HC Deb 28 April 1882 vol 268 cc1682-710

in rising to move— That, in the opinion of this House, the prohibition of the issue of bank notes of £1 each in England and Wales is unreasonable and ought to be removed, and that all needful steps should be forthwith taken to authorise the issue of such notes, said, that it was a long time since they had had a discussion on the currency of this country. He was glad that was so, because it showed that we were in a much better condition than we had been many years ago. At the same time, it was a very remarkable fact that the conditions of the currency in the Three Kingdoms were so different, and had remained so for so many years. He believed that Sir Robert Peel's legislation on that subject was wise legislation, and he was not the least disposed to break it down in any way. Bank notes in this country were not the machinery by which the great business of the country was conducted. They were merely used in the minor work of trade, and for the common convenience of mankind in the ordinary details of life. Anyone who knew anything of business was aware that business was conducted, not by bank notes, but by credit. Deposits had increased enormously, whereas circulation had practically not increased at all. In 36 issuing banks the deposits had increased from 100 in 1844 to 350 in 1874; while the proportion of circulation to deposits was, in 1844, 17 per cent, and in 1874 only 4 per cent. He would now refer to one or two points in the history of this question. The House was aware that £1 notes were, and had been for many years, in circulation in Scotland and Ireland, though successive Prime Ministers, in 1826 and 1844, had desired to do away with them. But the feeling in their favour was so strong, that the Prime Ministers had to give up the idea, and accordingly they were retained in Scotland and Ireland, though they were abandoned in England. On reference to the debates of the year 1826, when £1 notes were abolished in England, it would be found that the main reason given for their abolition was the panic of 1825, which, it was said, was caused by bank notes of small amount being in circulation. But Lord Liverpool combated this view, for, in writing to the Bank of England on the 13th of January, 1826, he said this— Though a recurrence to a gold circulation might he productive of some good, it would by no means go to the root of the evil. We have abundant proof of this in the events which took place in 1793, when a convulsion occurred more extensive than that which we have recently experienced. Nearly 100 country banks stopped payment, and Parliament granted an issue of Exchequer Bills, yet in 1793 there were no £1 or £2 notes in circulation in England. We have a further proof in the experience of Scotland, which has escaped all the convulsions which have occurred in the Money Market of England for the last 35 years, though Scotland, during the whole of that time, has had a circulation of £1 notes. The issue of small notes, though it be an aggravation, cannot, therefore, be the sole or even the main cause of the evil in England. The fact was that the main cause of the panic of 1825 was the enormous amount of speculation that then prevailed. Then, after the notes were abolished, there was another panic in 1837, and again in 1844, and there had been several more since, although during the whole period there were no £1 notes. The truth was that panics arose from great causes, such as excessive speculation and increase of prices, and not from comparatively small causes, such as the circulation of notes. If he was correct in his view, the Abolition Act of 1826 was passed under an entirely erroneous impression. Lord Liverpool was unable to carry out his project of abolishing the £1 notes in Scotland and Ireland, on account of the great attachment those countries felt towards them, an attachment as strong now as it was then. It might be asked—why raise this question at all; things were going on very well? That was, no doubt, a fair question; but he had recently, while travelling on the other side of the Atlantic, noticed the great convenience that was found in these small notes. In Scotland and Ireland they were found to be a great convenience to the poorer classes. Though the richer classes, with large balances at their bankers, and the power to draw cheques to any amount, might not feel any necessity for them, still, in dealing with this question, they must consider the humbler classes as well as those of the upper ranks. Postal notes and orders, although a convenience for the transmission of money, cost a commission for each order, and that consideration was a somewhat serious one to the working man. In Scotland, in Ireland, on the Continent of Europe, and in America, these small notes were found to be a great convenience to poor people. It was notorious that in Scotland and Ireland the people were determined to keep them. He had been informed on good, authority that the best way to bring about Home Rule in those countries would be by abolishing the £1 notes. Then it was a great convenience to be able to send small sums by post in this way without charge. Also, these notes were a great convenience in the small transactions of trade, such as in paying wages. He would not propose to circulate the whole issue on credit; but a certain amount might be issued on security, and a certain amount on bullion, as proposed with regard to English notes by Sir Robert Peel in 1844. What was the circulation of bullion at the present moment? In 1835 Sir Robert Peel said there were from 30,000,000 to 40,000,000 in circulation; in more modern times it was said to amount to from 100,000,000 to 120,000,000. His impression was that there must be, at least, 100,000,000 in circulation. Therefore, we might circulate a large amount on securities and the balance on bullion, as at present under the Act of 1844. He wished to refer to the character of the present circulation. The state of the coinage of this country was very unsatisfactory. Every other coin was light. In Ireland the people would not take sovereigns, because, on presenting them at the bank, they were so often charged for light weight, notes being preferred because of the depreciation of the sovereign. If small notes were put in circulation, it would not become necessary to recoin the whole of the sovereigns and half-sovereigns. The matter was one of considerable importance, and ought not to be lost sight of. Various objections were raised to his proposal, the most attractive of which, was the forgery question. In the early part of the century bank notes were wretchedly engraved, a great many forgeries occurred, and many unfortunate men lost their lives. But bank notes were now engraved in so superior a manner that forgeries seldom occurred. He believed that, at the present moment, a forgery of any importance had not occurred on any of the Scotch or Irish banks in respect of notes issued for the last 20 or 30 years. A similar state of things also prevailed in America, where there was also a circulation of small notes. When at Washington, figures were furnished to him showing that in the year ending June 1881 there were eight times as many notes of the value of £10 forged as of notes of £1. That showed that, at the present time, the skill and labour required to forge bank notes was so great that it did not pay to counterfeit notes of small value. In one case that occurred in Scotland he was told that it took a man six months to produce and circulate six £1-notes. In his opinion, they had passed that period when the forgery of bank notes was a serious question. Formerly, the punishment for the crime was so severe that people were unwilling to prosecute, and forgery was much more frequent than it had since become. The Judicial Statistics for 1880 showed that in that year no persons were committed for the forgery of bank notes in England and Wales. In Ireland there were eight cases, but in Scotland none. The figures with respect to Mint offences were very different, and proved that more than 2,000 persons were punished for the offences of coining, of having in possession implements of coining, and of uttering false coin. Another objection which he knew some hon. Members entertained to his proposal was the liability to the occurrence of panics. It was said that the holders of £1 notes would be more liable to panics than the holders of notes of larger amount. On that point he would quote the opinion of Mr. Tooke, who said that the only instance of a panic within the century with respect to Bank of England notes occurred in 1832, and that partook of the ridiculous, and was only remarkable for the use made of it by the partizans of a particular currency theory. The Glasgow Bank failure six years ago, affecting, as it did, a very poor population, and occurring under circumstances of fraud, was calculated to cause panic. That, however, did not happen, and the circulation of Scotch bank notes was in no way affected. He did not think that the liability to panics was as great now as it used to be. It had also been urged that they would lose bullion by the issue of small notes. In 1826 Mr. Huskisson said that notes and bullion could not exist together; but experience had not shown that to be true. He did not propose to issue the notes upon nothing; he considered that, for the most part, they should be issued upon bullion. The effect of the issue of small notes would be that the bullion would be kept in one place, instead of being scattered over the Kingdom. It was a mistake to suppose that the banks kept their reserves in gold; they only kept sufficient gold for their usual requirements. Gold would be much safer and much more available if held as a security against notes than if it were scattered over the country. It by no means followed that because there was a circulation of small notes there was no gold in a country. Although there was a large circulation of notes of various values in the United States, it was estimated by the Director of their Mint in November, 1881, that there were 112,000,000 sterling of gold and 36,000,000 sterling of silver in the country. It had been alleged that a £1 note issue would be costly; but it would not be so in reality, if we could save the interest on a large amount of bullion. Indeed, the saving on the bullion would pay all the expense of the circulation, and a good deal more. Moreover, the issue of £1-notes would prevent the wear and tear of our sovereigns, which at present amounted to a very considerable sum. It had been estimated that the restoration of our existing coinage would cost nearly £1,000,000. He calculated that the cost of the £1 note issue, as now existing, varied from 5s. to £1 per cent per annum. He had heard it suggested that the adoption of £1 notes would cause a great deal of trouble to bankers. Well, the Scotch and the Irish bankers were very happy to have that trouble as long as they had likewise the convenience for themselves and their customers. Then it had been said that the extension of banking facilities was less important now than it was formerly. There were, however, some figures on this point, which showed that, after all, the use of notes was a very important consideration even now. The amount of notes issued in Scotland and in Ireland was still very large, and there had been a very material increase in it. The circulation in Scotland had, between 1844 and 1874, increased 95 per cent; while in Ireland, owing to famine and loss of population, the increase had been 14 per cent during the same period. It would probably be said that some of the experience of the Continental States went rather in the other direction. It was a curious thing that in France the lower denomination was not that which was most in circulation; but the condition of France was so totally different from our own that we could not compare the two countries. Again, it was true that Germany had adopted something like our system in not issuing very small notes; but he did not see why we should follow Germany either in her politics or in her finance. He had endeavoured to show that the abolition of £1 notes was accomplished under a false impression as to the facts. He desired to impress on the House the truth that the great panic of 1825, on which all the burden was placed, was not occasioned by any issue of notes whatever, although it was aggravated, no doubt, by the conduct of both the Bank of England and the country banks. That panic was caused by enormous speculations and gigantic commercial operations of every conceivable degree of folly. As we had abolished the issue of £1 notes on unfair and ridiculous grounds, it was only right that we should reconsider the matter. It might be said it was impossible to prove that there was any public demand for the change in this country. He did not assert that there was; but he thought it was well worthy of the consideration of the House whether that which was so extremely convenient to Scotland and Ireland would not confer a boon on our own people, without doing them any conceivable harm. He had heard it suggested that there was one point about the bullion question which ought to be borne in mind—namely, that there would be more danger of gold being attacked in case of disaster if it were in one place than if it were scattered over the whole community. They ought not, however, for this purpose to consider what might happen once in a century, and to legislate with a view to an improbable contingency. He feared this was an abstract question, and, therefore, not an exciting one. But he must repeat his belief that no comparatively small change in the ordinary affairs of life would confer more real benefit on the humbler classes of the community than providing them with a well-secured currency of small denominations. The hon. Gentleman concluded by moving the Resolution of which he had given Notice.


