Sitting of 17 March 1875

MINUTES.
PUBLIC BILLS—Ordered—First Reading—Prisoners on Remand* [99].
Second Reading—Bankruptcy (Scotland) Law Amendment [7]; Open Spaces (Metropolis) [50], debate adjourned.
Select Committee—Bankers Act Amendment* [10], appointed.
Committee—Report—Local Government Board (Ireland) Provisional Orders Confirmation * [81].
Third Reading—Consolidated Fund (£7,000,000)*.

BANKRUPTCY (SCOTLAND) LAW AMENDMENT BILL.
(Mr. Fortescue Harrison, Mr. Anderson, Mr. William Holmes.)
BANKRUPTCY (SCOTLAND) LAW AMENDMENT BILL.

  [BILL 7.] SECOND READING.
  Order for Second Beading read.
  MR. FORTESCUE HARRISON, in moving that the Bill be now read a second time, said, Sir, the Bill which I ask leave to read a second time is by no means pretentious. Its dimensions, its object, and those persons whose interests its provisions are intended to affect are alike humble; and although it is described as a Bill to amend the Law of Bankruptcy in Scotland, the contemplated changes are not of a character to alarm the most timid of law reformers. The Bill begins and ends with an amendment of a short section of that Act. In point of fact, it extends only to the substitution of a single cipher in a section of the present Act. Yet, Sir, unpretending as it is, and small and slight as is the concession I seek, I venture to say that more interest is at this moment excited amongst thousands of working men in Scotland on my present humble efforts to amend the law, than would probably be evoked by more ambitious legislative propositions. The working men in Scotland believe—and in my judgment justly believe—that they are unfairly treated in one particular provision of the Scotch Bankruptcy Act. To explain how that section works injuriously to these men—to show that it is in Scotland only, as compared with England and Ireland, that the grievance exists, and to ask the House to sanction a remedy, is what I now propose briefly to do. The principle has long been conceded that certain claims should rank preferentially on bankrupt estates, and amongst these are

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  included the wages of working men. Under the provisions of the 122nd section of the existing Bankruptcy Act for Scotland—namely, the 19 & 20 Vict., cap. 79—the wages of workmen, and of clerks, shopmen, and servants, have a preferential claim on the bankrupt estate to the extent of a month's wages, provided that such wages or salary does not exceed £60 a-year. Should it be that any of the persons here described are paid at a rate above that limit, they have no preferential claim whatever, and must prove their debts in the ordinary manner, and rank with other creditors. The Act which so limits claims of this nature was passed in 1856, now nearly 20 years ago, and I have no doubt that at that time £60 a-year was considered a sufficiently limited amount to save the average working man from losing by the bankruptcy of his employer. Wages in those days were considerably less than they now are, and the means of living proportionately cheaper. From 20 s. to 25 s. a-week was the ordinary average wages of working men in Scotland at that time, and the limit of £60 a-year provided fairly enough for that calculation. But, Sir, things have changed very much since that period, and the average wages of working men have nearly doubled, while all the necessaries of life have risen in an equal proportion; so that I question much if working men are better off now, so far as a margin between expenditure and receipt is concerned, than they were 20 years ago. That this is so, is to a certain extent proved by the way this question of preferential payment to workmen has been treated by subsequent Bankruptcy Acts. By the Irish Bankruptcy Act, passed after the Scotch Act of 1856, provision was made to protect the wages of workmen to the extent of £5, without reference to any particular rate of wages. That arrangement gave workmen an opportunity of protecting themselves from loss by insisting on fortnightly, or even weekly, payments of wages. By the English Bankruptcy Act of 1869, Section 32, it is provided—
  "That all wages or salary of any clerk or servant in the employment of the bankrupt at the date of adjudication, not exceeding four months' wages and not exceeding £50, and all wages of any labourer or workman not exceeding two months' wages, shall have priority of payment."
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  Taking quarterly payments as the rule in regard to salary of clerks and shopmen, this would give priority to the extent of a rate equal to £150 a-year for this class of persons, while for workmen no specific rate in wages is named; and thus, whatever the annual rate may be, a workman of England is entitled to priority for two months' wages. This is a fair and liberal interpretation of the preference intended by all Bankruptcy legislation in favour of working men. If the wages of workmen are to be protected at all, there is no reason why there should be any limit beyond that period at which it is the local custom to pay wages. In Scotland, it is the rule to pay fortnightly, and I should have preferred to introduce a measure securing a fortnight's wages to working men in cases of the bankruptcy of their employers, irrespective of any rate of wages. But being most desirous to see a speedy change in the present system, and anxious to avoid an opposition which would have been fatal to my desires, I thought it best to follow in the track of the existing law, only extending its operation. By the Bill which I now submit to the consideration of the House, I propose to extend the annual rate of salary or wages from £60 to £100. I feel that, looking either to the Irish or the English Bankruptcy laws, skilled working men in Scotland will still be placed in a worse position in this respect than their fellow-workers in the rest of the United Kingdom, inasmuch as the enlarged rate of £100 a-year protects working men only up to 36 s. a-week, the actual average rate of skilled workmen's wages in Scotland being much in excess of that amount. But anxious to obtain some relief for those I sympathize with, I have preferred to name a low sum, with a fair chance of success for the measure, rather than, by attempting more, to fail altogether. If, however, the Bill is, by your favour, permitted to go into Committee, I shall be happy to accept any suggestion to increase the limit beyond the sum I have named in it. Recent occurrences in one of the burghs I have the honour of representing have awakened a strong feeling in this matter not only there, but throughout Scotland, and a sense of injury is felt by the classes affected that their position is inferior to that of working men under similar conditions in other

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  parts of the Kingdom. They urge with justice, that while they are told they should improve their technical education, and fit themselves to rival and excel the highly skilled labour of foreign competitors, they, by the very act of improving their position as skilled, and consequently as more highly-paid workmen, are placed, by the operation of the Act I am endeavouring to amend, upon the footing of unskilled labourers. I hope I have shown the House a sufficient justification for my attempt at legislation so early in my Parliamentary experience. The duty was cast upon me, and I should have been unworthy of the great industrial burghs I represent in this House if I had evaded it. I have only to thank the House for the patient attention it has given me, and to ask it to do an act of justice to working men in Scotland by the passing of the Bill, the second reading of which I have now the honour to move.
  Motion, made, and Question proposed, "That the Bill be now read a second time."—(Mr. Fortescue Harrison.)
  MR. FARLEY LEITH: Sir, I entirely approve of the principle of this Bill, but I wish to make a few observations, as I consider it is too limited in its object and provisions. It can neither remedy the acknowledged defects of the Bankruptcy Law of Scotland, nor satisfy the reasonable demands of the mercantile community in respect to it. The Bill proposes to deal with one section of the Bankruptcy Act of Scotland, and with only a portion of that section. Indeed, I am of opinion, it leaves untouched the most objectionable part of that section. The hon. Member for the Kilmarnock Burghs (Mr. Fortescue Harrison) seeks to raise or extend the pecuniary limit mentioned in that section from £60 to £100. Now, I consider that the most objectionable part of the section is the latter part of it, which limits the wages to be allowed in cases of bankruptcy to the clerks, shopmen, labourers, and workmen, to one month's wages. That, I think, is, in itself, indefensible. It is objectionable and unjust to those hard-working, meritorious persons whose benefit we all have in view. The limit of one month's wages is unjust in principle, and certainty may be shown to be so by reference to the Act which the hon. Member for Kilmarnock referred to
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  as the English Bankruptcy Act of 1869. On reference to that Act, it will be found that it distinguishes between clerks and shopmen on the one hand and labourers and workmen on the other. It provides that, as regards the former of these, the allowance of salaries shall be for four months, limited only by the provision which accompanies it—namely, that such amount as shall be awarded shall not exceed the sum of £50. With respect to the other class and division—namely, the labourers and workmen—the provision in the statute is, that they shall be allowed wages for two months. Now I ask, why should the clerks, shopmen, workmen, and labourers in Scotland be placed in a worse position than those of the sister Kingdoms of England and Ireland? Justice requires that the hon. Member for Kilmarnock should have further sought to amend that section of the Bill to which his attention has been particularly directed, by incorporating into his measure the four months and the two months which are given by the Act of 1869 in England. There is absolutely no reason for distinguishing between the circumstances, the position, and I may say the rights of the workmen in Scotland, and of those in England. I have no objection to this Bill, considered by itself, other than that which arises out of what I have just stated to the House. The mercantile community of the largo city which I represent has, however, expressed its views in the Chamber of Commerce, and it desires a much more comprehensive alteration of the Bankruptcy Law of Scotland. It requires that it should be brought into harmony with the Bankruptcy Law of England generally, and that the two systems of law should be assimilated. I have proof, also, that this is what is demanded by the mercantile communities both of England and Scotland. At a meeting of the Associated Chambers of Commerce of the United Kingdom, held in February, 1873, a resolution was passed which embodies the suggestions and the reasoning which I have just brought under the notice of the House. That Resolution is in these terms—
  "That it is expedient and desirable that there should be one Bankruptcy statute for the United Kingdom, and that the Government be memorialised to instruct the Law Officers of the Crown to prepare and introduce such a measure."
  Now, that resolution was acted upon,

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  and a memorial was presented to the late Prime Minister. The right hon. Gentleman handed the memorial to the Lord Advocate for the time being. "We have lost his services in this House in consequence of his promotion, and of another event which has happened in the change of Government; but I trust we have not at the same time lost any assistance in carrying that object out by the change of Lord Advocate. Therefore I appeal to my right hon. and learned Friend the present Lord Advocate to give effect to the memorial so presented. We had the promise of the late Lord Advocate that he would give effect to it. What are the objections to the present systems of bankruptcy in the Three Kingdoms? They appear on the face of those systems, and may be summed up in a few words without going into detail. First, there are three distinct and several statutes on the Bankruptcy Laws of the Three Kingdoms; one for England, one for Scotland, and one for Ireland. Now, hon. Members can easily imagine the inconveniences, the difficulties, and the evils which must arise from these widely differing systems of bankruptcy. The creditors in one country are at a loss to know the peculiar proceedings which are required to be followed in order to enforce rights in the other country, the principles and procedure in those other countries being diametrically opposed to each other. There are different rules concerning the marshalling the assets of the bankrupt's estate, and there is a difficulty, which has led to much litigation and delay, in ascertaining to which Bankruptcy Court's jurisdiction, of the Three Kingdoms a case ought to be referred. Is this not a scandal to the three countries, or at least to the two countries of England and Scotland, which are so closely united, and where the ramifications of commerce and trade are so extensive that we ought to have the same law to govern commercial transactions in both countries. I feel sure my right hon. and learned Friend will agree with me that there is no difficulty in having one statute for the Three Kingdoms, and we have precedents for it in the General Shipping Act, and the Revenue Act, which govern alike England, Scotland, and Ireland. The present Bill deals with only an infinitesimal part of the subject—the Bankruptcy
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  Laws—and although I am reluctant to vote against the Bill, I doubt whether in Committee we could so alter and amend it as to meet the reasonable demands and wishes of the mercantile community of England. However, having expressed these opinions on the general question, I shall vote in favour of the Bill, the subject-matter of which I hope will receive favourable consideration at the hands of the Government.
  GENERAL SIR GEORGE BALFOURsaid, he should record his Vote with great pleasure in favour of the Bill, because the hon. Member who introduced it had hit an undoubted defect in the Scotch Act, and at the same time had very properly refrained from touching upon the much greater question which the hon. and learned Member for Aberdeen (Mr. Leith) had referred to. The complete general question of a good law of bankruptcy ought, in his judgment, to be dealt with by the Government of the day, and was of too serious a nature to be dealt with by any private Member. He would suggest that if they did so, and introduced a Bill upon the subject, there should be a clause to the effect that no bankrupt should receive his certificate if he had not kept a set of books of account. As the Bill before the House only changed one item in the existing Act—namely, the amount which might be claimed for wages—and as it was an alteration needed from the changes in wages, he hoped the House would pass it in its limited shape.
  THE LORD ADVOCATE: I do not intend, Sir, to make any objection to the second reading of the Bill. The object of the hon. Gentleman who has introduced it is to assimilate as far as possible the law of Scotland to the law of England, in reference to the payment of preferential claims to clerks and workmen. I think it is quite right that that should be carried out by legislation, but I venture to think that the Bill is capable of some improvement in Committee, and I shall be most happy to put myself into communication with the promoters of it with a view to consider the question. As to the much larger question introduced by the hon. and learned Member for Aberdeen (Mr. Leith), I must say I do not look forward with very great composure to a Bill for the assimilation of the Bankruptcy Laws of the three countries. In Scotland I am not aware

