RESOLUTION.

HC Deb 25 March 1873 vol 215 cc111-57

MR. ANDERSON

rose to call the attention of the House to the currency system of the country, and to move a Resolution. The hon. Gentleman said: Sir, I have had considerable hesitation in carrying out my intention of bringing the subject before the House so immediately after the Ministerial crisis which we have just come through; but, in the fear that if I drew back now there might not be found any other time and occasion more convenient, I concluded to proceed. I know that the subject is one which, from its abstruse character, does not interest a great many Members of the House. I know that it is a subject which most men shun as a dangerous one—so beset with shoals and quicksands, in which many have lost themselves, that few now care to adventure upon it in any form, and still fewer will attempt it, whose views are in favour of a radical change in a system under which the wealthy classes become more wealthy, even while the poorer become more poor. It is one of the most important questions which any hon. Member of this House can undertake to deal with. It undoubtedly affects the national weal and woe far more than any question of party politics, and perhaps more than any other question that has been before the country since the Free Trade settlement of 1846. That Free Trade settlement of 1846 has even increased the importance of the currency question, for the general stimulus then given to the commerce of the country greatly intensified all the money difficulties we have experienced since, and especially those three great crises in which our currency system was strained to the breaking point and gave way, showing the utter unsoundness of those theories on which it was based. Those theories are, as I understand them, that the precious metals are the only safe basis of currency; that if any paper currency at all is permissible it should be strictly the representative of gold, and instantly convertible into gold at the pleasure of the holder; that such a currency will be plentiful or scarce according to the plenty or scarcity of gold in the country; that it ought to be so, and that whatever disaster and ruin accompany a sudden contraction of the currency through an efflux of gold is a perfectly legitimate result, and a less evil than it would be to adopt any other basis of a less fluctuating character. This, of course, is the pure bullionist theory, but its advocates were always unable to carry it out in its integrity, and we have, therefore, been left with a hybrid currency consisting partly of coin, partly of a miscellaneous collection of notes, having very many degrees of convertibility, but for the most part bearing the character, only through the forbearance of the public, which, so far, has not demanded instant convertibility. The Bank of England has a right to issue £15,000,000 sterling on gold and other securities lodged in the issue department, and this issue, although a legal tender, does not require by law to have a single sovereign or an ounce of gold to back its convertibility. The English country banks have an authorised issue of £7,250,000 against which they are not required to hold any gold. The Scotch banks have an issue of £2,750,000 equally without obligation to hold gold; and the Irish banks have an issue of £6,500,000 equally free from that obligation. These together make £31,500,000 of note issue authorised by law without any stipulations for gold backing it, and therefore, if put to a severe test, certainly inconvertible. A great part of our trouble arises from our struggle in difficult times to keep up those inconvertible notes with a semblance of convertibility. But our other note issues, so far as gold-backing is concerned, are not entirely secured either. The Bank of England issue above £15,000,000 is against gold deposited in the issue department, and although I have heard a doubt expressed whether, in the event of the Bank's insolvency, that gold could be kept exclusively to redeem those notes, I believe it certainly can. The English country banks are allowed no over-issue; but the Scotch and Irish are entirely unlimited as to the extent of their over-issue, provided they have in their safes a sovereign against every pound note of over-issue. But this, though a check, does not amount to a safeguard, for there is no provision whatever for keeping those sovereigns to guarantee those notes; and if a bank become insolvent, undoubtedly the sovereigns would fall in as general assets, and the notes would have to rank like any other debt. Thus, it is evident that the whole of the English country bank notes, and Scotch and Irish bank notes—amounting at present to about £18,000,000—depend solely on the solvency of the issuers; and here, Sir, I wish to guard myself against being thought to cast any doubt upon any one of our banks of issue. I believe they are all highly respectable, solvent, and well-managed institutions, but they are only trading corporations; and I maintain that, however sound they may be, their solvency is not a proper basis on which to rest the currency of a great nation. Another great objection to the Act of 1844—and when I speak of the Act of 1844, I include the Acts of 1845, which were merely supplementary to the main Act—is that these Acts have created everywhere but in London a complete monopoly in banking. The profit on the right of issue has had the effect of doing this. For instance, notwithstanding the vast increase in all other commerce, we have now in Scotland fewer banks than we had in 1844. We have lost some, and not a single new one has been established. That monopoly has many evils. For instance, in 1844 we had banks to the extent of £12,000,000 of capital, holding deposits of £30,000,000; whereas now the capital has gone down, I think to £9,000,000, while the deposits have gone up to £75,000,000. I do not think it forms any part of the duty of the State to interfere with the mere trade of banking, or to legislate for the protection of depositors as they do in America; but it is certainly the duty of the State not to legislate in the opposite direction, by creating a monopoly, which forces all the savings of the country to accumulate in fewer hands, for in the event of any great shock to public credit the result would be more disastrous than if the risk were more distributed. I wish to leave the trade of banking perfectly free, and without legislative interference—and in order to do that it is necessary to detach from it entirely the right of creating currency, for the State can never be justified in leaving that unrestricted. But there is a third objection, though perhaps a minor one, to the system I have described—namely, that whatever the amount of issue the nation may think it expedient to sanction without gold backing, it brings in an annual profit to the issuer, and it seems to me a most absurd anomaly that such profit should be handed over to trading corporations, instead of the nation itself having the profit of the national issue. The nation, with very mistaken generosity, keeps in its own hands the metallic currency, on the most part of which there is a heavy loss, while it hands to others the paper currency on which there is a large profit. It seems to me high time this injustice were put an end to, and I commend the subject to the consideration of the Chancellor of the Exchequer as a means of adding materially to his resources. I will now turn to the subject of gold. The Act of 1844 requires the Bank of England to receive whatever quantity of gold is brought to it, and to issue notes against that gold to the extent of £3 17s. 9d. per ounce. This is the most fatally bad of all the fallacies of the Bank Acts. It frequently fails to perform the function for which it was intended, while in the attempt to make it do so we have constantly recurring seasons of most aggravated commercial disaster. When the withdrawal of gold really does cause the curtailment of the paper issue—that is, whenever it succeeds in doing the thing which it was intended always to do—the result is ruinous to the trade of the country. Everyone rushes to secure a reserve, and the whole currency is at once locked up. What is really needed, then, is that, when gold is withdrawn from the circulation of the country, there should be something to take the place of the gold to carry on the domestic trade of the country, and for want of that we have rapid fluctuations in the discount rate, sometimes intensifying into absolute panic. The existence of the national gold store, with its weekly returns, does appear to me a machinery specially adapted to facilitate the operations of gold speculators at the public cost. Its supporters say that it does not even fix the price of gold. They say that the notes given for it are mere store vouchers, and that there is neither loss nor gain by them. Now it is quite true that there is neither loss nor gain to the bank, but the effect to the country is very different. These so-called store vouchers state their money value, which no other store vouchers do. You deposit iron, or wheat, or any other merchandise, and get a voucher for it, but the money value is not stated. It purports to be for so many tons of iron, or so many quarters of wheat, and it ought equally to be for so many ounces of gold. By naming the sterling value you fix the price, and the consequence of that is that either a glut or a famine is of longer continuance than it ought to be, for it must depend not on markets acting and reacting on each other, as all free and healthy markets do, but only on the action of the foreign markets. If the price were free, as soon as an efflux began, our price would begin to rise and so check it; whereas under our fixed price the efflux will go on till the foreign maket falls, and all we can do is to raise the hire, which is a much slower remedy than raising the price. In the same way when an influx begins it would at once begin to check itself in a free market by the price drooping, but with us it must go on till foreign prices rise or till our slow process of lowering the hire sends it away. It is in that way that our fixed prices cause such great fluctuations in the discount rate. If the Bank Act has nothing to do with the fluctuations in the discount rate, I would like its supporters to explain why those fluctuations have been so frequent and extreme since that Act was passed—why the contrast is so marked between the years previous to 1844 and the years subsequent to that date. I can only go back to 1833, because previous to that year the Usury Laws had some effect in steadying the rate, at least they prevented it rising above 5 per cent; but from 1833 to 1844 there were only five changes, giving on an average only one change every two years. But since 1844 we have only had one year–1851—without a change, and we have had as many as 15 changes in one year, and we have had as many as five changes in one month. In the one month of August, 1870, we had as many changes as in the 11 years previous to 1844. Besides all the changes in those 11 years previous to 1844 ran between 4 per cent and 6 per cent. I might almost say between 4 per cent and 5 per cent, for there were only a few months of 6 per cent in 1839; but since 1844 our fluctuations have run between 2 per cent and 10 per cent. Last July we had a minimum of 3 per cent, while by November it had run up to 7 per cent, making the value of loanable capital more than double itself in four months; but in July, 1865, the minimum was 3 per cent; in July, 1866, it was 10 per cent; and in July, 1867, it was 2 per cent. Thus we had money at one date no less than five times the value it bore at another date, only one year distant. If those frequent and extreme fluctuations which have followed the Act of 1844 are not at all attributable to that Act, I should like to know what they are attributable to. If the answer is that they are owing to free trade, then the inference seems inevitable that a fettered and cramped currency is a bad accompaniment to Free Trade, and that when we freed our trade we should have placed our currency on a broader basis; whereas by the Act of 1844 we had just bound it in double fetters. All the changes and fluctuations are made to check the efflux of gold, or to bring it back if it has gone. But, as I have before said, merely to raise the hire is a far more slow and uncertain process than to raise the price. If France wanted gold from us she would raise the price above our fixed price, and at once get it; but our plan of raising the hire entirely failed in the panic of 1866 to bring us gold from France. During our three months of 10 per cent discount rate, the Bank of France kept their rate at 3 and 4 per cent, yet their gold increased till they had actually over £28,000,000 sterling, while we with our prolonged 10 per cent rate, could not get above £12,000,000. The contrast with France is indeed remarkable. France issues no less than £112,000,000 sterling of credit notes, keeps up her bullion, keeps down her discount rate, and escapes panic; while we, with our small issues tied to the gold basis, fail in all. We have set up gold for our idol—we worship it with a senseless superstition. If a few millions of gold go out from the Bank we straightway plunge into insane panic, depreciate all our property, except gold—probably a hundred times the amount of the gold that has gone out; raise our hire for money four or five times what it was before; and at last, when our commerce is in collapse, when one half of our merchants are ruined and the other half on the