§ Order for Second Reading read.
§ MR. ANDERSON,
in moving that the Bill be now read a second time, said: The object of this Bill is to get rid of a monopoly which applies more or less to the whole country; but which applies in a pre-eminent degree to Scotland. When Sir Robert Peel passed his Banking Acts of 1814–5, the effect of which was to give a monopoly of note issue to a certain number of existing banks, he allowed no banks afterwards established to have any right of issuing notes. It is, however, incredible that it was the intention of those Acts to give a perpetuity of that monopoly, either of the note issue of the country, or of the trade in banking; and I have no doubt had Sir Robert Peel lived he would, shortly after the passing of them, have passed other Acts to get quit of that monopoly, and prevent it being crystallized as it has now been, until the banks believe they have a right to it, and that it would be an interference with their rights to take it from them. In England the monopoly has not been so completely established as in Scotland, for the simple reason there have been no £1 notes in England; and, therefore, the issue of bank notes is not of the same value to the English banker as it is in Scotland. But in Ireland, if not quite so great, the monopoly is nearly as great as in Scotland. There has been little done in Ireland since 1845 in the establishment of new banks, and the Act of Sir Robert Peel has been the cause of that. The object of the present Bill is to do away with that monopoly, by enabling any bank, whether an existing or a new bank, to have a note issue based on Government securities, in order that the notes might have a security, which the bank notes now existing do not have. The notes I propose to be based on Consols are to be payable on demand in gold; therefore, it would be absolutely necessary for all banks that take advantage of this Bill, and adopt an issue of their own—it would be necessary for them to keep such a reserve of gold in hand as would redeem the notes to any extent they might be asked for. The total amount I propose to issue, and 1780 which may be issued in this way, is £70,000,000 sterling. Now, £70,000,000 to be added to the note circulation of the country may, in one point of view, be considered a large sum; but it is not so when it is properly considered. The present gold circulation is probably not less than from £100,000,000 to £120,000,000. That circulation of gold is simply rubbing about in the pockets of the people, getting worn away and deteriorated, and every now and then we have to make up a loss of £500,000 or so, that arises simply because of this rubbing and the processes of artificial sweating that go on. The paper circulation will be redeemable in gold, and would not be subject to such deterioration. It would be a great improvement upon the present system; and I do not doubt if the people in England had the opportunity of taking £1 notes, if they wanted to have them, to any large extent, that the £120,000,000 now circulating amongst the people would be greatly reduced. That gold is now circulated entirely unprofitably, and the idea that it is a good thing to keep gold in circulation, and that if you have a paper circulation you will drive the gold out of the country is perfect nonsense; because if it is needed for your circulation, you cannot use it for any other purpose, and I want to free it from that circulation in order that it may be used for some other purpose, and that the country may have the profit of its own currency by charging the bankers an interest of 2 per cent on the notes they are allowed to issue. These are the principal objects of the Bill. It is a national Bill, and applies to Scotland, England, and Ireland. Its principal use would be adding from out of that £70,000,000 a considerable sum to the note circulation of England; but it would add nothing to the note circulation of Scotland, as we have all that we require. That circulation, however, has the disadvantage that the notes are only being circulated by certain banks, and that this monopoly of issue gives a monopoly in the trade of banking also. If it were open to new banks to start in Scotland, those banks would step in for a share of the circulation, but would not add £1 to the amount of note circulation already in use in Scotland, because it is not needed, being at present, as I have said, sufficient to meet every requirement. It would not make 1781 much difference to Ireland. As regards England, the effect would be to take a great quantity of gold out of circulation and substitute for it £1 notes. There would be no kind of forcing the circulation; it would only give the people the opportunity of taking the notes if they wanted to have them, and the Bill would not force them upon any unwilling district in England. I myself have not the slightest doubt, if they had that opportunity, they would avail themselves of it largely; and for that reason I have named the maximum at £70,000,000, and no further privileges could be given without further application to Parliament. The first operative clause is to institute an administrative officer to be appointed by the Treasury. The object of that is that there shall be someone directly connected with the Government, and under the control of the Government, who shall be responsible for the acts and doings of all the banks of issue in this country. Even if this Bill were not to pass at all, I hold it is absolutely necessary such an officer should be appointed. When the City of Glasgow Bank failed, not long ago, it was found that the managers of that bank had tampered with the gold reserve. They had made Returns for years to Government of the amount of gold they had in reserve against their notes, and those Returns were proved to have been fraudulent. Returns of this kind have been systematically made to the