BANK RESTRICTION BILL.— (Hansard, 9 December 1803)

Lord King
said, that if he had been present at the second reading of the bill, he should have thought it his duty to have urged, at some length, those arguments of justice and policy which struck his mind forcibly, as militating against the principle of the bill. The present not being the regular time for discussing the general principle, he should say very little on that part of the subject. He could not, however, avoid expressing his surprize, that a measure of this importance should be so much treated as a matter of course; that the bill should be read twice within two days after it had been sent from the other House, and that it should have been read for the second time without any previous notice, and without even the usual formality of a few introductory remarks from one of his Majesty's ministers. No inquiry was instituted; no reason was assigned for the passing of the bill, nor was any information laid before the House to prove the expediency of persevering in a system, which violated all general principles] and could only be justified by the most urgent necessity. Some very strong reasons ought surely to be assigned for continuing, to a distant and indefinite period, a measure which had not been found necessary in former wars, nor at any period prior to the year 1797, when the restriction was first adopted. It was at that time acknowledged to be a measure of the most questionable nature, and open to the most dangerous abuses. It was now asserted by ministers, and the partisans of the Bank, that die privilege had not been abused, and that no public inconvenience had been experienced. His lordship thought, that it was a great deal too much to take all this for granted, and that it ought, prior to a continuance of the measure, to be made the subject of inquiry. He was convinced, for his own part, that the contrary was the fact; and, though die abuse had not been flagrant or excessive, that the Bank had yielded, in a certain degree, to the temptation, and extended the quantity of their notes beyond the proper limits. By the present measure, the interest of the Bank was put in opposition to its duty; and in such a competition it was not difficult to conjecture which principle was likely to prevail among a commercial body. Whilst the measure was recent, the Directors appeared to have conducted themselves with great prudence; but since the end of the year 1708, there was reason to believe, that they had uniformly, though in different degrees, been guilty of a breach of their trust. He proceeded to slate shortly the principles upon 154 which this opinion was founded. An excessive multiplication of Bank Notes, so long as they cannot be exchanged for specie, had precisely the same effect as a debasement of the current coin; and as the bullion price of silver was the most accurate test of the purity of a coinage, it was the best standard of the degree of depreciation produced by an excessive paper currency. In ordinary circumstances the bullion price of silver seldom much exceeded the mint price, or 5s. 2d. per ounce, or if there was any occasional excess, it was not of long continuance. But, since the year 1798, it had uniformly exceeded that price, being at some periods (in 1800 and 1801) 5s. 11d. and 6s. At present it was 5s. 8d. being an excess of 9 per cent. above the mint price. He knew that there were other causes which might produce a temporary effect on the price of bullion; but he considered this uniform and unexampled increase of price, corresponding, as it did, with the increase in quantity of Bank Notes, and the depression of foreign exchanges, as affording a decisive evidence of misconduct in the Directors of the Bank. His lordship illustrased this position by a great variety of calculations and details. He said, that he should propose an amendment to the bill, calculated to give publicity to the proceedings of the Bank, which might operate as a salutary check upon the Directors. He proposed, that the Directors should be obliged to publish quarterly, in the London Gazette, during the period of the restriction, an account of the amount of their notes in circulation on the 25th of each of the three preceding months. By comparing the amount of the notes with the bullion price of silver, and the state of foreign exchange, the public would be enabled to judge at the time, whether the abuse was increasing to any pernicious extent. His lordship concluded by moving a clause in the Committee to this effect.

§ Lord Hawkesbury
deemed it unnecessary to follow the noble lord, through the greatest part of what he had advanced, as being partly applicable to the principle of the bill, which was not then under discussion, and as partly foreign from the subject regularly under consideration: there existed, however, a great and an obvious necessity for the present measure: the bill proceeded on similar grounds with that of 1798 and at least an equal necessity existed for the Restriction now as then. The period of he present bill was somewhat different from that of the above year, and was in its nature more definite. He differed from the 155 noble lord as to the onuses assigned by him for the unfavourable state of the Exchange at different periods. He had some serious objections to the adoption of the regulation proposed by the noble lord; first, there was no such provision deemed necessary in any of the former bills which had been enacted on the subject, though any reasons which might now apply for its adoption, obtained at former periods in equal force.—Secondly, as the Bank Directors had never, in the smallest degree, abused the discretionary power vested in them, they were, on the contrary, always most willing to come forward with every necessary information on the subject, and they never shrunk from any inquiry whatever. He additionally objected to the proposition, as it would tend (though perhaps such a thing might not be in the noble lord's contemplation) to reflect upon the Directors, a body who, so far from meriting any reflection upon their conduct, had uniformly discharged the trusts reposed in them with prudence, caution, and circumspection. However, the House would be aware, that in negativing the motion of the noble lord, neither he, nor any other peer, was precluded from coming forward at subsequent periods with motions for specific information upon the subject; and, indeed, such proceedings had taken place, in many instances, on the suggestions of members of both Houses of Parliament. On the whole, he deemed it his duty to oppose the noble lord's motion.

Lord King
observed, in reply, that if he had not been fully understood by the noble lord, he had no difficulty in distinctly stating, that he imputed blame to the Bank, and it was on this account that he had moved the amendment. He thought that the principle of publicity would be better secured, and the Bank Directors more effectually admonish ed of the importance of their trust, by a positive parliamentary enactment, than by leaving it to the discretion of any individual peer, who might choose to move for an account of their notes. He wished it to appear upon the face of the bill, that the danger of abuse was foreseen by the legislature, and guarded against by the only expedient of which the case would admit. With respect to the observation, that such a clause was unusual, and that it had not found a place in former bills, he would only say, that it was a principle which militated against all legislative improvements whatever. It was one of those general remarks which applied equally to every new proposition, and was, therefore, undeserving of attention upon any.

§ Lord Hawkesbury
contended, that such a consideration was a reason against the adoption of the clause, inasmuch as the omission of the provision in the former bills, was productive of no injurious tendency whatever, nor of any ground of complaint. With respect to the unfavourable state of the course of Exchange at the periods alluded to, it was by no means to be attributed to the issue of paper from the Bank, but in a greater degree to the immense sums which were necessarily sent out of the country at the time for the payment of subsidies, and in consequence of the alarming scarcity which then prevailed.—The clause was ne-gaiived.—On the question being put respecting the third reading of the bill,

§ Lord Grenville
expressed his opinion, without meaning in the least to resist the progress of the bill, that the passing of such a measure as the present should not be regarded as a matter of course in that House. He should have to offer a few observations, which he thought it incumbent on him to advance, on the occasion of the third reading, respecting the measure, and more especially on points of considerable importance connected with the subject of the bill. He should therefore propose that the bill be read a third time on Monday.—Adjourned till to-morrow.