brink of it, we give the Bank leave to issue a few more credit notes, as the only refuge from universal bankruptcy. Greater folly, greater insanity, greater crime could hardly be. More poverty, more misery, more broken hearts and more desolated homes, are due to this one cause than to all others put together. And the remedy, after all, is so easy—an extra issue of credit notes—that in every one of our great money panics has proved an immediate success—namely, in 1797, 1825, 1847, 1857, and 1866—at all times the remedy is the same; and yet we will not learn that what acts as an immediate remedy might, if applied a little earlier, have proved a preventive, and might even be the basis of a sounder system. Under our Free Trade system, the business of the country has increased to such an enormous extent that gold has become too narrow a basis for the conduct of that business. There is no doubt at all but for the extraordinary discoveries of gold in California and Australia, our currency would have broken down long ago, and we would have been obliged to turn to something else. Currency reformers, in fact, say there is no good ground for so narrow a basis as gold. They say that gold is only one form of stored-up labour, and that there is no reason why that one form alone should have representation. I admit that gold is necessary for our foreign import trade, but I do not see that it is so for our domestic trade. It may be said—"It is all very well to point out the defects of the present system, but what remedy do you propose in its place?" Now, I confess that when we come to consider how a remedy is to be contrived, we find wide differences of opinion among currency reformers. Everyone has a pet scheme of his own; and I admit that I myself am no exception to the rule. But, at the same time, I consider the present system is so radically bad that I would be inclined almost to welcome any change. I think many of the schemes for a more extended currency, based on Consols, are very feasible indeed; but I would prefer for myself something better. I should like to see something resembling the American system, without its defects, established in this country. I think that the United States national system of State notes, though not a perfect system, is a very bold step in the right direction, and is, perhaps, the best symbolic currency that the world has ever yet seen. Under such a system, notwithstanding her miserably cramped trade and her devastated fleets, America has succeeded in developing her resources wonderfully, and in paying off a very large part of her National Debt. America uses no gold whatever for her internal trade. She reserves it all for her foreign trade. Now, we have always been told that under such a condition of things all the gold would vanish from the country, and it would be impossible for our merchants to get gold to carry on their foreign trade. But that, let me say, is not the experience in America. They have there a class of traders called gold brokers, whose business it is to keep gold and deal in gold. When a foreign trader wants gold he simply goes to the broker and pays the market price for it. We, on the other hand, go upon a different principle. We give foreign traders access to our national gold store, and allow them to get it with too great facility, and without paying a proper price for it. Now, if we abolished our present gold store, and had recourse to a better system of currency, our foreign traders would also have to go to the brokers for gold. That is a thing which I think we ought to make them do. Something even better, however, might be done. My proposal is a National Bank with a right of issue somewhat resembling the issue department of the Bank of England, but free from all trade influences, free from Government control, and accountable only to Parliament. The only function of the National Bank should be to receive Government securities, and thereupon to open a credit account for notes to the extent of 80 per cent of these deposits. The banker would be entitled to draw the full amount of his dividend on these Consols; but, on the other hand, he would be charged an interest at the rate of 2 per cent on the daily balance of his note account—the dividends and interest to be both payable in gold, and the notes to be issued as low as one pound notes, and even lower. The issue in America goes down as low as one dollar, and there is, besides, a State issue as low down as 10 cents, to the vast convenience of the public. In England we practically adopt a similar currency, for at our clubs we generally get postage stamps instead of copper. I think the Chancellor of the Exchequer might adopt the hint and turn it to some account. The advantages I would expect from such a system are—it would be free from the objections now urged against the Bank of England management. It would also be free from all Government control, and no Government would be able to turn the system to an improper purpose. Moreover, the extent of issue would depend entirely upon the ability of bankers to deposit Consols, and the willingness of the public to pay a per-centage on the use of the issue. The only thing new in this scheme is the charge of daily interest on the balance of the note account. That would prevent bankers from taking out more notes than was necessary for the use of their trade. It would, in fact, be a self-regulating issue which would not depreciate, because no banker would take out notes to lie idle, or to pay them away for a lower rate than that at which he had procured them. Now, this is no mere theory. A charge of daily interest is a mere importation from the Scotch system of banking. Under the Scotch system of banking every trader in the country receives interest on the daily balance of his trading account. The consequence is that every trader is pecuniarily interested in keeping out as little currency as possible. He pays to his bank account every pound of his daily collections in order to get interest upon it; and in the same way the same causes acting upon the larger amounts with which the bankers have to deal would produce the same result. The economy of circulation in Scotland is proved by the facts that the population of England is not seven times as large as that of Scotland, nor are the taxes of England seven times as large as those of Scotland, yet England absorbs upwards of 15 times the currency that Scotland requires for her transactions. I think that charging the banker 2 per cent for the benefit of the country would still leave him a fair profit on the issue, and would give the revenue a large return. And this is nothing new—it is merely the expansion of a system that now exists; for at present the Bank of England has by Act of Parliament the power to take possession of two-thirds of any lapsed issue of any English country banker, on condition of depositing Government securities and paying 2 per cent. Moreover, the revenue receives a further sum from the profits of note issue. It receives as commutation of the stamps on bank notes £139,500 a-year, and it receives from the profits of issue from the Bank of England £138,500. £60,000—the composition from the Bank of England—is included in the £138,000 of profit received from the Bank of England, but the composition of the country bank notes is £139,500. Hon. Members who are incredulous as to this statement will find the one under the head of "stamps," and the other under the head of "miscellaneous," and the two together amount to £278,000. The public faith in such a note issue as I have sketched would certainly depend more upon its ultimate than upon its instant convertibility, but that ultimate convertibility would be more secure. Even our present note issue depends more upon ultimate convertibility than instant convertibility, because there are £31,500,000 that could not be instantly converted. Such a system would not give cheap money, but I have never advocated cheap money. I can see a good deal of evil in money being very cheap. What I want to see is steady money, and I think the plan I suggest would give steady money. I do not agree in the generally-expressed opinion that the bankers are very greatly interested in keeping up the present system. I do not think the bankers really benefit very much from it, for I find the average rate of discount is actually lower than it used to be. I find that the average discount rate for the years which have elapsed since 1844 has only been 4¼ per cent, while previous to 1844 it ran from 4 to 5 per cent pretty steadily. Therefore I do not think that the bankers derive such a benefit and have such a vested interest in the panics as is sometimes alleged against them, and I believe that they stand in their own light in supporting the present system. But, while I have in a manner sketched a proposal, I do not in the least wish to commit the House or any of my supporters, if I have any, to any form of remedy whatever. All I wish to commit the House to is the existence of certain very great evils, and to the need of inquiry. I am quite aware that the inquiry is not altogether new, and that the ground has been gone over to a considerable extent before. I know that a Committee of this House sat in 1848, and that in the same year there was a Committee of the House of Lords, but they came to absolutely opposite conclusions. There was also a Committee in 1857–8, which, after hearing a great deal of evidence, came, in my opinion, to a very inconclusive report indeed. They reported that the crisis of 1857 was due to excessive speculation and abuse of credit—but they failed to say what the excessive speculation was due to. They stopped too soon or did not go to the bottom of the subject. I think that the wild speculation was due to a systematic oscillation in the value of money, which destroyed all legitimate business. No merchant makes his calculation upon a very small rate of profits now, because he never knows whether a rapid change in the discount rate may not sweep them all away, and turn them into absolute loss. The merchants, therefore, are obliged to look to ventures in which there is a large profit, and large profit, of course, means large risk. In this way the character of our business and of our business men is becoming changed and deteriorated, and this is very greatly owing to the Bank Act and its influence. The Committee of the House of Lords in 1848 reported that the recent panic—the panic of 1847—was materially aggravated by the Bank Act. Therefore, the House of Lords and the House of Commons are entirely at issue upon the question, and for that reason I have asked for a Royal Commission instead of a Committee of this House. But since the last Committee reported, we have had another panic—the panic of 1866—which has not been inquired into at all, although it had some peculiar features of its own, such as the relative position of the Bank of France and of the Bank of England at that time. Then again the French have completed an important inquiry since that date; and they have come to a very different conclusion from the Committee of the House of Commons. Their conclusion was not that it was expedient to adopt our system. They have left their Bank perfectly free, and the course they have pursued is, I think, a question into which a Commission might very well inquire. Then, again, the United States national currency has been established since our inquiry. It has been in existence now for seven years, and is well worthy, I think, of being studied by a Royal Commission, and of being reported upon. For these reasons, I ask the Government to give me a Royal Commission in place of a Select Committee. The hon. Member for Maidstone (Sir John Lubbock) asks for a Committee. I am glad to see that the hon. Member for Maidstone agrees with me in considering that inquiry is necessary. I believe that he really and honestly wants inquiry; but to appoint a Committee of this House at so late a period in the life of the Parliament, would, I think, be very apt to lead to an inconclusive result. Before any Report could be presented Parliament itself would have died, and some of the hon. Members who sat upon the Committee might not chance to be returned to the next Parliament. That, I think, is a cogent reason for asking for a Royal Commission, and not for a Committee of this House. In fact, I fear that to ask for a Committee of this House would be practically asking Parliament to shelve the question. The hon. Member for Cambridge (Mr. W. Fowler) has also an Amendment upon the Paper; but I am glad to see that he is only half-opposed to the Motion. He admits that there were evils attending the present Bank Act, and that it is not the self-acting, self-adjusting, automatic machine which its great propounder held out to us it was to be. But with such an admission on the face of his Amendment, I wish to know how it is that he refuses inquiry. If the hon. Member has any faith in his own views, he must see that inquiry would be in his favour, and would lead to the adoption of his opinions; therefore, instead of the hon. Member opposing inquiry, I confidently look to him to support it. I have endeavoured to make my statement, although rather a long one, as simple as possible. Nothing would have been easier for me than to have covered up the whole subject with a cloud of figures such as has been usually the case when Gentlemen have dealt with it. I have steadily avoided that, and where I have used figures I have employed round sums and not the exact sums. Thanking the House for its patience, I now beg, Sir, formally to move my Resolution.

