Lords Sitting of 4 May 1821

BANK CASH PAYMENTS BILL.
The Earl of Liverpool, in rising to move the third reading of this bill, said, it would be necessary for him to state in a few words its object. The bill did not propose to make any alteration in the measure which had two years ago been adopted by parliament, further than to anticipate the pe-
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riod at which the Bank were to be allowed to pay in cash. By the measure formerly adopted, certain stages were prescribed to the Bank in the progress of the resumption of cash payments, In the first instance, they were prohibited to pay in coin until a certain period; in the second they were permitted to pay in coin under certain limitations; and in the third the restrictions were to be removed altogether. By law, the Bank could not pay in coin till May 1822; the object of the present bill was not to alter the principle of the law, but merely to vary its operation by enabling the Bank to do that in May 1821, which they could not otherwise do till May 1822. He felt great satisfaction in stating that it was the intention of the Bank to adopt certain measures for issuing specie and paying off all their 1l. notes;, and it would be a great public inconvenience not to give them the permissive power proposed by the bill.
The Marquis of Lansdowncould not allow a measure of such importance to pass the third reading without making a few observations with respect to its general principle. The object of the bill was, not only to afford facility to the Bank, but at the same time to promote the advantage and convenience of the public. By this measure the Bank would be enabled to throw into circulation the specie which they had accumulated. And throughout the inquiries which had taken place on this subject, he had always maintained the opinion, which he saw no reason to change, that when once the currency of the country should be established on durable principles, the less of the precious metals which might remain in the Bank the better. The present bill however, did not rest its claims to the attention of the House, as being merely a measure to enable the Bank to pay in specie, but as embodying the general principle of the financial system attempted to be established two years ago. Nobody could now doubt the capability of the Bank to pay all demands upon them. All the difficulties which some persons had anticipated would attend the resumption of cash payments had been already surmounted by the Bank, for at any time within the last eight or nine months, the Bank could have paid all demands upon them without the slightest difficulty—He did not consider the bill as in the smallest degree affecting the decision of the great question with respect to which kind off

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currency it would be most expedient for parliament to establish, namely, whether a paper currency founded on a metallic standard, or a metallic currency only. If it could be hoped, that by adopting a metallic currency, a final extinction would be put on the crime of forgery, and all its train of demoralizing consequences, the determination of parliament would be in favour of the measure, whatever might be the inconveniencies attached to it. But he did not think that parliament was prepared to come to such a conclusion in favour of a metallic currency. The more he had considered the subject, the more he was satisfied that it still remained a question whether, after a paper currency had received all the improvement of which it was capable, it was probable one system would give rise to forgery to a greater extent than the other. From the papers which had recently been sent to their lordships from the other House he had collected some facts which bore materially on this question. He found that in the course of the last twenty years the convictions for coining amounted to 3191 whilst the convictions for forgery during the same period, with all the facilities afforded to the commission of that crime, by the defective state of the existing notes, amounted to only 1581. Thus it appeared, that during the time he had mentioned, the convictions for coining were nearly three times as many as those for forgery. It might be said that a great many of these convictions were for coining silver. Allowing that to be the case, as a large quantity of silver would still continue in circulation in the event of the resumption of payments in specie, no material diminution would take place. Besides, it might be expected, that when gold came into circulation, the temptation for coining would be greater than at present. He was sorry to learn that in the opinion of the best-informed persons on this subject, great facilities were afforded for the coining of gold by the introduction of platina. He did not make these observations with a view of inducing their lordships to come to any determination either one way or the other; he only wished them to suspend their judgments on this question—whether the safety of the community, as founded on the currency, and viewed with reference to the penal laws, would be better promoted by a metallic than5 a paper currency. For his own part he would say, that if the advantages of a
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metallic currency over that of paper could not be shown to be of sufficient importance to justify its preference, he would decide in favour of a paper currency as the most economical machine that could be adopted for carrying on the circulation of the country. After the bill should pass, the principle of a metallic standard, without, a metallic currency, would still continue. He was of opinion that under these circumstances the Bank should be compelled to purchase gold a fraction below the Mint price. The Bank could have no objection to this. Alluding to the important measure which parliament had adopted two years ago, his lordship observed that he did not wish to retract any opinion which he had given on that subject. He did not desire to weaken the responsibility which the noble earl opposite and the rest of his majesty's ministers and parliament took upon themselves when they at that period attempted to bring back the standard