in seconding the Resolution, said, he heartily approved of it as an Irishman who had all his life been accustomed to £1 notes, and had seen the advantages of that system. He thought it seemed unreasonable that Ireland should have the advantage of the £1 note, while it was prohibited in England. One pound notes were merely promises to pay £1 in gold, and they were perfectly safe as £5 notes. In Ireland they found paper much more convenient for use than gold. Of course, there was the fear of forgery; but, as was said by the hon. Member, it was scarcely known to exist in Ireland, and they were a great deal more afraid of light gold than they were of forged notes. He believed that no people who had ever used paper would ever revert to gold. He might instance Ireland and Scotland, and the United States of America and the Colonies, where paper was much more popular than gold. The use of £1 notes had, no doubt, been objected to from the fear of inflation; but so long as they were convertible into gold there was, in his mind, no danger of inflation, provided a sufficient reserve was required. It might be feared that if the measure were adopted, it would be the germ of something further. Well, he hoped that no chimera of that sort would prevent the House from adopting what he considered would be a most valuable measure.

Amendment proposed, To leave out from the word "That" to the end of the Question, in order to add the words "in the opinion of this House, the prohibition of the issue of hank notes of £1 each in England and Wales is unreasonable and ought to be removed, and that all needful steps should be forthwith taken to authorise the issue of such notes,"—(Mr. William Fowler,) —instead thereof.