MR. MUNDELLA

seconded the Motion.

Motion made, and Question proposed, That, in the opinion of this House, the present system of Currency is dangerous to the commerce of the Country, and that some change is necessary to prevent such extreme fluctuations in the discount rate as have been frequent since the passing of the Bank Act of 1844, and that an humble Address be presented to Her Majesty, praying that She will be pleased to issue a Royal Commission to inquire into the means of remedy for the evils complained of."—(Mr. Anderson.)

SIR JOHN LUBBOCK

Fifteen years have now elapsed since the last Parliamentary inquiry into the operation of the laws by which the currency is regulated—fifteen years most eventful and instructive. Under these circumstances it is surely desirable that our financial history during this period should be recorded, and that the statistical tables which we now have up to 1857 should be brought down to the present day. There are, moreover, some points in which our present laws, or rather, let me say, our present customs, might, perhaps, be modified with advantage. Again, as when one of Her Majesty's ships is wrecked, it is usual to have a court-martial, so a suspension of the Bank Act may be said to afford sufficient ground for a Parliamentary inquiry. So far, therefore, I do not differ from the hon. Member for Glasgow, though unable to accept his Resolution. I do not wish, indeed, to lay any special stress on the appointment of a Committee rather than a Commission, although the former seems more convenient, and follows up the precedents of 1848 and 1858. It is, however, impossible for me to accept the Motion of the hon. Member for Glasgow, because I do not believe that the present system of currency is dangerous to commerce, or that fluctuations in the rate of interest can be prevented by Act of Parliament. It must be remembered that the Act of 1844, though called a Bank Act; is, in fact, only a Banknote Act. It does not interfere in any way with the Bank as a Bank, but it limits the issue of bank-notes to a certain fixed sum, plus the amount of bullion. The main object was to secure the convertibility of the note, and it has done so. In all other respects the Bank was left and is still perfectly free. Those who advocate what they call free banking often refer to the United States as a model. But in fact, while true banking—banking as opposed to the issuing of bank-notes—is perfectly free in Britain, this is not the case in the the United States. On the contrary, in that country the law attempts to regulate, not only the currency, but the direct banking business of the so-called National Banks, and provides that they must hold a cash reserve of either 15 per cent., or, in the so-called "redemption cities," 25 per cent. of their total liabilities to the public. These limits have not, however, as a matter of fact, always been maintained, and last December the New York Banks infringed the law in this respect, their reserve being below the legal amount. I agree with a very able article in The Economist (7th December, 1872), that the system— Is very far from a success. It lays down a hard and fast line, which fetters some banks and is superfluous for others, while it can hardly be said, looking at the strain upon the New York banks, that it suffices to secure an ample reserve in the proper quarter. But though banking proper is perfectly free in this country, the issue of notes is regulated by the Act of 1844, up to which time the Bank of England was left to exercise its own discretion. In considering the policy of the Act, it is very necessary to remember the history of our currency before 1844, and the events which induced Sir Robert Peel to propose the Bank Act. In 1797 the bullion in the Bank of England had almost run dry, and the directors communicated to Government their fear that they would be unable to meet their engagements. The Government replied by the Order in Council of the 26th of February suspending cash payments. The Act confirming this Order contemplated a resumption of cash payments in June of the same year; but, the fatal step having once been taken, the suspension was prolonged by subsequent Acts until the close of the war. Even then, however, the Bank was not in a position to resume cash payments, nor did this state of things cease until 1823. It must not, however, be supposed that this period was free from financial difficulties. On the contrary, in 1800–1 the commercial distress was very severe; in 1811 it was so great that Parliament authorized ail advance to merchants of £6,000,000 against approved securities, in spite of which the failures were very numerous. From 1814 to 1816 was also a period of great, depression, and in fact those who regard an inconvertible paper currency as a panacea for financial evils, would do well to study with care the history of this period. In 1825, within a year or two after the resumption of cash payments, the Bank of England was, in the words of Mr. Tooke, drained almost to exhaustion. It has been often stated that on this occasion the Bank was saved by the accidental preservation of a box containing £700,000 in £1 notes. At this period no less than 70 banks suspended in one month; a suspension due to panic, as was shown by the fact that many paid in full, and the whole on an average paid 17s. 6d. in the pound. In 1836 the bullion in the Bank of England was again very low, and in 1839 the Bank was driven to the expedient of raising £2,000,000 by drawing on Paris. This had, indeed, become necessary under the circumstances. Mr. Palmer, Governor of the Bank, in his evidence before the Committee of that House, said:— The case of the year 1839 was one of positive necessity; the bullion in the Bank was reduced so very low, by the discredit that existed of the Bank itself upon the Continent of Europe, as to endanger specie payments, so that there would have been no alternative but suspending altogether making payments in specie if they had not resorted to public credit. In short, the bullion in the Bank was allowed to fall to £1,000,000 in 1797, to £1,261,000 in 1825, to £3,831,000 in 1837, to £2,406,000 in 1839. Under these circumstances, some legislative enactments were obviously necessary, and the Bank Act was accordingly passed, since which time the bullion has never on any occasion fallen below £6,000,000. It may be said that the Bank of England would under any circumstances have kept up its supply of bullion. Such an opinion would not however, I think, be maintained by any one who had carefully considered the subject. I have great confidence in the judgment and prudence of the Bank Court; but the truth is that without the Act of 1844 it would be almost impossible for the Directors to maintain such large reserves as at present. There were times when these reserves would seem to all those who did not look far ahead to be extravagant and unnecessary. The Bank rate affects not only those who discount with the Bank itself, but a great variety of other transactions, and so many persons are interested in the matter that immense pressure is always brought on the Directors to reduce the rate as soon as it seems possible to do so. I need not, however, urge my own opinion on this point, but will refer to the conclusion of the Committee of this House in 1858, which reported that the true judgment of the Bank Court would, under any circumstances, lead the Directors to act as if the Act of 1844 was in existence— But yet it is not expedient to expose them to the influence of such a pressure as would inevitably be applied at such a time. Nay, this was the opinion of the Bank itself. The Governor, Mr. Palmer, was asked before the Committee of 1858— Looking at the present views of the Bank Directors, and to the experience which they have now acquired, do you think it probable that if the Bank Act had not been enforced, they would still have been desirous to pursue precisely the same course as they have actually pursued in that respect. He replied candidly— I think they would have been desirous to do so; but I am not sure that the influence of pressure from without might not have acted a little to warp their judgment." [Report on Bank Acts, 1858, p. 6.] The hon. Member for Cambridge (Mr. W. Fowler), who is so well qualified to speak on such a subject, has also expressed the same opinion, and I believe it is generally shared by those who have studied our financial history. If, then, we do not maintain the principle of the Act of 1844, we may depend upon it that in future panics we shall have no such stock of bullion to fall back on, and that no mere Treasury letter will be sufficient to avert a suspension of cash payments. My hon. Friend the Member for Glasgow, among the accusations he has brought against the Act of 1844, attributes to that Act the effect of rendering the establishment of new banks impossible. With regard to England that can hardly be said to be the case, because some of the most important and flourishing of the existing banks have been established since the passing of the Act. It is true that this is not the case in Scotland, and the state of the Scotch circulation seems to me to be well worth the consideration of this House. It is however fair to admit that the fact is to a great extent due to the excellent management of the Scotch banks. Admitting, however, that the Act has secured the convertibility of the note, it may be said that this result however important, may be secured at too great a cost. What, then, are the objections generally brought against the Act of 1844? They are, firstly, that it creates panics; secondly, that it necessitates high rates; thirdly, that it causes great fluctuations in the rate of interest; and, fourthly, that it prescribes a fixed and rigid limit. It must be remembered, however, that there were panics before 1844, and that they are not confined to England. In the opinion of the Committees of this House which investigated all the circumstances, the panics of 1847 and 1857 were mainly caused by the numerous failures which then occurred, not the failures by the panics. The unsound state of trade in 1847 and 1857 was sufficiently proved by the condition of the houses which failed. Many persons are under the impression that sound and solvent houses were pulled down by those panics. The facts show this to be entirely an error. The average dividend paid by the firms which stopped did not amount to more than 4s. in the pound, which sufficiently proved that they were hopelessly insolvent. Mr. Coleman, the accountant, than whom no one was more competent to speak on such a subject, was asked before the Committee of 1858— Speaking generally with regard to 1847, of which your experience is now complete, are you prepared to say that the failures which occurred in that year were owing to any imperfection of the law by which the facilities for obtaining credit were unduly curtailed?"—"No." "With regard to the year 1857, what would your answer be to the same question?"—"That every house which applied and deserved assistance received it. Mr. Ball, another of the principal accountants in London, was asked whether in his opinion the result would have been advantageous either to those houses or to the public if they had been sustained, and he expressed his conviction that the longer this had been done, the greater would the ultimate loss have been; in confirmation of which it might be observed that the three great banks—the Western Bank of Scotland, the Liverpool Borough Bank, and the Northumberland and Durham Bank—as well as the two discount houses which failed in 1857, and the stoppage of which so much aggravated the panic, were all in difficulties in 1847, and were assisted by the Bank of England. I will now pass to the second objection—namely, that the high rates which were reached in 1847, 1857, and 1866 were caused by the Bank Act. But if so they would have been confined to this country. Now, in 1847, when our rate went up to 8 per cent, it was 7 per cent in New York, and on trade bills even 18 per cent; in Hamburg, again, it reached 7 per cent, though the Hamburg rates were generally below ours. In 1857, when our rate was 10 per cent, the Bank of France had also raised its rate to 10 per cent, and the rate at Hamburg was 9 per cent, and even at that rate there were only three or four houses whose bills were taken. In New York 62 out of 63 banks suspended; most of the banks in Boston, Philadelphia, and Baltimore did the same; and the rate of interest ranged from 18 to 24 per cent. In 1866, when our rate was 10, that of the Bank of Prussia was 9½, while at New York the rate for short loans was 7 per cent, on good bills 7 to 8 per cent, and on ordinary trade bills from 10 to 18 per cent. It is true that the Bank of France rate was at that time 4 per cent; but that very fact showed the extent to which English paper was discredited. The French capitalists preferred to get 4 per cent for their money in France rather than discount English bills at 10 per cent. The third complaint against the Act of 1844 is that it has caused numerous and extreme changes in the rate of interest. I do not understand that the Act is supposed by the hon. Member to have made money dearer on the average, and such is certainly not the case. No doubt these fluctuations had of late years been more frequent than was formerly the case, but I believe that this is due more to the condition of commerce than to the action of the law. It seems to me a clear proof of this that for ten years succeeding the passing of the Act—from 1844 to 1854—there were only 25 changes in the rate of interest, or, on an average, 2½ a-year. It is no doubt true that latterly they have been more numerous. Last year they had 14 changes, while the Bank of France only altered once—namely, on the 1st of March, when the rate was lowered from 6 per cent to 5 per cent. Our rates, on the contrary, varied from 3 per cent to 7 per cent. The fact is, however, that the conditions of the Paris money market are so different from ours that any comparison for such a purpose must be unsatisfactory. New York is a much more apposite case, and those who wish for a