Commissioners of Stamps and Taxes since 1844–5, and during all those years nothing has been done to check them or to examine them; they have simply taken them for granted as they came to hand. If there had been an officer such as a treasurer to the banks, commissioned as I propose, to come in between the banks and the Executive, such a fraud as that which was committed by the City of Glasgow Bank would have been impossible; therefore, quite apart from the other provisions of this Bill, I consider the appointment of such an officer highly desirable. Having appointed him, his purpose should be to take charge of such Government securities, Consols, and others as are deposited by the banks for the amount of the note issue they propose to use, and which they are not bound to take advantage of to any larger extent than they please, but when they take it they must pay 2 per cent for 1782 it. I propose, as some concession to the existing banks of issue, to allow them to keep the issue they now have for 10 years free, without any charge, then for a second term of 10 years on payment of only 1 per cent for the note issue, and after that period of 20 years has expired, all existing banks, both the old ones and the new ones, would come on the same footing, all would pay the 2 per cent to Government for the privilege of issuing notes to the country. This is not exactly the same as a State issue; but it has a great many of the advantages of a State issue, and it would be much more easy to adapt it to existing conditions than it would be to cancel all existing notes, and for the Government to establish a new system of Government issue. This proposal would have the advantage of giving the country a large part of the profit of the currency of the country, which, at present, is either lost altogether by people using gold uselessly, or monopolized by the banks of issue. It may, perhaps, be said that the banks of issue, if they had to pay 2 per cent, would have to make their charges to the public so much higher to cover that; but that, I maintain, is not a correct argument. The public and the customers of the bank are not identical. I would have no objection to the banks charging their customers higher, if they found it necessary to do so. I do not believe they would find any necessity for such a thing, because at present the banks pay very much too high dividends; but supposing they did, that would not be charging it upon the whole; whereas the benefit of charging the 2 per cent on the circulation would be a benefit to the whole nation, because the 2 per cent would go into the Revenue of the whole country, and if there be any profit on the note issue it ought to be held by the country. Well, Sir, there are many clauses providing for safety of issue and for redemption. I believe one of the objections made to the Bill will be that I am proposing to add £70,000,000 to the note circulation of the country without being dependent in any way on the flux or efflux of gold. That is quite true; and I will explain why I propose that. One reason why I do not think it necessary to make a new currency depend on the flux or efflux of gold is that the currency of the country is a matter affecting home trade; whereas efflux 1783 and influx of gold should affect only foreign trade—the domestic transactions of the country ought not to be so hampered, merely because £1,000,000 or so of gold may leave the Bank of England—and that all we want is a currency in the country to enable us to carry on the daily transactions. Another reason is, I do not look upon it in the light of new circulation, because the £1 notes which I propose to issue would not go out without displacing something else. I mean by it to displace gold that is at present uselessly and perniciously employed, losing interest, and wasting away in the pockets of the people. I do not know what other objection may be raised to the Bill. It applies to the three countries; and the two largest benefits will be these—one giving to England the choice of £1 notes, if it desires to have them; the other, and the principal one, to the benefit of Scotland—the breaking of the bank monopoly that has existed there since 1845. Since the Bank Act was passed by Sir Robert Peel in 1845 not one single now bank has been established in Scotland. Though the population has increased, though the wealth and trade of the country have enormously increased, not one bank has been added, but several banks have ceased to exist; and, consequently, our banking is absolutely a greater monopoly than what Sir Robert Peel made it by his Act. I might go on to explain it is a pernicious monopoly; but it is almost unnecessary to do that to a Free Trade House of Commons, as every monopoly is pernicious. But this monopoly is specially so. It is pernicious to our local trade in every way, because, in order to keep up their large dividends, they charge much larger rates for discounting and banking facilities in Scotland than the London bankers do for their customers in London, and the Scotch banks are able to do that entirely in consequence of this monopoly. They have a meeting in Edinburgh once a week or once a fortnight at which they fix the future rates that are to be charged, and in consequence no one can say anything to them. They can do what they like, and, as a matter of fact, they do, because they know that no new bank can be started to oppose them. The consequence is that they systematically charge the high rates to which I have alluded. Well, Sir, another great ob- 1784 jection to the system that I may specially mention is that the banks in Scotland are not sufficient for the amount of accumulated deposits in the country. Those banks have something like £80,000,000 of deposits in their hands, and they are unable at the high rates they charge to employ the whole of those deposits in Scotland, and in order to keep up