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  that there is any great dissatisfaction in regard to the working of our own system. Of course, there will always be dissatisfaction regarding bankruptcy; but as far as the forms in use in Scotland exist, I do not think there is much dissatisfaction. On the contrary, the attempt of the trainers of the last Bankruptcy Act which was passed for England was to assimilate as much as possible the law of England to the law of Scotland, and therefore I apprehend that if there be any faults in the English system, they arise from some departure from our Scotch system. I was not aware that any pledge was given by the late Government in this matter, or that the late Lord Advocate had given any pledge in regard to the reconstruction of the Bankruptcy Law. But it is a large question, demanding grave consideration, less, perhaps, by me, than by the people of Scotland, in reference to a change of the system, and the opinion held in England concerning the assimilation of their system to ours.
  Motion agreed to.
  Bill read a second time, and committed for Monday 5th April.

BANKERS' ACT AMENDMENT BILL. [BILL 10.]
(Mr. Goschen, Mr. Weguelin, Mr. Baring.)
BANKERS' ACT AMENDMENT BILL. [BILL 10.]

  SECOND READING.
  Order for Second Reading read.
  MR. GOSCHEN, on rising to move that the Bill be now read a second time, said: The Notice of Amendment given by the right hon. Gentleman the Chancellor of the Exchequer to the second reading of my Bill, with a view of referring the subject to a Select Committee, has changed the aspect of the question, and considering the power which the Government can exercise on a matter of this kind, and also the position which the Scotch Members are likely to take in opposition to the measure, I think I may conclude that the Motion of the right hon. Gentleman, or some similar Motion, will be adopted by the House. Therefore, I do not propose to enter into any elaborate arguments in support of my Bill, or into the objections which may be taken to it. But I think I should be wanting in respect to the House, and to those large interests which are affected by the Bill, if I did not explain the
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  motives which have induced me to bring it forward. The turning point of the Bill consists in the fact that Scotch bankers have virtually a monopoly—a Parliamentary monopoly, and a monopoly which has existed almost without question since the year 1845. In reply, the Scotch bankers say—"Why should we not come to England, when the English banks can come to Scotland? There ought to be free trade." I submit to the House that they know, by the experience of 30 years, that when they say that their English brother-bankers can come to Scotland, the conditions of banking in Scotland, and of the law affecting the Scotch banking interest, are such that English bankers are virtually precluded from going to Scotland. When I introduced this Bill, I stated that there were two grounds for dealing with the subject. In the first place, I thought the English bankers had an equitable case for consideration, as they are under restrictions which the Scotch bankers are not under. Surely it is an anomaly that the National Provincial Bank should be obliged, as it has been, to give up the right of issuing bank notes to the extent of half-a-million when it comes to London, while the Scotch banks can come here without giving up their issue of notes. Perhaps, however, the Scotch bankers would retort—"You ought to remove the restrictions on the English banks." ["Hear, hear!"] Well, those cries of "Hear, hear," proceed from the Representatives of the Scotch monopolists, who are anxious that monopoly should become more valuable year by year; but the question of public interest in dealing with the Bill is, whether you ought to allow the monoply by a stealthy process—opposed, as we believe, to the intention of the framers of the Acts of 1844 and 1845—to become more valuable year by year. That it has become more valuable I think no one will deny; and if you have a close body like the Scotch bankers, who, in addition to the great privilege they exercise in their own country, are to be free to come across the Border and to compete with those who have not such privileges, you are increasing the value of the Parliamentary privilege they wish to enjoy. How far is it desirable in the interest of Scotland herself that the monopoly should continue? That, in my opinion, is a question for the Select Committee to decide Many

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  persons, whose opinions are entitled to considerable weight, do not wish, notwithstanding the many arguments which may be urged in favour of the Scotch bankers, to maintain this monopoly in Scotland. Then the Scotch bankers may say—"Let us have free trade in banking in Scotland, and let English bankers come and issue notes." Well, it is for Her Majesty's Government to consider whether such a course would be desirable; but, for my own part, I think that if the question were raised, it would be decided by this House in the negative, and that no body of monopolists or bankers should issue notes without the State claiming its portion of the profits. I have been charged by those who have not examined the question closely, with offending by the Bill against the doctrines of free trade. Now, I wish to point out that the question as regards free trade is this—you have on one side a body of monopolists with Parliamentary privileges, subsidized by the State; and on the other side, in competition with them, you have a body who are not so subsidized, and who have to contend against them. The Scotch bankers derive a certain annual value from those great privileges which they possess, for they can issue these £1 notes without paying any tax to the Chancellor of the Exchequer. Now, it is said—"Let there be free competition. Let the English bankers go to Scotland, and let the Scotch bankers come to England." The question has been argued as if the London bankers, or the English provincial bankers, objected to the establishment in this country of other banks, whereas, what they really contend against is the establishment among them of banks which have privileges in regard to the issue of their notes. They say—"This is free banking on one side, while you have the privileged issues on the other side." That is a very serious question, and the whole Bill turns virtually, as far as regards the public Exchequer, on the question, whether you ought to allow a privileged system of issues to go on and increase in value day by day. I think it is perfectly fair to take the course proposed in the Bill, and to say to the Scotch bankers—"If you drop your issues, you can come to England, and to London like any other bank; but as long as you enjoy the practical subsidy
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  and those privileges which were granted to you 30 years ago, and which have never been interfered with, so long we think your wings ought to be clipped, and you ought to be confined to your own preserves." I have mentioned as an historical fact that no new banks have been established in Scotland. There is, indeed, a branch of the Oriental Bank in Edinburgh, and there may be branches of English deposit banks in Scotland and of colonial banks; but it is a fallacy to compare the business done by an Indian bank or by a colonial bank in a Scotch town with the regular business of Scotch banks. And this is the reason why it is impossible for English banks to establish themselves in Scotland. The Scotch system of banking covers the whole population of Scotland in a most remarkable way, and I give the greatest credit to the able and indefatigable men who manage those banks. They have covered the whole of Scotland with those banks. Some banks have from 70 to 100 branches, and they supply £1 notes which they alone have the privilege of issuing, and they know that by the custom of the country the people in Scotland will only take £1 notes. What have the English banks that go to Scotland to do? They cannot issue Bank of England notes, because the people will not take them. They cannot pay their own notes, because it is not the custom of the country. What then are these banks to issue? Why, notes of their rivals. They are to issue the £1 notes, which they must take from the Scotch banks already established. The first operation of an English bank would be to get from the Scotch banks say £100,000 Scotch notes; and so in going to compete with its rivals, it would actually pay it a subsidy, because it would increase the issue of the Scotch banks. The English bank in Scotland must show its impotence, by not being able to issue the currency of the country, and in the next place it must actually go to its rivals and ask them for a supply of their £ 1 notes to carry on business at all. It may be said that this is not an advantage to the Scotch banks, because they must hold gold against their issues; but at this point there comes in the singular privilege of the Scotch banks—a privilege which the English banks have not, and which on general grounds is most questionable—of holding the

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  gold, not against the notes, but against the general issues of the bank. They have a certain stock of gold, which every prudent banker must want, and with the store of gold their can cover their, general liabilities. Therefore the present position as between the two countries, and the two competing banks in the different countries, is this—an English bank goes to Scotland; it can issue only £1 notes. A Scotch bank comes to England, and it can pay over its counter the general currency—gold and Bank of England notes—a currency to which they have the same access as everybody else. See how differently they are placed in this respect from the non-issuing English banks in a Scotch town. The Scotch bank has got a monopoly of the issue of the £1 notes; but in a provincial town in England, the bank, has got to deal with the competition of a non-issuing bank and the Bank of England. In fact, there is no analogy between the two cases. In England there are the three issues—Bank of England notes, gold, and private issues. In Scotland you have only one—namely, the private issues. Those banks are limited in number. No addition has been made to them by Parliament, and those banks are now enjoying the privilege of coming over the Borders and establishing branches in England. They bring with them the advantages derived from their Scotch monopoly. They bring with them this fact that they have drained, to the advantage of the country—I use the word in no sense implying any blame upon the transaction—Scotland of the deposits. They are able to secure what is beneficial to Scotland, but coming to England with these deposits thus obtained, they say—"This is free trade." That is not the only point. Do they bring their own £1 notes with them? In Cumberland they do, and the £1 notes circulate in great numbers in the North of England. The £1 notes, which English bankers have never been allowed to issue, circulate in the North of England under the auspices of the Scotch banks. They do not issue them in England itself; they issue them in a branch close to the Borders, and their customers bring them to England in their pockets, and pay for commodities with them. If this were reciprocal, it would be perfectly just; but see how this affects the English
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  bankers in the North. They got these £1 notes paid into them by their customers. They must cash these notes, however, through a Scotch bank. That Scotch bank—a privileged bank—charges them what commission it pleases, because it is able to regulate these matters itself. Having paid the commission, the bank in England is compelled to charge its customers. The customers naturally say—"We don't wish to pay this commission;" and the customers take their accounts to the Scotch banks, who are able to do the business without charging the commission; while English banks are unable to retaliate, because, owing to the Scotch system of issue, they are unable to cross the Borders. No one can say that it can be proper that a system should exist which so heavily handicaps one class as against the other. I think our Scotch friends may admit that much. The same argument applies, but not with equal force, to London. A Scotch bank may be established there, and its managers may be able to do all Scotch business free of commission, and in that way they may be able to supplant their rivals in certain branches of business. I think, however, the House would not wish that the privileged monopolists coming to London, and driving their rivals out of a certain business, should make it appear that the business cannot be done as cheaply and as satisfactory to the public by arrangement. If the English banks could have the privilege of paying their notes throughout Scotland, as the Scotch banks have, then they would be able to effect another arrangement. I quite agree that the interests of the public must be paramount in this matter. My feeling is, that the interests of the public must be secured by taking care that the value of a monopoly should not be increased. I would just refer to what has been stated in some of the able papers which have been circulated on both sides of the question. Sir Robert Peel foresaw what has happened. He knew that the course he was taking would be to the advantage of Scotland in the respect to which I have referred, and I suspect that he intended that arrangement practically not to be a permanent one; but that it should be subsequently revised by the State. There is only one point which I need further