change in our system of currency generally point to America as a model. Now, in New York last year the rate of interest on first-class bills altered 23 times in the year, and varied from 5½ to 12 per cent. Thus, while the difference here between the extremes, even last year, was 4 per cent, that in New York was 6½ per cent. The contrast between London and New York is still more marked if we take the rates on money loaned from day to day. In London the rates allowed for money at call vary from 2 to 5 per cent. But in New York the rates charged on loans from day to day vary from a minimum of 3 per cent to a maximum of 7 per cent and 4¼ per cent commission, thus bringing the rate up to 40 or even 50 per cent per annum. Surely, then, it is obvious that it would be an entire mistake to suppose that the adoption of the American system would prevent fluctuations, and periods of pressure in the money market. I am sure, however, that everyone who is conversant with the subject will agree with me when I say that, Bank Act or no Bank Act, if the Bank of England wish to retain its business it must follow the market rate of interest the Bank of England is often said to fix the rate of interest, just as Britannia is said to rule the waves we cannot however prevent storms in the money market any more than we can level the waves of the ocean; and last year, if the Bank of England had attempted to maintain an uniform rate of interest, she would at one period have been deprived of all her discount business, and at another have lost all her reserve. Lastly, some persons have objected to the Act of 1844 because it contains a fixed and rigid limit, but this is an objection not so much to the Act as to the nature of things. Before 1844 there was a limit just as there is now; then the reserve of the Bank of England was in gold, now it is in notes; but it was as much fixed in the one case as in the other. There is, however, this important difference—that the present limit can be altered by a stroke of the pen, as we have always a large stock of bullion in reserve. The three panic years of 1847, 1857, and 1866, so far from being periods when the Act broke down, were precisely the times when it proved most useful. The reserve which was intended to maintain the convertibility of the note, was temporarily used to support public credit. In the three years just mentioned the reserve fell to a very low point. The Act of 1844, however, had kept for us, beyond the Bank reserve, a stock of bullion which proved most useful. It is all very well to say that if it had not been for the Act, the bullion would have been available, and there would have been no cause for panic; but the truth is that, but for the Act, the Bank of England would not have held that stock of bullion. Many of those who oppose the Act seem to suppose that panics are confined to this country. Panics at home naturally produce more impression on us than those which occur elsewhere; but it would be a great mistake to suppose that periods of difficulty have been peculiar to England. On the contrary, they occur wherever trade is complicated and extensive. Take the case of America. During the autumn of 1814 all the Banks south and west of New England suspended specie payments. From the 1st of January, 1811, to the 1st of July, 1830, 165 Banks in the United States suspended operations. In 1825 the rate of interest in New York was from 12 to 36 per cent, and, as stated in a Boston paper of that date—"the merchants cracked like parched corn." In 1837 every Bank in the United States stopped payment, and I have already shown that since 1844 America has not been more free from financial difficulties than we have. There is, however, one way in which our system of currency differs materially from one entirely metallic. Bank notes are much more easily and safely carried about and locked up than the gold they represent, and timid persons during a panic may, under present circumstances, at once withdraw their deposits and lock up the notes. Notes can also be easily sent by post, and if they are cut in halves the risk and trouble of adopting that course are almost inappreciable. But with sovereigns themselves the case is different. There is not only great danger of robbery, but a large sum in sovereigns is both heavy and bulky. During the panic of 1825 a poor woman went to Williams's Bank in the West of England, changed a number of notes for gold, and set out with a mind much relieved to walk home. But though her heart was light her pockets were heavy, and before she had got half way she began to repent what she had done, and feeling very tired, sat down to rest and count her treasure. While she was doing so a butcher boy came by, and at once seeing the state of the case, informed her, with that ready wit which characterises butcher boys, that he was sorry for her, for she evidently did not know that the Sovereign Bank in London had stopped payment. The story adds that she jumped up, hurried back to the Bank, and, after abusing the astonished cashier, insisted on having back her notes. It is obvious that while to draw a balance of £10,000 in 10 notes of £1,000 each was an affair of seconds, to carry off 10,000 sovereigns is a much more serious matter. Many writers on these subjects have assumed that in panics cheques become comparatively useless, and that thus a greatly increased amount of notes is required. I believe that to be a mistake, and that in a panic creditors are glad enough to get a cheque. The increase in the circulation arises, I believe, from the natural wish on the part of Banks, and especially those at a distance from London, to keep strong at such times. I hope that in any future period of pressure the Bank Directors and other bankers, while raising the rate, will, as far as possible, avoid giving rise to an impression that they refuse to discount any good "business" bills. Nothing, I believe, would tend more to prevent panics than the feeling that, at the current rate, good bills would be negotiable. If that were the case, the public would present for discount as few bills as possible, whereas in the late panics they often discounted much more than was necessary, under the apprehension that if they waited they might not be able to discount at all. Still, we should indeed be blind to the lessons of the past if we hoped to avoid difficulties in the future. No law, I might almost add no prudence, could obviate the possibility of panics. Moreover, there is a certain amount of uneasiness in the City on account of the views attributed to the Chancellor of the Exchequer, and especially to his remark that the City must take care of itself. I am sure, however, that my right hon. Friend did not use this expression in an unfriendly spirit. I accept it rather as a tribute to the prudence of those by whom our banking and commercial institutions are conducted. As regards the body to which I have the honour to belong, on the very worst day of the panic in 1857, the London bankers had £5,500,000 deposited at the Bank of England, in addition to their reserves in their own tills. It must then be admitted that they had acted with prudence and forethought. Moreover, it must always be remembered that the pressure in the money-market in 1847, 1857, and 1866, as the published Returns fully prove, arose, not from any withdrawal of the deposits from the Banks, but from an entirely abnormal and extraordinary demand for loans and discounts on the part a the public. It is one thing to hold a sufficient reserve to meet any demands which can be made for deposits, but the calls for loans and discounts cannot be foreseen. Moreover, though the minimum amount of notes which can ever be in circulation may be estimated with certainty, it is impossible to foresee the maximum which may be required. So far as any gradual increase is concerned, the case is met by the provisions of the Act, but it is different with any sudden demand for notes, such as occurred, for instance, in May, 1866, when the amount in circulation rose from £22,300,000 to £26,100,000 in one week. What then would happen if we had a repetition of such a state of things as that which occurred in 1857—which I take in preference to 1866, because the facts of the latter year are not fully known to us? On the 12th of November, 1857, the reserve of the Bank of England consisted of £450,000 in coin and £131,000 in notes, while the deposits of the London bankers with the Bank of England amounted to £5,458,000. Under these circumstances, the Treasury wrote a letter stating that, should the Bank exceed the authorised issue of notes, the Government would bring in a Bil1 of Indemnity. It must be remembered that this letter did not alter the legal position of the Bank. The Chancellor of the Exchequer has no authority to suspend the Bank Act. No doubt it would always be satisfactory to the Bank Directors to know that they were acting with the concurrence of Government, but that does not affect their responsibility in law. It seems, however, to have been generally supposed that in the absence of such a letter the Bank of England and other bankers would have been compelled to cease discounting, and would thus have saved themselves at the expense of the mercantile community. This idea has caused, no doubt, a difference between the currency panics before and after 1844. In earlier times solvent houses feared for the Bank; latterly they have trembled for themselves. I believe, however, that their fear was groundless. The truth is that the Bank cannot, under such circumstances, suddenly cease to discount. The proper course is to act on the exchanges by timely precautions; but if the Bank cease to discount, the result will be that it will lose more by the panic which it will produce, the hoarding of notes, and the withdrawal of deposits, than it will save by the diminution of advances. Under such circumstances, then, what can the Governor of the Bank do? The Bank must honestly endeavour to conform to the Act; but, if a sudden emergency arise, they must do their best, and, if necessary, come to that House for an indemnity. The Act of 1844 is intended to regulate the Bank, not to break it. It must be remembered that the Bank does not hold it as trustee for the note-holders. The object of the Act was no doubt to regulate the issue, but it does not give the note-holders any special claim on the bullion. In a liquidation, they would rank with the depositors. Under the circumstances, therefore, while on the one hand the Bank ought not to over-issue notes, neither on the other ought they to refuse the cheques of depositors as long as they have funds. They must therefore choose the lesser of two evils. Whether they are responsible for the position, or whether it was due to circumstances beyond their control, is, of course, another question. The Governor who sanctions an over-issue of notes, whether with a Treasury letter or not, no doubt incurs a grave responsibility; but it would be far graver to close the doors of the Bank; that is a responsibility which I believe no Governor of the Bank would take upon himself. In certain contingencies, then, it seems—and Parliament has sanctioned the belief—that the Directors of the Bank of England would be compelled to extend the issue of notes beyond the limit contemplated by the Act of 1844. I confess, however, that I should be reluctant to entrust to them a legal power such as is indicated in the Amendment of my hon. Friend the Member for Cambridge, because I think that such a course may lead to an over-issue without sufficient reason. If then, these views are correct, solvent houses have no cause to regard the Act of 1844 with apprehension. As a matter of fact, even in the worst days of 1847, 1857, and 1866, good bills could always be discounted. I trust that no suspension of the Act may again be found necessary. At any rate, while we must no doubt expect times of difficulty, and periods of pressure in the future, still as long as the Act of 1844 is maintained on the statute book, we shall always have a supply of bullion in reserve sufficient to carry the country through any momentary panic. It is, of course, unde- niable that the fluctuations in the rate of interest have been greater since 1844 than they were before, but so have those in commerce itself. In 1819 our exports were £65,000,000, and in 1844 they were £144,000,000, showing an increase of £79,000,000 in 24 years; but in 1872 they were £608,000,000, being an increase in the 27 years since the Act was passed of no less than £464,000,000. Taking the amounts which passed through the Clearing House on the 4th of the month in 1839, they were £1,200,000 on an average; the figures were not again ascertained till 1868, but the amount now averages more than £22,000,000. The amount which passed through the Clearing House in 1839 was under £1,000,000,000. It is true that this amount does not include the joint stock Banks, but if we allow another £500,000,000 on this account we shall probably be beyond the mark. After that the figures were not taken till 1867, when they were £3,260,000,000. Last year they amounted in round numbers to £5,360,000,000, and this year they will probably exceed £6,000, 000,000. Surely, with these facts before us, it cannot be said that the Bank Act has prevented the development of our commerce? While, then, I hope that Her Majesty's Government will grant a Committee, so that the financial history of the country since 1857 may be put on record and some improvements introduced, I cannot agree to the Resolution of the hon. Member for Glasgow, and I beg, therefore, to move the Amendment which stands in my name. I am anxious that the financial history of the last few years should be inquired into, and while I believe that in some points our present financial arrangements might be improved, I feel the utmost confidence that, while willing to make any changes which can be shown to be desirable, the House will not consent to tamper with the firm basis of our currency, or to abandon the main principle of a system under which our commerce has attained a magnitude and prosperity unsurpassed and unparalleled in the history of the world.