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


who had given Notice of an Amendment, which, however, he was unable to move, to the effect— That it is undesirable to remove the restriction from the circulation of £1 notes (if at all) without a careful inquiry into the effect which such a change would have on the general currency of the Country, and into the conditions under which such notes should be issued, said, no one would deny the importance of the subject brought before them that evening by his hon. Friend the Member for Cambridge (Mr. W. Fowler), whose knowledge of the subject and great practical experience enabled him to state the views he entertained with so much weight and effect. Generally, on such subjects, it was his good fortune to be able to co-operate with his hon. Friend; but, on the present occasion, he felt bound to express the hope that the House would pause before it assented to the Motion which, the hon. Member advocated. The subject of £1 notes was no new question in this country. They had a long trial, and eventually were abandoned with general consent. The main arguments against them were three in number—first, the desirability of keeping up a large stock of gold in the country; secondly, that the £1 notes were more liable to be suddenly presented for payment during panics than notes of higher denomination; and, thirdly, they were found to lead to a very large amount of forgery. The result of the experience acquired at the commencement of the century was that almost all the highest authorities on the subject h ad unhesitatingly declared themselves against the issue of notes for smaller sums than £5. He might quote, for instance, the strongly-expressed opinion of Huskisson, Canning, Lord Lansdowne, the Duke of Wellington, Goulburn, Herries, Sir Robert Peel, Mr. Norman, Lord Overstone, John Stuart Mill, and, among more recent authorities, Mr. Weguelin, Mr. Kirkman Hodgson, Mr. Grenfell, the present Governor of the Bank; and Mr. Palgrave, the Editor of The Economist. He believed the very general opinion of the City at present was also decidedly opposed to the issue of £1 notes. There were Gentlemen in the House—for instance, the hon. Baronet the Member for West Worcestershire (Sir Edmund Lechmere)—who could speak more authoritatively for the country banks than he could; but he was naturally brought into contact with a considerable number of country bankers in all parts of England, and he believed that the very great majority were of the same opinion. The gold circulation had been regarded by the highest authorities as a reserve upon which they could fall back, if necessary, in case of adverse exchanges. Doubtless, the great extent to which what were called International Stocks were now held in this country weakened, to a certain extent, this argument. Still, it could not be omitted from consideration, and before it was summarily dismissed they ought to obtain the careful opinions of those most qualified to judge on the question. Again, it could not be denied that if we should, unfortunately, become involved in any great war with a first-rate Power, the gold circulation would be a source of much financial strength. During the Franco-German War the French found the practical advantage of this. By issuing small notes to replace the metallic circulation, they were able, with only a slight disturbance of values and at a very moderate cost, to obtain immense funds. But for this resource, they would either have had to borrow at very high rates or to purchase on credit, which would have been even more ruinous. He sincerely hoped that we should never have occasion to adopt a similar course; but the power of doing so must be taken into consideration when they were considering the respective advantages and disadvantages of a circulation of small notes. Again, the deposits in the Savings Banks amounted to nearly £80,000,000, and were steadily increasing. Against this immense liability the Government, according to the last Returns, held less than £500,000 of reserve, a reserve which, to a banker, naturally seemed, to say the least of it, extremely meagre. No doubt, however, successive Chancellors of the Exchequer had tolerated this state of things, partly on account of the exceptionally realizable character of the securities held on account of the trustees, and partly, also, because of the latent reserve existing in our gold circulation—a reserve which, although, of course, it would only be used as a last resource, and in case of absolute necessity, was still of great importance. Nor did he quite understand why his hon. Friend should stop at £1 notes. There were some considerations which afforded even stronger arguments for smaller notes than for those of £1. The half-sovereign was, in proportion, a more expensive coin than the sovereign. The wear and tear were more rapid. Again, our silver circulation, as everyone knew, consisted only of tokens, which did not, like the gold, constitute any solid national reserve. And, so far, the advantages of introducing a circulation of notes for 10s. and 1s. would be even greater in proportion. But even his hon. Friend did not propose to go so far as that. He would not occupy the time of the House by dwelling on the second consideration—namely, the liability of £1 notes to be presented for payment under panic. It would be sufficient to say that all practical authorities were agreed upon that point. It was possible that the spread of education—the greater amount of knowledge on such subjects possessed at present by the bulk of our countrymen might have removed this danger; and he quite believed that it had had much effect in that direction. Still, the consideration was not one which could be entirely ignored. Mr. Henry Burgess, Secretary to the County Bankers' Association, before the House of Commons' Committee of 1832, said that— Nine out of 10 of the country bankers are decidedly opposed to the issue of small notes under £5. They have found from experience that all great demands upon the banks have commenced through the demand for small notes. As to the profit which would be derived from the issue of £1 notes, he was not disposed to rate it so high as it had been estimated. Much, of course, would depend on the conditions under which the notes were issued, and especially whether such notes, when once paid, were to be re-issued or not. He would not discuss the question whether they should be issued by country banks or the Bank of England, though, if the subject were to come to a practical issue, that would be a question which would demand most serious consideration. He would assume that the notes were not to be re-issued, and he would shortly state to the House a calculation made by the late Governor of the Bank of England on that basis. That gentleman assumed that £21,000,000 of notes would be issued, and that one-third would be retained in gold as a security. That would leave £14,000,000 to be invested in Government securities, which would give £400,000 in interest. The present cost of a note was 1.26 of a penny; but on the manufacture of so large a number the cost might, no doubt, be reduced. He took it, therefore, at 7–8ths of a penny, and £21,000,000, then, would cost £76,600; and, assuming each note to live about three months, they must multiply this by four for a year. This would give £300,000, to which must be added the cost of prosecutions for forgeries and various minor expenses. The balance would be less than £100,000; certainly not more than enough to compensate the issuing bank or banks for their trouble. The Government, therefore, would gain but little in interest; and, if at all, would save little more than the wear and tear of the gold coins. It seemed evident, therefore, that if the notes were to he issued on this basis the pecuniary advantage would be comparatively small. Of course, if the notes were to be reissued the cost would be less; but to this there were other objections. If, on the other hand, the notes were issued against gold the profit, of course, would vanish altogether. He now came to the question of forgeries. In the year 1820, though the circulation of £1 notes was less than £7,000,000, there were over 400 prosecutions for forgery, at a cost of £53,000, the great majority of these being forgeries of £1 notes. From 1816 to 1820, the last five years during which £1 notes were issued, no less than 131,000 forged notes were presented to the Bank of England, being at the rate of over 25,000 a-year; while at present, with our much larger population and vastly greater commerce, the average number was only 20. Moreover, out of these 131,000 forged notes, no less than 127,000 were notes of £1, and only 400 were over £5. It was a remarkable fact that, though £1 notes had been out of circulation for more than half-a-century, the majority of forged notes brought into the Bank were still £1 notes. From 1869 to 1874, the last year for which they had any return, the total number of forged notes presented was £369. Of these, 36 were for sums above £5; 88 were £5 notes; and 245 were notes for less than £5. It was sometimes said that the improvements in engraving had practically done away with the risk of forgery. He did not wish to undervalue the security afforded by skilful engraving. It was, no doubt, considerable. But practical experience showed that the number of forgeries at the beginning of the century was not mainly ascribable to any roughness in the engraving, for in that case it would have applied to £5 notes, as well as to those for £1. Nay, the temptation being greater, it might even have been anticipated that £5 notes would have been the more frequently forged. But far from that, as he had shown, the overwhelming preponderance of forged notes were for £1. That proved that the real determining condition was not the facility of counterfeiting, but the opportunity for issuing without immediate risk of detection. The life of a note—that was to say, the length of time it remained in circulation—was inversely as the amount; and, consequently, the smaller the note the less the risk of detection. He was told, however, that there was little or no forgery in Scotland or Ireland; and, no doubt, £1 notes were popular in the Sister Kingdoms—though the late Member for Waterford (Mr. Delahunty) did regard them as the source of all the trouble of Ireland, from the creation of the world down to the creation of the Land League. But the whole banking and economical conditions of Scotland and Ireland were unlike those of England. In Scotland, for instance, these notes remained in circulation for a very short time—mainly because, as all the banks enjoyed the privilege of issue, none of them used the notes of any other bank as till money. Hence anyone who issued a forged note knew that the forgery would be detected in a very few days, which acted in two ways. Firstly, the chance of punishment was greatly increased; and, secondly, the opportunity for issuing any considerable number of forged notes, and, consequently, the temptation to do so was greatly diminished. We had tried £1 notes in this country, and they were abandoned with general consent. No doubt, since that date many years had elapsed, and circumstances had greatly changed. It was possible that the objections then felt might now no longer exist; it was possible that the advantages might now be greater. He did not say that his hon. Friend might not make out a case for a Committee or Commission of Inquiry; but when he called upon the House, without inquiry and without consultation, to decide off-hand that the prohibition of £1 notes was unreasonable, and that steps should be forthwith taken to authorize the issue of such notes, he (Sir John Lubbock) believed that he represented the general opinion of the mercantile and banking community in expressing a hope that the House would not be carried away by the persuasive eloquence of his hon. Friend.