their charges, they send large sums of money to compete with the London bankers in the London markets. They discount to London merchants in London at a lower rate of discount than they do to their own merchants in Glasgow and Edinburgh; therefore, the money they have in their hands, which is essentially Scotch capital, is sent to London, and used to compete with the London bankers. Under this Bill, if it be fortunate enough to pass even in a limited form, and only apply to Scotland, that monopoly and pernicious system would be broken down, new banks would be able to be started and get some share in the business, and merchants would not be systematically oppressed as they are now. I have heard of many cases of the greatest oppression on the part of those bankers. A man is not able to speak out his real opinion on this question in Scotland. There is the most complete slavery of opinion there on the question of banking. They can do what they like with the Scotch merchants, and the merchants cannot say a word about it. I was told the other day that a merchant had been so grievously wronged that he went to a lawyer to know what he was to do, and the lawyer, a prudent man, said—"Just pocket it, and do nothing; because if you do anything you will be 'Boycotted' by all the other banks, and need never expect to do any profitable business in this town again so long as the monopoly exists." I shall propose, if this is objected to now as a general Act, to re-introduce it next Session in a limited form, applying to Scotland alone. In its general form, it undoubtedly interferes with some of the exclusive privileges of the Bank of England; and as, in all probability, the Bank of England would refuse to consent to the Bill, it was necessary to put in a clause enabling the Treasury to go to the Bank of England and give them notice of an intention to terminate their contract, and no doubt that would bring them to reason within the year that you, Sir, have the right to 1785 give them notice for the termination of the contract, and then matters might go on as before. But if the Bill is limited to Scotland, it would be unnecessary to mention the Bank of England at all in the Bill, as the Bank of England has not for its notes even "legal tender" in Scotland. I do not wish to take up the time of the House by going into a long discussion on other currency questions, and I will conclude by moving the second reading.
§ Motion made, and Question proposed, "That the Bill be now read a second time."—(Mr. Anderson.)
§ MR. R N. FOWLER
said, he had given Notice of his intention to oppose the Bill, because it struck him as a strange thing that a Bill affecting the whole of the United Kingdom should be brought in by three Scotch Members. [Mr. ANDERSON: Two Scotch Members.] He was aware that one of the three was the Representative of an English constituency; but, if he was not much mistaken, that hon. Gentleman was the son of the late senior Member for Edinburgh, who was much respected in the House, and he therefore took it that all his ideas of banking matters had been obtained in Scotland. Be that, however, as it might, he thought that, in a Bill of the present description, at least the names of one English and one Irish Member ought to have appeared on its back. He was, however, opposed to the Bill on other grounds. The hon. Member for Glasgow (Mr. Anderson) had complained of the banking system as a monopoly; but he (Mr. R. N. Fowler) believed it was perfectly open to the hon. Gentleman to start a bank in Scotland as soon as he chose. One would, indeed, have thought that the hon. Member, holding the position he did as senior Member for the largest constituency in Scotland, would have been a very suitable person to act as Chairman of a Joint Stock Bank, or he might, as a private individual, start a bank of his own. If, therefore, the state of matters in Scotland was as he had described, then he could not but think that the hon. Gentleman had his remedy as a private individual, rather than as a Member of the House. It might be perfectly true that the note circulation was a monopoly; but there might be a great deal of good banking business done apart from that note circulation. In the 1786 City of London there was no bank that had a note circulation. They carried on their business quite independent of any such circulation, and that fact seemed, he thought, to point out that at least one bank might be established in the city of Glasgow without a circulation. His principal objection, however, to the Bill was this—that the subject was too large to be dealt with by a private Member. No doubt, the hon. Gentleman had, to a certain extent, achieved his object. He had made his speech, and had an opportunity of pressing his views upon the attention of the Government. He could not expect the Bill to pass that Session, seeing that it was of so sweeping a character. It was 50 years since £1 notes were abolished in England, and there bad been no wish expressed in England for the revival of those notes. If those notes were to be revived, it was a question of so much importance that it could only be dealt with satisfactorily by Government; and there were, he thought, certain advantages in the present Government taking this matter in hand, because the right hon. Gentleman the Prime Minister was, he believed, the only survivor of Sir Robert Peel's Cabinet, and was, therefore, in a particularly good position to consider the whole question when he had a little more leisure than he was likely to have that Session, and make any alterations that he considered desirable in the Acts of 1844 and 1845. Personally, however, he (Mr. R. N. Fowler) thought that the present system of notes was perfectly satisfactory; and, in these circumstances, he was opposed to the circulation that the Bill proposed, of 70,000,000 of £1 notes. He begged to move its rejection.