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  touch, and that is a comparison of the position of the issuing banks in England and the issuing banks in Scotland. I have shown that the former is no monopoly. They have to compete through the system of currency in the country with other banks—with the Bank of England and non-issuing banks. With regard to Ireland, there are issuing banks there; but the same monopoly which exists in Scotland does not exist in Ireland. This brings us to the question—What is the difference between the position of an issuing bank in England and an issuing bank in Scotland? The Scotch bank issues £1 notes, and the English bank £5 notes. The Scotch bank is not tied down to its issue, but can issue above the authorized amount against gold to cover its general assets, and it has got the further advantage of meeting with no competition at the hands of the Bank of England. It is clear the position of the English banks is different, and I must say that the issuing banks established in the North of England may claim the consideration of the House; and without saying what the remedy is, it may be said that the present state of things is intolerable to them, because it is perfectly clear that they cannot compete with the Scotch banks. Under the circumstances, I propose the Bill which I have laid upon the Table. I suppose it is the intention of Her Majesty's Government—so I gather from the Amendment of which they have given Notice—to deal with the matter themselves, I will not say immediately, but after the Report comes up. I know the immense difficulties which a private Member has in dealing with a question of this kind, and I should not have attempted to deal with it, unless I understood that the Government had some difficulty in taking up the matter. I perfectly agree with the opinion that it is for the Government, if possible, to deal with this class of questions, and I hope that they will do so. Let me, however, point out that this is a Committee which, if the House should assent to its appointment, will take a considerable amount of time. "What is to be the condition in the meantime? If the House at all shares the views which I have endeavoured to put before it—that it is unwise on the part of the public to allow the value of this monopoly to go on gradually increasing by stealthy means.
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  which were not intended by the Legislature, then I think the House would think it better that the status quo should remain during the time that this inquiry progresses. I should be very glad if I can persuade Her Majesty's Government to assist in passing a Suspensory Bill; or what would be far better, that the Government itself should pass such a Bill. Otherwise, the Scotch banks, pending the Committee, might be induced to take the very steps which the Committee afterwards will recommend should not be permissible. I call the attention of the Government very respectfully to the point. It would be difficult for the Committee to report, if at all, this Session, in time for legislation on so large a subject to take place. It might be two years before any action could be taken by Parliament, and in the meantime I think the monopoly with which the Chancellor of the Exchequer might wish himself to deal would have become more valuable, would have taken root in new places, and then we should find ourselves embarrassed in dealing with many vested interests which are absent at the present moment in a certain degree. I think it only just to have stated as clearly as I can the view I have taken, because it is a matter in which a great interest is taken by the mercantile community. Having done so, I will now move the second reading of the Bill.
  Motion made, and Question proposed, "That the Bill be now read a second time."—(Mr. Goschen.)
  MR. STEPHEN CAVE, in rising to move, as an Amendment—
  "That a Select Committee be appointed to consider and report upon the restrictions imposed and privileges conferred by Law on Bankers authorised to make and issue notes in England, Scotland, and Ireland, respectively,"
  said: I am not going, Sir, to make a long statement on this question. I rise simply to give a short explanation of the intentions of the Government. The question will be inquired into by a Committee, and we should be anticipating the labours and the result of that Committee if we went far into the question now. The Government has had the subject under their consideration for a considerable time. My right hon. Friend the Chancellor of the Exchequer has considered it most carefully; but he felt that a matter of the kind, involving interests of such

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  great magnitude and such great complication, ought not to be brought in without some preliminary inquiry. I need hardly suggest to hon. Members that in consequence of the pressure of Business upon the Government such an inquiry was likely to be postponed until a little more leisure could be obtained. There are many reasons why such an inquiry should take place. Amongst others, I should mention a strong one on the very threshold—the question whether the Scotch bankers are within the law. It is generally supposed they are within the law in acting as they have done; but still it is not certain. Other people have a different opinion on the point, Certainly in bringing their notes across the Borders, and practically establishing in England a Scotch circulation, they are sailing very near the wind. The difference in principle of the issue between the Scotch and English banks is another question that opens up a very wide field of inquiry on many important points. The stock of gold in the Scotch banks serves a double purpose—of being at one and the same time the security for deposits and also the means of extending the paper issue. For these and other reasons which hon. Members may very easily imagine for themselves, my right hon. Friend the Chancellor of the Exchequer, thinking that a preliminary inquiry was necessary, gave Notice of the Amendment on the Paper, which was, I may say, not in the least intended to be hostile to the Bill of the right hon. Gentleman; but another Amendment has been moved by the hon. Member for Glasgow (Mr. Anderson). He has given Notice of an Amendment which the Government have not thought it desirable to assent to. That Amendment is to the effect that the Bill be read a second time this day six months, and should the hon. Member move it, the Government will be unable to move their own, and before explaining the views of the Government, my right hon. Friend thought that he ought to hear both sides. We have heard the statement of the right hon. Gentleman the Member for the City of London, and we shall be glad to hear what can be said on the other side in favour of the Scotch banks. But we must also maintain our position. Therefore, I venture to rise to move the Amendment of the Chancellor of the Exchequer, in order to give him an opportunity
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  of explaining the views of the Government after having heard both sides of the question. I cannot avoid saying one thing. Free trade has been mentioned. I quite understand free trade in banking, but free trade in issuing is quite another thing, and one to which I should be wholly opposed in the case of England. No one can doubt that, on principle, the paper issue of the country like its metallic currency, ought to be in the hands of the Government. I believe that very few can read the debates on the Act of 1844 without believing that this was Sir Robert Peel's opinion. He went as far as he could in that direction, and I believe that his views were, that long before we should arrive at the present year of grace, the work would have been accomplished, and the entire issue of the country would have been in the hands of the State. Let me say before sitting down, to my right hon. Friend the Member for the City of London—by way of joke, rather than of finding fault—that it seems rather odd that he should be the instrument of bringing in this Bill, as his Government allowed a Bill to pass in 1873 enabling the Royal Bank of Scotland to come to London. At the same time, that is no reason why he should not bring in the Bill the object of which he has explained to-day. The right hon. Gentleman concluded by moving the Amendment.
  Amendment proposed,
  To leave out from the word "That" to the end of the Question, in order to add the words "a Select Committee be appointed to consider and report upon the restrictions imposed and privileges conferred by Law on Bankers authorised to make and issue notes in England, Scotland, and Ireland respectively,"—(Mr. Stephen Cave,)
  —instead thereof.
  MR. LYON PLAYFAIR, who had an Amendment on the Paper, to move—
  "That a Select Committee be appointed to consider the expediency of maintaining or imposing restrictions upon issuing bankers, so long-as they shall continue to be such, in respect of their banking business."
  said: The discussion on the Bill of my right hon. Friend the Member for the City of London has assumed a new asspect; for while one great objection to his Bill was that its object was partial, by being aimed against Scotch banks alone, when Irish banks ought to have been included, the new proposal of the

  1979
  Chancellor of the Exchequer does not err on the side of being too limited, for it is startlingly large. The subject now before us is not merely a Bill to restrain Scotch banks from having their own agencies in London, but this limited measure has actually swelled by the Government Amendment, into the large proportions of a general inquiry into the whole banking system of this country. For the words of the Chancellor of the Exchequer necessarily include the Act of 1844 as well as of 1845, and involve an inquiry, the magnitude of which may well astonish the House, coming as it does with so little note of preparation. The Chancellor of the Exchequer will probably tell us that he does not intend to open up the question of the privileges of the Bank of England and the restrictions put upon its issue of notes; but certainly the words of the Amendment include all banks of issue in the widest scope. It is surely inexpedient to bring forward a statement of such magnitude in the form of an Amendment to a Bill of a private Member. At the same time, the Scotch banks have no objection that such an inquiry should be made, provided it is as broad and open as the words of the Amendment imply. If, however, the words are to be restricted in practical investigation to the object of my right hon. Friend's Bill, then I think the issue should be limited by words to the purpose intended, and I wish the Chancellor of the Exchequer would accept my limited issue. Of course, in making the Amendment, I oppose the Bill of my right hon. Friend. My right hon. Friend disowns any intention to interfere with the freedom of trade in banking, resting his case on the regulation of monopolies. He refuses to the Scotch banks, which have a monopoly of issue in Scotland, the right to trade in London in competition with banks which have no monopoly of issue. He cannot deny that the principle of the Act of 1844, as explained and enforced in the strongest possible language by Sir Robert Peel, was to control and separate the powers of issue from the business of banking, but at the same time—for I use the very words of the great financier—to give the banking business "unlimited and unrestricted competition." It would have been inconsistent with the object of the Act of 1844 that
  1980
  English banks of issue, with notes circulating in England, should compete in London with the Bank of England, for that would have hampered its influence in regard to foreign exchanges, and therefore English banks of issue were prohibited from establishing themselves within 65 miles of London. But that danger could not occur with Scotch or Irish banks, for their notes are not allowed by law to circulate in competition with those of the Bank of England, and therefore the Act of 1845 contained no such restrictive clause against the establishment of agencies in London for the transaction of banking business as distinct from issue. My right hon. Friend says that Scotch notes are really in circulation in Cumberland. Well, the Scotch banks are not responsible for that, as they have never issued a Scotch note in England. Nor will his Bill remedy the evil of which he complains. My right hon. Friend would require to establish Custom Houses on the Border to search the pockets of travellers with the view of preventing this dreaded invasion of Scotch notes into England. My right hon. Friend has no right to assume the exemption of Scotch banks as an omission on the part of Sir Robert Peel. He was far too sagacious to have overlooked that contingency. The omission was in entire accordance with his advocacy of the principle that banking apart from issue could not be too free and unrestricted. The year 1845 is not so far back. It is in the minds of many hon. Members. All business was gravitating heavily to London. Far less sagacious men than Sir Robert Peel could foresee that this metropolis would become the the great centre of banking business, and that monetary transactions must of necessity have their ultimate destination in London. Twenty years later a Bill was brought into this House by another great financier, the then Chancellor of the Exchequer (Mr. Gladstone). The words used by the Chancellor of the Exchequer in 1865 confirmed the view taken of the Act of 1844 by Sir Robert Peel, and advocated unlimited competition in the business of banking. He said—
  "Is it undesirable when an almost absolute necessity drives banking establishments throughout the country towards this great centre of the money operations of the world that those establishments

  1981
  should be hampered by arbitrary provisions, and should be obliged to pass their business through the hands of agents?"—[3 Hansard, clxxvii. 618.]
  That imperative necessity has forced one hank after another to become its own agents in London when there was no legal disability. The National Bank of Ireland, with an authorized issue of £850,000—double that of any Scotch bank—has been domiciled in London for 20 years, and it now has eight branches in the metropolis. The Provincial Bank of Ireland, in like manner, has had its London centre for 10 years. No one has disputed their right, nor does the Bill of my right hon. Friend propose to take it away. The Irish banks have taken root, and perhaps it would require an effort even beyond the strength of my right hon. Friend to pull them out of the ground, and so he leaves them alone. Nor does he attempt to root out the Oriental Bank and other colonial banks, which in logic he should extirpate also. The Irish and colonial banks of issue are to remain in London, at least for the present, until my right hon. Friend gets his Bill passed into an Act, when it may prove a fulcrum on which to apply a lever for the stronger task of getting all these banks of issue rooted out of the City of London. For Parliament cannot consent to pass an Act of disability against Scotch banks, unless it proceeds on a distinct principle, which it is proposed to apply to Irish and colonial banks of issue. Now, why are the London agencies of Scotch banks selected for primary extirpation? My right hon. Friend the Member for the City of London knows very well that the right of issue of Scotch banks is not the main cause—is, indeed, only a small cause of their prosperity. He may justly look upon them as formidable competitors with London bankers; but he cannot in his heart believe that their strength depends upon their £2,750,000 of authorized note issue, when their deposits reach £77,000,000. They have a surplus issue; but it is covered by gold, and though a convenience to their branch business, is only indirectly a source of gain. The strength of the Scotch banks does not thus consist of their authorized circulation of £2,750,000, constituting only one thirty-third part of their resources; nor does it rest on their total of note circulation of £6,000,000,
  1982
  for that is only one-fifteenth of their resources. These resources amount to the large sum of £90,000,000, of which £77,000,000 consist of deposits. That is the capital—the results not of privilege, but of the savings of industry—which constitutes the strength of the Scotch banks, and creates alarm among the London bankers. I have said that the Scotch banks do not fear an inquiry into the expediency of imposing restrictions upon them, if they are not aimed at exclusively, as the Bill before us unfairly and illogically does aim at them. For the issue before a Committee would be—Ought restrictions to be imposed on Scotch and Irish banks in the interests of the public, and not merely in the interests of London bankers? The Scotch banks have been forced to come to London from the great increase of their metropolitan business. One Scotch bank assures me that its transactions to and from London amount to £60,000,000 annually. Can you conceive that with such an amount of business, a second-hand agency can work satisfactorily? Surely the benefits of a direct agency must be beneficial to the Scotch merchants who have dealings with London, and to the English merchants who have dealings with Scotland. I admit that the benefits which the public thus gain by a direct agency are detrimental to some of the London bankers, who formerly transacted the Scotch agencies—for even to their own customers they are unable to transact Scotch business as cheaply as the Scotch banks can do. But to suppress them, for this reason, would be a complete return to class legislation, and protection in its most naked form. If my right hon. Friend had brought in a Bill to enable the English banks of issue, if they left their issues behind them in the provinces, to open agencies in London, he would have been thoroughly justified' as a free trader, and he would have been supported by the Scotch Members; but to drive Scotch agencies out of London when doing banking business only, apart from issue, is the antithesis of free trade. It is impossible to see in this proposal any other ground than that of protection to a class. Assurances are given that the Scotch banks will be gainers by their exclusion from London, because if they remain, they might be tempted into all sorts of transactions on