The House, I think, will not be surprised when I say that the Government is not prepared to consent to put aside the Motion for your leaving the Chair, Sir, in order to adopt the Amendment, as the decision of the House, and it will be a sufficient reason against such a course, if I found myself entirely upon one word in the Motion—the formidable word "forthwith," I cannot conceive for the Go- vernment, in existing circumstances, a more formidable word, for undoubtedly it was found in 1844 that to deal with the currency of this country—and by no means to deal with the whole of the questions that may be raised—was an affair that required to be the main subject of legislation for a year, and was found quite sufficient to occupy a very great deal of the time of Parliament, certainly shutting out the consideration of any great measure during the same Session. Under those circumstances, my hon. Friend will judge that the Government must be either unduly sanguine or unusually unscrupulous, if it were prepared, by adopting this Resolution, to deal "forthwith" with the question which, I admit, is not of itself necessarily involving the whole question of currency, but which would be found, practically, to require that the whole question of currency should be considered. This question of currency is one of that long list of arrears which ought to be considered legitimately and positively as such. The House is probably aware that the old practice of Parliament, both with regard to the East India Charter and with regard to the Bank Charter, was to consider them once in 10 or 20 years—I think once in 20 years as regards the East India Charter, and once in 10 years as regards the Bank Charter—and I recollect very well that Mr. Goulburn, reflecting on the matter, was of opinion, when the Act of 1844 was framed, that it was an inconvenience to have the House tied down absolutely to consider the matter decennially, because there might be exigencies of a particular order which might make a short postponement rather convenient and desirable. Consequently, the Act of 1844 was enacted, not to remain in force for 10 years, but during the pleasure of Parliament, distinctly indicating, by its own phraseology, that the subject was one that ought periodically to be brought under review. And I do not entertain the smallest doubt that Sir Robert Peel, who was himself a great master on the subject of the currency, himself regarded the Act of 1844 not as a passing measure, but as a measure that laid a firm and strong foundation upon which a superstructure was to be raised, which the Act of 1844 imperfectly and partially supplied. I believe that both Sir Robert Peel and Mr. Goulburn would have been immensely astonished if anyone could, by the gift of prophecy, have announced to them as a fact that, 38 years after the Act of 1844, nothing would have been done in prosecution of the views with which that Act was introduced to lead onwards the system of the currency of this country to what may be called its perfection. That admission I make to my hon. Friend, accompanying it with the hope, which is more sincere than sanguine, that the vigorous labours on the Parliamentary Benches may, in a certain time, bring about a state of things so propitious that this great question may be dealt with for the benefit of the country. Having made that concession, Sir, I must make a further concession to my hon. Friend who has just sat down. I think it clear, looking to the importance and complexity of the issues involved, that no important change ought to be introduced into our system without a previous Parliamentary inquiry. The last Committee sat, I think, with the hope that legislation might take place which has not taken place; but, undoubtedly, that Committee grew also out of the circumstances connected with the commercial crisis; and my hon. Friend has observed, with great satisfaction, and, I think, with great justice, that the administration of the Bank of England—the enlightened administration of the Bank of England—appears, in a great degree, to have solved the practical question connected with these disturbances of the currency which marked the years 1847, 1857, and 1866, and which were so irregular, both in principle and in practice, that they might well be described as intolerable. As long as those crises occurred, at periods of eight or ten years, they themselves proved an irresistible argument for the review of the Currency Laws. As matters now stand, it may be said that the argument has lost a great deal of its force, because we may state that the days of those crises will have passed by, and that, from administration and early anticipation of difficulties on the part of the governing influences of the Bank of England, may prevent their return. While I quite admit that, on other grounds, there are reasons why this matter should come under the view of Parliament, I imagine there can be no doubt among us that the three great conditions of a good currency are these— its safety, its convenience, and its cheapness. I must say, for my part, T would give a fourth condition to a perfect currency, which is that the profit of that currency ought to be the profit of the nation. But with regard to our system as it exists—and I think we have only yet got a very partial acknowledgment of the principle that the profit of issue belongs to the State—we have to look at the qualities of safety, convenience, and cheapness. As regards safety, no doubt, the question would be raised whether metallic currency or paper currency in small notes is the more liable to forgery; but my hon. Friend the Mover of the Amendment will at once see that we are not in a condition in this House to determine a question of this kind without a very close and careful inquiry. The question of how to deal with light gold is also an important and difficult one. As to the position of the gold coinage—which the country will have to face—I own that I am one of those who think that it is a fair and proper matter for inquiry, whether the country ought to make a charge, not in the nature of seigneurage, not in the nature of an artificial value attached to a commodity as an exercise of the Prerogative, even as we do in silver and in copper, but whether the country ought to make a charge for the labour of manufacture, by which it certifies in a particular form its value to the gold in circulation. Undoubtedly, the effect of our present system is that everybody melts gold at his convenience, and wastes to an enormous extent the costly labour we have bestowed upon it. I believe that a very proper subject for consideration. As I see the Leader of the Opposition (Sir Stafford Northcote) in his place, I may say I was very sanguine in the hope that he might have felt himself strong enough in the time of the late Government to have attempted to deal with this whole question. I felt that the position of affairs was favourable; for I am quite certain that as regards all those who now sit on this side of the House, they would have been found in very general concurrence with the right hon. Gentleman in his views on monetary questions, and I believe he would have had their most cordial and faithful support. I had a stronger reason for entertaining that wish, and it is, that I believe there is no person, either in the House or in the country, who more thoroughly comprehends that question than the right hon. Baronet, or who would have been more likely to lead the discussion of it to a favourable issue. I will enter briefly into one or two of the points which have been raised. I do not think the Mover of the Motion open to any just exception that there is no public demand for a change, because this is one of the questions as to which we cannot expect that there should be what is called a popular demand. After the War, and in 1834, the raising of questions of this kind was undoubtedly due to the few—and the number was a very small one, only, in fact, a fraction even of the educated classes—who took an interest in those questions. I would, indeed, say that there is no subject which interested a smaller number of persons, considering its importance. I will go one step further, and say that among the many sound arguments which contributed to the establishment of our metallic circulation, there was one argument that was less sound than the rest, and that was the notion that for whatever monetary crisis might occur, the possession of a metallic currency for ordinary cash transactions constituted an element of security, and afforded an available reserve. I do not now enter into the case of a great war. I can well conceive that in the case of a great war, Parliament, legislating for the purpose, might avail itself of the existence of a vast body of gold in circulation in the country for temporary purposes, which it might have in view, in the extreme exigency of the case, and might in that way, on that particular occasion, supply itself with a large quantity of gold by legislation, perhaps more easily than if it had not a very large metallic circulatian to deal with. But, undoubtedly, as far as my recollection goes, there was a belief that upon every occasion of monetary pressure such as we used constantly to be subjected to in the case of bad harvests—although, happily, the vast extension of the freedom of our trade has rendered these occasions of pressure comparatively insensible—that even upon these occasions we were better able to encounter them by having a large metallic circulation. I believe that was an entire fallacy, because, in point of fact, that large metallic currency is hard at work in the daily business of life conducting the cash transactions absolutely essential to the operations of civil society, and so far, I believe, the argument is not well-founded. I hope I shall not shock anyone when I say I see no fundamental unsoundness in the main intention and demand of my hon. Friend. We have already applied to a certain number of notes over £1 the principle that it is wise, to a certain extent, to economize the monetary circulation by the issue of such notes, provided we take care to keep that issue of notes within the limits of demand which we know the necessary purposes of the country will always make, so that there can be no possibility that those notes should become superfluous. If that be so, I own, although I believe in quarters of very high metallic doctrine there was a notion that something heretical lurked in the very idea of the £1 note, yet I must say I do not see why that principle, cautiously applied, should not apply to £1 notes which applies to notes of higher denomination, provided it may be found that convenience would be attained, as well as some degree of economy. With regard to that question, my hon. Friend the Member for the University of London (Sir John Lubbock) has suggested that it would necessitate a modification of the practice of banking. I am the last person to propose that the practice of banking should be changed by the Executive. If it were so changed, it should only be after full Parliamentary Inquiry. I will only add, in conclusion, that I hope the present discussion will do good in tending to turn the mind of those who are not in the habit of thinking on this question of currency to consider it; and I entertain not a very sanguine hope for myself, but a hope certainly for younger Members of this House, that they may have the happy duty of developing and applying the principles of the Act of 1844, in the way of giving it full effect, and to fulfil with still greater efficiency and equal safety the great purpose for which a currency is established.