to its denomination. He thought that parliament deserved the thanks of the country for adopting that measure, which had been forced upon them by necessity, for necessity imposed upon parliament the duty, even at the expense of great sacrifices, of avoiding to recur to a dangerous precedent. But though his opinions had undergone no change with respect to the propriety of that measure, he would repeat what he had stated on a former occasion—that it had never entered into the contemplation of any individual in the country, that the moment when the difficulties of the country were increased by the passing of the bill to which he alluded, another attempt would be made to increase the amount of taxation. It was the duty of parliament at that period to consider whether the taxation was adequate to the necessary expenditure of the country, and whether it was not possible to reduce the expenditure. If it had been deemed impossible to reduce the expenditure, it would have altered the view which he had taken of the suggestion of the committee of that House, because it would have altered his view of the practicability of carrying the recommendation of that committee into effect. He did not object to the particular taxes imposed at that time, but to the general principle of making any addition to the burthens of the country, whilst they were adopting a measure which tended to increase the already existing burthens—not only by the

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difference it would create between the new arid old denominations of coin, but by other results; for he was of opinion that his friend Mr. Baring had not successfully shown, in opposition to Mr. Ricardo, that the extended distress which at present existed was to be attributed to the difference in the value of coin at one moment compared with another, and not to a more extended influence. No person who had looked at the present condition of the country, and considered the distresses which weighed upon the agricultural and commercial classes, particularly the former, could avoid coming to the conclusion that those distresses were much beyond any thing that could be the result of any difference in the prices of bullion at one time and at another. Much as he approved of the step which had been taken towards a return to cash payments, he had to qualify his approbation in consequence of other circumstances. In adopting that step, he had hoped that the policy of ministers would have been to reduce the expenditure of the country, and not to increase its burthens, by the imposition of new taxes. But it would be said, that they could not think of relinquishing the idea of a sinking fund, and that that fund could not be rendered efficient without increasing the taxes. It appeared to him, however, that the sinking fund had been abandoned long before, and that the taxes had been imposed, not to maintain a real sinking fund, but merely the shadow of one. If it was really wished to establish a fund for reducing a debt, that certainly would have been done far more satisfactorily, and also more easily by diminishing the expenditure than by an endeavour to increase the revenue, by laying on taxes which would sap the roots of that wealth and industry through the employment of which, relief for the difficulties of the country was yet to be hoped for. It was not by the addition of three million of taxes to maintain the shadow of a sinking fund, that any thing like a diminution of the public debt was to be obtained. It was only by a strict economy, and by alleviating the pressure of taxation, that any thing like a real surplus for the liquidation of the national debt could be expected. In bringing back the finances and the currency of the country to a healthful state, there were three courses to be followed: from two of which he had, when this subject was before under
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consideration, stated that he should recoil, and from them he still would recoil with alarm. Their lordships might have diminished the interest paid to the public creditor; but this was a resource, the resorting to which could never be excused, except by an unavoidable necessity. It was a breach of public faith, from the idea of the commission of which their lordships must recoil with horror. There was another expedient. Their lordships might have altered the denomination of the coin, but if they did not choose to do that, there remained only for them the course which they had pursued. Having then resolved to return to the former currency, it was necessary to bring down the expenditure by reductions and economy below the revenue. He did not mean to say that this course had not in some measure been adopted; but it was necessary still to pursue it steadily, and avoid all deviations from it. To it only could they look for salvation to the country.
The Earl of Lauderdalesaid, heap-proved of the bill; but if he were to give his advice to the gentlemen of the Bank, it would be, that they should be very cautious in their proceedings under it. In making this observation he called their lordships' attention to the remarkable circumstance, that gold had been for about six months at one price. It had continued steadily at the standard price at which it was purchased by the Bank. Now, to tell him that an article continued for any considerable length of time at the same price was tantamount to saying that it did not come fairly into the market; for the ordinary law of supply and demand rendered it quite impossible that an invariable price should be maintained. When he found that the nominal price of standard gold had been for six, or even three, months, neither more nor less than 3l. 17 s. 10½d. he must say that that circumstance afforded him no criterion whatever of the real price. But it was very easy for him, or any one of their lordships, to tell what the market price of standard gold ought to be, by comparing it with the price of Portuguese and doubloon gold. They knew how many carats fine each kind was> and they knew the price of each in the market. The price of these foreign gold coins was 3l. 14 s. 6d. per ounce. The price of standard gold, therefore, compared with them, ought to be 3l. 19 s. 0½d.