  1983
  the Stock Exchange, unfitted for their small stock of metallic reserve. The Scotch shareholders and depositors belong to a canny race, and are well able to protect themselves. The metallic reserve in Scotland of £4,100,000 forms only a small portion of the reserve of the Scotch banks, and is scarcely deemed by them a reserve at all in its true sense. Their second line of reserve, in Government securities and bills of short date, exists in London, and is so ample, that no one questions the solvency of the Scotch banks. They deem it wiser to use money, than to let it lie idle in their tills; but the prudence of its use as a whole has justified the confidence of the public, and this confidence is the real ground of alarm of the English bankers. They fear that a system of banking, which has inspired every individual in Scotland with as much confidence in a bit of dirty greasy paper as in a sovereign in gold, may have a catching effect on the English people, and induce them to add to the £77,000,000 of deposits which form the groundwork of their resources. It is this accumulation of the savings of the prudent Scotch which mainly remain in London, and, therefore, which requires constant watching in investments, that forms a strong argument for direct and responsible agency. I should have met the Bill of my right hon. Friend by a direct negative vote, were it not that I was anxious to show, for my own part, that the Scotch Members are not afraid to court inquiry, and do not wish to show satisfaction with the continuance of restrictions which the law imposes upon English banks of issue. I believe that any Committee which this House may appoint will recommend that the existing restrictions should be withdrawn—not that new restrictions shall be imposed. Parliament, which has so thoroughly carried out the principle of Free Trade, is not likely to return to the system of Protection in banking. Even the larger proposition of the Chancellor of the Exchequer would have been welcomed by us, if we had thought the time opportune for a complete review of the system of currency. The Scotch banks have no fear that any Government will interfere with their paper currency. If a Government desired to make the Scotch people Home Rulers, I can give them a double receipt for their speedy conversion.
  1984
  Threaten to suppress Presbytery, and threaten to suppress the £1 note. One would be about as dangerous a proceeding as the other. But we do not wish to introduce our paper currency into England, though I think few people would object to the Bank of England notes being made legal tenders in Scotland. While, then, we preserve an issue which forms an insignificant part of the resources of the Scotch banks, and which is not more than sufficient for a circulating medium in Scotland, and cannot affect the just influence of the Bank of England on exchanges, we are quite willing that a Committee should inquire into the expediency of maintaining or imposing restrictions on banking, in the full belief that the House will be advised that the principle of unrestricted banking, so forcibly urged by such great financiers as Sir Robert Peel and the right hon. Member for Greenwich (Mr. Gladstone), will more firmly be established by a new investigation of the relations of the metropolis as the centre of monetary transactions to all the banks throughout the Kingdom.
  MR. GLADSTONE: One thing, at all events, that is satisfactory is—and I am glad that it has been already recognized to-day—that this is not at all a party discussion, and that we may exchange our sentiments, whether in approval of or against the Bill, without their being embittered by any of those feelings which arise out of political contests. It is in that sense I wish to speak, and in starting I am free to admit that I think that in one instance the right hon. Gentleman who spoke last made a point against the right hon. Gentleman the promoter of the Bill, for it is undoubtedly not consistent, at any rate in theory, that we should be asked to legislate against the privilege of Scotch banks coming to England, and should at the same time be called on to close our eyes against the existence of a similar privilege which is enjoyed by the banks of Ireland. Whatever course is taken with regard to the banks of one of the two countries would have to be taken in equity and policy with respect to the other, and I shall be very much surprised if my right hon. Friend (Mr. Goschen) shows any disposition to be obstinate on this subject, or pushes his quarrel to extremity for the sake of excluding the Irish banks. I am led to

  1985
  make a few remarks immediately after the last speaker in consequence of his references to the Acts of 1844 and 1845, and to the views of Sir Robert Peel, for I have the eminent and melancholy privilege of being the only person now in the House who belonged to the Cabinet of 1844, and as I occupied a post intimately connected with the trade, commerce, and finances of the country, I was naturally and necessarily cognizant of the views of that eminent statesman upon which the legislation of that period was founded. Now, my right hon. Friend has referred with perfect accuracy to the declaration of Sir Robert Peel that he was entirely in favour of absolute freedom of trade in banking; but he did not give him credit for the qualifying statement he made—that he was not also of opinion that, if it were the pleasure of Parliament to combine the business of banking, which is essentially and properly a free business, with the factitious and artificial privilege of issue, which has nothing whatever to do with banking, and which rests on grounds of its own, such a combination of privileges might not materially modify the principle of freedom in banking. That was the course taken by Sir Robert Peel in respect to English banks at the period referred to, and it affords an illustration of his opinions on the question, and I do not think my right hon. Friend (Mr. Lyon Playfair) has been at all successful in his attempt to show that it was otherwise. It could not be conceived by Sir Robert Peel that the circulation of the English banks could ever be made an instrument of inconvenience as regarded the foreign exchanges. Sir Robert Peel proceeded steadily on the principle that where the law imposed restrictions on issuing banks, these restrictions ought to be maintained; and, moreover, Sir Robert Peel did that with reference to a wider principle still—namely, the principle that the State ought ultimately to get into its own hands the whole business of issue, and that that course should be taken upon the first favourable opportunity. That is the true statement of the views of Sir Robert Peel, and his views on subjects of this kind, I need not say, must always be of very great weight and authority. I am not prepared to admit to my right hon. Friend (Mr. Lyon Playfair) that this Bill is to
  1986
  be justly described as an attempt to legislate in favour of English as against Scotch bankers. It is perfectly true that there is a class interest involved, on the one hand, of Scotch bankers, respecting whom I do not deny that the extension of their privileges, apart from issue, appears in itself desirable, and a class interest, on the other hand, of English bankers. But my right hon. Friend (Mr. Goschen) bases his Bill and his arguments in support of it mainly upon the public interest—basing this measure, in fact, entirely upon the ground taken by Sir Robert Peel, that banking privileges in the case of those banks which enjoy the additional and external privilege of issue must not be taken for granted as fit subjects for unlimited extension, but are open to the consideration of Parliament as regards the sphere within which they are to be exercised. My right hon. Friend (Mr. Goschen) put the case of equity very strongly as regards the English banks, and my right hon. Friend who has just spoken did not deal with this point when he referred to the case of the National Provincial Bank. I will ask, with my right hon. Friend, the simple question again, whether it is equitable that the National Provincial Bank should be required to surrender its very valuable issue of £400,000 of notes as a condition of its coming to London, and at the same time, that any bank in Scotland or Ireland should be allowed to come to London without surrendering its privilege of issue? That, I think, is a very inequitable state of the law, and fully justifies my right hon. Friend in having raised the question now before us. I suppose my right hon. Friend will not insist on desiring to obtain the second reading of his Bill in face of the Notices of Motion upon the Paper, and especially of the action taken on behalf of the Treasury Bench. I am not, however, for myself, prepared to say, in regard to this matter, that there is any case requiring investigation as anterior to legislation. I think the question is quite clear and simple, and I know there are hon. Gentlemen in this House perfectly competent to discuss it without any previous inquiry. But we are in the hands of majorities, and I am disposed to assume that probably the majority is in favour of having some inquiry previous to legislation. In that case,

  1987
  being under some apprehension, I would venture to suggest that the terms of the inquiry proposed by the right hon. Gentleman the Chancellor of the Exchequer should be altered in such a way as not to leave them open to the construction put upon them by the last speaker. The words he complains of ought to be left out, otherwise the terms seem to amount altogether, or very nearly, to the appointment of a Committee for the purpose of investigating generally the state of the currency, and even the privileges and powers of the Bank of England. If you are to discuss generally the issue powers of private bankers, which is obviously the immediate scope of the Motion, it will be quite impossible to exclude from inquiry the issue powers of the Bank of England. The two things are in point of fact the complement of one another. The interests of bankers and the issues of private banks and the Bank of England are so closely connected, the one taking the place which the other does not fill, that it is impossible to make an inquiry in regard to the one without extending it to the other. I am not quite sure that I gathered distinctly from the speech of the right hon. Gentleman who spoke on the part of the Government (Mr. Stephen Cave) on what ground the objection was raised to the narrower inquiry proposed to be instituted by my right hon. Friend (Mr. Lyon Playfair). [The CHANCELLOR of the EXCHEQUER: We dispute that it is narrower.] I am glad to hear that answer from my right hon. Friend. It is going into a question of words, and if it is limited to a question of words the matter may be easily settled. What I understand to be the contention of my right hon. Friend (Mr. Lyon Playfair) is to confine the inquiry strictly to the purpose and scope of the Bill before the House, not denying, as I understand, that Irish banks would be properly included in such an inquiry. That being so, there need be no great difference as to the terms of the inquiry; but I do not understand the words of the Chancellor of the Exchequer as being capable of that interpretation. However, I leave that to be settled, as I have no doubt it will be settled, further on in the debate. As I have already said, I see no advantage to be gained by this preliminary inquiry, but I do not feel it my duty to ask the House to vote in opposition to it.
  1988
  What I do look for from this discussion as likely to be beneficial has reference to the larger aspects of this question. The point raised by the Bill of my right hon. Friend is, in itself, comparatively narrow. It either relates to the interests of certain English and Scotch banks, or it relates to matters connected with the public interest which go far beyond the question of banking in Scotland or England—namely, the question whether the privilege of banking shall or shall not be accompanied by the greater privilege of issuing notes. The real question which I think the Bill, after this debate, must suggest to the mind of the House is whether it is or is not desirable, supposing a favourable opportunity to have arrived, that we should now at length, after the lapse of 30 or 31 years since the last legislation upon this subject, endeavour to deal with the whole question of issues. I am one of those disposed to adhere firmly to the principle of the Act of 1844, and I am disposed to adhere firmly to the principle laid down by the Chancellor of the Exchequer—namely, that all issue is the privilege and prerogative of the State, and that nothing can be more fallacious and mischievous than confounding the privilege of banking with the privilege of issue. Nothing could be more strictly accurate, and, at the same time, more felicitous, than the expression of my right hon. Friend (Mr. Goschen) when he spoke of the issue banks as being subsidized by the State. They are so subsidized in the strictest sense, because they have in their own hands, in their notes, a power which, if exercised by the State, would be directly productive of considerable funds available for the relief of the taxpayer. It would be exactly the same thing, as far as the money is concerned, to grant a lucrative privilege to a person or pay over to him a considerable sum from the Consolidated Fund. Do not suppose that I wish to speak with disrespect of the persons who possess these privileges of issue, especially the Scotch banks. I think they have derived rather more advantage than my right hon. Friend (Mr. Lyon Playfair) is disposed to admit, from the possession of this privilege of issuing notes, and coming to the metropolis. But I feel bound to admit and assume that the prosperity of the Scotch banks, and their great extension, is in the main due to the prudence of the