said, that, although his right hon. Friend had stated that the Motion could not be accepted by the House, it might, nevertheless, not be superfluous that a few remarks should be made on the topics which had been raised in the debate. His right hon. Friend had alluded to the fact that the Bank Act had been allowed to remain without change. It was a most fortunate circumstance for the country that that Act had not been, revised on the various occasions when revision had been called for. For if a revision directed at certain minor points had been granted, it might have led to a revision of vital provisions of the Act. He thought he could discern, through his right hon. Friend's speech, that there were certain points in that Act which he would like to have changed. He thought his right hon. Friend was led in that direction by the desire to secure some profit to the State. In that respect he could entirely sympathize with his right hon. Friend. The profits of issue he would himself wish to see secured to the public. But he would impress upon the House that what had been desired by others on many occasions was to introduce relaxations into the Act, which the experience of years had shown not to be necessary. He thought there was no greater proof of the wisdom of Sir Robert Peel than that he had secured to this country a currency which, with all its drawbacks, had through most trying times and difficult crises proved to be a great success. His hon. Friend the Member for Cambridge (Mr. W. Fowler) had introduced some dangerous proposals in a very seductive form. He admitted what had been said by his right hon. Friend the Chancellor of the Exchequer, that the proposals of his hon. Friend were not by any means so dangerous in his hands as they might be in other hands. His hon. Friend had stated in his opening that he was a Bullionist. But here was a Bullionist proposing in that House to diminish the amount of bullion. His hon. Friend the Member for the University of London (Sir John Lubbock) had already called attention to this point. These £1 notes were, in part only, to be issued upon the security of bullion; and it had been admitted by the Head of the Government—and, indeed, it had been admitted by his hon. Friend—that the result of the proposal would be to diminish the amount of gold in the country. His right hon. Friend had naturally, as Chancellor of the Exchequer, looked to the amount of profit which might possibly be derived from these notes. But he himself confessed to being one of the straitlaced school of economists, and no desire for profit would induce him to lessen the extent to which our currency rested upon gold. His hon. Friend the Member for Cambridge had told the House the stupendous amount of transactions carried on by banks without any reserve of gold at all. But, notwithstanding that, it could not be understood too clearly that the whole of the vast transactions of this country rested ultimately in gold. The Bank of England was bound to find gold for its notes, and bankers were bound to find gold for their deposits. Every promise to pay was, in fact, a contract to deliver gold. The commerce of the country was conducted on that basis. His hon. Friend had called attention to the fact of the small reserves of gold existing in the country as compared with its enormous liabilities. But did not this increase the importance of avoiding any diminution of the stock of gold in the country? This decrease of that stock was a matter of the highest moment. It was well known how, in times both of external and internal pressure, gold flowed from a thousand channels into the coffers of the Bank of England, strengthening its reserve. The strain put upon gold was greater than it was before Germany had adopted a gold coinage. Gold, silver, and notes had, if he might use the phrase, been partners together, conducting jointly the business of the circulation of the world. Silver had now been thrust out of the partnership, and heavier responsibilities now rested upon gold. Hence it was more than ever important to look to a sufficiency of gold in the country. That was a matter in which they could not proceed too carefully and anxiously. His hon. Friend had referred to the motives which induced him to make his proposal. He, on the other hand, had brought forward some considerations which made him think that very strong arguments would be required to induce the House to introduce a change which would diminish the gold circulation in the country. Were those arguments strong? He admitted there were some arguments, and that some of the objections against the proposal had been successfully dealt with by his hon. Friend, especially those which related to forgeries. Nor did he base his own objections on the score of expense, but upon principles affecting the general currency of the country. As regarded the advantages which the proposals would bring about, they were alleged to be mainly in favour of the humbler classes. He thought his hon. Friend would not contend that they would bring any advantage to the richer classes. He agreed with his lion. Friend the Member for the University of London that it had not been sufficiently elaborated how the humbler classes would gain. They were told that Scotland, Ireland, and America had notes of £1 in value. It had always been a matter of notoriety that the population of Scotland had clung to their £1 notes with great tenacity; but that proved nothing as regarded other countries. Custom seemed to play a most important part in all questions of the use of different forms of money. It was urged that the transmission of small sums would be facilitated by the existence of £1 notes, and that the commissions on Post Office Orders would be saved. It might be convenient to have these notes for those purposes; but would the working classes prefer to be paid in them rather than in sovereigns? He believed it would be as hard to convince an English mechanic that the £1 note was better than a sovereign as it would be to convince a Scotchman that the sovereign was better than a £1 note. He did not feel disposed to legislate in order to make an experiment of that kind. His hon. Friend the Member for Cambridge had alluded to Germany, where the smaller notes had been abolished with a view to the introduction of gold currency, and he made an appeal to the patrotism of the House, saying that we ought not to follow Germany, either in her politics or in her financial transactions. The observation was an ungracious one, for, in point of fact, Germany had in this matter been following us. Germany had believed that in abolishing her smaller notes she had been adopting the soundest and most admitted English principles. With regard to America, the circumstances of that country were at present quite abnormal. His hon. Friend had stated the fact that an immense amount of gold had been accumulated there in order to prove that the stock of gold might increase, notwithstanding the cir- cumstance of bank notes being issued. But his hon. Friend did not remind the House that it was the resumption of specie payments which obliged America to collect so large an amount of gold. We had not yet seen how America would settle down permanently. The resumption of specie payments, and the importance America showed she attached to a large stock of bullion, ought, in his judgment, rather to be put on the other side of the argument. His hon. Friend thought the humbler classes would receive considerable benefit from the ease with which £1 notes could be transmitted by post. In all other respects it appeared to him that gold coin was more convenient for the humbler classes than bank notes. The experience of many travellers was the reverse of that of his hon. Friend, and went to show that notes were more liable to be lost than gold; that they were less "get-at-able," and in many ways less convenient than the English sovereign. It was argued that £1 notes might be transmitted through the post in preference to Post Office Orders; but it should be remembered that if it were necessary to send odd amounts, the £1 notes would not be available. Consequently, the advantage to the humbler classes would be very slight indeed. In his judgment the arguments in favour of the proposal had been shown to be exceedingly weak. On the other hand, he had endeavoured to establish that there were strong arguments against any measure which would diminish the aggregate amount of bullion in the country, and that even the coin in the pockets of the people was an ultimate reserve which it was most important to maintain. Looking at all the circumstances, he could not vote with his hon. Friend, though he entirely acquitted him of any desire to weaken our currency system, because he knew it had few firmer supporters than himself.