§ Amendment proposed, to leave out the word "now," and at the end of the Question to add the words "upon this day six months."—(Mr. Robert Fowler.)
§ Question proposed, "That the word 'now' stand part of the Question."
§ MR. W. FOWLER
said, he entirely agreed with the hon. Gentleman opposite (Mr. R. N. Fowler) in thinking that the measure was of such a sweeping character that it ought not to be put forward on the responsibility of a private Member. It was a matter that should be dealt with by the Government if taken up at all. But that was not his only objection. The hon. Member for Glas- 1787 gow (Mr. Anderson) had attached great importance to the issue of notes; but it seemed to him that this was a mistake. The fact was that merchants could carry on a very large business, day after day, and never see a bank note. That was, in fact, done by many people in London. The business of the country depended upon the capital which there was engaged in business, and on the intelligence of those who used it. If they had abundance of security to offer, they would have no difficulty in carrying on transactions. It was the people who had no securities to offer that made the complaints. He looked with great suspicion upon that disposition to increase the circulation of notes. It would, he thought, be a most curious point if they could ascertain what number of notes were actually circulated for the purpose of business day after day in this great city. He believed the House would be perfectly astonished by the remarkably small number of notes so used. Then there was another point. The hon. Member for Glasgow had talked about the internal circulation as having no connection with gold. He differed from him in the view entirely. The English of it seemed, indeed, to be to drag them back to the old unscientific system of currency which was in operation 70 or 80 years ago. The principle which Sir Robert Peel had given effect to was that the circulation of the country should fluctuate with the gold that was in the country, and this was the true principle on which the circulation should be conducted. He should be very sorry to go back to an uncertain circulation of notes, and he hoped they would keep to their present scientific system, with one exception, on which, indeed, he agreed with the hon. Member for Glasgow—namely, in regard to the £1 note. He was one of those curious persons who thought there was no reason why the £1 note should not be a good thing for England as well as for Scotland and Ireland, and he hoped the Government would take into consideration before long the question of £1 notes; because, if these were brought into use, he believed they would liberate £30,000,000 in the shape of bullion which was now really useless. They would also be found very useful for the transmission of small sums through the Post Office. So far he agreed with the hon. Member for Glas- 1788 gow; but he could not go beyond it. All the other parts of the Bill were objectionable, especially that part taking away the privileges of existing banks. He was very much surprised at what the hon. Member had said about the people of Scotland being oppressed by the banks. He never knew a more independent people than the Scotch, and it struck him as strange that matters should be represented in this way. No doubt there might be people with large overdrafts who thought they had cause of complaint; but people with a large balance at their credit were not likely to be oppressed. He believed, indeed, that the banks of Scotland had done enormous benefit to the country. He recollected very well that a friend of his had told him that he had been taken to see a well-cultivated valley in Sutherland, which, he was informed by the agent of the owner, had been brought under cultivation by the banks—that was to say, the banks had advanced the money to the farmers, who otherwise could not have effected the improvements. And yet they were told that the banks oppressed the people. They might, perhaps, be the oppressors of an impecunious few who could not pay their debts; but he did not think they were oppressors of the general community. He regarded the Bill as one which was absolutely uncalled-for, and should therefore support the hon. Gentleman opposite in his opposition to it.
§ MR. WILLIAMSON
said, he was utterly opposed to the scope of the Bill, whether it was sought to apply it to Scotland or England separately, or together, and hoped the House would emphatically reject it. The hon. Member for Glasgow (Mr. Anderson) had spoken of the Bill as affecting only their domestic currency; but he had lost sight of the connection between that currency and their foreign indebtedness. If it were not that their business was managed with great skill, their present metallic reserves would be decidedly insufficient. It was only because of a skilful arrangement of banking and finance transactions that they were able to do with so small a metallic reserve as they had. If they were a country living on their own resources, having no foreign indebtedness, then there might be some argument brought forward in support of the Bill; but, seeing that they lived almost entirely on 1789 their foreign trade, it was quite different. When, it might be, a calamity occurred through a bad harvest or otherwise, and they became largely indebted to foreign countries, and had to export £2,000,000, or £3,000,000, or more of gold from the Bank of England, there was an immediate contraction in the circulation of the country leading to disastrous consequences often. There was, he thought, no force whatever in what had been said about the City of Glasgow Bank. Because the Directors of that bank had tampered with their gold reserve, it was argued that there should be no gold in the vaults of the bank. But if men wanted to commit fraud with gold, they might tamper with securities as well. The men in question were in collusion to commit fraud in any shape that offered, and so the argument of the hon. Member fell to the ground. The Bill was monstrous in its conception, and he was perfectly sure that the hon. Member for Glasgow had not the sympathy of Scotch business men in bringing it forward. He trusted the hon. Member would not press it.