Amendment proposed, To leave out from the word "That" to the end of the Question, in order to add the words "a Select Committee be appointed to inquire into the operation of the Bank Act of 1844, and of the Bank Acts for Ireland and Scotland of 1845,"—(Sir John Lubbock,)

—instead thereof.

Question proposed, "That the words proposed to be left out stand part of the Question."

MR. W. FOWLER

said, he could not agree with the Motion of the hon. Member for Glasgow (Mr. Anderson), chiefly for the reason which had been given by the hon. Baronet the Member for Maid-stone (Sir John Lubbock)—namely, because he did not think that the present system of currency was dangerous to the commerce of the country, or that any change was necessary to prevent such extreme fluctuations in the discount rate as had been frequent since the passing of the Bank Act of 1844. Hon. Members should keep clearly before their minds what the law could do and what it could not do. The law could separate issue from banking, taking care that the money issued in bank notes was duly secured, so as to be really money, and leaving banking free. Now, he asserted that the Act of 1844 did what was required. By it the note was duly secured, so that a £5 note was what it professed to be; and, at the same time, banking was free, except, perhaps, in Scotland—a case that should be inquired into. Let the House consider the progress of banking in the last 30 or 40 years. During that time the bank note had almost receded into insignificance, when compared with banking deposits. He believed he was correct in saying that the circulation of notes was larger in 1819 than in 1872, which was a very remarkable fact, when considered in connection with the increase in our trade in that period. He would ask the attention of the House to the figures. Take first the exports and imports. The amount being represented by the figure 65 in 1819, would be represented by 608 in 1872. The clearing returns were even more astonishing. The amount of the clearing in 1844 was 40 times the total note circulation; in 1868, 87 times; in 1869, 90 times; in 1870, 97 times; in 1871, 113 times; and in 1872, 135 times. But the actual figures of the clearing for the present year would make the matter still plainer. Take a few weeks. In the week ending January 8th, the total clearing was £114,000,000; for the week ending January 15th, £145,000,000; for the week ending January 29th, £103,000,000; for the week ending February 5th, £149,000,000; for the week ending February 26th, £100,000,000; and for the week ending March 5th, £161,000,000. But this was not all. Mr. Inglis Palgrave had lately made an estimate of the total amount of the banking deposits of the Empire, and, though only an estimate, it might, he thought, be safely depended on. The figures were certainly astounding—

Average deposits of Bank of England		£25,500,000
Circulation not covered by bullion		10,000,000
Liabilities of London
Banks	74,000,000
English Provincial ditto	210,000,000
	384,000,000
Less estimated capital	54,000,000
		330,000,000
Two-fifths of deposits of discount houses		32,000,000
Scotch Banks, including circulation		80,000,000
Ditto, Irish		34,500,000
15 per cent of liabilities of Foreign and Colonial Banks (120,000,000)		18,000,000
Savings Banks		50,000,000
Total liabilities		£580,000,000

And, now, what was the amount of reserve held against this enormous liability, according to Mr. Palgrave's estimate? He was sorry to say that it was only £24,000,000. Nor was this all. It might fairly be said that the only great reserve in the country was the reserve of the Bank of England, and a large part of that reserve consisted, in fact, of the reserves of other bankers deposited by them with the Bank. Now, under these circumstances when the reserve of actual cash was so small, and the possible and probable demands on it so large, who could wonder at great fluctuations in the rate of discount? That little bit of money, under those circumstances, became so extremely valuable that its worth could hardly be measured when men felt that they must have it whatever they had to pay for it. He wished to ask the hon. Member for Glasgow whether it was possible for any modification in the law of the country to alter this condition of affairs. The present system had grown out of the exigencies of the commercial classes, and a system of bills, cheques, and notes had been invented in order to meet the conveniences of trade. Such a system, of course, had its drawbacks, and the people had to pay the penalty when the day of panic arrived. That which he thought the law could do, and did do, was to give timely warning by acting on the Bank reserves. He could not illustrate this point better than by quoting a few words from Lord Overstone's evidence before the Committee of that House, in 1857— Previous to the Act of 1844, as bullion went out, the place of that bullion was taken by paper notes issued. The consequence of that was that the circulation—in other words, the money of this country—was kept at an undiminished amount when the action of the exchanges required the decrease of it.… Under the Act of 1844, we now all know that as the bullion goes out, either the notes which are not in the Bank till, or the notes which are in the Bank till, must undergo a corresponding decrease; and, that being the case, the corrective influence on the action of the Bank, and upon the feeling of the public, is brought into play at the very commencement of the evil."—[Lord Overstone's evidence in Report on Bank Acts, 1857, p. 332.]

He believed the noble Lord was right. The Act gave warning in time, and in ordinary times the warning was taken. The Bank raised its rate and public opinion supported the Bank in so doing, which it would not do but for the information afforded by the system adopted by the Act. Raising the rate without apparent reason was very unpopular, and the reason would not be apparent under the old system until it was too late to do any good. But it was said we we have to deal with panics, and the Act does not work well in times of panic. The hon. Member behind him seemed to have forgotten that panics were not the invention of the Act of Parliament. They existed in oven greater intensity previous to 1844, for anyone who recollected the panic of 1825 looked back to it as one of the most hideous periods that ever existed. In 1837 the Bank was in the position of having neither notes nor gold; but since 1844 there were large reserves of bullion, whatever might be the demands upon it, and thus the Act enabled the Bank to assist commerce. In America, where there was free banking with a vengeance, the panics were far worse than anything of which we had experience in this country. The Bank of England had had three experiences of the peculiar position of which he was speaking, and there was no doubt the remedy invented by what was called the Government letter was perfectly effective. But this remedy was said to be unsatisfactory. He did not assert that it was satisfactory, but the question was whether or not a better remedy could be proposed. He would like to read another extract from the evidence of Lord Overstone, which showed that, although he was averse to the relaxation of the Act, he thought that the case of panics required exceptional treatment. He said— The principle of the Act is to regulate and control all those actions upon the bullion which arise from legitimate causes, and are capable of being controlled by measures which rest upon principle. But there may be actions upon the state of the circulation arising from accidental causes, as panic, and therefore not controllable by principle, which the Act cannot regulate, and which must, therefore, if they run to an excessive extent, be reached by some extraordinary power."—[Lord Overstone's Tracts, 1837–1857, p. 537.]

Again, the Committee who reported in in 1858, spoke as follows:— Your Committee think that such a provision could not be regarded as any violation of the principle of the Act of 1844. To have introduced such an express provision when the law itself was first adopted by Parliament, or even when, as in 1848, it had only been a few years in operation, and was comparatively little understood, was a far more serious question of policy and of prudence than it can in fairness be considered at the present time. Yet the interference of Government in an extreme case must, in fact, be taken to have been contemplated by the framers of that Act."—[Committee of 1858, p. 27.]