said, that in discussing a question of this nature it was above all things necessary to have a clear idea of the issues which were placed before them. He did not desire to repeat the arguments the House had already heard. The question of the £1 notes might either be a very large or a very small question. Unless they could multiply the bank notes and make money for the time cheaper, so as to increase the wages of the working classes, he was afraid a great portion of those benefits to the working classes that had been pointed out would disappear. In the case of Scotland there was, no doubt, a great attachment to the notes, arising not so much from the fact that it was a piece of paper instead of a piece of gold, but very much on account of the operation of issuing £1 notes giving the banks a profit which enabled them to multiply the number of banks and provide additional banking facilities all over the country. As a Scotch Member, he should say there was no doubt that the people of Scotland were most firmly attached to the £1 note; and he thought they would encounter very serious opposition from Scotland if they attempted to abandon the system. Scotland being, as it were, a separate portion of the Kingdom, it had been possible to continue the advantages of the £1 note to that country without interfering materially with those general monetary rules that regulated the money market in London and the national relations with other countries. If the question were merely between £1 certificates as against the sovereign it would be a small question, and he thought argument would resolve itself into the question whether the loss of issuing the £1 notes would be less than the loss by the wear and tear of the coins that were in circulation. If the question were limited to the possibility of forgery it might be a fair question of investigation for any Government or Select Committee. The question of providing security against panics was one of the largest that could be raised, as that was a question which involved the whole currency system of this country, which was based exclusively on the metallic basis. That was a question on which he might say a great deal; but after the speech of his right hon. Friend it would be unnecessary for him to detain the House upon it. He concurred entirely with the remarks that the right hon. Gentleman had brought forward as to the importance of not tampering in any way with the great principles of the Act of 1844. Looking to the future, it could be denied that, seeing the wants of the nation for gold were constantly growing, that population was increasing and commerce was spreading, whilst the quantity of gold was spparently diminishing by natural causes, it was, of course, a possible question of the future whether the quantity of gold in the world might not be found insufficient for the wants of the community. When that became the case, some means might be devised to meet the difficulty; but, in the meantime, when they had a system that was working extremely well, and which was improving in its working every year, he could not imagine why they should desire at the present moment to depart from it. Many years ago there was a series of panics, and the Government were obliged to interfere and authorize deviations from the Act of 1844 in order to prevent the Bank of England from stopping payment, and to save the City of London from a great crisis. That was done by raising the rate of interest. Periodically panics had occurred which were milder and milder each time; and within the last few years they had many instances in which a slight rise in the rate of interest by the Bank of England, taken in time, had been sufficient to secure confidence and prevent anything of the nature of a crisis. They could not have a better instance than what occurred in the present year. A great financial crisis had occurred in Paris; an immense amount of over-speculation collapsed that suddenly sent a mass of international stock to the market, and it was thought it would extend to this country; but the Bank of England raised its rate of interest by successive steps up to 6 per cent, on which gold gradually flowed in from all parts of the world, and within a very short time without any perceptible disturbance or panic the Bank bullion accumulated, and the reserve rose to a point at which the whole apprehension of evil was dissipated, and they again found themselves in possession of easy money. It would be unwise, he thought, as London was becoming the central money market of the world, if they tampered with the existing system; and on those grounds he should feel bound to vote against the Motion.


