§ The Earl of Ripon
rose to move that the House do resolve itself into a Committee on the Bank of England Charter Bill, and said, that in so doing, he felt called upon to explain to their Lordships the grounds on which it had been brought forward, and the provisions it contained. It was not necessary to detain their Lordships at any length by discussing the principles of Currency and Banking; those principles had been so frequently considered and such extensive inquiries into those subjects had taken place in both House of Parliament, that he apprehended their Lordships were in a condition to satisfy themselves with respect to the principles on which the Currency and Banking of this country ought to be conducted. It was necessary, however, that he should state how it happened that this question was brought before their Lordships in the course of the present year. By the Bank Charter Act of 1833, that at present existing, a provision was made that it should continue in operation to 1834, but that at the expiration of the first ten years it should be competent to Parliament on giving notice to revise the regulations of that Act, and to make such alterations therein as it should seem to require. The provision of the Act was this, notice might be given at the expiration of ten years; but if that 705 opportunity was suffered to pass without notice being given, then it would not be competent to Parliament to interfere in any subsequent year, and the Charter would run its whole period of twenty-one years, When, therefore, the period arrived when it was competent to Parliament to consider the question, the Government had felt that many circumstances rendered it desirable that some further steps should be taken to give more scope and efficiency to the great principles on which the Act of 1819 was founded, and with reference to which the late Bank Charter Act was framed. When that Act was proposed, many opinions were strongly expressed in favour of a system still more exclusive than that, which exists under the present Act; and his noble Friend, the then Chancellor of the Exchequer (now Earl Spencer) expressed an opinion, and others of great information and experience agreed with him in thinking, that the true plan which ought to be adopted was, to have one bank of issue for the country, and some, in fact, went the length of supposing that the Government itself ought to constitute that bank of issue. That view was not, however, generally entertained. He (Lord Ripon) thought it a measure of very doubtful policy, and which might be attended with consequences of a serious kind; he thought there were constitutional objections of great weight to such a system, and he doubted whether, even if the Government were invested with the power, it would have been able to persevere in controlling the Currency, but that Government and even Parliament would have been prevailed upon to relax the screw from time to time, and theory would have been lost sight of for the purpose of relieving particular interests. The Government thought, that looking particularly to the effect of recent laws, it was desirable that the Bank of England should be made not the sole, but the main instrument of issuing paper, and of providing for the wants of the country in respect to its paper currency. It did not appear that what was done in 1819 and 1826, and subsequently to the renewal of the Charter—after the recognition of the principle upon which the Act of 1819 went; viz., the establishing the convertibility of paper into gold—had practically had the effect of preventing injurious and excessive fluctuations. Their Lordships would, no doubt, recollect the pressure that there was in the money market in 1825—the most severe pressure, he believed, which had ever existed in this 706 country. Indeed, he believed that the effect of that pressure was greater than that which occurred in 1797, previous to the Bank Restriction Act. In the year 1826, the amount of bullion in the coffers of the Bank was so low that many persons apprehended that the time was near when it would have none at all. It did so happen, that before that critical period arrived, the exchanges became favourable and those who looked to them as indications of the actual state of the money market were convinced that the tide had turned, and the lowest point had been reached. So critical was the state of affairs that the very morning when the Bank Directors expected that they would be obliged to pay their last sovereign, there arrived at Dover a considerable quantity of sovereigns which had been exported to the Continent in the former year in the way of merchandize, in consequence of the state of the exchanges, and this timely arrival of gold prevented the dreaded consequences from taking place. That state of things led to certain alterations in the year 1826 with regard to country banks, the object of which was to permit the formation of Joint-Stock Banks of Issue, under the supposition that when such a great number of persons would be concerned in the banks, and where such publicity would be given to the proceedings, they would operate as a check in preventing over-issue. But this expectation was not realized. In 1832, occurred another serious pressure, and in 1836 and 1839 circumstances assumed a serious aspect, that it was impossible not to see that the mere convertibility of paper into gold was not a sufficient security, and it became indispensably necessary that something should be done, in order to prevent an evil the consequences of which it was impossible to exaggerate. People who saw a business going on with the greatest activity could not imagine or measure the consequences which might arise if the issue of paper were not regulated by some safe rule—and there was none but the foreign exchanges. If the exchanges were unfavourable, and the gold went out of the country, if more paper were issued, it drove it out still more, and if the Bank of England, which has the best means of judging of the state of the foreign exchanges, thought it wise and prudent to restrict its issues in consequence of any appearance, which was perceptible, yet it would not, at the same time, check the issues of the country banks; for it appeared from the Report laid before the other 707 House of Parliament, according to the evidence of Mr. Hobhouse and Mr. Stuckey, persons of great experience and both country bankers, that the country banks did not regulate their issues by the state of the exchanges, but simply by the demand; that is, they issued their notes according to the demand for them, without reference to the ultimate consequences of such issues. He (the Earl of Ripon) did not blame them; but thus it might happen, that just at the moment when the Bank of England, acting upon sound principles, were reducing their issues in order to correct the exchanges, at that very moment the Joint-Stock Banks and others were increasing their issues, and thus neutralising the endeavours of the Bank of England. It was well known that in some of those years, viz., 1836 and 1839, several Joint-Stock Banks had failed; and in the manufacturing districts, he believed that not less than 2,000,000l. of notes had been put in circulation by those banks, and as they had little or no security, the unfortunate people who held the notes at the time those different banks failed, got nothing, or nearly nothing, for them, in some cases, 2s. in the pound was received, but that was the utmost dividend given in any instance, and some instances paid nothing at all. It was, therefore, plain that the law in its actual state was not calculated to meet all the contingencies that might arise, and, above all, that it was not calculated to give that which was so essential to the best interests of the country—a steady currency, placed upon a sound and unvarying basis. The present measure was intended to produce that result, and he believed it would be found calculated to meet the difficulties which existed under the existing system. The general principles on which it was based had, he believed, met with very general approbation throughout all parts of the country. It was, he thought admitted to be based on sound principles, and it certainly had no object in view except to give that security which all admitted to be so desirable to have established. It proposed, in the first place, to limit the circulation of the country banks; and, secondly, the circulation of the Bank of England was proposed to be effected in the following manner: The Bank was to be at liberty to issue notes to the amount of security which it held; and, further, it was to be at liberty to issue notes in proportion—in exact proportion — to the bullion which they might have in their coffers. The better to effect that result, the 708 Bank was to be divided into two portions—one a bank of issue, and the other, a bank of deposit. He spoke of course, of the ordinary functions of the Bank. The amount of issue in circulation was to be handed over to the bank of deposit, and was in the first place to be 14,000,000l.; it might of course be less if the Bank chose, but that was not at all probable. The amount of issue was then to be 14,000,000l., and that was to rest on the basis of the 11,000,000l. which the Government owed to the Bank, together with 3,000,000l. of other securities—such as Exchequer Bills, stock, and other exchangeable and convertible securities, making the whole amount to an aggregate of 14,000,000l. But it was quite obvious that a sum of 14,000,000l. tied down in that way would be a very inadequate provision for the wants of the country; and it was therefore provided that this same bank—to wit, the issue branch of the Bank, should be obliged to issue notes at the regular Mint price, for all gold, bullion, or coin of any sort that might be brought into them for that purpose. Now, their Lordships would see how the matter stood at the present moment, and it would be important for them to direct their attention more particularly to it, as so much had been said as to the effect which the measure might possibly have in contracting the currency of the Bank. There would be 14,000,000l. issued on security, and there would, in addition, be the amount issuable on the bullion held by the Bank. At the present moment, the actual issue of the Bank did not exceed a sum amounting to between 20,000,000l. and 21,000,000l.; so that if the proposed scheme were at the present moment in force, the actual issue would be