Lords Sitting of 17 March 1826

SCOTCH BANKS—SMALL—NOTE CURRENCY OF SCOTLAND AND IRELAND.
The Earl of Liverpoolrose to move for a select committee, to inquire into the state of the circulation of Promissory Notes under 5l. in Scotland and Ireland. The question was put and agreed to. After which, the noble earl moved, "that the petitions presented upon this subject be referred to the committee."
Earl Grosvenorthought the proposed inquiry could now be of no service. His majesty's government, before they had announced any intention of interfering with the system, ought to have been fully informed; and he supposed that they must have had sufficient information. Why, therefore, was there now to be as elect committee appointed to inquire into the subject? He believed that all this originated in the fears excited in the minds of ministers by a celebrated personage, no other than Malachi Malagrowther; but he did not think it wise to yield to those fears, or to enter into any discussion upon a subject on which full information had been obtained. Indeed, he thought the discussion should have been left to Bradwardine Waverley, from whose hands Malagrowther seemed to have received a full and satisfactory reply. His lordship then repeated his former arguments with respect to a summary remedy for compelling the payment of small notes, and thereby giving to the poor, for whose benefit these alterations were professed to be made, real and effectual security.
The Earl of Liverpoolthought the objections of the noble earl to the appointment of a committee most extraordinary. At the commencement of the session, it

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was announced that a bill was to be brought in for the suppression of one and two pound notes. When that announcement was made, a question was put to him, as to the intentions of the government to extend the measure to Scotland and Ireland. His answer was, that it was intended to do so, but not at the same time that it was to be carried into effect in England. It appeared, however, that there was, on the part of the people of Scotland, a general sentiment against the measure being extended to that country. What then, he would ask, was the best and most decorous course to be adopted? Why, to institute an inquiry into the facts, as to whether the bill ought to extend to Ireland and Scotland or not. Not having as yet heard any argument against the expediency of extending the measure to Scotland and Ireland, he thought the best mode was, to appoint a committee.
The Earl of Aberdeensaid, that an experiment was about to be made for which he saw no necessity. The people of Scotland had made no complaint, and had suffered nothing from their Banking system. If they had suffered, or had complained, then it might have been proper to Institute an inquiry. There was, on the contrary, a universal sentiment prevailing in Scotland against any alteration. He had not heard what was to be the object of the inquiry, nor any good reason for instituting it. If it was deemed expedient to revert to the state of things that had existed before the Bank Restriction act, would it not be the wisest way to wait until the experiment was first tried in England? But, if an opposite system had prevailed so long, and with such good effect in Scotland, he saw no cause why it should be disturbed. Under the present system the people of Scotland had prospered. He did not say that the whole of that prosperity had been caused by the banking system, but it had been cotemporaneous with it. If their lordships looked back for a century, they would find Scotland in a state of barbarism and disorder, and they would find at present, to use a strong phrase of a noble lord near him, that the people of Scotland were the best-conditioned people in Europe. He did not suppose this had been produced by their having one-pound notes; but the people were contented with them, and without some good reason he did not think it necessary to make any alteration. The experiment about to be tried for
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England would give difficulty enough if it succeeded, and he therefore thought it very unwise to increase the difficulty, by extending the measure to Scotland. He was sure the noble earl was the last man to adhere to any measure out of mere punctilio, and that he did not now propose the committee, because he had on a former occasion announced his intention of doing so. Under these circumstances he must express his regret that any committee was to be appointed.
Lord Melvillesaid, his noble friend was under a mistake if he supposed that any measure was to be immediately introduced. The committee had, in fact, been appointed, and his noble friend should have made his objections on that motion. The question before their lordships was, to refer the petitions to that committee, and his noble friend could not surely object to that. There were many individuals who were totally unacquainted with the Scotch system of banking; and by having the committee, their lordships would have the details brought before them, and he better enabled to judge of the propriety of extending the measure to Scotland. His noble friend had hinted that the measure would be prejudicial if extended to Scotland; but he was sure the noble lords who were to compose the committee would not concur in recommending any measure which was not proper. It was quite a mistake to suppose that the committee would inquire into the stability of particular Scotch bankers; but it was due to those bankers to state, that they made no objection to a full inquiry into the effects of the system; in fact, they wished the inquiry to be made. At least, this good would result from the committee, that it would bring before their lordships, when the report should be made, all the details of the system, and satisfy them whether the measure should be adopted in Scotland or not.