Now, the real question was whether we were to trust to the discretion of a Ministry going against the law as it were, or, whether it would not be far better to have the provision a part of the law, so that the law should not be periodically broken. He thought it most dangerous to proceed on the supposition that we were to have no more panics. That mistake was made in 1857. Everything was at that time said to be in a most satisfactory state, though the country was on the eve of a great disaster. A similar mistake occurred in 1866. Some gentlemen then made speeches in public or quasi public places in which they declared that the era of panics was at an end. One hon. Member of the House made a statement to that effect than whom no one had access to better sources of information. All, however, were equally in error, and the danger, he would remind the House, was increasing, because while our deposits continued to grow larger our reserves did not proportionally augment. There was a want of elasticity in the Act of Parliament, which did not meet the case, and, that being so, he thought it might be a fair subject for inquiry whether some plan could not be invented by means of which the necessary relaxation, for it must come, could be given by and not against law. It It was, in his opinion, a most unsatisfactory state of things that we should have the people of this country expecting the law to be broken. The law should be so arranged as to be applicable to foul weather as well as to fair. He had no objection, therefore, to inquiry, but he wished the inquiry to be instituted into the whole question, without the House committing itself to anything which was unsound. No hon. Member would, he hoped, give way to the idea that we should get rid of panics. Nothing could be more fatal to a sound conclusion than any idea of the kind. It was, in his opinion, failures which caused panics, and not panics which caused failures. It was a rare thing, he believed, for any man to fail except as the result of his own imprudence, as for instance, in locking up his assets in the wrong sort of securities. We had, however, the same state of things over and over again, and there was no use in assuming that it would not return. He was even afraid that we should have worse panics than those which we had already experienced, in the time to come. He therefore entreated the House, if it resolved to inquire into the question, to inquire into the whole matter thoroughly, and not to expect that it could make money cheap by Act of Parliament, or prevent the consequences of imprudence.

MR. J. B. SMITH

said, that previous to the Act of 1844 the Bank of England were allowed to issue notes ad libitum. The Bank laid down a rule that it ought to keep a reserve in gold equal to one-third of its liabilities; but it continually broke that rule, and often the Bank was left with scarcely any reserve of gold at all. At last the reserve was reduced to about £1,000,000, with some 30,000,000 of deposits, and if it had not been for the kindness of the Bank of Franco in making advances of gold to the Bank, in all probability it must have suspended payment of its notes. The Act of 1844 was passed to preserve us from that humiliation, and it had most effectually succeeded. Nobody doubted that since that period banknotes could at any time be exchanged for gold, but the Act of 1844 made no other change. The Bank was not allowed to issue notes beyond £15,000,000 except upon deposits of gold, and, consequently, there was a security that its notes could always be converted into gold. But in separating the issue from the other department of the Bank, the Bank, like any other joint-stock Bank, was at liberty to carry on its business as it pleased; and the result had been that it had carried it on just as before—heedless of its principles. The Bank professed to keep a reserve of cash equal to one-third of its liabilities; but in 1847, instead of having 33 per cent, it had only 11 per cent of reserve; iii November, 1857, it had only 7½per cent; and in 1866 only 4½ per cent of reserve. In times gone by the Bank of England was able to govern the money market; but a new state of things had arisen, large joint-stock Banks had sprung up with larger deposits than those of the Bank of England, and things had changed the course. In 1866, three of the joint-stock Banks of London held 60,000,000 of deposits, while the Bank of England had only 29,000,000. It was the large amount of deposits, and not the capital of the Banks, that ruled the money-market; yet at that time—June, 1866—the Bank of England had only £4,000,000 of cash in hand, and that included the cash on hand of the joint-stock Banks. Thus there were £39,000,000 of liabilities, and only £4,000,000 of reserve to meet them, being 4½ instead of 33 per cent of the liabilities. Remembering that state of things, it was not surprising that he should find on taking up The Daily News of that day, a paragraph to the effect that uneasiness prevailed in the money-market because £600,000 in gold had been taken from the Bank, and it was expected that the rate of discount on Friday would be raised. Since 1866 the power of the joint-stock Banks had so much increased that they now ruled the Bank of England. There was no other remedy for constant panics and fluctuations in the money-market, except keeping an adequate reserve. In a country like this, where almost all the payments of the world were balanced, they must necessarily have great fluctuations from time to time; and the only way to prevent inconvenience arising from them was to have such a reserve as that a drain of 3,000,000, 4,000,000, 5,000,000, or oven 10,000,000 of gold would have no effect upon the market. In 1866 while panic was raging here, no panics occurred in America or France, because of the sound condition of the banks in those countries. The Bank of France had at that time 60,000,000 of liabilities, and 26,000,000 of cash in hand, and, there, a drain of 3,000,000 or 4,000,000, which in this country created a panic, would not have been felt, because they held 44 per cent of their liabilities in gold. The Banks of New York had 17,000,000 of cash against 46,000,000 of liabilities, or 39 per cent; the Banks in Boston held 36 per cent of reserves, and the Banks of Philadelphia a reserve of 48 per cent; while the Bank of England and the three London joint-stock Banks to which he had referred had only 4½ per cent of reserve against £89,000,000 of liabilities. Such a state of things accounted at once for our difficulties, and the constant changes in the rate of discount. One of the most desirable measures to adopt would be to simplify the accounts of the Bank of England by relieving it altogether from the issue of notes, and to transfer the issue to the Government. He had been glad to hear from the hon. Member for the City of London (Mr. Crawford) that the issue department was of little importance to the Bank, which made little profit by it, and no doubt the Bank would, therefore, be ready to resign it to the Government. The proposed inquiry should embrace the whole question, and they must not omit to take into consideration the joint-stock Banks, which no doubt had now about 100,000,000 of deposits, while the Bank of England had perhaps about 30,000,000; and although the Bank of England at present held about £15,000,000 in reserve, that was only 10 per cent of the liabilities of these Banks. In 1865–6, while the whole mercantile community were losing so much money, the joint-stock Banks were realizing 10 per cent interest on their deposits, and were thus in the half year ending the 30th of June, 1866, enabled to make dividends, one at the rate of 25 per cent, another at 29 per cent, and another at 50 per cent per annum; that was done at the expense of the mercantile community. He joined in the demand for the proposed inquiry, and he trusted that it would be of a full, complete, and searching character.

MR. NORWOOD

said, he was convinced that the feeling of the country was in favour of a searching inquiry into our currency system. The fact that the Act of 1844 had required suspension in 1847, 1857, and 1866, owing to crises from which the trading and labouring classes had severely suffered, did not tend to show that it was a satisfactory measure. Moreover, the circumstances of the country had materially changed since 1844, for in that year our imports amounted to £75,449,000, and our exports to £58,584,000, a total of £134,033,000, whereas in 1872 the figures were £353,376,000 and £255,962,000, a total of £609,338,000. In 1844, too, the private deposits in the Bank of England amounted to £8,000,000, and those in five leading joint-stock Banks to £8,000,000; while on the 31st December, 1872 the private deposits of the Bank of England were £21,481,000, and four joint-stock Banks held. £79,350,000—namely, the London and Westminster, £28,660,000; the London Joint Stock, £18,540,000; the Union, £15,180,000; and the London and County, £16,970,000. And notwithstanding that the foreign and internal trade of the country had thus enormously increased, the circulation of notes upon which our currency was based had remained nearly stationary. He agreed with the principle laid down by the Prime Minister in his speech of 31st July, 1866, in which he said— The whole business of issue is the business of the State. The profit of issues belongs to the State, and what is much more important, the responsibility of issues also belongs to the State. And in the judgment of many well qualified to offer an opinion, the period had arrived when the Government should take over into their own hands the issue and regulation of our paper currency.

MR. CRAWFORD,

having heard the speeches of the hon. Member for Maid-stone (Sir John Lubbock) and the hon. Member for Cambridge (Mr. W. Fowler), was satisfied to rely for defence of the Bank Act of 1844, and the manner in which the Bank of England had administered it, on the statements made by those hon. Gentlemen. He had listened with interest to the able and convincing speech of the hon. Member for Glasgow (Mr. Anderson); able because it contained more financial heresies and economical fallacies than he had ever heard propounded in an equal space of time, and convincing because it had convinced him that the opinions he had hitherto held were correct. He should like the hon. Gentleman to define what he meant by the expression that there should be a "free price for gold." The hon. Member for Stockport (Mr. J. B. Smith) had alluded to the peculiar part which joint-stock Banks took in the monetary transactions of the present day, and it was true that those Banks and the Bank of England held in deposit a large amount of money belonging to other people; but he could not see why the hon. Member should have mixed up the other Banks with the Bank of England, considering the totally different position in which they stood from that occupied by the Bank of England. The London and Westminster Bank had a capital of not more than £2,000,000, and had £28,000,000 deposits, while the Bank of England had a capital of £14,000,000 and had £21,000,000 deposits. Why the former with a limited capital could pay so large a dividend was therefore obvious. As to the complaint that the Bank of England held no reserve adequate to its liabilities, it had for some time had 45 per cent of its liabilities in hand. The probability of a rise in the rate of discount on account of the export of gold had been spoken of; but it was a deduction which anybody could draw, that if the export went on the value of money would rise, and the Bank would be bound to raise the rate of discount. The movements of gold were, he must say, made too much of at the present time. There was too great a tendency on the part of public writers to alarm the public mind as to what might be expected to happen. It was quite sufficient for those who had the responsibility of determining what, in their opinion, was the proper thing to do, and what the proper time to do it, without the public mind being alarmed from day to day by prognostications as to what might be the result of such and such a course. His hon. Friend the Member for Hull (Mr. Norwood) had spoken of three suspensions of the Bank Act. He should remind the House that the Act had only been broken, so to say, once. On two occasions the Government had authorized the Bank to go beyond their regulated and legal amount of issue, but only on one occasion had the Bank any necessity to do so. The fact, when it became known out of doors, that the Bank would be able to find notes for all persons who had security to offer, at a price, was quite sufficient to put a stop to all feeling of uneasiness as to the customers of the Bank being able to obtain whatever they might require. He quite concurred in the observations of his hon. Friends the Members for Maidstone and Cambridge that failures were produced by panics and not panics by failures. For his part, he could only name one single instance when throughout the entire panic persons having security were not able to obtain money. On that "Black Friday" there might have been, perhaps, some difficulty, but it was got rid of when it was known that the Government letter was coming, in consequence of which the assistance required could be obtained. It should be borne in mind that during a panic they had not to deal with reasonable and reasoning people. It would be found as difficult to control a herd of wild animals as to render amenable to reason people who had got exaggerated ideas into their heads under the influence of panic. His hon. Friend the Member for Cambridge had given Notice of his intention to propose an Amendment to the effect that a power of relaxation should be vested in the Government, and he confessed that he saw no sufficient reason why they should not be intrusted with such a power. If it were known that such a power existed to increase the amount of accommodation to the public—subject to the operation of a high rate of discount, and with the check of public opinion and responsibility to Parliament—the result could not but be beneficial. He was aware that when the Act was under discussion Sir Robert Peel had in his mind some idea of proposing to give the Government a power of relaxation in the official discretion of the First Lord of the Treasury, the Chancellor of the Exchequer, and the President of the Board of Trade, although the idea was not carried out. He could not help thinking that the circumstances under which the Bank Act was considered in 1844 and the circumstances of the present day were essentially different. Then the principles of the Act had not been tried or tested. Now, after a lapse of 30 years, they had had considerable experience of its operation. It was apprehended that the Government or the Bank would give way too readily to pressure; but it had been shown that there was no ground for such an apprehension. On the whole he was clearly of opinion that much good would result from the granting to the Government of power, under circumstances to be defined, and with the checks to which he had alluded, to enable the Bank to exceed its legal amount of issue. With respect to the inquiry which was asked for, he could only say for himself, and he was sure he might say also for every gentleman with whom he was associated in the administration of the affairs of the Bank of England, that while they saw no necessity whatever for inquiry, all the information sought for being at the disposal of the House, they would interpose no objection whatever in its way. They were ready to come and state all that had occurred in the course of their administration as to which the public had a fair title to information, and that would, of course, have no relation to the private affairs of their customers. They and the officers who represented them were perfectly ready to give evidence as to the working of the Act and the manner in which their duties had been fulfilled in reference to the issues of the Bank. There remained the question whether, if the Government granted the inquiry, as to which he knew nothing, it should be by a Committee or by Royal Commission. For his part, he preferred a Committee of their own to a Commission of which, after its appointment, they might hear again in two or three years. If a Committee were intrusted with the inquiry, he hoped it would be presided over by some person in whom the House had full confidence, and consist entirely of men who had no strong predilections of their own. He did not regret the discussion which had occurred, and he believed that neither the Bank nor the Act, as to its principles, could in the least degree suffer from the most searching inquiry.