about 14,000,000l. on security, and 7,000,000l. on bullion. But the bullion which the Bank now held was nearly 16,000,000l.; so that the Bank would actually have a capacity of extending the issue—should it be thought necessary to do so—to the amount of 30,000,000l. He did not mean that it would be advisable for the Bank to increase the issue to that amount—he had by no means any intention of making such an assertion; but what he meant was, that the Bank could go as far towards that amount of 30,000,000l. as would be necessary to meet the demands of the country. But, then, if the Bank were to go beyond that prudent line, what would be the effect? Why, that their bullion would be drawn out, instead of being brought in, 709 and they would then, according to this Bill, have to reduce their issue of notes, so that the two must balance each other, and there could not, therefore, be any depreciation of paper money as compared with gold under this system. But it was thought necessary to give a further power of issue to the Bank to a limited extent, and the circumstances under which it was proposed to grant that limited power he would next proceed to explain. It was proposed to limit the issue of country banks, but there was nothing to prevent a country bank—supposing that it had at present the power of issuing notes of its own—from giving up that privilege and taking upon itself the use of notes of the Bank of England in place of its own notes. It was obvious that in such an event, or in case of the failure of a country bank, the circulation would pro tanto be diminished by the amount of the notes that the country bank had been in the habit of issuing, and a power was proposed to be given to the Bank of England to meet the deficiency that would thus arise by issuing an additional number of notes on securities equivalent to two-thirds of the paper, which according to the hypothesis that he had stated would have been put out of circulation, either by a country bank choosing to give up its issue or by any hank failing or ceasing its circulation. Thus, if a bank of issue or a number of banks of issue, whose circulation amounted to 300,000l., should withdraw their issue either by failing or by a junction with the Bank of England, it was in that case intended that the Bank of England should, with the consent of the Queen in Council, be authorized to issue on securities two-thirds of the notes thus withdrawn, and the remaining third could, of course, be supplied on the deposit of bullion if the Bank were called on for the purpose. He next came to the proposition on which the Bank was to be allowed to issue notes on silver. That proposition was this — gold being retained as the standard, which it was quite necessary should be the case, the Bank were to be at liberty, when they had silver bullion in their coffers, to issue notes on the security of that silver to the amount of one-fourth of the whole issue that they were to be at liberty to make on bullion. For instance, if they had 8,000,000l. of bullion, partly in silver and partly in gold, they might issue 2,000,000l. of notes out of it on the security of their silver bullion, and the remainder on the security of their gold 710 bullion. He did not know whether it was necessary to trouble their Lordships on the subject of the increased security which the proposed alterations would give to the public. Nor was it to be lost sight of altogether that they would gain an annual, sum of 60,000l., which was to be allowed to them by the Bank of England in return for the increased privileges which they would give them. Though the Bank would derive advantages, still he thought the bargain that had been entered into with them one that was extremely favourable to the public. He considered that the Bank of England had, on the whole, acted with the greatest fairness, for, though it was true they would by the new measure obtain advantages and privileges, still he had enough to do during his public life with large bodies to know that where their interests were concerned, it was not at all times that liberality was to be found among them, or appeared to be the guiding principle of their actions. Then with respect to the country banks, it was proposed to fix a limitation to the issue of those banks whether they came under the head of joint-stock banks or banks whose proprietors did not exceed six, and it was also intended not to admit any new bank of that description to the privilege of issuing paper. It would, no doubt, according to strict theory, seem to follow from the principle which he had been endeavouring to explain to their Lordships, that no issue should be allowed to country banks. But it would be a great impolicy and injustice to the banks already existing to follow up that principle too rigidly; for there was no doubt that those country banks had contributed very much to promote the industry and prosperity of the country. Whatever might be the disastrous effects of certain imprudences, to use the mildest term, that some of them might have fallen into in some parts of the country, it was but justice to the country bankers generally to state that they had contributed much to the prosperity of the country, and he thought it would be, therefore, unwise, and unjust to deprive them of the privilege which they now had of issuing notes. But still it would have been inconsistent with the principle of the present measure and would have defeated its object, if that privilege was to be in no way circumscribed. The only mode in which it could be circumscribed was to limit the amount that they were hereafter to issue, that limitation to be fixed by 711 certain averages taken from antecedent issues. The first proposition of the Government was to have taken the average of the last two years; but great objections were made to that course, which objections would also exist against any longer period. Under all the circumstances of the case, it was therefore decided to take the average of the last three years, immediately prior to the introduction of the measure before Parliament, and he believed this limitation would be found just and reasonable, and to answer all the purposes intended. The paper that it was likely would be in circulation under the new system, would be about 8,500,000l., and the average of three years would leave it at 8,785,000l., which would be divided among about seventy country banks. It was also proposed that the average of the returns from the Bank should be taken once every month. He believed that he had thus, without troubling their Lordships with any long dissertation on the question, stated the general principles and provisions of the Bill. The Government had been anxious to introduce as few novelties as possible into it. Various suggestions might be made such as shutting out silver, or not adopting gold as the standard; but he did not think it would be at all expedient to introduce novelties without any absolute necessity existing for them. The more he reflected on the matter the more convinced was he that all that was wanted by legislative enactment was to give full and beneficial effect to the Act of 1819. It was to establish the security which that Act was intended to bring about, and which, he trusted, would yet be fully established, that the present measure was introduced by Her Majesty's Government, and he hoped their Lordships would therefore allow it go into Committee.
§ The question having been put,
§ Lord Monteagle
I trust that my noble Friend, who has moved the commitment of this most important Bill, will not imagine that, in rising to follow him in debate, it is my intention to oppose the measure. So far is this from being the case, that I feel great, satisfaction in admitting that the Bill is founded on principles which, at an early period of the present Session, I ventured to recommend to your Lordships' most serious attention. So long back as the 6th February last, [Hansard's Debates, vol. lxxii. p. 270], I pointed out the distinction between the trade of banking, and the privilege of issuing paper money, as well as the mischievous consequences which would not 712 fail to arise from the unlimited competition of numerous banks of issue. In making those observations I do not, however, claim any credit to myself, as I did little more than repeat and recommend principles and opinions originating with some of the wisest and most experienced persons who had ever turned their attention to the great question of currency. I thus begin by a sincere and hearty admission of the obligations due to Her Majesty's Government for having introduced the present Bill. They deserve infinite credit for the manner in which they have dealt with the question. It required no small courage to grapple with the whole subject of our currency, including the privileges of the Bank of England, proceedings of the Joint Stock Banks, and of the private banking establishments. But that which is at the least quite as admirable, is the skill and adroitness with which the Government have treated and have conciliated those various and somewhat conflicting interests. By offering concessions to one class, and making satisfactory arrangements with another, any very inconvenient disturbance of the present system has been prevented, whilst at the same time the Government have avoided any material deviation from the general principles on which their measure is based. It was owing to this most useful and prudent conduct, that a measure of unexampled magnitude and importance had been permitted to pass through Parliament with less of opposition than had ever before been known in the history of this branch of our legislation; a circumstance not only highly creditable to the Government, but likely to be conducive to the beneficial working of the system. I therefore cannot approach the subject without offering my thanks to the Government for the measure taken as a whole. At the same time I think that justice requires that some grateful acknowledgment should be made to those eminent men from whom the measure first emanated, or who at least have established those principles on which the Government have founded their Bill. I am unwilling to detain the House by a reference to their printed works, but I may at least refer to the valuable evidence given by them before Committees of the other House of Parliament. The House will already have perceived that I allude mainly to Mr. Jones Loyd and Mr. George Norman, whose sound practical