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or 3l. 19 s. 7d. Now, he would like to ask any of the gentlemen of the Bank, whether they ever had in view making payments at either of these prices? In fact, the present price was evidently artificial. His noble friend had alluded to the question, whether a paper or a metallic currency was preferable. He confessed, for his part, that even on the point of economy, he was not satisfied that a paper circulation was the most advantageous. He knew it was often said, that if you take thirty millions, the sum which might be necessary for the circulation of the country to purchase, you thereby create all at once a dead capital. But this appeared to be an erroneous view of the subject. Gold was never purchased in the way contemplated, but gradually, and in exchange for manufactures exported. The purchase of the gold, therefore, instead of being disadvantageous to the country, was highly beneficial. The loss sustained by the depreciation of paper had also to be taken into consideration; and when the question was fairly weighed, their lordships would see reason to doubt whether, on the mere ground of economy, a metallic currency ought not to be their choice. Of this he was certain, that the advantage the manufacturers of the country must derive from it would be very great, by the encouragement it would give to exportation. But, if the country was to look forward to the possibility of being again engaged in foreign warfare, then it was highly important to have a metallic currency; and, much as he deprecated war, it was fit to be prepared for it.—There was another question connected with that of the nature of the currency started by his noble friend, namely whether a greater risk arose from false coining or forging of notes. Now, considering that the price of silver was 4s. 10½d. or 4s. 11 d. and the number of shillings the ounce was coined into, it appeared that no country in the world held out such encouragement to coining as this, did. The coiner might gain by his operation altogether about 14 per cent. With regard to what had been said as to the reduction of the establishments of the country, he should be extremely glad to see any plan of that kind proposed, from which efficient relief could be expected. Every day, it was true, new schemes were proposed; and it was suggested to take 300 l. from one man, and 400 l. from another, and so on. This was a petty
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mode of proceeding, altogether unworthy of a great nation; but let him see how a million or half a million could be fairly saved, though that would go but a short way towards relief, and he would, be glad to concur in the necessary means. His noble friend had also alluded to the denomination of the currency as affording a resource of which their lordships might have availed themselves. He was one who thought there was a time when their lordships might have altered the denomination of the currency with advantage. He meant at the time when the one-pound note was depreciated to 14 s. 8d. Had it then been resolved to make the pound 16 s., a premium would have been given to every holder of 1s. 4d. The benefit derived by every man who had payments to make from the measure, and the effect it would have had in reducing the public burthens, would have rendered, it satisfactory to the country. This favourable opportunity had, however, been allowed to pass by, and such an arrangement was now no longer practicable. But perhaps even now their lordships might go so far as to make silver a legal tender in payments. This, he was convinced^ would prove a great relief to the tenantry throughout the country, and to the public at large. It certainly could not be a greater violation of the principles of currency to make the silver coinage, of which 40 s. was at present a legal tender generally receivable, than what was done with respect to gold. He concurred in what his noble friend had said respecting the sinking fund. Were the country ten times more affluent than it now was, it would be absurd to persist in that ruinous scheme. His noble friend had called it the shadow of a sinking fund; but shadow as it was, the abolition of the establishment connected with it would be a great public benefit. If the three millions or two millions and a half employed to keep up this shadow were applied to the public service, there would result, not only relief to the public, of taxes to that amount, but the produce of all the remaining taxes would be increased, and the demand for labour would be augmented. The mischievous consequences of the sinking fund, in the circumstances, in which it now stood, were so obvious, that he could not understand however those who were, on general grounds, advocates for such a measure, could support it at the present moment.