MR. R. N. PHILIPS

said, he wished to say a word as to the operation of the Bank Act upon the manufacturing interest of the public. On the whole, he was inclined to think that the result of the change made in 1844 had been beneficial to those interests. He hoped that the result of any inquiry which might be instituted would not be to place the commercial affairs of the country more under the influence of the Government. His hon. Friend the Member for Hull (Mr. Norwood) had found fault with the mode in which the Bank Act had been suspended. In point of fact, the Act had been rescinded, not at the request of the Directors of the Bank, but at the instance of bill brokers in the City, who had brought pressure to bear upon the Bank and upon the Government. He believed that to the step thus taken might be traced much of the difficulties and evils which had since been experienced in the mercantile world. Inquiry might very properly be instituted upon one point. The Bank of England had the privilege of issuing £14,000,000 of notes above bullion, and this privilege was given in acknowledgement of services rendered to the Government. A far more straightforward course would be for the Government to pay the Bank for whatever service it had rendered, and for the Legislature to forbid the issue of notes in any degree beyond the amount of bullion in the Bank. He agreed with the hon. Member for the City (Mr. Crawford) in preferring a Committee of the House to a Royal Commission.

THE CHANCELLOR OF THE EXCHEQUER

said, he had listened to the discussion upon this question with great pleasure, because he gathered from the views expressed that the House had no wish to interfere with or alter the main principles of the Act of 1844. Such a declaration, supported as it had been by such admirable reasoning, was not only an intellectual treat, but of real solid advantage to the commercial and free institutions of the country. It would be strange if it were not so. But he wished to say a few words on the Act, notwithstanding the approbation it had received, just to point out the practice with regard to it. Whenever any evil occurred in the mercantile world people who had anything to complain of immediately flew at the Act of 1844, without troubling themselves to establish a link between the Act and their trouble. The Act of 1844 had been much misrepresented and misunderstood, but it was exceedingly simple. It rested on a metallic basis. All exchange transactions of mankind ultimately resolved themselves into bargains, and the man who undertook to make a payment really undertook to deliver a certain quantity of precious metal at the proper time. That quantity might fluctuate in value—that was inevitable in the nature of things—but the quantity in each bargain was fixed, and ought not to be departed from. All honest commercial transactions rested on that principle, and it was the duty of the Government to maintain it without deviation. The Act of 1844 embodied it. The object of the Act was to manipulate a mixed currency of gold and paper so that whether the token of exchange were gold or paper it should represent the same value as if the entire currency were metallic. That being so, all that reasonable people could expect from the Act was that it should do at the most what metallic currency could do, and that was what the Act had done. Assuming the desire of the hon. Member for Glasgow (Mr. Anderson) attained, he would say of the metallic currency, as he had said of the Act of 1844, that it was the cause of all the fluctuations in discounts. Assuming also that the hon. Member had established this, what more would he have shown than that it was the pleasure of mankind to select as means of payment and measure something which in its nature was exceedingly liable to fluctuation? He would not have shown there was anything wrong in such a state of things, or that it was in the power of man to correct it. He would have shown only the nature of the substance in which contracts were made. How was it possible for the hon. Member to maintain that the Act had been the cause of all the fluctuations in discount? Did he assert that there were no fluctuations in gold? Of course he could not. There was nothing in the world more fluctuating than gold. Every circumstance of trade influenced its value. There were always a number of people wishing to dispose of it and a number wishing to obtain it. Commercial successes created a demand for it. War, discoveries, increased emigration, every movement in the complicated organization of mankind made a demand for it, and the electric telegraph spread the news of that demand throughout the kingdom, so that it was felt immediately in all quarters. These being the principles of the Bank Act, it was manifest that any attempt to substitute any other basis for mercantile transactions was to attempt to make the Government accessory to great dishonesty, because if a man contracted with another to receive a certain quantity of a certain metal, and in accordance with the wish of the hon. Member for Glasgow something else was substituted for that metal other than a piece of paper which was so managed as to bear exactly the same value as the metal, the man contracted with would be cheated. Instead of the contract being dissolved on the same terms as those on which it was made, it would be dissolved on other terms, and the Government would be the cause of the dishonour. Of all persons who should be anxious to preserve the stability of the standard of value, none should be more so than the representatives of large constituencies of work-people, because what could be more unreasonable than that when contracts had been made for labour the Government should alter the standard of value, and force upon the contractors obligations they had never undertaken, causing some to pay more, probably, and others to receive less than they undertook? The hon. Member proposed that any person possessed of a certain amount in Government securities should be allowed to issue notes to the amount of 80 per cent, paying 2 per cent in gold to the Government. What would be the value of such currency? That would depend on the wants of mankind. If such currency were issued by an individual according as his necessities dictated, without regard to the wants of the rest of the community, what guarantee had they that the currency would meet the wants of the community? All that would be certain was that the issue would go on to the full extent. Gold would go out of the country, and all the other evils would ensue which generally result from an extension of the currency. That being the state of the case, the question which had excited most attention in the House was, what ought to be done in case of a panic. It was very difficult to say—and for this reason, that the word "panic" presupposed the temporary absence of all reasonable laws and regulations. He was happy to say that "panic" was un- known in our military and naval services, and that it was only reserved for our mercantile service. And why? Our naval and military men had confidence in their courage, discipline, valour, and former success. They had a well-grounded confidence in their discipline and system of control, whereas he was sorry to say our mercantile transactions, at any rate, did not appear to rest on so solid a foundation. He would not enter into the causes of the panics. They had been clearly explained by several speakers, and particularly by the hon. Member for Cambridge (Mr. W. Fowler.) They depended on the anxiety of people to make every penny they could, and on their being content to carry on the banking business of a great nation on exceedingly narrow and slippery foundations. The Banks of Deposit were an instance. The money deposited did a double duty. It formed the security of the depositor, and contributed towards the assets which the Bank had at its command. The money could do one or other of these things; it could not possibly do both. This represented a dangerous policy, and similar instances might be multiplied. The reserves of the Banks, for instance, were fearfully small, but that was a matter with which the Government had nothing to do; it was a matter for those who deposited in the Banks and those who conducted them. The fact was the conductors of the Banks had not self-denial enough to keep sufficient reserves to carry on the business that came to them. What, then, was the course he could reasonably suggest to the House to adopt? He did not think it would be desirable to enter into the inquiry recommended by the hon. Member for Glasgow. He, at least, would not vote for it, because he did not in the least believe that the Bank Act of 1844 had been the cause of the panics which had occurred in our monetary transactions. And as to the Amendment of his hon. Friend the Member for Maidstone (Sir John Lubbock) it had certainly many things to recommend it, but the great difficulty in the way of that Amendment was the speech of his hon. Friend himself, because, while proposing a Committee of Inquiry into the Bank Acts in a very wide sense, he had demonstrated that there was hardly anything in those Acts which he was prepared to say was not right. And what would such a Com- mittee, if appointed, have to do? Why, simply to record facts derived from experience of the working of the Acts. But the House of Commons would hardly be justified in appointing a Committee of this magnitude merely to record facts which had taken place. And as every speaker with only one exception had spoken in approbation of the Bank Acts, it would be a needless agitation of the public mind, which would be only unsettled and disturbed if the House were to grant an inquiry which in its form would embrace even the question whether the monetary system of this country was to be carried on upon a metallic basis or not, when they were all agreed that the metallic basis was the right one, and that the Act of 1844 had stood the test of experience and had answered the purpose for which it was framed. He hoped, therefore, his hon. Friend would not persevere with his Amendment. There remained the proposition of his hon. Friend the Member for Cambridge (Mr. W. Fowler) which had attracted great consideration from the House, and it was only fair to say that a large amount of opinion had been expressed in favour of something in the nature of what his hon. Friend had suggested. There was a very general consensus of opinion that the subject was worthy of consideration. What he would therefore propose was that the House should decide nothing tonight, and that the Motion should be withdrawn; but he would undertake on behalf of the Government that they should consider, not the principle of the Act of 1844, but the proposition of his hon. Friend the Member for Cambridge, and matters cognate to it, and would, after the Easter recess, make a communication to the House whether they thought it desirable to have a Committee to inquire into the subject or whether they would at once undertake to deal with it themselves. He hoped hon. Gentlemen would agree to that proposal. It would be extremely desirable that they should agree on this subject, and not go to a Division upon it.

