Lords Sitting of 21 June 1819

CASH PAYMENTS BILL.
The Earl of Harrowbyrose to more the order of

1225
the day for committing this bill. The noble earl then proceeded to describe the clauses of the bill, as founded on the recommendations of the committees of both Houses. In the result of the inquiry which had taken place, it was thought necessary that the principle of a metallic standard should be adopted. There were different modes in which this recommendation might have been carried into effect. Some considered the subject as theorists, others examined it practically. Those who are of opinion that the Bank, by the power of limiting their issues, possessed a control over the exchanges and the price of gold, could not be insensible to the difficulties and alarm which too sudden a contraction of those issues would create, and therefore must approve of a gradual return to cash-payments. Those, on the contrary, who thought that the abundance of the paper circulation was not the cause of the difficulty, and that gold and the advantage of the exchanges would return when the operations of trade produced a balance in favour of the country, were, doubtless, anxious that time should be afforded for producing this effect. Besides, if a sudden return to cash payments had been prescribed, the Bank would have been obliged to make great increase of its treasure, in doing which the price of gold would have been still further augmented. The bill, therefore, provided for a progressive return to cash payments, by payments in bullion at different prices, at several successive periods.
The Marquis of Lansdownesaid, he rejoiced to see this bill introduced, not only because through its enactments was to be found the best road for getting out of the difficulties in which the country was involved, but on account of the sound principles of economy and legislation which it contained. It recognized a metallic standard as the only safe foundation for a circulating medium. It proposed regulations which inferred that the value of the exchanges and the price of gold depended upon the state of the currency. It inferred that the Bank, or any persons who possess the means of increasing or diminishing the currency, are invested with the power of influencing the exchanges, raising or lowering the price of gold, and altering the value of every kind of property. If those principles were false, the bill was unnecessary. It would be mere waste paper, and worse than useless. The bill, therefore, sanctioned the
1226
great principles he had mentioned, and put an end to the system founded on opposite principles. He hoped the country would never again hear of the theories founded on the abstract idea of a pound sterling as a unit, or a bank-note and a shilling being in public estimation equal to a guinea; on the tendency of gold to fly to other countries where it was dearer, without producing any change of value; and other absurdities of that kind. These theories, which had been so ruinous to the country, deserved to be stigmatized as they were by the bill before their lordships, every enactment of which declared their falsehood. By acting on them, the country had been overwhelmed by an oppressive mass of debt, and grinding system of taxation, all the evils of which were augmented by the fluctuation of value, debts having been contracted at a low price which it was necessary to pay at a high. This measure, he trusted, would not only have the effect of rescuing the country from its dangerous situation, but of placing it on a foundation of security. It was necessary to endeavour, in returning to the metallic standard, to put the country, and the Bank, as a part of the country, to as little difficulty as possible. In this view, the plan recommended to parliament appeared to be attended with every practical advantage. It was calculated to inspire more confidence, and to attain the object desired with less risk and danger than any other. If any thing struck him as susceptible of improvement in the bill, it was that part which related to the payments in bullion. In the original plan it was proposed to compel the purchase as well as the sale of gold by the Bank. If the Bank had been obliged to deliver notes for gold, as well as gold for notes, such a regulation would have kept the circulation in a due equilibrium. If another arrangement, which had been suggested, were adopted, namely, that of keeping certain sums of money ready coined at the mint to exchange for bullion, so that the person applying would not have to wait, he thought it would have the effect of sending a great part of the coin out of the country, as it would on coming into circulation have a higher value than bullion. He therefore was inclined to think that it would be expedient to take a brassage or seignorage from the coin (though to a small amount), to keep it in the country.—Having stated his opinion on these points, he came to the clause which had been added to the pre-