  1989
  Scotch bankers, not only in the way they manage their issues, but also, and to a still greater extent, in the way they have extended their branches and banking facilities to all parts of the country. Why, so thoroughly have they done this that I would hardly be surprised to hear that there was a branch bank at John o' Groat's House. [An hon. MEMBER: There is one at Thurso.] Yes, and at other places far less promising and fruitful than the town of Thurso. It is this extraordinary banking energy—the manner in which the wise and thrifty disposition of the people to avail themselves of banking facilities has been developed and turned to account—which has been the main cause of the prosperity of the Scotch banks. But what I wish to point out to the House and suggest to the Government is, that there is now a good opportunity for that larger legislation upon this subject which I have indicated is desirable for an equitable settlement of every just claim on the part of vested interests—and I admit that these vested interests exist—for the establishment of the title of the State to issue, and for effecting a very large economy in behalf of the people of this country. The question could never be settled if party interests were allowed to enter into it, but if the Chancellor of the Exchequer avails himself of the opportunity which I think is open to him, I venture to think he will not be met in a partizan spirit. It is impossible, however, that considerations of party feeling can at present enter into the consideration of the question. I know the opinions of the Chancellor of the Exchequer on the subject, because I have heard them explained in this House with great clearness and great force. I know that the opinions which he has expressed are also the opinions of the Government, and I know that these opinions are in conformity with the opinions of hon. Gentlemen sitting on independent benches on both sides of the House, who may be able to render the right hon. Gentleman valuable assistance in the task which I respectfully propose to him to undertake. Though I have not asked the permission of those who sit near me upon this bench, I am sure I speak their sentiments when I say that if my right hon. Friend is disposed, on the part of the Government, to grapple with this great and important
  1990
  question, he will receive from them, as from myself individually, the most cordial support. This is a very important matter. When the present Government took office, we were told that all dangerous categories of legislation were to be avoided. Among these I hope cannot possibly be included a subject of this kind, in which such large public interests are at stake, and as to which substantially the same views are taken on both sides of the House by those who have considered the question. I simply throw this out as a suggestion to my right hon. Friend, and trust it will receive from him the consideration it deserves. With regard to the matter more immediately before the House—the Bill of the right hon. Gentleman (Mr. Goschen), I think there is great force in the plea that he has made—which can hardly be viewed with jealousy or antagonism. If an inquiry is to be instituted, I think the Government should, take care that the status quo is maintained while the inquiry is progressing. Obviously, the House would be placed in a false position, and would be exposed to just criticism and censure for want of foresight, if, when we are going to inquire whether it is or is not desirable to do a certain thing, we should leave the door open for those who may forestal the decision of the House by instantly establishing those houses of business in London. To that extent, at any rate, I hope that my right hon. Friend (Mr. Goschen), while meeting the Government in the most conciliatory spirit in the inquiry they suggest, will adhere to his proposal that the status quo should be preserved. Indeed, I anxiously hope that we shall hear from the Chancellor of the Exchequer that, in view of the investigation he suggests, it is reasonable and right that this precaution should be adopted.
  MR. PERCY WYNDHAMsaid, that while the Scotch banks had exceeded their limit of issue by £3,600,000, the English banks were £1,100,000 within the limit, from the fear of the heavy penalties they would incur by exceeding it. The English banks in the North of England had no fear of competition, provided it were conducted on fair and equitable terms; but the competition to which they had recently been subjected in Cumberland by the Scotch bankers was neither the one nor the other. The

  1991
  Scotch banks had peculiar privileges, and when they came to England and exercised those privileges against the English country banks which had no such privileges, great injustice was necessarily committed. When the Scotch boasted that they had covered the whole of the country with banks, it must be remembered that if a bank in Cumberland wished to start a branch, they could not do so so without locking up a large portion of their capital; whereas a Scotch bank could start tentative branches without locking up any capital at all. It was said that the Scotch bankers did not seek to issue their notes in England. Virtually, however, there would be a £1-note issue in England, and even last year in Carlisle £100,000 in £1-notes were paid over the counter of the banks there. This was a question between banks of issue with great and peculiar privileges and banks of issue without those privileges. The question was asked—"Why not object to the establishment here of foreign, colonial, or Indian banks?" The answer was, that these banks competed with the English banks upon fair terms, whereas, as he had observed, the Scotch banks came here with peculiar privileges. These privileges were conferred upon the Scotch banks in 1845, on account of the poverty of the people, and the great advantage which it was alleged would accrue to them if they had a larger note circulation. Now, as the fruit of these privileges, the Scotch banks had more money than they could lend in Scotland; but it was never intended that they should cross the Border and compete with English banks upon unfair terms. He did not see why inquiry should preclude a more immediate remedy, because, otherwise, if time were allowed to pass, legislation would become increasingly difficult.
  MR. NEWDEGATE: I am fully impressed with the perfect equity of the Bill which has been introduced by the right hon. Gentleman the Member for the City of London (Mr. Goschen). I am likely to feel this, because I remember the debates on the Acts of 1844 and 1845. In those discussions I took the part of the country bankers, who felt—and, I thought, justly felt—aggrieved by the stern restrictions which the Act of 1844 imposed upon the powers of issue. It appears to me that if it were right that those powers should then be
  1992
  so severely restricted, it is only right now to protect those who are so restricted against this invasion of Scotch bankers. It appears, therefore, to me a matter of sheer justice, that we should now prevent the extension to England of the monopoly which was granted to the Scotch bankers for public reasons in 1845. But I observe that this question is about to assume far larger dimensions than at first appeared; for, limited as is the scope of the Bill of the right hon. Gentleman, it is announced by the Government, and the proposal is supported by the right hon. Gentleman the Member for Greenwich (Mr. Gladstone), that this is a favourable opportunity for the State to assume the exclusive power of issuing notes in the United Kingdom. That is a question of the deepest and widest importance; and I would entreat the House, when that question is raised by persons of such weight and authority, to consider well the history of the currency and of the Banking Acts of this country before it lends itself to the sanction of any further steps towards the policy of the late Sir Robert Peel, beyond the point to which he was able to carry that policy. The step now contemplated is one which, if the late Sir Robert Peel ever thought it prudent, he never actually proposed, a measure which he never thought his own powerful Government in 1844 capable of enforcing. Now, Sir, the right hon. Gentleman the Member for Greenwich will not, I am sure, think I am likely to overlook the fact, that there has been a great change in the relations of money to the prices of labour, and of produce, and of property of all kinds since 1844. My firm belief is, that had it not been for the subsequent great additions to the circulating medium of the world, by the discoveries of gold, our Banking Act of 1844, and the system of commercial policy founded concurrently with the passing of that Act would have broken down. We had the failures of 1847, of 1857, and of 1866; and I am quite sure that, although it has been said that no house which did not deserve to fall did fall during these crises under the pressure of the action of the Bank of England, as dictated by the statute of 1844, that statement will not commend itself to any person, who remembers the circumstances. It is enough to say that the operation of the Banking Act of

  1993
  1844 has been twice interrupted, and that the right hon. Member for the University of London (Mr. Lowe), when Chancellor of the Exchequer, not only proposed a system by which these interruptions which were at these periods justified as exceptional, would become regular, since similar interruptions would have been organized as the standard method of relief for the future. I only touch upon these subjects in order to show how large a question has cropped up out of the very limited Bill now before us. It is now suggested that we should have an inquiry, and the right hon. Gentleman the Member for Greenwich tells us that he contemplates as a completion of the policy of Sir Robert Peel, that the State should take into its own hands the whole issue of the United Kingdom. I want to know what is meant by this contemplated intervention of the State; because the late Sir Robert Peel did not even propose that the issue of the Bank of England should be regulated by the State. The late Sir Robert Peel did not propose that the issues of the Bank of England, or of the English country banks, or of the banks of Scotland, or of Ireland, should be regulated by the State. On the contrary, he placed that function by law in the hands of that great corporation, the Bank of England, supplemented by the issues of the English country banks; he either suggested or suffered the continuance of the right of issue by the minor banks as well as those of the banks of Scotland, and he retained the same privilege for Ireland. This was not taking the issue of the country into the hands of the State, for that issue is committed by law to those banking corporations which have been thought worthy of the confidence of Parliament—Parliament representing the State. It is my belief that it would be most dangerous, considering the form of government in this country, and the constant changes in the depositories of power brought about by varying majorities in this House, for the State to have the regulation of the issue of notes; and that it is wiser and better that these issues should continue to be controlled by laws which are much more likely to be observed by banking corporations than by the Ministers of the day. The present system is this—We rely on the discretion of the banks of England,
  1994
  Scotland, and Ireland, which have the privilege of issue. The issue of notes in this country is governed by commercial corporations, empowered by law and trusted by the State; and I believe that system is far safer for the interests of the people of England and far more consistent with their freedom than any gigantic system of issue in the hands of officers of the State. I did not intend to take part in this debate; but I beg hon. Gentlemen to remember the tremendous power and, possibly, pressure that may be brought to bear on the industry and production of this country by measures of this kind, as was manifested in 1824 and 1825 by the action of the Bank Act of 1819; to remember also the effect of the Act of 1844, which was the complement of the Act of 1819, and of the still further restrictions enacted in 1845 on the power of issuing notes, which produced or contributed to the panics of 1847, 1857. and 1866. If we are to carry these restrictions still further, I trust that Parliament will consider well before so doing the history of the effects of these disasters upon the Bank Acts. I view with no alarm the privilege of issue which the Scotch banks enjoy; on the contrary, under the wise and prudent management of those banks, that privilege of issue has contributed greatly to the prosperity of that country. If that privilege were now to be restricted in Ireland, we should lay the foundation of a grievance much more solid and real than most of those we hear so frequently advanced. It has been said in this debate that the principle adopted by the late Sir Robert Peel involves stern restrictions on the issue of notes; but, at the same time, favours the greatest freedom as regards banking. But I doubt whether in its unrestricted sense that was the opinion of Sir Robert Peel; because when the Bill of 1844 was in this House, I, on behalf of the country banks, proposed to extend to the Bank of England the power of issue from £14,000,000 on securities—its present issue, with perhaps the addition of another £1,000,000 taken up by the Bank of England when abandoned by certain provincial banks—to £22,000,000, as the limit. What was the answer of Sir Robert Peel? I am not likely to forget it. He said, that in order to secure the convertibility of the note—that is, the convertibility