knowledge, resting on scientific doctrines, tested by experience, and communicated to Parliament and to the world, prepared the 713 way for the introduction and for the success of the Bill of Her Majesty's Government. I am convinced that the noble Earl who has preceded me, will admit candidly that unless the public mind had been so prepared, the Government would not have succeeded in passing this important Bill with so little opposition, indeed, I may add, with so little even of adverse discussion. After this full and unqualified approval of the general principles of the Bill, given in all frankness and sincerity, I trust I may be allowed, without any appearance of discourtesy to comment on certain parts of the measure, in which I do not so entirely concur; but which, on the contrary, I view with some degree of doubt and apprehension. But before I do so, I must be permitted to deal with some general principles on which my noble Friend has not thought it expedient to dwell. This Bill has been justly called a complement to the Act of 1819. This description was a just one, but it leads us back necessarily to the consideration of that Bill, which bears the name of the present first Minister. If the present measure can justly be called the complement of the Act of 1819, it deserves our support, or should meet our opposition in proportion to our approval or disapproval of that Act. On this ground there are persons to be found, though I hope the class is not a very numerous one, who consider that we are now passing a measure likely to be productive of evil to the country, because it is a complement to Peel's Bill. It would be unnecessary as well as presumptuous on my part, it would be tedious to your Lordships, if I were now to go into any lengthened discussion or minute analysis of the Bill of 1819. But, surely at this time there cannot, or at least there ought not, be found many sane individuals, who can hesitate in declaring, that after an experience of the events which passed between 1797 and 1819, and a review of the vicissitudes and changes in the value of money which continued to the restoration of cash payments, it was the absolute duty of the Legislature to revert to a fixed standard. If the restoration of a metallic standard had not taken place at that time, it would have involved a sacrifice of duty and of all the permanent interests of the community. But it is said, "Ay, we admit that it was right to revert to a fixed standard, but we deny that it was right to rerert to the standard of gold at3l. 17s. 10½d. In so doing you have committed a grievous wrong, more especially in compelling the 714 people of England to pay in gold debts contracted in depreciated paper." Persons who were pleased to argue in this plausible but most fallacious manner, were willing to forget that although our public debt had been contracted in depreciated paper, they were contracted on the solemn contract and engagement that those debts should be paid in the coin of the realm, or in convertible paper, when on the conclusion of the war the time of cash payments and of renewed public credit should again arrive. This obligation, which existed by law, settled the question of what was the standard, which in honesty and fair dealing we were bound to adopt. At the same time there is no doubt but that the effect of this alteration was greatly under-estimated, even by some of the most eminent men who took part in the discussion, and that the differences which existed at the time between the mint and market price of gold were not the most accurate criterion of the change produced. My noble Friend (Lord Ripon) must recollect that discussion well, but if it had been as fully admitted as it was stoutly denied, and controverted even by so great an authority as my late and excellent friend, Mr. Ricardo, that the restoration of cash payments must greatly enhance the burthen of all fixed charges, it was not on that account, the less our duty to submit to this change. Before I quit this part of the subject, I must be permitted to deal with the argument, of the class of persons who object to the restoration of the current standard, on the ground that it had produced a severe pressure on the interests of the labouring and productive classes, and who suggested that those classes had largely benefitted, and would again benefit, by issues of inconvertible paper. I contend, on the contrary, that no class suffers so much from a continual and augmenting depreciation as those who are dependent on wages for their support. With increased issues came increased prices; increased wages might ultimately follow, "sad longo intervallo;" wages if they rose at all would be the last to rise; and if the population WHS augmenting in a greater degree than the demand for labour, even the ultimate and tardy increase of wages would be altogether prevented. But, in the meanwhile, the labourer would find his real wages diminished; he would find that he daily had a command over a lesser quantity of the comforts and necessaries of life. His rent would rise, his taxes and his bread. It would follow, therefore, that whilst a depreciating 715 currency produced evils to every class, except debtors, the evil resulting to the labouring class would be greater than that affecting all others. Every attempt, therefore, to produce dissatisfaction against the present Bill, by connecting it with the Act of 1819, and falsely attributing to the latter consequences injurious to the labouring classes, was founded upon a gross misrepresentation, or at least a misconception of all the principles which regulated either currency or wages. In looking back at former proceedings in Parliament, it was most gratifying to perceive the progress of knowledge on these subjects. But at the same time our experience should prevent us from dogmatizing respecting the probable consequences of any experimental measure. We are enabled to escape from the errors committed by our predecessors; but we cannot be confident but that we may commit errors of our own. I need scarcely go back to the time when the House of Commons voted that a one-pound note and a shilling were equal to a guinea, in opposition to the undeniable fact, that guineas were then selling for twenty-six or twenty-seven shillings. But even the assertions most confidently made in subsequent times had subsequently been refuted, and past experience proved that the remedies considered as specific could no longer be exclusively relied on. In 1819 as in 1810, the doctrine was, that the convertibility of paper money into gold was in itself a full and adequate corrective. This doctrine was now modified, and it was shown that though convertibility afforded an ultimate check it neither acted with the promptitude that was required, nor in the steady and gradual manner which the interests of credit and of commerce demanded. This was conceded in the discussions of 1832. At that period a new rule was adopted by the Bank of England, and was countenanced by the highest authority. I allude to what is commonly called Mr. Horsly Palmer's rule, It was contended that all future difficulties would be prevented, by maintaining a fixed amount of securities. From 1832, however, it would appear that this rule was not adhered to, and it was not even contended, that if adhered to it would have been effective. To justify the deviations most minute and somewhat metaphysical, distinctions were arbitrarily drawn, and deposits, securities, and circulation were defined and defined over again, even classed as active and passive, as public and private, until the account of assets and liabilities were rendered 716 almost unintelligible as well as useless. It could not be said that during these years the management of affairs by the Bank of England had been very uniformly such as to advance the interests of the public or of the commercial classes. We are now called on to adopt a new system, on which we are encouraged confidently to rely. I am prepared to adopt it; I think the evidence in its favour strongly preponderates; but I think we are bound nevertheless to consider it in the light of an experiment rather than of a demonstration. If it does not altogether avert these calamities which we have had to deplore, I shall think this result no sufficient proof of failure. This country, from its peculiar circumstances, from its wide spread commerce, its enormous power of manufacturing production, from its dependency on foreign markets, must be exposed to casualties and vicissitudes under any possible system of banking and of currency. These must still exist with the present Bill. I therefore think my noble Friend (Lord Ripon) is over sanguine, in representing his Bill as laying the foundation of a system perfectly secure and satisfactory. If there were no paper currency at all, the fluctuations of trade, the alternations of high prices and low prices, to say nothing of the yet more fearful contrasts of peace and war, must always render our monetary affairs in some degree uncertain. So far as a fixed metallic standard goes, so far as it is connected with a well regulated and convertible paper currency, few countries could stand in a better position than France. The Bank of France preserves unshaken credit, and the command of bullion to an extent almost unprecedented, compared with the liabilities of that establishment its resources are prodigious. This has been proved in times of difficulty, when we have seen the Bank of France not only supporting its own credit, but assisting England likewise, which for a moment was seen to rest upon the aid of foreigners. Yet notwithstanding all this, France had not escaped her trials and her difficulties. Believing, therefore, that after the passing of the Act now under discussion, we may come to our time of difficulty and of domestic calamity, I do not on this account feel less prepared to give my support to the Government Bill. On this ground I must protest against the doctrine and the hypothesis that we should deduce from a recurrence of commercial distress the failure of the present experiment. This argument may require some further elucidation. Can 717 it be denied that an increase of the quantity of money in circulation, whether it be gold or paper, has a tendency to enhance prices? or that prices will sink as the amount of money is decreased? If this elementary principle is controverted, I know not how we can reason on circulation at all. If the gold or silver specie of any