§ SIR JOHN LUBBOCK
said, he felt bound to join in the appeal just made that the Bill should not be pressed upon the House, though he sympathized very much with the circumstances which had induced the hon. Member for Glasgow (Mr. Anderson) to introduce it. He certainly objected to the extension of such a measure to England, and thought it would have been better if the Bill had been confined to Scotland. The fact that there were only about half as many banks in that country now as at the time of the passing of the Bank Acts was, no doubt, due to the monopoly of circulation which those banks possessed. There could be no doubt, therefore, that that monopoly demanded the serious consideration of Government; but in England there was no such monopoly. The existing Scotch banks, he would admit, had been most honourably managed; but it was none the less important that there should be the power of starting new banks. Thus far he agreed with the hon. Member for Glasgow; but he was unable to accept the Bill, because he thought the remedy provided by it was worse than the evil. This Bill raised very grave questions, and proposed to place our currency on an entirely new basis. In the first place, it proposed the re-issue of £1 notes. 1790 He thought that before taking any such step as that the matter should be carefully looked into by the House, for it must be remembered that, notwithstanding their undoubted convenience, these notes were deliberately abandoned after long trial. Their experience of the use of such notes had not been of an assuring nature, for they found when they were in use in this country they led to an enormous amount of forgery. It was often said that £1 notes were not forged in Scotland; but if he were not afraid of wearying the House with details, he thought it would be possible to explain the reason of this. He did not say, indeed, that with the improved methods of the present day as regarded engraving forgery might not be prevented; but they ought surely to have evidence on the point, and it seemed to him that the diminution of forgery was much more due to facility in tracing the notes than to the improvement in manufacture. Without, then, sharing the late Member for Waterford (Mr. Delahunty's) opinion, that all the troubles of Ireland were due to £1 notes, he was not prepared to see them re-issued in England without very careful consideration. If a Committee were proposed to be appointed to re-consider the whole question raised in the Bill, he should certainly have to consider the matter before he could see his way to opposing its appointment. Again, the Bill would replace sovereigns by paper money. He would not enter into the difficult and intricate, though interesting, question whether a metallic circulation was desirable or not. The House would, however, remember that the highest authorities had been of opinion that it was very desirable to maintain our gold circulation. They had considered that it was a security to commerce, that it enabled them more easily to meet adverse exchanges, and to tide over periods of depression or of bad harvests, and that these advantages far outweighed the loss of interest which it involved. Considering the enormous magnitude of our transactions, it was obviously most desirable to retain a large stock of gold. He must admit in passing that it was anomalous and not just to England that the undeniable burden of maintaining a stock of gold for the advantage of the whole United Kingdom should fall on England alone. He submitted to 1791 the hon. Member for Glasgow that even if these authorities were mistaken, if the advantages of a gold circulation were chimerical, still, they ought surely not to reverse their policy on so vital a question without careful inquiry and ample time for discussion and consideration. Again, there were financial authorities who considered that such a Bill as that would tend materially to create panics. When the rate was low, there would be a loss, or, at least, an infinitesimal profit on the issue of such notes. At present, for instance, money lent from day to day was worth less than the 2 per cent named in the Bill. But, as the rate of discount rose, it would become more and more profitable to issue notes under the provisions of the Bill. Such notes would, therefore, be created, and, of course, would drive sovereigns out of circulation and out of the country just at a time when it was desirable that their stock of gold should be increased rather than diminished. The process would continue, and gold would gradually go abroad, until, at last, distrust would arise, the notes would be discredited and brought in for payment, creating a panic, and, finally, a crash, very injurious to the interests of the commerce of the country. He did not say that this would necessarily be the effect of such a Bill; but, certainly, many high authorities were of opinion that it would work in the manner mentioned. There were many other points raised by the Bill; but he trusted that the hon. Member for Glasgow would be satisfied with having had a discussion on this important question, and he hoped that House would not, without further consideration or inquiry, hastily tamper with the laws regulating the currency, the security and stability of which were so essential to the prosperity of the great mercantile interests of the country.