  1995
  of the notes issued by the Bank of England—the power of the Bank of England to issue on securities must be limited, and he maintained that the Bank of England, while it had the right of issue, had also the right to continue its banking operations, but to conduct those banking operations with reference to the securities upon which the power to issue £14,000,000 of notes is based, and the total amount of gold in its coffers, which is affected by its banking operations. I have always held that, although it is very convenient for the information of the public, that the accounts of the issue and of the banking departments shall be kept separate, it is the credit of the whole establishment of the Bank of England on which the privilege of issuing notes is granted and founded. That the security for the whole operations of the bank is one and the same—they rest on the same basis. It is useful for business purposes, useful that the trader shall be able to regulate his transactions by being able to judge from the amount of bullion in the coffers of the Bank the probable state of exchange, and hence the probable operation of the Bank upon commercial transactions and trade; but I hold that the security for the whole of the operations of the Bank of England, whether of issue or of banking, is, in fact, positively and absolutely the same.
  SIR JOSEPH M'KENNA, while feeling no difficulty in accepting the Amendment of the right hon. Gentleman the Member for the University of Edinburgh (Mr. Lyon Playfair) thought the proposal of the Chancellor of the Exchequer preferable, as it was of wider scope. There were a great many difficulties and defects in the working of the Acts of 1844 and 1845, which had escaped general observation. The Committee should be prepared to deal with those difficulties and defects and to recommend a satisfactory solution, if the Acts were to be altered. The proposition of the right hon. Gentleman the Member for the City of London that we should have a Suspensory Act to maintain the status quo, in order to prevent any bank from taking advantage of the present state of the law would to a large extent prejudge the case. He understood that the Scotch banks, which alone were feared by the right hon. Gentleman, were prepared, individually, to come under terms that
  1996
  they would not attempt to alter the status quo while the Committee was sitting. The Irish banks had been referred to, as if they enjoyed an advantage without paying for it, and as if a subsidy had been granted to them by the State. "While admitting that any advantage enjoyed by one corporation and not by another was to a certain extent in the nature of a subsidy, he begged to say that the Irish banks paid the State for the advantage which they possessed. They paid 7s. per cent per annum on the total of their note circulation, although beyond a certain limit, that circulation was secured by specie which the banks were bound to retain. What he wished to impress on the House was, that the scope and powers of enquiry granted to the Committee should be as wide as possible, with a view to effect as nearly as could be done a satisfactory settlement of the question. He conceded that the right of issue should be in the hands of the State; but the State was in the habit of respecting vested interests, and he trusted that all the interests of the Irish and Scotch banks would be duly provided for in any legislation which might ensue.
  MR. HANKEYsaid, it was evident from the remarks of the right hon. Gentleman the Member for Greenwich (Mr. Gladstone), which must have had great weight with the House, that in his opinion the time had come when the whole question must be dealt with, and if that were so, the proposal of the Chancellor of the Exchequer would be insufficient. He (Mr. Hankey) could not conceive it possible that a Committee of that House, representing particular interests as that Committee must do, could possibly take that large and general view of the question which was required, and which could property be taken only by Her Majesty's Government. Was it possible that a Committee of that House could enter upon the investigation proposed by the Chancellor of the Exchequer without going into the question of the circulation of the Bank of England? Suppose they entered into the question of currency, as established by the Act of 1844, and the position of the Bank of England with respect to it, could it be doubted what a large and important subject that would be? He did not want to overrate the importance of the Bank of England; but its issue formed so

  1997
  large a proportion of the currency, under the Act of 1844, that it was impossible for a Committee of that House, constituted as that Committee must be, to come to a satisfactory conclusion on the subject. If the arguments of the right hon. Gentleman the Member of Greenwich had any weight with the House and the Government, they must see that the Cabinet, and the Cabinet alone, could deal effectually with the question as a whole, for any attempt to treat it in a piecemeal fashion would not be satisfactory.
  MR. BALFOURsaid, he was afraid they were straying from the specific point before the House, and were losing themselves in generalities. He assumed that the Bill before the House and the whole agitation on the subject were based upon the grounds of public utility. One thing, however, was clear, and that was that if the English bankers were afraid of being damaged by their Scotch competitors, the Scotch were able to offer better terms to the public than the English could. Since that was so, it could hardly be contended that the Bill of the right hon. Gentleman the Member for the City of London (Mr. Goschen) was favourable to the interests of the public. He had received a circular asking him to vote for the Bill on the ground that his constitutents were much interested in it; but the only persons who would be benefited by the measure were the shareholders of such English banks as were being thrust out of the market by Scotch banks. There were, however, two other grounds upon which the Bill was recommended; the first, the Act of 1844; and the second, the principle of justice. As for the first point, the Act of 1844 was not a Banking Act at all, but a Currency Act. The whole object of that Act was to make the currency safe and to place it above suspicion. But it could not be maintained that the presence of Scotch banks in England would throw any doubt upon the currency. As to the second point, any appeal to justice seemed rather to show that the present system was unjust. It was said that in Scotland the banks had taken advantage of the Act of 1845, and when they came to England they would use that advantage by cutting out those banks which were not similarly favoured. But nobody maintained that the banks in this country were on an
  1998
  equality;—there was a marked inequality: the Bank of England was itself a monopoly. Then it was urged, that the Scotch banks were subsidized, because they did not pay, like the Bank of England, any equivalent to the State for their powers of issue, and that the Scotch Banks were thus extracting from the country the whole interest of their note issue. Though that statement had been supported by high authority, he could not think it was well founded. On the contrary, in England, private banks of issue were really subsidized by the State, because none of them had any rival in the town in which it was established. That was not the case in Scotland. There, in each town, there were 10 or 11 rival banks, which reduced by their competition the profits to the lowest point on which the business could be carried on. Upon these grounds, he should think it his duty to oppose the Bill, not because he thought restriction or privilege was good, but because the result of the right hon. Gentleman's Bill would be that we should have all the disadvantages of increased restriction, and lose all the benefits which the public now derived from the privileges of the Scotch banks.
  MR. SAMPSON LLOYDsaid, he supported the Bill upon this plain and intelligible principle. He contended that where, two rival banks existed, those banks should both be placed upon the same footing as regarded privileges, and that the one ought not to have any unfair advantage over the other. It was absurd for them to suppose that the Scotch banks were purely actuated by considerations for the public benefit. They were simply looking after themselves. Even supposing all existing monopolies were to be respected, he thought those monopolies ought not to be extended beyond the boundaries where they now existed. What were the facts under which the Bill came before them? The Act of 1845 gave the Scotch banks specially valuable and exclusive privileges—practically, a monopoly of banking business in Scotland, where they were protected against competition of any bank which could not issue notes. No such monopoly of banking existed in other parts of the Kingdom. To permit the extension of a monopoly was contrary to free trade and public policy. English banks of issue—only 174 out of 370 banks—might not

  1999
  issue £1 notes—by far the largest portion of the circulation where it was permitted—might not under a very heavy penalty exceed the authorized limit by even £5, and might not issue against gold. On the other hand, all existing Scotch banks had the privilege of £1 notes, and might issue against any stock of gold which they held. The result was that, while the English circulation steadily declined, the Scotch circulation, which was authorized to the extent of of £2,749,271, actually amounted to £5,862,215. They might form some idea of the enormous value of these monopoly privileges by considering, first of all, what was the profit on the authorized notes themselves; secondly, these notes, being payable in coin only at the head office, they could keep all their tills supplied with their own notes. There were 862 local bank offices in Scotland, and if each only required £5,000 they thus got the use of £4,310,000. Then, adding £200,000 each for 11 head offices and £2,700,000 authorized note circulation, they had £9,200,000, the interest on which at 3½ per cent was over £320,000. It was important to note the argument that if they kept gold against notes they could not get profit by it. But all banks in England, as well as in Scotland, must keep a certain amount of money in their tills. In England bankers were prohibited from making use of this. In Scotland they were permitted to make use of it, by issuing notes against it. These privileges were worth to the 11 banks which possessed them not less than £300,000 per annum. Surely it was an injustice and an anomaly that Scotch banks of issue were permitted to do business in London, while English banks of issue were absolutely prohibited from doing it at all? Surely it was an injustice to grant a monopoly worth £300,000 a-year to 11 banks, and then turn them loose into England to compete with banks which had no such privilege? This Bill had been represented as a Protectionist measure. It was really one aimed against Protection. Scotch banks were strongly protected. English banks—at least 200 out of 370—had no protection at all. English banks of issue were only very partially protected. The English banks merely asked that wherever trade was carried on, the law should give equal freedom
  2000
  to all who there carried on that trade. If the interests of the public required restrictions to be imposed, such restrictions should be equally imposed on all. If public policy permitted one of several banks competing in the same town to issue notes at its head office, the other banks competing in the same town should be also permitted to issue notes at their head offices. If, on the contrary, public policy required that the issue of £1 notes and issue against gold should be forbidden to the one, they should be equally forbidden to the other. But it was said—Why complain of Scotland, and not of Ireland and the Colonies? In Ireland two banks only had offices in England. One was merely an agency; the other had no branches in the country, and was only doing banking business in London, where its head office was. Foreign and colonial banks did not compete for banking business in England. They were more merchant bankers than bankers, having no monopoly powers conferred by the British Legislature. This Bill did not seek to prevent any Scottish bank having a London agency. He should not oppose the reference of the whole of this subject to a Select Committee; but, as it was a most grave and complicated question, he hoped the Chancellor of the Exchequer would make that Committee as fair as possible, and large enough to include representatives of all class in.
  MR. ANDERSONsaid, that as he had an Amendment on the Paper, the House would expect him to make a few remarks. The excellent speech they had just heard from the hon. Member for Plymouth (Mr. Sampson Lloyd) would have been a very a good speech if its object had been to advocate the removal of restrictions from English bankers; but it was in no sense a good argument for removing the privileges enjoyed by Scotch banks. He would himself have no objection to assist in removing the restrictions on English banks; but he objected to imposing them on the banks of Scotland. The right hon. Gentleman the Member for Greenwich (Mr. Gladstone) had set the example of opening up a very much larger question than the Bill dealt with, and other hon. Members had followed his example, notably the hon. Member for North Warwickshire (Mr. Newdegate), who had made an

  2001
  able speech, which would, however, have been more appropriate as a contribution to the Currency debate of the previous evening. He should like to return to the Bill immediately before the House, and in doing so, he could not avoid expressing his surprise and regret that a Liberal ex-Cabinet Minister of a Free Trade Government should be found lending his position and influence to a small knot of London bankers, for the purpose of bringing in a Bill to create new restrictions, and a new monopoly, rather than a Bill for doing away with the restrictions which already existed. This Bill was founded on a complaint that English issue banks could not come within 65 miles of London. That was the real secret of it, as was shown by the right hon. Gentleman the Member for Greenwich when he said the question had never been answered, whether it was fair that English banks should be prevented from coming within 65 miles of London, whilst Scotch and Irish banks were allowed to come to London? Well, he admitted it was not fair; but how should the unfairness be got rid of? Why, by removing the restrictions from English bankers. Any free-trader who wanted to get rid of a monopoly would adopt that plan, instead of taking away the privileges of the Scotch bankers. That was why he complained of the right hon. Gentleman the Member for the City of London, as a professed Free Trader and Liberal ex-Cabinet Minister, bringing in such a Bill as that. He had, however, been pleased to hear the right hon. Gentleman so well rebuked by the speech of his late Colleague in the Cabinet, the right hon. Gentleman the Member for the University of Edinburgh (Mr. Lyon Playfair). The Bill had two aspects, and he did not think they had been sufficiently separated from each other. In one aspect it was a question affecting the Scotch banks of issue as against the English banks of issue, and in its other aspect it affected the non-issuing banks. With regard to the English banks of issue, there was nothing to prevent them going to Scotland, backed by their issue, and establishing branches there, any more than there was to prevent a Scotch bank, backed by its own issue, coming into England. Neither one nor the other took their issue with them. The right hon. Gentleman the Member for
  2002
  the City of London had said that if an English bank went into Scotland to establish a branch, it must begin by subsidizing some Scotch bank, and getting the use of its notes, on which it would pay that bank a profit. That was an entire fallacy. The Scotch bank issue was at present something above £6,000,000. Its legal authorized issue without gold was only £2,700,000; therefore every penny of the authorized issue had been exhausted long ago, and on the extra issue, for which they had to keep gold, they made not a penny profit; so that if the English banks did go and use the Scotch bankers' notes, they would not be giving those bankers a farthing profit. The same thing held good in reference to competition in London by Scotch banks. The latter, having fully used up their issue at home, had already got all the profit they could have from it, and it did not assist them in their business with the English banks in London. More than that, he proposed to show that in this matter the Scotch banks were not aggressors. They had been told it was an omission in the Act of 1844 that the same restrictions were not placed upon Scotch as upon English banks; but those restrictions were created not by the Act of 1844, but by an Act of 1826, and was it to be thought that that Act, creating the 65 mile radius, would have been allowed to go on till 1844 without somebody discovering the omission, if it had been an omission, and endeavouring to get it rectified then? That was hardly credible when they knew they had so many English bankers watching all these clauses. The Royal Bank of Scotland was prohibited by its Charter from coming to England, until in 1873 it brought in a private Bill with the consent of the Bank of England, and the consent of a great many of the London bankers, to remove those restrictions and allow it to establish a bank in London; and was it to be believed, if it was intended to put a restriction on Scotch banks, that the English bankers would have allowed a special Act to be passed? Would they not have said—"The Scotch bankers ought to be under the same restrictions as the English bankers, and should not have any special privileges." That Act, given with the consent of the Bank of England, was enough to condemn the present Bill, even if there was nothing