particular states be doubled in amount, a greater quantity of money will be given for the same quantity of produce—in other words, prices must increase, and export will become less profitable; specie or bullion will be exported, and this must continue until the value of the specie or bullion will be raised and equalized with that of other countries. The exchanges will be affected till the distribution of the precious metals is generally equalized. Two theories are now maintained, and each on very high authority. The first, that nothing could be considered as currency but specie and promissory notes payable on demand. The second, that not only were specie and convertible bank notes so to be considered, but likewise bankers' cheques, deposits, bills of exchange, and every other species of circulating credit. The amount of the latter descriptions of credit was so enormous in a country like this, that the bank notes and specie appeared to be in comparison but an evanescent quantity, so insignificant as to require no legislative regulation whatever. Each of these theories appears to me far too exclusive. No one can deny but that notes and specie are currency, but I contend that all other description of securities by which payments can be effected are currency likewise, acting on prices, and working on the exchanges, though each according to its nature and quality in a different degree. I cannot but admit that, if by law we limit notes and specie, we create a void which other securities will have a tendency to supply; but, because we cannot interfere directly with other forms of credit, it does not follow that we are not to apply regulations where we can, as in the case of specie and bank notes. The late William Cobbett, whose illustrations were often of the happiest kind, and whose style was more pure, and more truly English than his principles, was accustomed to say that the one pound notes were the legs on which ten pound notes walked, and in like manner I am inclined to think that an excess of bank notes and of specie have a tendency to influence all other species of commercial credit, and that a diminution of this primary branch of currency will ultimately 718 place a limit on the rest. Yet it does not follow that this action will either be strictly proportionate or immediate. In the present Bill it was assumed that currency consisted of bank notes and specie only. I doubt the propriety or correctness of this definition. I believe that there is much besides convertible promissory notes and metallic coins which act on prices and on the foreign exchanges. I believe that bills of exchange, bankers' cheques, and every ingenious contrivance which the progress of commercial society adopts for encouraging currency, produce similar effects though not in the same degree. They are similar though not identical. An Italian economist of eminence had compared currency to the doctrine of momentum in mechanics; we are bound to consider not only its quantity or weight, but its velocity likewise. A smaller amount of money circulating rapidly, may produce a greater effect than a more considerable amount circulating slowly. These distinctions have been overlooked by the Government, and no inconsiderable errors appear to me to be the consequence. But without going into these broader distinctions, I am at a loss to conceive what difference my noble Friend (Lord Ripon) can find between a promissory note for 10l. payable on demand, and a bank post bill for 10l. accepted, made payable to Coutts and Co., and bearing the endorsement of that great banking house. On what principle can it be stated that the latter of these securities differs from the former? I feel much anxiety on this subject, for if these two classes of securities are as I contend, identical, and yet that the issue of bank post bills are left wholly unrestricted, the very principle of the Bill might be rendered nugatory. The proposed limitation of issue would thus be of no effect. In many parts of the country a great proportion of payments were made through the medium of the instruments I have described. In Ireland the post bills of the bank of Ireland had at times contributed, I believe, one-third of the circulation of that establishment. What happened in Ireland might surely occur elsewhere, and if it did, what became of the restrictions of the present Bill. To me the great merit of the present measure is to be found in its approximation to the establishment of one single issuing bank. So long as a multitude of issuing banks exist, in various and distant parts of the country acting simultaneously, the first efforts at restriction by the Bank of England whether by raising 719 the rate of discount or by restricting issues,. gave necessarily to money a higher value. This acts upon competing banks for a time at least, as an inducement to extend their issues, and their banking profits will extend in proportion. This action, counteracting and neutralizing the precautionary measures will continue till the country banks find a difficulty in negotiating or re-discounting their bills, and feel the check which acts the more violently in proportion as it has been long delayed. I am far from suggesting that the Bank of England has not been to blame in this respect also; indeed it has at times been to the full as culpable as the country banks. At times its discounts have increased just at the same time and almost in the same ratio that its bullion has diminished. On the 1st January, 1839, the amount of bullion in the Bank was 8,300,000l.; on the same day, in 1840, it had fallen to 4,200,000l. On the 1st January, 1839, the amount of discounts was 3,100,000l.; at the corresponding date in 1840, when the bullion had decreased one-half, the discounts had increased from 3,100,000l. to 6,200,000l. Mr. Horsly Palmer admitted in his evidence, that it was precisely when the amount of bullion was reduced that the money market made the greatest demands upon the Bank. Now in future these operations must not only be checked, but a contrary action will be enforced. The object and tendency of the whole Bill is to establish in the country, and ultimately for the whole country, one single issuing Bank. But how is it proposed that this should be effected? Not simply and directly by confiding this mighty prerogative to one great body undisturbed by conflicting functions; but by separating the Bank of England into two departments, the distinct and independent agency of each of which must be assumed; the department of issue, and the banking department. I cannot say that this appears to me very satisfactory. It was no more than a declaration that one specified duty should be performed to the right of the Woolsack, and another to the left. I fear that contingencies may arise in which the separation of a wooden partition may be found but delusive. In these observations I am far from suggesting that any power of regulating the circulation should be assumed by the Government, or entrusted to them. On the contrary. In times of pressure a Government, and especially a Parliamentary Government, and therefore open to Parliamentary influence, could not undertake such duties safely or 720 with any advantage to the public. Whilst filling the office of Chancellor of the Exchequer under circumstances of commercial difficulty, I have frequently felt the danger I have alluded to, and from which I was only enabled to protect myself by stating frankly and decidedly to applicants for assistance or relief, that the Bank of England was wholly independent of the Government, and that the Treasury had no right to interfere in their operations. Your Lordships will, I am convinced, agree with me, that if the Government possessed any power of direction or control over the issues of the Bank, it would be vain to expect that the strict regulations of prudence should be adhered to. A plausible case would be made to justify every popular exception. I am aware that some safeguards against abuse are to be found in the present Bill. The more extended and more immediate publicity prescribed in respect to the Bank Returns, will in this respect act beneficially, and the extension of the country business of the Bank of England will do so likewise. The returns required from local bankers will also act as a corrective, not that we have any reason to place unlimited confidence in the effect of the publication of issues taken separately, because such publications on the part of the Bank have taken place even during the widest departure from the rules laid down for its management. The Bill was founded on the admission of the expediency of separating altogether the functions of issue from those of banking, but why was not the separation more complete? The public cannot be too strongly impressed with the important truth that the free trade of banking should not be combined with an equally unrestricted power of issuing money. I have not heard on what principle it was assumed that the sum of 15,000,000l. neither more nor less was the exact amount which it was expedient to fix for the issues on securities. It seemed an amount arbitrarily fixed. If to be hereafter varied, I should like to know on what data or by what authority such variations should be made? Are we prepared to adhere permanently to that principle? I apprehend we cannot. If a fixed amount had been determined upon in 1793, would that have been applicable to the present times. Can we then confidently legislate in this respect for the future. But on this account, I cannot but fear some difficulty and danger from the attempt permanently to fix a limit for this class of 721 issues which it will be unlawful to exceed. I cannot contemplate the propriety of giving to the Government any authority in this respect. I adopt the views of the noble Earl in respect to the expediency—indeed, I should say, the absolute necessity of making the Bank independent of the Government. But whilst opposed to sanctioning any interference on the part of Ministers, it was questionable whether it was prudent wholly to limit the discretion and diminish the power of the Bank itself. No Minister should have the authority of increasing or lessening arbitrarily, and therefore altering the value of that which formed the measure of the poor man's wages and the rich man's property. But it appears to me, that a still more dangerous consequence may flow from the inflexible rule which renders the issues of paper above the 14,000,000l. invariably