Committee that a term of ten years should be substituted for the term of fifteen, as proposed in the clause as it now stood; but, as it appeared to him, the whole principle advocated by the Chancellor of the Exchequer was given up by the Amendment. The Chancellor of the Exchequer said that he meant that the bank issues should cease at a certain time by Act of Parliament; but, by the wording of this clause, it was merely that the country banks should not issue after that time without further notice—so that any Chancellor of the Exchequer who might take another view of the matter might, if he liked, postpone altogether the issue of the notice. He (Mr. Hankey) wanted the Act passed in such a form as to make the country issues class entirely independent of the will of any future Minister.
MR. HEYGATEsaid, he understood that the opposition of the country bankers had been withdrawn on this condition.
§ MR. ALDERMAN SALOMONSsaid, that after all, the Act would only operate in the case of those banks which voluntarily adopted it, and who might or not be called upon by the Chancellor of the Exchequer, in fifteen years' time, to execute the bond they now undertook. He contended that, so far from being a great commercial measure, it would be found that, from its optional character, they had after all their labour done nothing at all. He believed it would only be accepted by one or two banks, and considered the Bill one very unworthy of the present Chancellor of the Exchequer.
§ MR. BRISCOEsaid, that he should support the Bill as it had been modified by the Chancellor of the Exchequer; had it remained in its original shape he should have opposed it.
§ MR. HUBBARDsaid, one great argument for the Bill as it originally stood was, that private issues would terminate at a given date; but as the clause was now proposed to be amended it would only 1267 enable the Treasury to terminate those issues or not, as they should think fit.
§ MR. AYRTONsaid, that he thought that the first offer of the Chancellor of the Exchequer was the best for the public, because it was some satisfaction to see that in 1875 those banks which came under the Bill would cease to have any rights at all. The substitute was that in 1880, instead of being extinguished, they were to receive a notice from the Treasury to that effect. The result would be that if a strong Government, which could carry everything, happened to he in office, and an enterprizing Chancellor of the Exchequer who held sound opinions upon this question, this notice would probably be given; but not otherwise.
§ THE CHANCELLOR OF THE EXCHEQUERsaid, that there was a great deal of difference between issuing a notice from Downing Street and bringing a proposition before the House and having to contend with a variety of suggestions and Amendments. It was not intended to refer the policy of this Bill for re-consideration by any future Chancellor of the Exchequer. The one great object of the Bill, for which many sacrifices were made, was that as to those issues which came within the scope of the Act Parliament should at a certain period have absolute power, and there was no way of giving to Parliament this absolute power except by providing for an absolute determination of the right of issue. He undertook nothing with regard to the view which Parliament might take at the period indicated. The question upon what principles the policy of issue should thereafter be conducted would depend upon the judgment of the Parliament of the day, who would no doubt pay greater attention to the great and wise Act of 1844 than to any words of his, and would avail themselves of all the experience which would by that time have accumulated. As to the notice from the Executive, this would be a purely Ministerial act, and one which, whether the Government of the day were strong or weak, they need not hesitate to perform. Upon this question he had found it impossible to bring in a large and comprehensive measure. He had framed one satisfactory to himself, but in the face of the opposition by which it was sure to be met it was hopeless to propose such a measure, and so when he found he could not do all he wanted he tried to do part. He 1268 saw no mischief in providing for the notice; and as the bankers seemed to attach great value to such a warning he had acceded to their views.
§ MR. THOMSON HANKEYsaid, that the optional power could be done away with by leaving the word "if" out at the commencement of the words proposed to be added.
§ MR. GOSCHENsaid, it would be better still to leave out the words "if, on arid after," and then the sentence would begin by definitely stating that the notice should be given by the Lords of the Treasury.
§ SIR STAFFORD NORTHCOTEsaid, it would be an improvement to leave out the four words, "if, on and after," as suggested.
§ THE CHANCELLOR OF THE EXCHEQUERproposed that the Amendment which he had moved to the clause should read thus—
On or before the 1st day of January, 1879, notice shall be given by the Commissioners of the Treasury, by publication in the London Gazette, to all the hanks issuing notes, in respect of which such percentage as aforesaid is payable, requiring the termination of such issues, and then, unless Parliament shall otherwise determine, the said issue shall cease on the 1st day of January, 1880.
§ MR. THOMSON HANKEYwithdrew his Amendment.
§ Then the Amendment of the Chancellor of the Exchequer agreed to.
§ MR. SALTsaid, that if, under this Bill* a right now possessed by the banks was absolutely to cease at the end of a given number of years, the measure was ones of great importance, and the clause was deserving of great consideration.