  2003
  else. But in this matter London was more the aggressor than Scotland a great deal. Scotch bankers had been driven to come to London because of the competition that came from London to them in Scotland. Many discount houses had come in to compete on the spot with Scotch bankers. That was one way of competition. Another was, that the course of business had been such that trading transactions culminated in London to a greater extent than ever before. The consequence was that Scotch mercantile houses were obliged to do a great deal of their business in London. It was natural Scotchmen should say—"We would rather do our business with our Scotch bankers than have to pay other bankers." A great deal of profitable business came to the London bankers from Scotland, and so they now hoped by the Bill to drive Scotch bankers out of England for the purpose of appropriating that snug little business to themselves. That was the whole history of the Bill. Besides it was not merely to prevent Scotch bankers coming to London. It went a great deal further. It was not merely a monopolist's Bill—it was a robbing Bill. It went the length of robbing banks by driving them out of London. If it was merely a Bill to prevent new banks from coming, it would have been a grossly monopolist Bill; but as it was, it was far worse. The business these banks now had was property they had fairly earned, and had any man a right to bring in a Bill to rob them of that? It was the same as if he were to bring in a Bill to disestablish the firm of Fruhlen and Goschen, and deprive them of the business they had established. So far as this was a matter directly between the banks, he would not have interfered with it at all. But the public interest was to be considered much more than anything else. Although the right hon. Gentleman the Member for the City of London had endeavoured to show he was consulting the public interest, he must greatly prefer the opinions expressed on the previous night by the hon. Member for Bristol (Mr. S. Morley), who said that the traders of the City of London had not enough banking accommodation, and therefore welcomed the Scotch bankers who had come to set up establishments in the City to assist them in doing their business. Why was it that Scotch bankers
  2004
  were to be driven away when neither the Irish nor the Colonial bankers were to be turned out? That only meant that the right hon. Gentleman thought the Scotch bankers would have the smallest support in that House, and so would deal with them first, and after driving them out would turn round on the others and drive them out too. It seemed the Bill was to be referred to a Select Committee. He did not object to that. He therefore should not move his Amendment to reject the Bill. He understood that, under the circumstances, the right hon. Gentleman was willing to withdraw it.
  MR. GOSCHEN: NO.
  MR. ANDERSON: Then the right hon Gentleman means we are to read his Bill a second time?
  MR. GOSCHEN: No.
  MR. ANDERSON: What then?
  MR. GOSCHENsaid, the Bill would be shelved, but he had never said he would withdraw it.
  MR. ANDERSONsaid, that was practically withdrawing the Bill, and he was content with that. If the Bill was to be shelved until that Committee dealt with it, it would wait a great deal more than the six months of his proposal. He was, however, very jealous of a Committee of that House on trading questions, and most of all on banking questions. There was a great trade union of bankers which was largely represented in the House. The Chancellor of the Exchequer must have seen from the speech of the right hon. Gentleman the Member for Greenwich, that necessarily a much larger question was raised hero than he wished to raise. It was true the right hon. Gentleman the Member for Greenwich supported an Amendment to make the inquiry narrower still; but while the Amendment was to make the Committee narrower, the speech made the Committee a great deal wider. After that speech the right hon. Gentleman the Chancellor of the Exchequer could not narrow the Committee as much as he liked. It was too large a question to be dealt with by a Committee of the House, and therefore a Royal Commission ought to be substituted. It would have been better to have granted the Royal Commission he (Mr. Anderson) asked for on the previous night, which would have dealt with the question as well as any other. It had been suggested

  2005
  that there should he a Suspensory Bill proposed. That he objected to. The Scotch bankers would object to it altogether. In the first place, a Suspensory Bill would rob them of the right they possessed by law; and, in the next place, the action of the House of Commons in passing such a law would be a censure on Scotch bankers. It would be saying that Scotch bankers, in coming to London, had done that which was illegal and improper. If it was desired, Scotch bankers would be willing to agree with Government to preserve the status quo, but would not suffer a Suspensory Act to prevent them from doing a thing which they had a perfectly legal right to do.
  MR. BIRLEYsaid, he thought the supporters of the Bill had just grounds for the course they had taken. Could there be any doubt that the Scotch banks at present enjoyed a large and valuable monopoly? In 1846 there were 19 joint stock banks in Scotland—there were now 11. It was impossible to find more conclusive evidence that a great and powerful monopoly existed. It was quite clear that that far-seeing statesman Sir Robert Peel, foresaw what would occur when he said the Act of 1845 would have the effect of conferring a monopoly on them, and that an exclusive power would be given to these banks which was not given to banks in other parts of the country. The banks in the North of England were not afraid of free competition in banking. They did not ask for an exclusive privilege. They were not banks of issue; they simply carried on the ordinary business of banking; but the power which the Scotch banks had in the issue of their £ 1 notes was so great, that give them only time, and they might take possession of the whole southern part of the island. If they did so much upon their comparatively barren hills, what would they not do on the fruitful pastures of England. The right hon. Gentleman the Member for Greenwich had stated that he should not be surprised if a Scotch bank were established at John o'Groat's; he (Mr. Birley) should not be surprised if one were established at the Land's End. He gave the Scotch bankers every credit for remarkable talent and energy; but he asserted, without the fear of serious contradiction, that if they came here without their rights of issue, English banks would be
  2006
  perfectly able to maintain an equal contest. The Scotch banks derived great advantages from the Bank of England, and from the accumulation of gold in the southern part of the island. If, as had been stated, the question of issue had nothing to do with banking, let the two be separated, leaving issue as much as possible under the control of the Government, and the business of banking to private competition. The Scotch banks combined the two, and that gave them an overwhelming power over their competitors. Taking the whole thing together, he could not but think the Bill of the right hon. Gentleman the Member for the City of London, whatever might be its defects, was founded on sound principles, and that the only way in which it could be settled, would be to deal with the whole question by a Seleet Committee, a course which if decided on, he should not oppose.
  MR. LEVESON-GOWERsaid, it did not seem to him that the measure was so large as many hon. Members appeared to imagine. He should have thought from the speech of the right hon. Gentleman the Member for the City of London (Mr. Goschen) that his proposal was to deal with the banking monopoly of Scotland, or, at all events, to have some inquiry on the subject. But, so far as he could make out, his Bill had nothing whatever to do with the monopoly of Scotland. His (Mr. Leveson-Gower's) objection to the Bill was founded on the principle of free trade. As a free trader, he felt it was their duty to consult the interest of the public generally, and not of individuals or classes. The language of the circular which had been freely distributed among hon. Members by the promoters of this Bill reminded him very much of the representations which had been urged against free trade—that such and such interests were not afraid of competition, provided that competition was not unfair. Competition was always said to be unfair where advantages were offered to the public superior to those which the complaining interests could themselves afford. That was invariably the case where the competition originated in a foreign source. For instance, take the case of the agriculturist, where it was said the foreigner could export untaxed. Take the case of the paper-makers, who said they would never have

  2007
  feared the competition of France, except that the exportation of rags was prohibited. He wished to secure the advantage for the public which it was well known the Scotch banks afforded. Now, he did not defend monopoly, but he did not think it fair to taunt Scotland with monopoly. That monopoly was not the production of Scotland, and it was therefore unfair to tax her with it. He was, therefore, disappointed at the course taken by the Government, for he thought they ought either to have supported or opposed the Bill on its merits. It had been forced on Scotland most unwillingly, and the only reason why Scotland did not oppose it with greater success was the bribe which was offered to the existing banks. Then it was said Scotch bankers were enormously wealthy. Surely that was a reason why the English community should profit by it. Why should they not take advantage of the great knowledge which had been brought into use for the benefit of this country? He hoped the Government would make perfectly distinct what was the nature of the proposed inquiry, because there was still considerable doubt on that subject. He would like to know whether they were merely to inquire what legal objections there were to the establishment of these banks, or whether they were going into the whole question of currency. Were they to go into the disabilities of the English bankers, the monopoly enjoyed by Scotchmen, and the whole question of Government issue? Because if they were to have an inquiry of that sort, he did not think that a Committee of that House was the proper body to conduct it. An hon. Member had suggested that the Representatives of the large commercial towns should be upon the Committee. Many hon. Gentleman who would be admirable witnesses would be very bad judges. He did not suppose any Commission could be appointed which did not include persons who entertained some previous opinion upon this subject, but persons could be appointed who would easily surrender their opinions. If hon. Members of the House who represented large commercial towns were appointed, they could not surrender their opinions.
  SIR JOHN LUBBOCKsaid, the hon. Gentleman who had just sat down had referred particularly to the case of the
  2008
  agriculturists and paper-makers; but what the English bankers complained of here was, that disabilities were placed on them by their own Legislature. They could not help what other countries did, but they had a right to ask for equal justice at the hands of their own Parliament. The hon. Member for Glasgow recommended the removal of the restrictions on English banks; but he did not think that Parliament was prepared to give to English banks the right of issuing £1 notes. The question raised by the Bill was whether it was desirable in the public interest that a monopoly should be increased in area and in value. It had, indeed, been said that the Bill was an attack upon free trade in banking; but, so far from that being the case, the supporters of the Bill were contending for free trade, while the opponents were endeavouring to uphold and extend a monopoly. The hon. Member for Glasgow (Mr. Anderson) had said that the measure had been instigated by a knot of London bankers. Speaking in the presence of a great number of country bankers, he felt sure they would all confirm him when he said that this matter was first of all taken up by the National Provincial Bank—which had recently surrrendereda circulation amounting to £400,000 for the privilege of coming to London—then by other country banks, and it was only when these pressed the matter on the attention of the London bankers, that the latter took up the question. Several hon. Members had spoken as if this matter specially affected London bankers; but, in fact, the North Country bankers were those most immediately interested in the question. Had the Scotch banks a monopoly? It was no doubt true that, technically, the monopoly only existed in Scotland; but if you had two sets of banks in a country—one set with a monopoly of one half of the country, and able also to extend into the other half—it was obvious that they possessed so great an advantage as to render competition almost impossible. It was true that some of the English banks had the privilege of issuing notes, but on much less favourable terms than those enjoyed by the Scotch banks. Moreover, while the Scotch bank circulation had greatly increased since 1845, that of the English country banks, which was £9,000,000 in 1845, had now fallen to an average of