dependent on the receipts or payments of bullion. The Bill appears to me to be admirably well adapted to meet the case of a demand for bullion produced by an adverse foreign exchange. This is however the only case contemplated or provided for Unhappily, it is not the only case which may occur. The framers of the Bill have not thought it necessary to provide for the possibility of the diminution of the bullion in the Bank as arising from an internal drain for gold. The remedy applicable to remedy an adverse foreign exchange, is not only inappropriate to the case of internal drain; but it will greatly aggravate the evil. Where the drain proceeds from the foreign exchanges, it proves that the circulation is in excess; the remedy is therefore a diminution of its amount. An internal drain may arise from commercial discredit, from a panic, from political movement; these perils and calamities may or rather must be aggravated by a forced diminution of circulating paper, necessarily proportional to the amount of bullion or specie withdrawn. I must call your Lordships' attention on this momentous view of the question to the following extract from Mr. Huskisson's Pamphlet on Depreciation, which expresses in language more clear and precise, and with an authority much higher than mine, the argument I have endeavoured to urge. Describing the case of an internal drain, Mr. Huskisson observes:—Cash is withdrawn, not because the circulation is excessive, but by the country hanks and town bankers, for the purpose of meeting possible demands upon them, and by the community at large, either directly from the 722 Bank or indirectly through the former channels for the purposes of hoarding, from the dread of some imaginary or contingent danger. In such a crisis every reduction in the amount of bank paper is so far from checking the drain, that it aggravates the general distress; because the gold which is taken out of the Bank instead of being subsituted for the notes withdrawn from it, is for the most part locked up, and thus in proportion to the stagnant and straightened circulation, wants life and aid, it becomes every day more embarrassed, whilst each new calamity produced by such a state of things, contributes to spread and increase the general apprehension. It is therefore manifest, that by a possible combination of things the Bank might be driven to part with its last guinea, not only without having checked the drain, but with the certainty of increasing it in proportion as their notes were diminished.I pray your Lordships to weigh well these words, and to consider what would be the operation of the present Bill in the case supposed. Under the new law, notes would be withdrawn and their re-issue prohibited; must not this increase the discredit and the alarm, and end by draining the Bank of its last guinea? Such were the apprehensions of Mr. Huskisson, and who can doubt that the present Bill will act most dangerously on the state of things which he describes. Before proceeding to another topic, I must be permitted to call your Lordships' attention to the greatly increased danger which may arise in an internal drain of gold in consequence of the immense extension of the Savings Banks in this country. No one could contemplate the liability which the public incurred under this head without perceiving to what extent it might act in case of an internal drain for gold, and a restricted power of issue imposed by law on the Bank of England. Of the effect of this, Mr. Huskisson was fully aware. Besides, might not other causes be greatly aggravated if we were visited with one or two successive bad harvests. It must be obvious to all men, how intimately bound up was the question of currency with our Corn Laws, and bearing that circumstance in mind, I ask, where is the man who can feel confident of the working of this Bill when it becomes a law, if a sudden demand for gold should arise, during a period of restricted circulation? After the best reflection I can bestow on the subject, I feel persuaded that the Bill before your Lordships and the present Corn Laws, cannot permanently co-exist. The question thus becomes doubly serious. I rejoice to see the provision introduced by which issues to a certain extent 723 are allowed to be made on silver as well as on gold. It is the recognition of a most important principle, and I do not dislike it the more, if it should lead to the consideration of the policy of reverting to the ancient policy of England, departed from on grounds not very intelligible or defensible, and in again using both metals as a due satisfaction of debts and engagements. This question had frequently been mooted but of late it had been confounded altogether with the theory of those who contended for the adoption of our present coined silver as a standard of value. This was the principle of the "little shilling" gentry: and amounted to a payment of debts in a currency of counters, or of shillings coined sixty-six to the pound weight. My suggestion is of a very different kind; the payment of debt in silver of a given fineness taken by weight was the old law of England, and ought not to be confounded with the dishonest attempt to pay our debts in a less valuable currency than that in which we had contracted them. In support of these views, I must be permitted to remind the House of the evidence given in 1828 by my noble Friend Lord Ashburton, when examined before the Privy Council, at the desire, I believe, of Mr. Huskisson. In that important evidence my noble Friend stated, that "If we went to war, two years would not elapse without such a crisis as that which had occurred in 1797," and when your Lordships take into account the great knowledge and experience of my noble Friend, you must feel that his is no common authority. In addressing these arguments to your Lordships, I beg it to be understood that I do so in no spirit unfriendly to the measure before us; but I feel it a duty to impress upon the House the grave and serious nature of the question with which we are dealing. I do not propose any amendments, but I wish to bespeak for the measure the most attentive and dispassionate consideration. I am the more strongly impelled to do so from a conviction that the proposed separation between the two functions of the Bank of England, whilst both are under the management of the same authority must prove fallacious and delusive. On the subject of the relative value of gold and silver, as facilitating payments in one metal rather than another, parties were not quite agreed; Some contended that the quantity of gold was largely and progressively increasing, more especially in Russia. A contrary doctrine had been urged by some in respect 724 to silver: all these were undoubtedly important considerations for deliberate enquiry. Of course the Government on the part of the public were bound to make the best bargain in their power with the Bank, if their negotiations with so important a corporate body could justly be termed bargain-making. I regret that in this Bill there should be contained any provision which gave the Government any possible participation in the profits of the Bank, and seemed to establish a species of joint-stock partnership between them. Such an arrangement is objectionable in principle, and in the present instance it is wholly unnecessary; the Bill provides that, if under certain specified contingencies, the Bank shall extend its issues on securities beyond the fixed sum of 14,000,000l., the net profit of such circulation shall accrue to the Government. This Clause was only justifiable on the supposition that a certain degree of apprehension was felt lest, the Bank for the sake of profit should enlarge its issues, when for the public interest it was bound not to do so. It is on this score that it is proposed to confer on the Government a power of restraining the Bank; but that power of restraint being given, one thing was clear, that if the restraint were properly exercised, any limitations on the Bank profits were unnecessary. The one check or the other might be required, but both could not be demanded. Under any possible circumstance I think it indefensible that the Government should go shares with the Bank in any portion of its profits. I have endeavoured to discuss this question free from all party bias; indeed there are some with whom I politically agree, who may not concur with me this night, whilst I give my humble support to a Government with whom I generally differ. The strongest objections against the Bill are raised, not by us of the Opposition, but by some of the more extreme members of the Tory party: for instance, I have this morning received a printed paper, issued by an Association calling itself the Society for the Emancipation of British Industry, which declares violent war against the Bill. This paper is authenticated by the signature of a respectable Tory gentleman, the Queen's printer, (Mr. Spottiswood) who is now engaged in more harmless, though not more rational pursuits, than when engaged in the more ambitious pursuits of contesting Irish seats, and ousting Irish liberal Members. The arguments advanced by this new school of economical science, though 725 novel, are so preposterous that I should only waste your Lordships' time and that of the public by alluding to them at any length. For the purpose of ensuring a fixed standard, it is presumed that Society recommended that all paper money should be convertible into gold or silver, valued according to the market price of the day. The effect of this, which would inevitably lead to progressive depreciation, was fancifully termed "the just action of a symbolical currency." This was not a very clear or definite expression; when the labouring man felt a fall in his real wages—when his earnings gave him day by day a lessened command over the comforts and necessaries of life, it would not be more satisfactory to him than it would be intelligible, to be assured that all this was nothing more than the "just action of a symbolical currency." I have now but to thank your Lordships for the patient condescension with which you have listened to my argument. I should not have done so at such length, but that I hold it the duty of one, who like myself has filled high office under the Crown, and who still continues in the public service, to tender to that public the results of the experience he may have gained, though conscious that in doing so he may only display his own incompetence.