Lord Kingwas very desirous to see the measure before their lordships carried into complete effect; but he believed great difficulties would be found to arise from* the junction of increased taxation with a new currency. The noble lord who spoke last could see no means of effectually reducing the expenditure. Now it was not required of him, or any individual in that House, to point out details of reductions. Let, however, the House of Commons come to a resolution to reduce the expense of the public departments to fifteen millions, or any other given sum, and he was sure the head of the Treasury, the noble lord opposite, would discover how the business might be managed. He would doubtless say to the head of the army, you shall have only so much; to the head of the ordnance you shall have only so much; for miscellaneous services so much shall be allowed, and no more. As soon as this distribution was made, the required reductions would follow of course. The great difficulty to be contended with, and one which had always been foreseen, was that of paying the same amount of taxation as before with a currency of increased value. With regard to the sinking fund, any tax for its support was most objectionable. He conceived the proper view with respect to it was this—that at the time when steps were taking to raise a depreciated currency to the legal standard, it was wrong to bring forward another measure for the support of the sinking fund. Having, by the measures taken for restoring a just currency, increased the value of the fundholders dividend, was it reasonable that we should also increase his capital? Such, however, was the effect of imposing taxes for the support of a sinking fund. With regard to the price of gold, he was of opinion that, the purchases of the Bank tended not merely to raise it to its proper value, but to carry it beyond it. The Bank gives a certain price for gold, 3l. 17 s. 10½d. But, judging from the value, if this rate of payment were not given by the Bank, gold ought to have fallen below the standard price. The effect of the transactions of the Bank, therefore, was, to raise the gold currency not only to the Mint standard, but beyond it. With respect to purchases, the Bank, bethought, had done too much: there had been too great an eagerness for the collection of gold. The value of the paper was thus
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decreased in comparison with the gold. He should very much wish to see this measure accompanied by others. Their lordships ought to consider what the state of the law with regard to the currency now was. The acts inflicting penalties on sending gold out of the country had, he believed been repealed. These penalties were very properly abolished. But then it was to be recollected, that coin might be legally exported or melted, and that the country would therefore have to pay the expense of the coinage—of all the coins sent abroad, or committed to the crucible. This was, however, an evil easily remedied. In every other country in Europe, the expense of the coinage was taken out of the coin, and he thought a similar practice ought to be introduced here. He did not mean to recommend a seignorage. He would propose to take, only the exact expense of coining, or what was called a brassage. He did not know what that might be; but suppose it amounted- to one per cent, then a person taking gold to the. Mint to be coined-would receive 99 pieces for the value of 100 in bullion. This arrangement would take away the inducement to export or to melt the currency, while the coin would be kept up to the standard purity. The Mint arrangement, by which nothing is taken for the expense of coinage, was at all times a bad regulation; but was now, from the altered situation of the country, become much worse. From the change which was taking place in the government of South America, the precious metal would be brought here with more facility; than to any other part of Europe. It was probable, therefore, that gold would' always be cheaper in the English market than in any other: there would, of course, always be an influx of gold and silver into this country, and a reflux from it; but if the regulations of the Mint, continued, it would be more convenient to export specie than bullion, and thus we should not only have to coin for ourselves,, but for all the rest of Europe. He could not see why the expense of coining should be incurred by the public, when the standard of the coin could be maintained in equal purity by the arrangement he* had described, or some process of a similar nature.
The Earl of Liverpoolobserved, that some particular views had been taken in the course of this conversation, the justice and propriety of which he was

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not disposed to question. He agreed with the noble marquis who spoke last, and the noble lord in regarding the bill as a permissive regulation. It appeared to him right and expedient, not, at this moment, to determine what the precise system of our circulation finally should be. But at the same time he thought it his duty to remark, that the passing of this bill would certainly operate to increase, in a great degree, the difficulty and inconvenience of adopting other principles. The Bank were of opinion that it would be a judicious measure to pay, without further delay, their 1l. notes, now amounting to between six and seven millions, and to issue gold in their place. The metropolis, therefore, as well as the county of Lancaster, which was also supplied by the Bank, might very soon expect to possess 3 metallic instead of a paper currency. It was obvious that, after such a change, the inconveniences attending any plan for re-settling the system must be materially augmented, lie did not at this time mean to go into a discussion of the question, whether upon the whole a paper or a metallic currency was the fittest for a country like this. Some doubts, however, he could not but entertain as to the accuracy of the noble marquis's proposition; the inclination of his own mind being, that, of the two, a metallic currency was the most advantageous. The superior economy of a paper circulation had been alluded to; but the attendant evils, he feared, overbalanced that advantage, important as it might be. The extent to which forgery prevailed, as compared with the offence of coining, formed one very serious objection. It must be remembered, too, that the forgeries consisted chiefly of one-pound notes, and entirely of notes of a small denomination. At critical periods, when a danger of overtrading existed, and a variety of fictitious capital was brought into activity, a paper currency was by far the best calculated to encourage the spirit of the first, and the formation of the latter. Giving, therefore, all its due weight to the argument of economy, he apprehended, that where it was wished to establish a fixed and solid system, the preference ought still to be given to a currency composed of the precious metals. Nevertheless, he was desirous that the subject should be still left open for discussion. Whilst he was upon this topic, he might also remind their lordships that