said, he desired to thank the Prime Minister for three clear principles he had stated to the House. One was that the profit of a paper circulation ought to belong to the State; the next was that they were not bound to wait for a change of this kind until there was an apparent public demand for it; and the third one was that the currency in the pockets of the people was in no sense a reserve currency of any value for any other purpose. That last he considered to be the most valuable point that had been stated in the debate. He had himself endeavoured to expose the fallacy of the contrary position in the House on several occasions, and he was pleased to see it stated so clearly by the Prime Minister. The right hon. Gentleman the Member for Ripon (Mr. Goschen) endeavoured to controvert that; but he considered his argument was entirely fallacious. The right hon. Gentleman said that a reserve of golden currency in the pockets of the people acted as a reserve, and could be got out of them by means of a high interest. He denied that entirely. It might have been the case in old times when private individuals hoarded large quantities of gold; but now-a-days private individuals did not do that, they merely retained sufficient for their daily wants; therefore, no temptation of high interest would bring that out. The Prime Minister said in the event of a crisis, such as a war, legislation would be necessary to bring the reserve out of the pockets of the people, and that would be a forced paper currency, as that was the only way by which they could bring the gold coins used by the people for their daily wants in use as a national reserve. No advocate of the £1 note currency had ever desired to see a forced currency. The right hon. Gentleman the Member for Ripon said it would be as difficult to persuade the mechanics of England to take a £1 note in place of a sovereign as it would be to induce a Scotchman to take a sovereign in place of a £1 note. He would never wish to persuade the English mechanics to do anything of the kind; neither would he seek to force or persuade them; all he desired was to give them the option of taking it if they chose. Let them have which they liked best. The English mechanics were too enlightened not to do the same thing that every other civilized nation had done—namely, to take the symbolic in place of the actual currency. The symbolic was the scientific currency. The other was the barbarous system of mere barter. The paper note was a symbol, and was, therefore, the more scientific and more modern form of currency, and was sure to be taken when the people had the option of taking it. But what the State was bound to do was to take care the paper currency was in every respect thoroughly sound and secure, and that could be done perfectly well by legislation. He agreed with almost all his hon. Friend the Member for Cambridge (Mr. W. Fowler) had said. The only objection he had to him was that last year, when he introduced a Bill to confer the inestimable boon of paper currency on England, the hon. Member opposed it; and his hon. Friend the Member for the University of London (Sir John Lubbock) also opposed it, and in his speech to-night in opposition he endeavoured to frighten the House with a large array of great authorities. It might be a deficiency in his character, but he confessed he had not got the reverence for antique authorities that the hon. Baronet displayed. Upon any other question the hon. Baronet would be the first to say they were better able to judge for themselves than any of these antique authorities; and, as far as he was concerned, he said they had the experience of these authorities as well as their own, and there would he no advantage in living in modern days if they were not able to use the experience of those who had gone before to add to it, and to benefit from it. The advantage of having a paper currency was so great that he did not think it required any argument at all; but he admitted that, before making so great a change as that proposed, it might be well to have the advantage of some inquiry before the House. If the hon. Member had proposed an inquiry of that kind, he would have got a great deal of support for his proposal. He could not, therefore, recommend the hon. Gentleman to divide the House; but if he did he would support him.