§ Lord Ashburton
said, that the same sense of duty, arising out of a long course of public life passed in the other House of Parliament, during which he had mingled in discussions connected with the laws relating to Circulation, Currency, and Banking, imposed on him the same necessity as that which had prompted the noble Lord who had just sat down, of troubling their Lordships with some observations on this subject, but he should do so at less length in consequence of the very able speech of his noble Friend who had entered on the question so much more ably than he could pretend to do, that it would be quite unjustifiable in him to enter on any repetition of what he might call the general principles of this question. Now, first, it occurred to him that this measure was not brought before Parliament and the country as a simple question of the renewal of the Bank Charter, but it was evidently intended to be considered as laying down general principles of Banking on this occasion distinguished from those on which the country had hitherto acted. The noble Earl (the Earl of Ripon) had expatiated on the great advance we had made at the present 726 day in the knowledge and science of currency as compared with past times, and as compared with the days in which his old friend Mr. Jeremiah Barman directed the affairs of the Bank of England; yet he (Lord Ashburton) must remind his noble Friend that at the close of his speech he completely upset the claim he thus made to superior enlightenment in the present times by his admission of great doubts, whether that limitation of the circulation of banknotes corresponding to the amount of bullion which the Bill enacted could be accomplished in all circumstances. His noble Friend said, that it was an experiment that might prove fallacious. When, therefore, his noble Friend admitted these doubts, he surely upset a little his eulogium of the improved intelligence of the world as to banking affairs. His noble Friend who had just sat down had stated, that no man who was able to form an opinion on these questions—and he (Lord Ashburton) also held that no honest man, could entertain any notion that any benefit could accrue to the country either from cheating the public creditor or by means of measures passed in Parliament, letting debtors generally cheat their private creditors, but that the principles of honesty and morality were those with which the best interests of the country were bound up, and without which no expedient could ever be made valuable; but, setting aside for the moment those considerations, it was quite clear to his mind as was stated by his noble Friend opposite (Lord Monteagle) that no benefit to the country could be expected from any debasement of the standard of value, but on the contrary, much mischief would undoubtedly arise from any uncertainty or variation in such a matter. He should like to be able, if it were within his competence, to induce their Lordships, and, he might say, the country, to consider maturely this question of the standard of value. In talking of the folly of past times on such subjects, his noble Friend naturally called to their Lordships' recollection the year 1810, when Parliament stultified itself by a vote that two things were of equal value, which at the very door of the House of Commons they might have found not to be so; but if those persons who carried that vote—he (Lord Ashburton) was not one of them, for he voted against the proposition—were out in their calculations, he held that his late Friend Mr. Horner, and those who took his view, were not less so, if they supposed it possible 727 that in the midst of a great and frightful war the country could have returned to specie payments; for their proposition, he believed, was not to wait till the end of the war, but to oblige the Bank to return immediately to cash payments. Now, any person who had become acquainted with the difficulties that arose after the termination of the war in returning to a metallic standard might easily conceive what the difficulties would have been, taking such a step when the war was going on. In truth, this very science of circulation, and banking and debt, which seemed to some persons so simple and which every man look upon himself to dogmatize upon, as if his opinion must be true, and all the rest of the world were fools and idiots, turned out in reality to be surrounded with difficulties. It was a subject on which though practical men sometimes fell into error, those who took their opinions entirely from theories and abstract reasoning were much oftener and more grievously wrong. With respect to the measure now under discussion, he did not look forward to its operations with the same confidence that many persons out of doors seemed to do. He had the greatest respect for Mr. Loyd, to whom his noble Friend (the Earl of Ripon) seemed to cling so much; with Mr. Loyd's acquaintance with the practical working of the banking system, and his abilities, it was impossible that his opinion could be despised; but he had also a very high respect for his old friend Jeremiah Harman, and he had his doubts whether all this new wisdom could be implicitly relied on. His noble Friend who spoke last said, that at the end of the last war many persons doubted whether the honest way was to return to the ancient standard, or whether some allowance ought not to be made for the difference in the value of money from what it was when the debts then due were contracted. He (Lord Ashburton) had felt that doubt himself; many persons he was acquainted with had the same doubts, but they were very unwilling to open the door to let what his noble Friend called the little shilling people come in and perpetrate some monstrous enormity or other. He had always thought it a very difficult question, and if the war had not ended when it did, by means of the victories by which the noble Duke had secured the liberties of Europe and restored peace to the world—if it had continued two years longer, in the then state of our debt, he thought the depreciation would have become such that it would not have been 728 honest, equitable, or possible, to return to a metallic standard, Now, what was the ancient standard? To find this he went back to the period before the standard was tampered with by the suspension of cash payments in 1797, from which period till the restoration of a metallic currency by Mr. Peel's Bill, the whole was a mass of perfect confusion. What was the standard in 1797? If he had owed his noble Friend 100l. at that time, he should have had a right to pay him either in gold or silver, at the rate for the one of 3l. 17s. 7½d. an ounce, for the other of 62s. the pound weight. That was the ancient standard; in fact, it had been the standard from a time "whereof the memory of man runneth not to the contrary;" but, setting aside all older times, he said that the law at the period of 1797 was, that any man might take either silver or gold to the Mint to be coined, and might pay his creditor either in the one or the other, as he liked. [The Duke of Wellington: Only to a certain amount in silver.] That was usually supposed to be the case; but he was just coming to that point when the noble Duke spoke, and was about to show that it was not so. His noble Friend (the Earl of Ripon) had stated to the House that in this measure he was only going back to the ancient standard; that would be a very strong case to make out, if it could be made out; but was it so? His noble Friend said that by the Act of 1774 no contract could be legally discharged in silver for any sum beyond 25l. He (Lord Ashburton) was not surprised that in the multiplicity of business which his noble Friend had to dispose of, he should not have had time to refer to the Act of Parliament; he (Lord Ashburton) having little to do, had looked into the Act, and found that the effect of it had been entirely misstated. The enactment of 1774 was,And be it further enacted, that no tender in the payment of money made in the silver coin of this realm of any sum exceeding the sum of 25l. at any one time shall be reputed in law or allowed to be a legal tender within Great Britain or Ireland for more than according to its value by weight, after the rate of 5s. 2d. for each ounce of standard silver.That was the standard rate of silver. At that period, therefore, when it seemed to have been thought that the right of paying in specie stopped, it did not stop in reality; the effect of the Act was only to apply to the silver coinage what was already the law with respect to the gold 729 coinage, and payments could be made in silver to any amount provided it were of the requisite weight and fineness, exactly the same as was the case in gold coin, which was not a legal tender unless it were of full weight; of which they had had a recent example in the difficulties caused by the proclamation against light sovereigns. That Act of 1774 was renewed in 1776; and again, if he was not mistaken, in 1783. That year, he thought, was the last in which it was renewed, the matter was forgotten and lost sight of, and nothing was done on the subject until 1798; so that up to one year after the suspension of cash payments both gold and silver were legal tenders, and a debtor had the power of acquitting himself to his creditors in that metal which he could obtain the cheapest. In 1798 came the real prohibition of payments in silver. Whether gold or silver had then increased in relative value to one another was a question which his noble Friend had stated was not yet settled. If the noble Lord would attend to the wording of the Act of 1798, he would see an answer to that question which his noble Friend did not think quite solved. In 1798 the Earl of Liverpool recommended that the Mint should be stopped from issuing silver coin. The Act stated,That whereas His Majesty had appointed a Committee of his Privy Council to take into their consideration the state of the coins of the kingdom, and the present establishment and constitution of His Majesty's Mint; and as inconvenience may arise from the coinage of silver until such regulations shall be framed as shall appear necessary; and whereas from the present low price of silver bullion owing to temporary circumstances (this, by the by, was