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there was a metallic currency in this country up to the period of the suspension of cash payments at the Bank, and that it was, therefore, the system under which we had become what we were.—Having said thus much, he would shortly refer to the particular measure before their, lordships. The market price of gold, he had reason to believe, was below the standard price of 3l. 17 s. 10½d. Large quantities of bullion, to the amount of perhaps 500,000 l., now entered this country monthly. The price of gold was necessarily on the decline, and probably did not at present exceed 3l. 15 s. or 3l. 16 s. But, when gold was at 4l. per ounce, it was because the Bank, no doubt in the exercise of a conscientious judgment thought proper to give that price. Another subject introduced into the discussion was the 3,000,000 l. of new taxes imposed in 1819, and to which the most unfortunate effects had been ascribed. Now, it was his firm belief that those taxes had not at all increased the public distress. Since the termination of the war no less than 16,000,000 l. of taxes had been reduced; and it would not be difficult to show that similar or greater distress existed in other countries where there were no such taxes. The pressure upon agriculture had been felt upon the continent; and, in America the difficulties of their situation had rendered it necessary to negociate a loan during the session of congress* With respect to the sinking fund, he was one of those who had advised that an addition should be made to it two years ago. He did so upon this principle—that if an effectual sinking fund was to be maintained, and that already in existence to be increased, it was most wise to do at once whatever was desirable, and then leave the country to itself. Nothing had operated; more to prevent them from knowing the actual situation of the country than the practice of raising loans in time of peace, by which the money market was kept in a feverish and precarious state. If it was expedient to maintain a sinking fund, the next consideration was, what ought to be its amount? With reference to the first point, it did appear to him, that, supposing the reduction of debt to be the object, it was yet very important to keep a sinking fund; and that as no private individual; could be called opulent without a surplus of income, so a nation could not be truly flourishing or prosperous without a like excess over its expenditure. Circums-

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stances might Easily arise which would demand at once the additional expenditure of two or three millions. Such a necessity might be brought about by unfavourable seasons, or by an unavoidable increase of our military force. Without some resource of this kind, therefore, a nation did not give itself elbow-room, nor prepare for any of those exigencies which were of perpetual recurrence. Upon these grounds he had come to the conclusion that it was desirable that a sinking fund of 5,000,000 l. should be established.— He now came to notice those ideas which bad been suggested in some quarters, as to the means of obtaining relief by reducing the interest of the public debt. Such an act would, in his opinion, be the most disgraceful that any legislature could commit; and it would be a waste of words to expose its monstrous injustice. By another plan it was proposed to introduce a slight depreciation in the value of the currency; but this was precisely the same thing, done in a still more objectionable mode. Much had been said of the possibility of reducing our establishments; and their lordships knew, by the votes of the other House, that inquiry had been made into the several branches of our expenditure. Some considerable retrenchments had been made; but it was of importance that their lordships should know how this matter really stood. The great burthen at present was the half-pay of the army, the navy, and the ordnance. The charge alone of the army and ordnance in this respect amounted to 5,000,000 l., or what formerly was sufficient for defraying the whole expenses of our civil establishment. Now, this was a source of expenditure that must continue to flow on; it was a subject which they could not touch. It now cost more to support the same number of men than it did formerly. It had been, therefore, found necessary to raise their pay; and perhaps the increase had been too large; but he must be a bold man who would now propose to reduce it to its former amount. Of such items, however, the mass of our expenditure was made up; and unless they could be deducted from the account, he did not see where any effectual retrenchment was to take place. He knew it was said, that our military establishments were too large for a time of peace. To this he could only answer, that ministers were disposed to bring them within as narrow limits as was consistent with their
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duty. It was obvious, however, in the altered circumstances of the country, that a much more considerable force than was maintained at preceding periods of tranquillity had become requisite. The noble lord had alluded to the existing system of coinage, and seemed to think it capable of some amendment. There were two principles upon which the views of the noble lord might be carried into effect. To the first, that of a seignorage, he entertained a decided objection. That of a brassage seemed to point out a system entirely new, and would require much consideration.
The Earl of Darnleyexpressed his conviction that great retrenchments might be effected in the public expenditure. With this impression on his mind, he should feel it his duty to call their lordships' attention to the subject during the present session.
The Duke of Wellingtonstated, that if the whole of the ordnance department were abolished, the salaries and half-pay must remain, and the amount of the reduction would not exceed one-third of the present expenditure.
The Bill was then read a third time.