said, his hon. Friend had laid himself open to the charge of raising expectations without any definite prospect of fulfilling them. There were some very novel theories current about property. They had before them a scheme for dealing with property in a way in which they had never dealt with it before to his knowledge. But, whether it was held that the State ought to adopt a system of expropriation or not, compensating the owners of property for what was taken from them, he hoped that the House would set it face firmly against any attempt to manufacture money for meeting any schemes of that kind. The hon. Member for Glasgow (Mr. Anderson) had told them he had no great faith in the antique authorities cited by the hon. Baronet the Member for the University of London. But, surely, the Governor of the Bank of England and other distinguished men now living, whose names he had mentioned, were not antique authorities.

Notice taken, that 40 Members were not present; House counted, and 40 Members being found present,


resuming, said, that the system of the Banks Act of 1844 had come triumphantly out of whatever examination it had been subjected to, and he did not think that it had been proved to be unfit for the present time. As far as his own knowledge and experience went, he had never heard that it was contended in any quarter unconnected with the Scotch banks that £1 notes would be of benefit to the commercial classes of this country. In his opinion, it was a question not of theory, but of practice, and one for the people to decide for themselves; and although there might he a demand prevailing in Ireland or in Scotland for those small notes, that of itself was no reason why England should follow the example of those countries. He deprecated the use of small notes to be used for transmission through the post as an incentive to crime, which the institution of postal notes had been expressly created to obviate. The Prime Minister had laid it down, without qualification, that a metallic reserve in the hands of a nation was no reserve and of no use. He entirely, but respectfully, differed from so high an authority. What more ample disproof of that assertion could possibly be given than the case of France after the German War? The French Government, by a very wise arrangement, placed their Stocks at the command of every class of the community in such sums that the smallest peasant was able to buy into those securities, and they were paid for in gold—£180,000,000 going in that way into the French Treasury. In conclusion, there ought to be no alteration made in our system of currency which was not well considered and investigated by a com- petent Committee; and he earnestly hoped that nothing would be done which would tend to shake the confidence of the world in the English bank note.


said, he could not but think that it would be greatly for the convenience of the people that £1 notes should be issued. In Scotland and. Ireland £1 notes were not only regarded with satisfaction, but were preferred to gold. In England they would also be found useful, more especially for the transmission of small sums of money from one part of the country to another. That was shown by the demand for the Postal Orders now issued, though it was an argument against the Motion that Postal Orders were not used as currency after their issue. One great advantage would be a reduction in the heavy loss now incurred by bankers through light gold. He spoke feelingly on this subject, for, as a banker, he was one of the small body of men in the country who bore the whole loss through light gold.

Notice taken, that 40 Members were not present; House counted, and 40 Membere being found present,


said, he believed great profit would result to the country through the issue of these notes. No doubt, there were drawbacks to the proposition by reason of the danger of forgery and the diminution of the bullion reserve of the country. With respect to the diminution of the bullion reserve, he believed that that was a very serious objection to the proposal. The stock of gold was none too much, and a very small drain upon it might cause serious inconvenience at any moment. He should have preferred to vote for the Amendment of the hon. Member for the University of London (Sir John Lubbock), affirming the undesirability of removing the restrictions on the issue of £1 notes without careful inquiry as to the effects of the change, had it been possible to do so. As that Amendment could not be moved, he feared that he must vote against the Resolution.


said, he thought that the speech of the right hon. Gentleman the Member for Ripon (Mr. Goschen) was the only consolation that could be derived from the debate, as it showed that the English mind was not yet willing to yield to the fallacies that had been so lightly brought forward. He objected to the Motion, because no Act of Parliament could make a piece of paper of any value.


concurred very much with the way in which the right hon. Gentleman the Member for Ripon (Mr. Goschen) had dealt with the question. At the same time, there might be some value in the proposal that £1 notes should be issued in England. If, however, they were to be issued, it must be made clear that they could only be issued by the Bank of England, and that there should be a deposit of bullion for each note issued. In that case there would certainly be an advantage to the community. It would be easier to carry in one's pocket a small bundle of notes than 20 or 30 sovereigns, and there would be a great saving in the deterioration of the coinage which at present took place by friction. If the hon. Member had limited himself to inquiry, and had omitted the word "forthwith," he should have been inclined to support the proposal; but as the matter stood he could not do so, because it was evidently the hon. Member's idea to economize the metallic currency, and that, he believed, would be a thing fraught with the utmost danger. Considering the vast extent of our commerce, the enormous amount of the transactions that took place, and the very small amount of bullion in this country used for the liquidation of our international indebtedness, the proposal, as it stood, could not but be dangerous if it were adopted. If, however, the hon. Member introduced a Resolution for an inquiry into this subject, and at the same time let the House clearly understand that he so guarded his proposals as to make the issue of £1 notes to be solely by the Bank of England, and expressly and only on the, deposit of coin or of bullion, then he (Mr. Williamson) should most cordially support it, because he believed it would be one of great public advantage.


said, he would never advise an unsecured issue of £1 notes. As a very interesting debate had taken place, if the House would allow him, he would withdraw his Motion. ["No, no!"]

Question put, and agreed to.

Main Question proposed, "That Mr. Speaker do now leave the Chair."