§ MR. SHAW
said, the hon. Member for the University of London (Sir John Lubbock) had spoken of our currency system as a scientific system; but, if it was so, he (Mr. Shaw) could not say he had much admiration for science as concerned in the subject, for he was of opinion that nothing could be more unscientific than that system. Let them note, as an instance, the note circulation as it now existed. The hon. Member stated that the note circulation was based 1792 on gold; but was it based on gold? Nothing of the kind. The Bank of England was empowered to issue a certain amount—£11,000,000 in Consols—but beyond that it was bound to issue in gold. The Bank of Ireland also issued on Consols, and very seldom wont beyond its authorization powers; but the issue of none of the other banks in Ireland was based on gold. With regard to Scotland, none of its banking issues were based on gold. The same might also be said of the country banks in England; but he believed that, as a general rule, the banks both in England and Scotland were safe enough; but he believed, at the same time, that our system of common currency was perfectly absurd, and ought not to be left in its present state for a single year. He hoped most sincerely that some of the suggestions of his hon. Friend the Member for Glasgow (Mr. Anderson) would be adopted. He disagreed with the suggestion that a Committee should be appointed to consider the question, for there could be no greater authority on the matter than the right hon. Gentleman the Chancellor of the Exchequer, who understood the subject thoroughly; but when the right hon. Gentleman brought in a Bill some years ago, alike in some respects to the Bill of his hon. Friend, the Bank of England was up at once, and he had to drop the Bill. He hoped the Government would take up the Bill, because it was too much for a private Member to undertake. This was a subject in which all the great interests of the country were materially concerned, and a measure of this kind ought to proceed from the Government. At the same time, he did not feel the slightest jealousy because there were no Irish Members' names on the back of the Bill. As a matter of pure economy, there could be nothing more uneconomical than the present system, which involved a large amount of wear and tear, the cost of which was borne by the public. His hon. Friend the Member for the University of London said, if a certain proportion of notes were issued, that gold would go out of the country. He (Mr. Shaw) was at a loss to understand how that could be. Gold could only go out of the country if somebody wanted to buy something somewhere else; but, on the other hand, the effect of an improved and secured paper currency would be to 1793 bring into the Metropolis £30,000,000 in gold, which would stimulate greatly and regulate the trade of the country. At present, when more than a certain quantity of gold was sent away a panic ensued. There should be no such feeling as that in such a place as London. In his opinion, the reserve of gold ought to be double the amount at which it stood at present. The gold could only be got out of the places where it was now lying idle simply by keeping the reserve at a uniform amount, instead of allowing it to fluctuate as was the case at present. He considered the Scotch banks enjoyed a great monopoly; but he did not believe they were great tyrants. His own experience of banks was that, instead of combining, they did all they could to do business irrespective of each other. If one did anything unhandsome in one street, its neighbour in the next street was on the look-out for the customer. Some banks had been established in Ireland; but they had a loss of about 2 per cent in the note issue on their capital, and he thought they ought not to be weighted by legislation in that respect. The poorer a country was the more need it had of capital; but in a country like England, which was so rich and prosperous, it was possible to do anything without injuring it; but that was not the case as regards Ireland. In that country, where every pound and every shilling was wanted, to simplify the currency of the country was to do a good and useful thing. He believed the principle of the Bill was sound, and he hoped the Government would consent to carry out some such reforms as were indicated in the measure, as he believed they would be doing a wise thing in trying in some way to meet the existing evils.