The Earl of Limericksaid, that being connected with Ireland, he would not shrink from giving his opinion as to the effects of extending the proposed measure to that part of the kingdom. He agreed with the noble earl who spoke last but one, in regretting that a committee should be appointed to consider of the propriety of extending the measure to Scotland and Ireland, when in those countries it was not at all called for. Where there was no disease, no remedy was required. Their lordships should wait to see the

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effects of the measure in England, before they thought of extending it to Ireland. The consequences of agitating the question were already disastrous. By letters which he had that day received from Ireland, he had learnt that the markets had tumbled down 50 per cent, and no merchants were willing to become purchasers in consequence of the agitation of this question. The measure would be infinitely more mischievous in Ireland than in Scotland. In the latter country, a sovereign was hardly to be seen, but the paper circulation in Ireland was founded on what modern political economists considered the best of all possible principles, that of a metallic currency, for the notes might be immediately converted into gold. Ireland, as compared with England, was a poor country, in which the dealings were on a small scale, and the circulating medium should be of a corresponding character.
The Earl of Lauderdalewould ask the noble earl opposite what was the professed object of this measure as applied to England, but to restore confidence? Now, he was at a loss to see how it could restore confidence; and hitherto it had only operated against restoring confidence. But how, such a measure could be thought necessary to restore confidence in Scotland was what neither the noble earl nor any other person could take upon himself to say. In Scotland a perfect confidence already existed. The people of that country were universally satisfied with their banking establishment at Edinburgh. There was but one dissentient, and he was a retired goldsmith, who moved an amendment to the proposed motion, at a very large meeting there, to the effect that every dependence was to be placed on the wisdom of his majesty's government. He could not help being curious to know who this gentleman was who entertained so singular an opinion. He learned that he was a retired goldsmith, and therefore supposed that the habits of his life had produced this extraordinary attachment to a currency consisting of that metal. It reminded him of a story told by Dr. Johnson, in one of his pamphlets. The doctor, in describing the effect, of habit on mankind, related an anecdote of a retired tallow-chandler, who, on selling his business, stipulated that he should be allowed to attend his old shop on melting-days. As to the appointment of a committee, it appeared
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to be objected to, both by those who were for, and who were against the measure, though their arguments were very different. The noble earl behind him (Grosvenor) was for ministers going forward with the measure without any committee. He would not have them flinch an inch. His noble friend opposite (the Earl of Aberdeen), on the contrary, was against a committee, because he thought the measure ought not to be adopted; and in this view he confessed he agreed with his noble friend. It seemed to be supposed that the Scotch bankers had a particular advantage in the system that existed in that country. Unquestionably, men would not employ their capital in trade but with a view of deriving profit from it. It was clear, however, that the Scotch bankers would have more profit if they were to follow the English mode of doing business, and give no interest to their customers. If, therefore, they joined in the petitions, it must be from a conviction of the advantage of the system to the country. But it was the people of Scotland who were to be considered—that people who had grown up to prosperity with the system now in practice: it was to inquire what the effects of the measure would be upon them, and not upon the bankers that the committee would be appointed. He was sure that whatever evidence was produced before the committee would only show the advantage of the present system in Scotland; and, perhaps, they would furnish the noble earl with some useful hints how to new-model the banking establishment of this country; instead of inducing him to cram down the throats of Scotchmen the system pursued here.
The Earl of Liverpoolwas surprised that the noble lord should persist in objecting to all inquiry. He now, it seemed, thought it would be more dignified in ministers to do that which he had often accused them of doing; namely, come forward with a measure, and force it down the throats of parliament. With respect to what a noble earl had said on the subject of Ireland, he was astonished at the nature of his argument; for, if it was true that Scotland had been benefited by her banking system, surely the same thing could not be said of Ireland. The noble earl could not say that that country had not suffered by the failure of banks; for certainly no country had suffered more in that way than Ireland.