MR. MUNDELLA

said, that, as there appeared to be an unanimous feeling on this subject, and as every speaker had arrived at the conclusion that some inquiry should be held, he trusted the hon. Member for Maidstone (Sir John Lubbock) would not accept the suggestion of the Chancellor of the Exchequer. He would recommend the hon. Member for Glasgow (Mr. Anderson) to withdraw his Motion. He had seconded it because he thought that an inquiry by Royal Commission would be better than any other form of inquiry. The speech of the hon. Member for Maidstone had proved too conclusively that there w as no necessity at all for an inquiry; but in the gloss and brilliancy of the speech many of the serious defects of the Act of 1844 had been lost sight of. If the Government would resist the Motion for a Royal Commission, he trusted that a Committee of the House would be appointed to inquire into the working of the Act of 1844. Some of the oldest, soundest, and most experienced bankers in London and the country were most anxious for inquiry. The Chambers of Commerce which met a few weeks ago were urged by one of the soundest bankers in England to come to the Government for an inquiry on the subject. Not only the best men in Lombard Street, but the bankers and merchants throughout the country believed that there were serious defects in the working of the Act of 1844. In 1866 the Government of the day promised an inquiry into the whole question, and, after serious consideration such as the Chancellor of the Exchequer promised tonight, the right hon. Baronet the Member for North Devon (Sir Stafford Northcote), on a Motion by Mr. E. Watkin, stated that there was not one but there were many points which would need inquiry. Owing, however, to the illness or absence of the Chancellor of the Exchequer the Committee was not appointed. He trusted the Government would at once consent to the Motion of the hon. Member for Maidstone.

MR. HUSSEY VIVIAN

said, that the Chancellor of the Exchequer had failed to appreciate the feeling of the House on this subject. The right hon. Gentleman seemed to suppose that the object was limited to a single point—that of enabling the Government legally to suspend the Act of 1844 in case of panic. But something far beyond that was required. At all events, the feeling was that the matter had arrived at a point when it was ripe for investigation. The hon. Baronet the Member for Maidstone (Sir John Lubbock) had advocated inquiry on the ground that very great experience had been gained since the last investigation in 1858. Since then a great crisis had occurred in 1866, and in 1872 we were on the verge of a crisis probably averted by the operation of the Act. It was self-evident from the figures quoted by the hon. Member for Cambridge (Mr. W. Fowler) that the circumstances of our commercial finances were at this moment very different from what they were in 1844 or 1858. That hon. Gentleman stated that in 1844 the transactions in the Clearing House were 40 times greater than the note circulation, but that in 1872 they were 135 times greater. That was surely a remarkable fact. Did it not prove that the note circulation of the country was fractional and infinitesimal? Must there not be a large and wide question to consider besides merely the note circulation? He considered that the currency had very little to do with the rate of discount and value of money. When they had such a fact as that the transactions of the Clearing House amounted in one year to six thousand millions of money, and contrasted this enormous sum with the small amount of the actual currency, it was plain that the whole subject was far wider and deeper than was involved in a mere inquiry into the Bank Act. With the vast interests which were concerned, it was surely not too much to ask that a Committee of the House should be appointed to investigate this great question; and he infinitely preferred a Committee to a Commission. There was one point which ought not to be allowed to go forth to the world, and that was that the reserves of bankers were so small as they had been represented to be. Their cash and notes, though technically called their reserve, were really only a fractional portion of their reserves, which consisted in securities of all kinds, and amongst others the numerous bills drawn by commercial houses which they had in their coffers. It must not be supposed that these did not represent real value; they represented to a very large extent produce as valuable as gold, and it was to the effect which the small gold reserves of the Bank of England exerted on that vast circulation of commercial bills that the investigations of the Committee ought to be directed. He ventured earnestly to press on the consideration of the Government that they should grant the Committee so ably advocated by the hon. Baronet the Member for Maidstone. They might also very properly introduce a simple amendment of the Bank Act which would enable them, under certain exceptional circumstances, to suspend it; but it would be a lame conclusion, indeed, to limit the inquiry simply to what Government should do in case of panic.

MR. WEGUELIN

quite admitted that there was room for inquiry in regard to the banking system of the country. That was so vast a question that he doubted very much whether it was included in the terms either of the Motion or Amendment. The Act of 1844, as explained by the Chancellor of the Exchequer, placed the currency on a basis that could not be shaken, but it left banking and the management of deposits entirely free. Whether that should be so was another question. Formerly the system of banking in the City of London was not to pay interest on deposits. That had been changed to a great extent. The joint-stock and other Banks now paid a large interest on deposits, and if they paid a high interest on deposits they must invest their deposits to a larger extent than formerly. That, of course, affected the reserves. The Government were prepared to deal with the only question as affecting the law of 1844 which, in his mind, was open to discussion. He should therefore be glad if to that extent his hon. Friend the Member for Maidstone (Sir John Lubbock) accepted the proposal of the Government. He did not wish at the present period of the Session and of the Parliament to embark on a more general inquiry of which he did not see the end.

MR. ALDERMAN LUSK

said, he thought the Chancellor of the Exchequer had made a very fair offer to the House. For his own part, he was averse from an inquiry into monetary matters at the present time, as no good could result from it. Discussions of this kind were not unfrequently raised; but in his judgment it would be better if gentlemen, instead of talking about Banks and currency, would look to the manner in which their own business was conducted. The subject had been discussed this evening as if the Bank of England were everything in this country as regards money. Not unfrequently it happened that in one week something like £140,000,000 passed through the Clear- ing House, and what a small speck the Bank of England appeared when compared with that. The truth was that the rate of money was fixed, not by the Bank of England, but by the joint-stock and other Banks, and the Bank of England merely followed them. Over speculation caused the disasters which had been referred to, and he failed to perceive how any inquiry could prevent them. During the last two panics scarcely a single house had failed which ought not to have failed long before.

MR. GLADSTONE

said, his hon. Friend the Member for Maidstone (Sir John Lubbock) had received much counsel from many friends and advisers, and he would add his mite to the store by giving his adhesion to what had been so emphatically and well said by the Chancellor of the Exchequer on the subject of the Act of 1844. He trusted it would always be understood in the House that if the Government should be disposed at any time to make or entertain any proposal for further legislation on the subject-matter, it would not be in the way of impairing the Act; but by way of assuming it as the basis, and making it the point of departure, if necessary, for any arrangement which might appear likely to be advantageous in giving more thorough effect to the ideas upon which it was founded. Those who had advised his hon. Friend the Member for Maidstone to refuse the offer of the Chancellor of the Exchequer had done so on very different grounds. They had all in supporting his Motion emphatically repudiated his speech, and the hon. Member for Sheffield (Mr. Mundella) admitted that it was impossible to support the Motion on the hon. Baronet's speech. The hon. Member for Glamorganshire (Mr. Hussey Vivian) went further, and would not be content with an inquiry into the Bank Act; but wished to extend the inquiry not only to the whole nature of currency, properly so called, but to monetary paper and all instruments of credit which were used as auxiliaries to transactions between man and man. The discussion might, then, be very well wound up. Some hon. Members had objected to the offer of his right hon. Friend the Chancellor of the Exchequer, that it was insufficient for the occasion; but he would say to them—"Wait and see what it is." The hon. Baronet could not possibly lose anything by accepting the proposal of the Chancellor of the Exchequer, because he would have the power of moving any Amendment he pleased to the Motion of his right hon. Friend. His hon. Friend, he hoped, clearly understood that what the Chancellor of the Exchequer promised was not only to take the subject into consideration, but to advocate a specific proposition, and within a limited time to come down to the House either to make a proposal or to offer an inquiry. In redeeming that pledge the Chancellor of the Exchequer would give the hon. Baronet ample opportunity for making any proposal, if that made by the Chancellor of the Exchequer did not meet his views. The hon. Baronet had no occasion to invite the House to deliver judgment, or to go to an issue on his Amendment. If he did so, he would go to an issue with allies who did not agree with his views except with reservations.

MR. LAING

said, that as an earnest supporter of the Act of 1844, he trusted the hon. Member for Maidstone (Sir John Lubbock) would accept the offer made to him by the Government. The Act had survived far more serious attacks than the present. The Amendment was, in fact, an admission of weakness, if the result of the debate should be a sort of roving Committee or Commission for an inquiry into the whole of the question. It would be a serious thing for this country that this question should be considered an open one the working of the Act had shown that in the main it had attained the object for which it was it was introduced. Still, however well it might work in ordinary times, occasions might arise, and did arise every 10 years or so, when some relaxation of the Act was necessary.

SIR JOHN LUBBOCK

said, he was in the hands of the House, but after the speech of the Chancellor of the Exchequer he thought it was useless to press his Amendment. He trusted that the Government and the Bank of England would give the statistical information required.

MR. CRAWFORD

said, that the Bank of England would be ready to give any Returns in continuation of those supplied to the former Committee.

MR. ANDERSON

said, he had fully intended to withdraw his own Motion in favour of the Amendment of the hon. Member (Sir John Lubbock), but he was rather precluded from doing so by the withdrawal of the Amendment. The hon. Baronet had done this without consulting those who were going to vote with him (Mr. Anderson). He was, however, in the hands of the House, and would, with its permission, withdraw his Motion.

SIR JOHN LUBBOCK

said, that he had, on the contrary, as far as was possible, consulted those with whom he was acting. He had understood that the hon. Member was disposed to withdraw the Resolution and support his Amendment; but he did not consider that this committed him in any way.

MR. ANDERSON

said, he certainly understood so.

Amendment and Motion, by leave, withdrawn.