§ LORD FREDERICK CAVENDISH
I hope that the hon. Member in charge of the Bill (Mr. Anderson) will be contented with the discussion that has taken place, because I do not think that anyone who may be here present can doubt that this is a question far too wide and too important to be entered upon in the latter half of a Wednesday Afternoon Sitting. There is no question but that the Bill of my hon. Friend opens up all the principles of our banking legislation and of the Bank Acts of 1844–5, and in many respects it is based upon diametrically opposite principles from those 1794 incorporated in those Acts. In some of the provisions of the Bill, and in some of the arguments of my hon. Friend, I recognize principles which the Act authorized. My hon. Friend stated that, in his opinion, the profits of note issue should belong to the State. I think that is an opinion which Sir Robert Peel and his Colleagues would have frankly endorsed, and, as far as circumstances allowed, have acted upon. Secondly, he stated that there was no right of perpetuity of a monopoly of note issue. There, again, Sir Robert Peel would have agreed with my hon. Friend. They recognized for the time existing rights; but they most carefully guarded themselves against any assumption whatever that these privileges of note issue should be held in perpetuity. It is perfectly true that nothing has been done since the time of this Act to put an end to these exclusive privileges; but it must be remembered that these privileges were accompanied by various restrictions, and that Parliament has been very jealous, and I think I may say has always refused to allow the removal of those restrictions upon banking, unless it was accompanied with a review of those privileges of note issue. In the course of this discussion we have had some most interesting remarks made upon the results of this monopoly of note issue. I think that when we consider, that, in spite of the expanding trade and increase of the population of Scotland, the number of banks now in Scotland is very little more than half what it was in 1845, it is a most remarkable fact, and it is difficult to doubt that the possession of this monopoly of note issue, if it is the cause of this diminution in the number of Scotch banks, acts in some degree prejudicially to the interests of Scotland. So far I am able to go along with my hon. Friend; but there I am afraid our agreement must cease. His Bill is based upon principles in many respects diametrically opposed to the great Bank Acts of 1844 and 1845. The principle upon which note issue was regulated by those Acts was not, as the hon. Member for Cork County (Mr. Shaw) said, that note issue should rest solely upon bullion; but it was, as I understand it, that the issue of notes should, under the system of those Acts, vary exactly, according to the same laws, as it would have done if it had rested 1795 solely upon bullion. That object has been fully attained. All those alarms which were so constant as to the convertibility of a note have ceased for ever; and I think it is a most emphatic testimony to the success of those Acts, that whereas in the early years after those Acts had been passed it was found necessary in times of difficulty to suspend their action, that has not been the result during the last 15 years. On the other hand, three suspensions of the Acts took place in little more than the first 20 years after the passing of the Acts. Another object of the Bank Acts was to maintain an ample supply of bullion in times of commercial difficulty. That object has likewise been attained; but that, I venture to say, would be entirely lost if the measure of my hon. Friend was accepted. He proposes to enlarge the currency by some £40,000,000 sterling. As I understand it, he would have £70,000,000, in notes, to be issued, in addition to what I may term the present authorized note issues; but would put an end to the amount now issued against bullion. That amount we may, for the purposes of argument, put at £30,000,000 for England and Scotland; and, therefore, my hon. Friend would propose that the banks should issue about £40,000,000 more than the present note circulation. I do not think there can be any doubt that this £40,000,000 of notes would displace, in process of time, £40,000,000 in coin, which would be exported abroad. The result would be that our amount of bullion would be diminished to that extent, and our amount is now narrow enough in this country. I will ask the House what is the loss of interest that is incurred upon this £40,000,000 of gold, compared with the loss by a money panic in this country? My hon. Friend threw out some hints that he would be prepared to limit the Bill to Scotland. Some of the arguments I have given would equally apply to that case; but I admit the whole question of Scotch banking is thoroughly one for consideration in this House, and if my hon. Friend should, in the succeeding Session, bring in a measure on this subject alone, I have no doubt the House would give it very careful consideration. I hope, however, my hon. Friend will rest satisfied with the discussion which he has raised, and will withdraw the Bill.
§ MR. ANDERSON
said, that if the bringing in of the Bill had had no other result than the speech of the hon. Member for Cork County (Mr. Shaw), he (Mr. Anderson) would have been justified in introducing it. That speech was a valuable contribution to the knowledge of the House on the subject of banking and currency. He was also pleased with the speech of the hon. Member for the University of London (Sir John Lubbock), because it showed a considerable advance on the banking ideas of a few years ago. He had admitted the desirability of replacing with something else at least £30,000,000 of the £70,000,000 he had put in the Bill. On the other hand, the speech of the hon. Member connected with banking on the other side of the House (Mr. R. N. Fowler) was decidedly consistent with Toryism in banking; but the hon. Member for Cambridge (Mr. W. Fowler) had, he (Mr. Anderson) was glad to see, arrived at an appreciation of the £1 note. That was a great gain also. He was glad to see that the feeling of the House was not so strong as it used to be against £1 notes. As to the speech of the noble Lord (Lord Frederick Cavendish), he (Mr. Anderson) wished to point out the utter fallacy he laboured under that gold in the pockets of the people was of any earthly value in supporting the bullion reserve of this country. It must be used either as a reserve, or as a circulating medium; but it could not be both. When there was any drain on the bullion, how were the pockets of the people to support the reserve of the country? How were we to got it out of them? We could not get it except by issuing inconvertible notes. It was only by that means we could force it; and the more we tried to force it, the more the people would be driven to hoarding; and, therefore, the argument was a very great fallacy. However, he quite admitted that a question of the kind ought to be dealt with by the Government. But every great reform was a private Member's question for years and years before it was taken up by the Government. That was the reason he had brought it forward, and he yet hoped they would be privileged to see it become a Government question. In that case, the discussion which had taken place would be beneficial, and he would not trouble the House with a division 1797 on the Bill, but would ask leave to withdraw it.