1227
sent bill, making it lawful for the Bank to pay either in bullion at the mint price, or in the gold coin of the realm, after May, 1821. In this provision he was disposed to concur. The existing law prohibited the Bank from paying any of their notes in coin till the expiration of the restriction; and by this state of the law, that corporation might not be able to get quit otherwise of their accumulated cash. They might thus receive coin for their notes without being allowed to pay it away. He therefore approved of this clause, which authorized the Bank to get rid of the coin in their coffers for internal circulation, if they preferred giving it rather than bullion.—The consideration of the bill now before the House naturally led him to some observations on the financial system for the year, of which it formed a part—a system formed not only for the present year, but he might add, for future years. He entirely approved of the loan made by government for the annual supplies, and of that part of it especially which, without interfering with the effective operations of the sinking fund, borrowed a part of it for the services of the year. What he had to regret in viewing the policy of this measure was, that the system on which it proceeded had not been adopted sooner, as by this means a considerable saving might have been effected to the public since 1816. Nothing could prove this better than the effect which the present loan had produced on the money market, compared with the result anticipated from a different course. Having no real sinking fund but the excess of our income over our expenditure, the wisest course appeared to him to be the making of the nominal sinking fund subservient to the loan. On the practical consequence of the measure this year adopted, and the manner in which it was to be followed up, he had a question or two to put to the noble earl (Liverpool) opposite. He wished to know if a sinking fund of 1 per cent was to be provided on that part of the loan taken from the sinking fund of the year, as well as upon that part of it obtained from the contractors: he did not see the necessity of following the old system, while its principle was departed from.—Having said so much regarding the loan, there still remained for him to make a few observations on the large amount of taxation to be raised, as a part of the new financial system; and here be must say, that, in justice to the
1228
country, in justice to parliament, and in justice to the committees which had recommended this bill, the permanent settlement of our finances ought to have been delayed till the effect of the restoration of our currency had been ascertained. He could have wished that an opportunity had been given of judging how far the return to a metallic standard would affect the amount of our existing revenue, and of the income of every individual, before new taxes had been imposed. The great question with him was, whether we ought to have 3,000,000 l. of new taxes in the present state of the country, and during the progress of an untried experiment respecting our circulation. The particular nature of the taxes was not material to discuss, as in the present state of the country any tax would find its way to every class of the community, and distribute itself equally over the community, however imposed. If parliament were to tax the necessaries of the poor, they must come for relief to the funds of the rich; and whatever was taken from the luxuries of the rich, must to the same amount diminish their power of employing the poor. But while he said this, he could by no means agree, that these burthens would affect no class at all; that they would be so much gained to the revenue of the state without affecting that of individuals; in short, that they were merely taxes in the abstract, and to become substantial when they came into the exchequer. Renouncing, as he did, this doctrine, the only question was, ought we to appropriate in the present circumstances of the country 3 millions of money out of the resources and productive capital of the nation, to create an addition to the treasury of the state? Ought we to reduce our public debt by a sacrifice of the funds that maintained national industry? Ought we to deprive the people of 3 millions of capital, which would fructify in their hands much more than in those of government, to pay a portion of our debt? He thought not. There were signs and symptoms of a state of things in this country which proclaimed the impolicy of this system. Besides many others which he would not enumerate, we saw not only an emigration of numbers of our people, but an emigration of capital, which would be increased by new taxes. He called upon their lordships to say, whether they would choose a moment of so much uncertainty regarding our currency, to settle the state of the national income, when