§ MR. HUBBARDsaid, he wished to ask what was to be the position of the banks which did not comply with the provisions of the Bill?
§ THE CHANCELLOR OF THE EXCHEQUERsaid, he was rather surprised at this question. Before the House went into Committee, with all the variations of language which the powers at his command enabled him to employ, he had gone into this same question, and had at length checked himself from the fear that the House would experience a species of nausea in being obliged to listen to so much on the subject. The banks referred to by his hon. Friend would incur no loss and obtain no benefit under the Bill. Under the Act of 1844 they occupied a certain position, and in that position they would remain.
§ SIR STAFFORD NORTHCOTEsaid, that the Bill would not leave those banks precisely as they now stood. The banks would be divided into two classes—namely, conforming and nonconforming banks; and the question was what effect would this clause have upon the nonconforming banks? If the measure was a good and a proper one, it would, of course, be desirable, in the interests of the public that as many banks as possible should accept its terms. But the managers of provincial banks would naturally argue that it would be better to forego the advantages offered rather than absolutely to resign their right of issue at the expiration of the fifteen years' term fixed by the Act. He thought that, under the circumstances, it would be better to place both classes of banks on the same footing at the expiration of the term.
§ MR. CARDWELLsaid, to adopt such a suggestion would be to throw away the principal object of the Act, which was to advance another step in the direction taken by the Act of 1844.
§ Clause, as amended, agreed to.
§ Clauses 9 to 18, inclusive, agreed to.
§ MR. ALDERMAN SALOMONSsaid, that he wished to draw attention to the fact that of late one large bank had been compelled to close its doors, and that the public had been glad to accept 10s. or 12s. in the pound upon its notes which were in circulation at the time of its stoppage. In his opinion banks ought to give some security for the payment of their notes. He understood from an hon. Member of that House, who was a director of a very large bank—the National Provincial Bank of England—with an ample capital, that the managers of that establishment would have no objection whatever to give security for its notes; and he thought most of the substantial banks would be equally able and willing to give the security the clause he proposed pointed out. It was certainly a great anomaly that while the Act of 1844 compelled the Bank of England to give security for its issue, the public should have been left at the mercy of the private banks. He begged to move the adoption of the following new clause:—
(Deposit of Government Securities by Banks of Issue.)Provided always that, previous to any Bank of Issue having a house of business or establishment as bankers in London, or at any place not exceeding sixty-five miles from London, such Bank shall deposit with the Commissioners of the 1270 National Debt an amount of Exchequer Bills or other Government Securities equal to its maximum authorized issue, to be retained by the said Commissioners so long as such Bank shall continue a Bank of Issue, with a house of business or establishment in London, or within sixty-five miles thereof.
§ THE CHANCELLOR OF THE EXCHEQUERsaid, that the argument of his hon. Friend might have been understood to apply to a different clause from that which he had moved. His hon. Friend said, there was a great amount of unsecured issues of bank notes, and it might be supposed that he was going to move a clause to put an end to that state of things, and to require all private and joint-stock banks of issue to give security for their notes. The House had passed a clause through Committee by which certain of the banks of issue would place themselves in a position much more favourable to the public than banks of issue in general, and his hon. Friend wanted to draw a fundamental distinction between these banks to the disadvantage of the conforming, and the advantage of the non-conforming, banks. He would rather say, on the other hand, that it was the notes of the non-conforming banks that ought to give security, and not the others. The hon. Member was free to hold that at any moment Parliament would be justified in imposing the duty of giving security upon all private issuers whatever. But he (the Chancellor of the Exchequer) protested against imposing the duty exclusively on the conforming banks. If there were any necessity for giving security for notes, that necessity was strong or weak, as the banks were weak or strong. Where the bank was weak there was the more need of security; where it was strong there was the less need of security. Did his hon. Friend think that the weak bank, to which reference had been made, would have been a conforming bank? If there were any banks now in existence with a rotten circulation, they would remain untouched by the clause, but if there were banks strong, flourishing, extending their business, having the confidence of the public, solid and solvent, these banks would conform to the Bill and become banks of issue. He protested against drawing the distinction proposed by the clause. It was both unfair and inconvenient. His strong objection, however, to the clause was that this question of security was essentially one which, if it were dealt with at all, ought to be dealt with by direct legislation. The right of Parliament to require banks of 1271 issue to find security was one deeply rooted in the nature of note issue, and it was the duty of Parliament to provide for the soundness of the issue. By the Bill now before the House, the