§ MR. BOLTON
said, he wished to correct a statement that had been made as to the number of the Scotch banks. The noble Lord on the Treasury Bench (Lord Frederick Cavendish) had represented the reduction of Scotch banks under the operation of Sir Robert Peel's Act as about one-half. The actual numbers, he thought, were from 13 to 10. [Lord FREDERICK CAVENDISH: 19.] In point of fact, the reduction might be from 19 to 10, because a number of amalgamations had taken place; but the banks themselves, under other names, still remained in business. Three banks had failed after the passing of the Act. The hon. Member for the University of London (Sir John Lubbock) had pointed out what he (Mr. Bolton) took to be an admitted fact—that the existing 10 banks in Scotland possessed a complete monopoly of the banking of that country; but he was wrong when he drew as a consequence of that monopoly the conclusion that charges were imposed upon the Scotch people which the English people did not bear. The only question was, whether a charge was made upon the collection of cheques in Scotland which was not made in England? It was true that the banks in Scotland did make a charge for the collection of cheques when they were sent to out-districts. But in England also, as far as his experience went, the banks did something of the kind. He had not yet heard that the Scotch people had made any complaint about the matter. The complaint that the Scotch people did make was that they could not, in consequence of the restrictions imposed on the right of issue, have that competition in banking which they desired. Whether it would be for the advantage of the Scotch people to withdraw that restriction which now existed as to the right of issue or not was another question; but the Scotch people did not desire to move in the direction of which the hon. Baronet the Member for the London University approved. What they desired was an unlimited right of issue, which would be opposed by the hon. Baronet. The hon. Member for Glasgow (Mr. Anderson) had told the House that the Scotch bankers were tyrants, and the people of Scotland the slaves of those tyrants. There were 1798 some Scotch bankers in the House who might be the so-called tyrants, and there were some Scotch Members in the House Representatives of those slaves. It would be difficult to get any number of Scotch Representatives to announce themselves as slaves of the Scotch tyrants of banking. For himself, he (Mr. Bolton) believed that there was no tyranny and no slavery. It had also been said that the Scotch bankers charged a much higher rate of discount in Scotland than they did in London. Although not a banker, but one of those slaves described by the hon. Member for Glasgow, he begged to explain that for the same class of bill the Scotch bankers charged the same rate exactly in Scotland as was charged in London. This statement he made on his own personal knowledge. The hon. Gentleman was right in saying that a higher rate of discount was charged in Scotland on some classes of bills than was charged in London probably on the same class of bills; but he would have given more correct information to the House had he added also that had he compared Glasgow or Edinburgh, or any other large town in Scotland, with Liverpool, Manchester, or Birmingham, the charges on the same class of paper occupied the same position. As the hon. Member had given Notice of his intention to drop the Bill, he did not wish to detain the House with further observations; but he had desired to make those remarks as a justification of absent men—the great majority of the bankers of Scotland.
§ SIR ANDREW LUSK
said, he did not want the public to suppose that they knew nothing about banking in London, and that everything was known in the country. He was opposed to any restriction on free competition in banking. He did not see why banking should not be conducted on the same principles as were applicable to other businesses, without State intervention. He did not think £1 notes or extended currency was wanted. He thought Scotland required the same straightforward system as existed in London.
desired to thank the noble Lord (Lord Frederick Cavendish) for his interesting speech, and sincerely hoped that the intention of the Treasury of taking up the question of note issue, as hinted by the noble Lord in his speech to-night, and in his Treasury 1799 Minute on Scotch Banks of March 24th, 1881, might before long bear practical fruit in some Bill which they would bring in. The subject could not be dealt with properly by a private Member. The proposal of the hon. Member for Glasgow (Mr. Anderson) would add £11,000,000 to the National Debt now kept afloat by the Bank of England.
§ SIR GEORGE CAMPBELL
expressed extreme regret that there should have been any objection expressed by a Scotchman to £1 notes. Scotchmen appreciated them, and thought that when a good £1 note could be got to do duty for bullion, it should be encouraged to do so. Scotland was quite satisfied on that point. The hon. Baronet who had spoken last but one, though a thorough Scotchman, must have been corrupted by residence in London.
§ Amendment and Motion, by leave, withdrawn; Bill withdrawn.