a mere conjecture of his own) a small quantity of silver bullion had been brought to the Mint, and as there is reason to suppose that a still further quantity will be brought,the Act then went on to say that the Mint shall no longer coin silver, and cited what was, in fact, the history of the whole case—namely, "whereas the two metals were a legal tender." Here, then, they had an Act of Parliament to stop the coinage of silver coin, because Lord Liverpool had reported to His Majesty that silver was an unfit standard of value. Why it was unfit he (Lord Ashburton) could never discover; the reason given by Lord Liverpool he was sure was unsatisfactory—that a rich country ought to have a rich standard of value. It might as well be said that a man of six feet high ought to be measured by a longer measure than other people. On 730 the other hand we had the opinion of Mr. Locke, for we had philosophers in those times who looked into these matters, Sir Isaac Newton among others, who spoke with less confidence, Newton in particular, than the authorities of the present day did; and Mr. Locke's remark was, "Gold is not the money of the world, as the measure of commerce, nor is it fit to be so." Now, he (Lord Ashburton) could not go so far as to say that gold was not fit to be the standard of value, but he could say that it was unfit to be the exclusive standard of value for one country, if all other countries adopted a different standard. If, then, they came to what had been called the restoration of the old standard, that standard was to be taken from before 1798—they could not take it from any other later period—it must be taken from a period antecedent to any tampering with the currency—that was to say, the suspension of cash payments, and Lord Liverpool's Act, which was after the suspension, and up to that time the debtor had a right to acquit himself to his creditor in one metal or the other, as he pleased. He was not disposed to depreciate the argument as to the possible equity of making some allowance for the altered condition of the currency; at all events, nobody would have thought of screwing; up the standard, and thus, make the debtor pay more than be had contracted to pay. But then he asserted that the debtor was entitled to acquit himself, according to the ancient standard, in either one metal or the other. Had they left him alone and passed no Act of Parliament, or merely said by one Act that the country should go back to the standard which then existed, the consequence would have been, that if he had owed his noble Friend 100l., and the debt had continued up to the present time, he would carry his money to the Mint, and might acquit his 100l. debt with 95l. 6s. 8d. according to present prices. If there were any case made out for standards of limitation on this subject of currency, they might as well go back to the Statute of Elizabeth as go back to the period of thirty years ago. On the subject of silver, he should state that there happened many crisis-times of great panic and difficulty, as in the years 1825 and 1826, which was commonly called the bubble year, which ended by almost a general failure. He had undoubtedly held communications with Lord Liverpool and Mr. Huskisson, two great authorities on this subject, and with the latter's opinions he very much 731 concurred. Mr. Huskisson was apprehensive that the country was involved in a very great difficulty from the inability of the Bank to right itself on every little change which drew its issues abroad, and the efforts that were resorted to to get back the gold from the Continent. He was impressed with the conviction that the difficulty was greatly increased by the inability of the Bank to issue more than one of the precious metals, and particularly in reference to that one which was the circulation of the rest of the world. It was quite clear that if they took a bill on Paris, Amsterdam, or any part of the world, they were quite sure of their silver; but when the Bank had obtained silver from abroad, it was obliged to go and purchase the gold. It appeared to Mr. Huskisson as to himself, that the disposition extremely to refine upon the question of the standard, as connected with a relation of the two metals to each other, did produce the greatest possible difference, and that which was most essential to be kept steady was the pound sterling; the Bank, throwing out its money loosely at one time, and drawing it in by jerks at another—discounting at 6 per cent, at one time, and 2½ per cent, at another, produced loss and injury to the country, and that it was absurd to be listening to philosophical arguments that there was occasionally a difference of 1 per cent, between the gold and silver. Mr. Huskisson was extremely intent upon the subject, and the consequence of that discussion with him was, that he (Lord Ashburton) was called upon to give the evidence before the Privy Council to which his noble Friend had alluded; but there were some inaccuracies in point of date and time, and there are observations, which, perhaps, if he were now to give similar evidence, he should put to the general argument of that agitation. The great outcry of the present day was against the Bank paper. The great object was, to take care that the paper should answer the purposes for which it was given—that there should be no suspension of that engagement. How had this system worked—practically operated—during the several crises which this country had undergone; he referred more particularly to those of 1825 and 1826, and 1837 and 1838, the latter in consequence of the derangement of affairs in America. In 1825 and 1826 the Bank was reduced to almost its last sovereign—there was just enough left to enable them to say, that they 732 did not refuse any payment, but they were looking to the clock to see if they could last out five minutes longer. This was not inaccurate, because Mr. Richards, the Deputy Governor of the Bank, stated to His Majesty's Government, that he thought they were likely to be run dry. When that state of things existed, the Bank had silver and was treating with the late Mr. Rothschild to be able to make their payments in gold, giving him in exchange the silver in the Bank; and it was stated in evidence before a Committee of the House of Commons by Mr. Ward, one of the Bank Directors, that he (Mr. Rothschild) made something like 100,000l. by his patriotic exertions in taking the Bank out of its difficulty. In the panic of 1837 and 1838, the Bank was saved from failing by the Bank of France. If, in two instances, in times of profound peace, those were difficulties, what might not be their difficulties if unfortunately there should be a run upon the Bank when this country might be at war? That consideration induced him to make use of the expression which had been read by his noble Friend, in which he said that he did not think two years of expensive war would be gone through without returning to the catastrophe of 1797. As to the principle established by this new Charter to the Bank he would only say a few words. He thought that separating the Bank into two departments was wholly useless; it was quite harmless, but it was a delusion which persons not acquainted with the practical conduct of the Bank might naturally fall into, because at present a certain distinction was in effect made between the issuing and banking departments, and, whether this Act passed or not, they would of necessity be kept distinct. As to the limitation of issues, which provided for the gradual stopping of the issues of all country banks, he would only say, that if it was a desirable thing, it was well and carefully and judiciously done, because they consulted the opinions of all the existing banks inasmuch as a monopoly had been given to them in every part of the country. Then there came the checks put upon the Bank of England. Undoubtedly the Bank of England had been at times a great offender in the indiscreet mode of managing its circulation, but at the same time he had with his noble Friend opposite, some apprehension that after all that was an experiment which in its working might not turn out as well as had been expected. The 733 limitation was, that they might issue to the amount of 14,000,000l. without the permission of anybody, and then they were to issue only to the amount of their specie—that being now about 16,000,000l.. Supposing that their specie came down so low as it was in 1825 or 1836 and 1837, when they had only 1,000,000l. they of course would then have 14,000,000l. of unlimited issue, and 1,000,000l. more for the amount of specie they had in hand. This would of course cause a great commotion in the country, and involve the country in much difficulty. His noble Friend had stated that the call upon the specie of the Bank arose from two circumstances, either a domestic panic, or a demand for exportation; with regard to the latter cause, the intended check upon the Bank might be found to operate, but in the other case it would not operate at all, because the distress at home obliged them sometimes to increase their issues, and the Bank might be drained without a sovereign going out of the country, as was the case in 1826. On the 17th of December 1825, the lowest return the Bank made was 426,000l. in silver, and 600,000l. in gold bullion. What was the state of their issue then? Though the Bank was running dry, the money was rather coming into the country than going out of it. The panic, however, was so great, and the difficulties of the country banks so general, that they had employed all the post chaises that were to be had for the conveyance of money from the Bank of England to the country banks. The issues of the Bank on the 17th December, 1825 amounted to 23,942,000l. which by the 31st December were further increased to 25,700,000l. The country banker could not possibly look to the foreign exchanges, for he must take into consideration the necessities of his own neighbourhood and a variety of other circumstances, and he could not, therefore, be that very wise man which the modern philosophers would wish him to be. Upon the whole, he thought the measure was a great experiment; his general opinion certainly was in favour of it, and he could only say that he hoped it would succeed.