1229
neither the House nor the government could either tell the amount of the sacrifices which the new taxes could occasion to the people, nor the effect they would have on the revenue of the country. The course most consistent with the public interest appeared to him to be, to postpone any new taxes till we had adjusted and ascertained the amount of our existing revenue in the restored circulation, the effects of which we then could measure.
The Earl of Liverpoolsaid, that the present bill had met with no opposition, and required no defence. He would only say, with a reference to the general doctrine of the expediency of having a metallic standard, that though he had formerly differed in opinion from the noble lords opposite regarding the excess of paper in circulation, and the necessity of continuing the Bank restriction, he had always maintained that the restriction ought to be removed as soon as possible after the war; that we were never safe till we had traced back our steps, and had returned to a sound currency; that the restriction was only to be temporary, and ought not to last beyond the existence of the necessity which justified it; but he had always contended that the facilities which the restriction gave had mainly contributed to enable us to carry the war to a successful issue. He did not, therefore, commend the system as a permanent one. Having said thus much, he would not go further into the subject. It was a matter of great satisfaction to him, that this most vital question, after an investigation by committees of the two Houses, and after the expression of the opinions of the most enlightened individuals of the country, had been decided consistently with the general opinion of those who had studied or understood it. The noble lord had properly brought forward the other parts of the financial system, and he would now make a few remarks on what he had said. In the first year of the peace, parliament had remitted 18,000,000 l. of taxes, in opposition to the wishes of government. If this remission had not taken place, the unfunded debt might have been reduced, and the restriction been sooner removed. Such being the case, government was obliged to depend on expedients. The present bill, after a long examination, was thought necessary. He should have wished the whole subject to have been delayed to another year; but
1230
as circumstances had ordered otherwise, it was proper to take a full view of our financial situation. The country was entitled to say—"Do not take half measures, make the inquiry about to be instituted effectual, and adopt a general and permanent system." Our general financial system was connected with the Bank, as when parliament proposed to pay up the Bank advances, it brought on the consideration of a greater loan. Government then said, "You see the great efforts that must be made; you perceive the pressure on our finances; tell what is necessary to be done; tell the country what they must bear to place our financial system on a basis of security." To do this, government could not impose taxes by driblets. The people said, "Show us all that you want, propose a connected system, and we will make an effort." If this system were adopted, we should want no more loans, no more taxation, during the continuance of peace. The noble marquis had asked, whether it were intended to keep up the machinery of the sinking fund. There were two questions on this subject which it was very important to consider. He had always said, that effectual sinking fund there was none: there was none beyond the surplus of our income over our expenditure in all its branches. But as long as the nominal sinking fund existed, the country never could tax the government, or the parliament with any breach of faith, although they borrowed to render it ineffective. As long as the nominal sinking fund lasted, the national creditor could have no cause of complaint whatever; and, therefore, the question of the nominal sinking fund, whether their lordships adhered to it or not, could not influence the consideration of the question then before them. Whatever course they might think proper to adopt, the deficiency of the sinking fund ought to be made up. But, in his opinion, it was not judicious to decide the question proposed by the noble marquis at present. It was important to this country that it should look to a surplus revenue; and was a surplus revenue of 2,500,000 l. sufficient for a debt of 800,000,000 l.? He did not believe that the extinction of the national debt would be any benefit to the country; but their lordships would not do their duty to themselves or to posterity, if they did not look to some diminution of that debt. There was not a country in Europe which had not adopted our system; and France,

1231
Austria, and every other nation had accompanied it with a sinking fund. Should not this country, then, in a period of peace, put its finances upon an equal footing at least with that of all other countries? France had now a sinking fund of 1 per cent upon her capital. A great country must have a surplus of revenue above her expenditure. This was absolutely necessary, not only to enable her to discharge the ordinary expenses of government, but to give her the means of providing for those who were entitled to her generosity and gratitude. The same principles, in fact, applied to a state as to an individual. With this view of the subject, he conceived that the question now to be considered was, whether it would not be expedient to provide a sinking fund of about 1 per cent on the capital of our debt. He should think that, with that provision, the country would have the means, not only of recovering from its present burdens, but of meeting the exigencies of a future war. The amount of taxation now proposed was 3,000,000 l., leaving a sinking fund of about 5,000,000 l. If he were not much disappointed in his expectations of the revenue, at a short period, the country would arrive at that point when we should have a clear sinking fund, above its expenditure, of 8,000,000 l.; and his opinion was, that if the country had once a clear sinking fund of 8,000,000 l., that fund need not increase further, and there would be the means of relieving the country to the amount of 400,000 l. a year, from the burthens of the present system. We might then look forward to the continuance of peace, or to the renewal of war, without any alarm. He conceived that no taxes could be imposed which would, have so little pressure as the present.
The Earl of Lauderdalecongratulated the House that this measure, and the opinions now entertained by the most intelligent ranks of society, had given the death-blow to those principles which had so long prevailed in the country. Looking at this subject in every point of view, he was one of those who said that it had been much misunderstood. He thought that the directors of the Bank of England had acted a part which did them the highest honour. By the act of restriction, their lordships had, in fact, transferred to the Bank of England what was once considered as the greatest power and pride of the prerogative of the Crown—the right
1232
of regulating the currency of the country. The noble earl then repeated the opinions which he entertained on the subject of the currency, and contended that they were correct. He thought that the imposition, of 3,000,000 l. of taxes, at the present moment, was an act of the grossest injustice. Granting that it was necessary to make a sinking-fund of 5,000,000 l., was it not necessary to give the country a little respite from taxation? Nobody who considered the state of our manufactures could think of imposing 3,000,000 l. of taxes without trembling for the consequences. The best way of arriving at a sinking fund with convenience to the country, was to allow taxation to relax for a moment, in order that it might attain that object.
The bill was then committed.