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It would be no answer to this to say, that a new banking system was established in Ireland. Whatever advantage might be derived from that system, it was as yet an experiment. The question, therefore, as it respected Ireland and Scotland, stood upon different grounds. But, as it related to Scotland, he begged noble lords would go into the inquiry fairly. The question of the banking system of Scotland was not to be considered with reference to its general operation on the people only, but more particularly to its effect on the commercial part of the community. Now, if their lordships looked at the commercial embarrassments which had occurred during the last five, ten, or fifteen years, it would be found that Scotland had suffered as much as England. How far this was connected with her banking system, he did not mean to stop to inquire. But there was another question. Could the Scottish system go on under the existing state of things? Could their lordships say, that it was possible to support one system in one part of the United Kingdom, and another in the other? It was necessary that the system should be the same in both countries. It was said, however, by the Scotch, "Keep your English system, and let us have ours, under which we have so long flourished; or, if you will assimilate the two, why not adopt the Scotch system for England?" But the real question was, could Scotland, in financial concerns, do without England? When distress occurred, could the Scotch merchants find relief without coming to England? Could they manage their affairs without depending on the Bank of England? Would they, in moments of difficulty, never call for sovereigns from that Bank? Then, indeed, let them have their own system! But if this was not the case—if both Scotland and Ireland must lean upon the Bank of England—if, in periods of difficulty, the commercial classes of those countries must come to this for relief—then assimilation was necessary. Connected together as the countries were, where an alteration of the banking system was made in England, it seemed to be at least proper to inquire, whether it would not be necessary to make a similar alteration in Ireland and Scotland. This was the great point of the subject; and he had stated it in order that his noble friend might turn his mind to it. The question was, whether Scotland was in so secure
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a state, that, happen what might, she was perfectly safe. If that should turn out to be the case, then she ought to be left to manage her own banking affairs as she chose.
The Earl of Lauderdalesaid, that the noble earl supposed a case of necessity arising for applications from Scotland for commercial relief, either by Exchequer-bills or advances from the Bank. Now, if it were not for the noble earl's new mode of management, how would his argument stand? In a period of commercial distress, the people of Scotland had just as good a right to apply to government for relief as the people of England. Thus his whole argument arose out of his own practice. In the present period of distress he had granted relief, by guaranteeing the Bank [The earl of Liverpool, "No."] Well, then, if the noble earl had not guaranteed, he had induced the Bank to make advances; and upon that the essence of his argument was founded. The people of Scotland must, of course, come to the Bank of England for gold. If the bankers in Scotland possessed Bank of England notes, they had only the same fight to call for payment as the bankers of France had; and that was all that they wanted. As to the banks of Scotland leaning on the Bank of England, there was no such leaning, and no occasion for it; but they must come to the Bank of England for gold as long as the noble lord chose to allow that body to possess exclusive privileges.
The Duke of Atholdeprecated partial discussion, and thought their lordships ought to defer their observations until they had the report of the committee.
Lord Clifdenapproved of the measure, and thanked ministers for getting rid of the small notes. No idea could be formed of the misery of the people of Ireland when the country banks failed in the years 1819 and 1820. In those years nine Irish country banks broke; and one in Dublin. It was of great importance to prevent those country banks from springing up again. There were now established in Ireland new banks, consisting of numerous wealthy individuals, which he hoped would be found to work well. For his own part, he felt an extreme horror of one-pound notes; and thought it must cause distressing sensations in every feeling mind, to reflect on the great sacrifice of human life which these notes had occasioned.
"The Earl of Carnarvoncould not see any insuperable obstacle to the establishing, of chartered banks within a limited distance of the metropolis. It did not appear that there had been any offer of compensation made to the Bank of England to induce it to relinquish this portion of its privileges; and no one could suppose that the Bank would gratuitously make the country a present of this boon. The present proceeding was a most extraordinary one: for after applying this measure to England, without having made any inquiry as to its expediency, it was now proposed to lump Scotland and Ireland together, and to inquire whether it would be expedient to extend it to those countries. Besides, was it a proper season for agitating this question, when credit was in a ticklish state, and confidence in a great degree destroyed? Instead of disturbing the public mind by this alarming proposition, it would have been more politic to have had recourse to some healing expedients. He conceived it would have been much better that this inquiry should have been conducted before a committee of the whole House; for when he saw that the committee selected for this investigation consisted of nearly the same persons who constituted the committee in 1819, he was afraid there was little probability that the paper system would have A fair chance before such judges, as he bad no doubt that these Midases would resolve to extract bullion blossoms from Caledonian thistles. Why the House should be called upon to alter the currency of Scotland, when no human being had complained that that currency did not work well in practice, he could not conceive. At any rate, the committee ought not to have been a select one, but a committee of the whole House.
Lord Ellenboroughagreed in thinking that it would have been better to have referred this measure to a committee of the whole House. Had that been done, the consequence must have been the abandonment of it at least for one year. But the whole proceeding struck him as a most extraordinary one; for their lordships had, in a few days, without any inquiry, determined upon the adoption of this measure for England, and now it was proposed to inquire how far it might be advisable to extend if to Scotland and Ireland; when, in point of fact, unless it was extended to these two countries, it must be wholly ineffectual for England. There-
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fore, if the noble earl was determined to press this measure, it would have been more candid and statesman-like for him to have proposed the extension of it to Scotland and Ireland at once, without going through the useless ceremony of an inquiry.
The motion was then agreed to.