Government did something, although not everything, with regard to conforming banks. Upon the general question of legislation he would not on the present occasion give an opinion, except to say, that it was within the right and competency of Parliament to take security. But his hon. Friend's clause would require a great deal of subsidiary legislation to carry it out, and of a kind not belonging to the measure before the House. He (the Chancellor of the Exchequer) was not seeking by this Bill to prejudice the question of security by banks of private issue, but his hon. Friend, on the contrary, was, by his clause, going far to prejudice the question. It would be most unwise to deal with this important question of security at the present moment. His hon. Friend required that the notes of the banks in question should be secured by Exchequer Bills or other Government securities. He, on the other hand, was by no means certain that it was either necessary or equitable to limit the banks that might be required to give security to Government securities. There might be securities quite as good—mortgages, for example, which might be bad securities for the bank itself to take, but which might be as perfectly good as the securities contemplated by his hon. Friend. He (the Chancellor of the Exchequer) was not sure that the security for the notes of issuing banks might not be provided by very different means—by constituting, for example, their notes as a first lien on their assets. That, however, was a matter of great delicacy and importance, and before legislating upon it, it would require more consideration than had been given to it. He believed there were many topics that should be taken into view before they proceeded to deal fully with this important question; but he did not intend to treat it lightly, or show disrespect to his hon. Friend's authority. If it were the opinion of Parliament that banks issuing notes should give security, that would be of great advantage to the public. He would almost venture to say that his hon. Friend himself must see that to attempt to close the consideration of the subject by this clause would not be sound or good policy.
MR. HEYGATEsaid, he thought the distinction drawn by the right hon. Gen- 1272 tleman between strong banks and weak ones was likely to be misunderstood. If only two or three banks conformed to the proposal, the condition of the non conforming banks would remain unimpaired; but if the right hon. Gentleman were enabled to split up the banks and to induce one-half to conform, the others standing alone would find their position materially disturbed. The hon. Member for London (Mr. Goschen) was correct in the view which he took when he regarded the Bill as the thin end of the wedge. That hon. Member was a determined opponent of country issue, and was therefore consistent in wishing the passing of the measure.
§ THE CHANCELLOR OF THE EXCHEQUERsaid, what he intended to convey was that the banks, generally speaking, were strong; but in the case of issuers they could never be certain that there might not be one or two weak ones. And these would possibly be found among the non-conforming ones.
§ In reply to Mr. GOSCHEN,
§ THE CHANCELLOR OF THE EXCHEQUERsaid, that he understood this contract with the banks to refer altogether to matters apart from the security for issues. It appeared to him that the obligation of the note issuer to give an adequate security for issue was of a general nature, and could not be possibly affected by a Bill of this kind unless specifically expressed. The liberty of Parliament to deal with the security of issue would remain totally unimpaired.
MR. HUSBARDsaid, he believed that the measure would never come into operation save with regard to two or three banks, and wished it had never been brought forward.
§ MR. THOMSON HANKEYsaid, he thought there could be no impropriety in dealing with the issuing banks, to whom under the terms of the Bill a privilege for fifteen years was given.
§ MR. NEATEsaid, he should require legal authority higher than that of the right hon. Gentleman for the assertion that rights of issue already enjoyed by banks under Parliamentary authority could be affected or withdrawn without compensation being given for the loss ensuing from the alteration.
§ MR. ALDERMAN SALOMONSsaid, that seeing how well Gentlemen with Univerversity educations had argued against his proposal, he felt more sensible than ever of the great disadvantage which he suffer- 1273 ed in not having had one himself. He still adhered to the opinions which he had expressed, but in deference to the feeling of the House would withdraw his Amendment.
§ Clause withdrawn.
§ THE CHANCELLOR OF THE EXCHEQUERsaid, there was a limited portion of the country banks who were in the habit, not of compounding for their issues, but of paying stamp duties on their notes. Those persons would be under a certain disadvantage if at any time they should wish to compound for the rest of their notes. He bad, therefore, prepared a clause which gave power to the Treasury to make those banks such compensation as might be fair on their stamped notes yet in circulation.
§
Clause A (Compensation to Banks issuing Notes on Stamped Paper.)
16. When any Bank which issues its Notes on I Stamped Paper becomes a privileged Bank, and I proves to the satisfaction of the Commissioners of the Treasury that it has paid a greater amount of Duty in respect to its Stamped Notes in Circulation than it would have paid if it had compounded for the Duty on such Notes, the Commissioners of the Treasury may make such allowance to the said Banks as they under the circumstances think just.
§ House resumed.
§ Bill reported; as amended, to be considered on Thursday, and to be printed. [Bill 123.]