The Earl of Radnor
said, that in the former part of his speech, in which the noble Lord who had just sat down, had laboured very much to show the propriety of not returning to the old standard at the time when cash payments were suspended in 1797, he certainly entirely agreed with 734 him. As to what the noble Lord had said of a joint standard of gold and silver, he did not agree with him, and he did not think that the noble Lord agreed with himself. If a man lent 100l. and knew, for instance, that there was a chance, he would be paid back in 96l. 10s., he would take care and indemnify himself by a larger interest, to cover himself from the chance of loss. His noble Friend had said, that in France gold and silver circulated together; but then he did not apprehend that there was a joint standard in France, the standard there was silver, for the fact of a person paying an agio on gold, showed that gold and silver did not circulate together. As to gold being the standard in this country, he had never heard a reason given for having a gold one, except this, that this being a rich country, they ought to have a rich standard. As to the Bill which was then before the House, it was said by the Government, that it was for the purpose of preventing the fluctuations to which they hitherto had been subjected; and they were also told, that it would limit the circulation of the country banks. It was evident that one great object of the Bill was to limit the circulation of paper. We had at present about 21,000,000l. in Bank of England paper, and 8,000,000l. in paper circulation of other descriptions, making in all a circulation of 29,000,000l. The Bill provided that the country circulation should not be increased, but that it might be absorbed by the Bank of England, and re-issued again to the extent of two-thirds, with the permission of the Privy Council. He thought this was a very unwise thing to do. It was his belief that the country, if left to itself, would naturally provide itself with the amount of circulation which it wanted, and with no more than that amount, so that it would be presumptuous—he did not mean to use the words in an offensive sense—in any one to pretend to limit the amount of circulation which it might be fit for the country to have. He thought, too, that there was a very unfounded alarm on this subject amongst the agriculturists, namely, that a decrease in the circulation would decrease the price of corn. Gross misconduct had been imputed to the country banks, and also to the Bank of Eng land, for the panics that had taken place, and the pressure that had at various times been felt; but it was his opinion that the great difficulty had arisen from another cause? perhaps he might be ridiculed for 735 saying so, as bearing upon that which was his hobby, the Corn Law; but this he maintained, that there could be no doubt that the corn trade, being a fluctuating one, had contributed much to the difficulties that had pressed upon them. The years 1825 and 1826 had been years of distress, caused by internal circumstances; but with a little management on the part of the Bank, matters soon rallied, and the difficulties were got over; but the great difficulties that had arisen always had arisen when there was a great exportation of coin for the purpose of purchasing corn. The doctrine was, that bullion was found to go out of the country when the exchanges were against us; but it had been shown that bullion went out of the country even when the exchanges were in our favour. Now, he believed what was proposed by the Bill was, that by lowering the price of goods, goods would be sent out of the country instead of coin. If they wanted silks or wines, or articles of luxury, the rise in the prices of these articles would check the demand; but was that the case with corn? No; for exactly as corn became dearer, the more necessity was there for it, and the greater the necessity, the more would they be obliged to send for gold. The noble Lord having referred to one of Mr. Jones Loyd's pamphlets on the Currency, proceeded to say, that the difficulties referred to in that pamphlet, arose from their maintenance of the Corn Law. This was shown by the pressure felt in 1839–40, when money was borrowed from the bank of France. But then when the demand for foreign corn ceased, the pressure and its difficulty ceased also. His noble Friend had said, that under any system of Corn Laws the same difficulties must have occurred. Perhaps they would under any system of Corn Laws, but then if they had no Corn Laws, if they had a regular trade in corn, if corn were like any other article coming to the market, then, instead of coin going out of the country, they would be sending goods; and during the last three years that the harvest failed, there had not been an exportation of gold, but the corn was paid for in goods. What had been the consequence? That the bullion had increased to an inconvenient quantity. He admitted that the Bill had been generally approved of, because it was supposed that it would obviate those difficulties he had referred to. He was afraid that that was a delusive opinion; he believed that the Bill would bring on a still greater crisis. It was introducing a 736 sliding-scale into the currency, as they had one in their corn; and the difficulties that had been felt would, he was sure, but be aggravated by the present measure. Nothing, he believed, would ever relieve them, so long as they had a Corn Law. It was his opinion that those who had attempted to manage the currency had much better have left it alone. They ought to let prudent men issue notes convertible into gold, to suit the demands of the country. They ought to have left men in this country to manage their own currency wisely, as well as they had in Scotland. He believed that the Scotch banks had given universal satisfaction. Feeling so strongly on this subject, as he did, he could not permit the Bill to go into Committee, and suppress his opinion respecting it.
§ Lord Ashburton
explained. With respect to the Corn Law, he said, there could be no doubt that the want of corn at particular times must have a considerable effect on the currency; but no state of law could prevent that, unless they could govern the seasons.
§ House in Committee, the different Clauses agreed to.
§ House adjourned.
§ The following Protest was entered on the Journals against the Bill.
- "1. Because this Bill, by unnecessary interference with the affairs both of the Bank of England and of the country banks, takes from those, who are most likely clearly to understand, and, if left uncontrolled, most able advantageously to direct, the management of their respective concerns, that freedom of action, by which both the interests of the parties themselves, and in the end those of the public, are best promoted; and in so far relieves them from the responsibility to which they ought to be subjected.
- "2. Because the provisions of this Bill are intended to supply the want of prudence and discretion in the persons directing these banking establishments—an object which can never be accomplished by general and legislative enactments; and because they thus hold out inducements, both to those persons themselves, and to the public in general, to rely for security against the ill consequences of such want of prudence and discretion—not on their own care and caution, or the known character and means of the parties—but on the provisions of the Legislature, which is wholly unfit and inadequate to afford it.
- "3. Because the commercial and financial difficulties, against the recurrence of which this Bill is meant to guard, have, in my opinion, not been generally owing either to mismanagement on the part of the banks, or to
737 the want of such prudence and discretion; and if the great financial crisis of 1825, and that of 1837, may both of them be in some measure traced to the assistance incautiously given to improvident speculations, it is not probable that the experience of those periods will have been so lost, as not, of itself, to have prevented the repetition of similar conduct. If, however, such should be the cast, I fear that this Bill, while it will entirely prevent the adoption of the measures which in 1825 (and, I believe, in 1837), restored confidence, and applied a speedy remedy to the difficulties of the times, will raise a much less effectual barrier against the operations out of which those difficulties arose.
- "4. Because in all the cases of long-continued commercial and financial difficulties, these are, in my opinion, clearly to be traced to the exportation of bullion for the purchase of corn, at the period of deficient harvests; and because, in the event of the recurrence of a similar demand for foreign supply, the provisions of this Bill will not only not do anything to remedy the evil, but, by compelling a continued and constant contraction of the currency, tend very much to accelerate its progress and aggravate its effects.
- "5. Because, in every case, when in consequence of the diminution of the bullion in the Bank of England, an inconvenient contraction of the currency may, under the provisions of this Bill, take place, that inconvenience will be further augmented by the withdrawal of the deposits in the Bank, which the evident interest of the depositors will occasion; and thus, cause and effect acting and re-acting on each other, the entire exhaustion of the bullion of the Bank, and the ruin of the establishment may be apprehended.
- "6. Because the amount of the currency required by the wants of the country varies from time to time, and is influenced by a multitude of circumstances quite out of the reach of human controul or of possible foresight, and the attempt to regulate it by legislative provisions introduces a new, unnecessary, and unnatural element of uncertainty in the value of property, subjects it to the discretion (it may be to the caprice), of particular individuals, and tends most mischievously to disturb the relation of debtor and creditor.
- "7. Because I believe that, in a great commercial and opulent country, whose pecuniary transactions are infinitely multifarious, and especially in this country, where for many years the currency has been of a very varied character, any attempt to manage it by legislative enactments is as impossible as to regulate the amount which may be required; that when the Legislature has provided a sure, certain, and unerring standard on which it shall be based, and has secured to the people the easy and immediate convertibility of any paper or token (which may be issued by private individuals or by any company) into the legal and recognised coin of the realm, they
738 have done all that they ought to do, or can safely and effectually effect; and that all the rest may be safely left to be regulated by the wants of the people, and by the interests and the judgment of the persons who minister to them. "RADNOR."