  2009
  about £5,000,000. Again, the English right of issue was exercised under such restrictions that it had no appreciable effect in preventing the establishment of new banks. That the legislation of 1845 had practically given the Scotch banks a monopoly of Scotch banking business could not be denied. The Economist, in a recent and very able article in support of the Bill, truly said that the law had given them "one of the greatest benefits which legislation ever conferred—the absolute monopoly of the deposits and of the business of banking in Scotland." Since 1845, though many banks had been successfully started in England, and attempts had been made to do the same in the North, not one of them had succeeded, and in 33 years not one new bank had been established in Scotland. Sir Robert Peel himself, in the debates on his Bill of 1845, described the measure as practically "a prohibition against the establishment of competing banks of issue;" and said—"I have protected the Scotch banks from competition." When Sir Robert Peel introduced his Bill, there were 19 Scotch banks, whereas now there were only 11; in fact, banking in Scotland was a sort of tontine. The Scotch banks considered that the law permitted them to come to England. His opinion on such a point was of no value. But he thought it was inconceivable that, while thus conferring such privileges on the Scotch banks, Sir Robert Peel should have meant to allow them to come into England and compete with English banks for English business. It was incredible that Sir Robert Peel did not anticipate that the Scotch banks would open branches in England if they could, since geologists told us that even the fossil footsteps of the extinct animals on the Scotch rocks point southwards. Sir Robert Peel certainly considered that he had subjected the Scotch banks to the same restrictions as had been imposed upon English bankers. In one of his speeches he enumerated the privileges he had conferred on the Scotch banks, which were denied to the English banks of issue. Now, if he had meant to give them the privilege of coming to London without surrendering their issues, he would have alluded to the subject at that time. But more than this, in one speech he expressly objected to the introduction of the Scotch system
  2010
  into England. Several hon. Members having spoken in terms of high praise of the Scotch system, Sir Robert, in reply, admitted the fact with some qualifications, but he added—
  "I say. Sir, that if there were the same system of banking in England as in Scotland, everything would be ruined. … The security of the system which prevails in Scotland rests in the amount of gold in England, and it is this which enables Scotland to dispense with an amount of bullion in proportion to its circulation."—[3 Hansard, lxxxi. 147.]
  If any hon. Member disputed Sir Robert Peel's dictum, he (Sir John Lubbock) would ask his attention to the following facts:—The liabilities of the 11 Scotch banks, as stated in Mr. Somers's recent work, which was easily accessible to hon. Members, and written in the interests of the Scotch banks, were £82,503,000. The amount of gold held against this immense liability was, however, only £3,324,000. But more than that, the amount of notes then in circulation was returned as £5,300,000, while the authorized circulation was £2,700,000. The Scotch banks, therefore, were bound to hold £2,500,000 of gold against their notes. Out of the total of £3,300,000, therefore, £2,500,000 was held against the notes, and only £800,000 against deposits and acceptances amounting to £79,000,000. It was perfectly obvious that if it were not for the gold in England, the Scotch system could not be maintained for a moment. Under any circumstances, the Scotch banks must hold some reserve against their immense liabilities. This could not well be less than it was, so that in reality the Scotch banks enjoyed a practically unlimited right of issue, and under these circumstances any permanent competition between the English and Scotch banks was out of the question. It must be remembered that the value of the Scotch circulation was by no means to be limited to the £2,700,000 of authorized issue. The Scotch banks had 862 branches, and if it was not for their peculiar privileges, they would have to hold, say £5,000 of currency at each, making in all £4,300,000. Add to this £2,200,000 for the 11 head offices, and we had the sum of £6,300,000, which, added to the authorized issue of £2,700,000, made an amount of £9,000,000, which, at 4 per cent. was equivalent to £350,000 a-year. But even this calculation did not represent

  2011
  the full extent of their privileges. Any one who compared the published Returns of the English and Scotch circulations, bearing in mind the absence of £1 notes in England, would see at a glance that the Scotch Returns gave the minimum and not the average circulation of the Scotch banks. They did not, therefore, represent the true state of the case. He did not say that they were not true at the moment to which they referred, but they did not indicate the average condition. It might naturally be supposed that, having such great privileges and advantages, the Scotch banks would do business on very cheap terms; and, in fact, some hon. Members had hinted to him that the North Country banks deprecated this competition on that account. But what were the facts? Mr. Somers, in his work, gave the average rates of interest for the years 1868 to 1872, and in every case the English rate was lower, and in some cases considerably lower, than the Scotch rate. The Scotch banks enjoyed not only a subsidy, but a monopoly. As Sir Robert Peel truly said, he had protected the Scotch banks from competition, and if by the effect of law that House prevented English banks from going to Scotland, surely it ought also to prevent Scotch banks from coming to England. In reference to the former contingency, they had been told that the Oriental Bank had a branch in Edinburgh; but he believed that the staff employed there simply consisted of a man and a boy, and that it was opened as an agency for the benefit of their Indian shareholders in Scotland, and no real banking business was done there. The case of colonial and other banks coming to London had been referred to, but none of these transacted banking business in the English sense of the word. It was no doubt true that in this matter the House must look principally to the public interests; but it did appear to him that the extension of a monopoly could not in the long run be for the public interest. It must be remembered that this was not merely a question affecting private bankers; there were more than 50,000 shareholders in joint-stock banks whose property would be prejudicially affected for the benefit of the 15,000 shareholders in Scotch banks. The monopoly enjoyed by the Scotch banks enabled them to make any charges they pleased on cheques
  2012
  and bills payable in Scotland. For instance, if a Scotch bank received a cheque or bill payable in any English town, it received the full amount in London, while, on the contrary, if an English bank had to collect a cheque or bill payable in Scotland, the Scotch bank always charged a commission for paying it. As regarded the circulation of £1 notes, although it might be true that the Scotch bankers would not bring their £1 notes with them, yet their notes would follow them, if they were to have branches established in England; and if they were to have a circulation of £ 1 notes in England, let it be after careful consideration and discussion in that House, and let it not be altogether to the advantage of one set of bankers, for it was surely unfair to this country that the advantage of such a circulation should be enjoyed by the Scotch banks alone. Since the passing of the Act of 1845, the Scotch banks had diminished in number from 19 to 11, and surely these 11 had an ample field in Scotland for their energy and their capital. It had been deemed to be for the national advantage to maintain a gold circulation in the country; but though, no doubt, the advantage of that was great, the expense was very heavy, and was thrown almost entirely on England. Under those circumstances, he hoped the Chancellor of the Exchequer would accede to the suggestion of the right hon. Gentleman the Member for the City of London, and bring in a Suspensory Bill. In moving for a Select Committee, he practically admitted primâ facie that there was a case for the Bill then before the House. Surely, then, it would be only fair and wise to keep matters in statu quo, until Parliament should have had time to deal with the matter. The English banks could not, and did not, object to any fair competition; they did ask Parliament that it should be on equal terms. They submitted that the Scotch banks were in possession of a monopoly, and that to permit the extension of a monopoly was unjust in itself, contrary to the public interests, and to the whole principles of our commercial policy.
  MR. J. G. HUBBARDsaid, that that House was the acknowledged redresser of grievances, and the right hon. Gentleman the Member for the City of London (Mr. Goschen) had propounded a very serious grievance. He (Mr. Hubbard)

  2013
  would indicate what in Ms opinion was the grievance, who were injured by it, and what was the remedy. The grievance complained of on the part of the bankers of London and of the provinces was, that the Scotch banks had by law a privilege of issue which could not be enjoyed by any new comers, and that the circulation of £1 notes gave to them a large advantage in carrying on their ordinary banking operations. With the exception of the notoriety which the issue gave to the Scotch banks, he declined to admit that the mere fact of issue gave to the banker, who was the issuer, any advantage in the conduct of his ordinary deposit business. If the issue were unlimited, the case would be entirely different, and undoubtedly the banker would then have a very advantageous monopoly. At present he could not see that the operation of this power on the part of Scotch banks incapacitated them from demanding the free use of their capital in the ordinary process of banking and of their deposits. It was quite true that the operations of the Scotch banks were not confined to the other side of the Cheviots, but extended to this side of the Border, and that £1 notes were found circulating in Cumberland and Westmoreland. He admitted that was a grievance; but he asked again, who was injured by this grievance? He could not himself think that the London bankers were pecuniarily injured by the action of these Scotch banks. Undoubtedly, so far as having greater power, wealth, and credit were concerned, the Scotch banks were formidable competitors of the English bankers; but who would suppose that in that year of grace 1875, the London bankers would be frightened at the introduction of capital into their own business? Did they not see constantly in the City of London, some of those ancient firms, whose names were coeval with the greatness of the City, endeavouring by the conjunction of their capital to ensure a larger amount of credit and acceptances with those whose custom they sought to get? So far, therefore, as the exaggeration of the power and wealth of the Scotch banks went, he could not as a disinterested spectator admit that the English bankers had any grievance as against them; but he admitted that the exercise by these Scotch banks of the right of issue, and especially the issue of
  2014
  £ 1 notes, was an exceptional feature in the system of currency instituted in 1844 and 1845, and did constitute a grievance. But who were the sufferers? The whole nation, for the Scotch banks were not so much monopolists as usurpers of the Royal Prerogative. They were exercising on the other side of the Border that which was the special function of the Crown—that function, which ought to be exercised for the advantage of the Exchequer, in the interests of the whole people of England, was exercised by a knot of something loss than a dozen Scotch banks. That was an anomaly. It was an invasion of the rights of the nation, which had been tolerated for a period of 30 years. But he quite agreed with the view that had been expressed, that this state of things was never intended by Sir Robert Peel to be a permanent adjustment of the currency question. He judged so from the different manner in which Sir Robert Peel dealt with those with whom, at the moment, he had the power to deal. How did he deal with the Bank of England in 1844? A distinct compact, the Bank Act of that year enabled the Bank of England to issue paper to the extent of £15,000,000, and the Bank of England was required to pay £200,000 a-year to the State as due to it in virtue of that prerogative; while, at the same time, only £80,000 a-year was paid to the State in respect of all the other issues of the country. He was glad to hear the right hon. Gentleman the Member for Greenwich (Mr. Gladstone) say that that was an opportune moment for taking up once for all the great question of the prerogative of coining, and seeing whether they could not bring it into a position more in accordance with the public rights of the country. There was, however, one point on which he could not agree with the right hon. Gentleman. Speaking clearly and distinctly of the right of the State, the right hon. Gentleman went on to make a suggestion, that as a temporary arrangement the Bill should be accepted, and a restraint put on the Scotch banks, pending the investigation about to be entered upon. He (Mr. Hubbard) must say that he most humbly but most earnestly protested against the adoption of that suggestion. It was not the duty of that House, nor was it in accordance with English principle to level inequalities

  2015
  by adding new restraints. If the London banks were so fettered band and foot that they could not compete with Scotch banks, it was not the business of the House to put handcuffs and chains upon the Scotch banks, but to take them off the English banks. He was in favour of universal liberty, not of universal coercion, and he did not think the circumstances of which London bankers complained were any justification for the suggestion of the right hon. Gentleman the Member for Greenwich. He trusted that Her Majesty's Government would stand distinctly to the position which they had taken. He understood them to oppose the second reading of this measure. After having listened attentively to the debate he felt it his duty to vote against it; but he most earnestly recommended Her Majesty's Government to accept the other suggestion of the right hon Gentleman the Member for Greenwich, and to take the present great and favourable opportunity for reviewing the whole question, with a view to adjust it to the interests of the trading community, and restoring to the Crown a function which ought never to have been in abeyance.
  MR. D. DAVIESsaid, his opinion was, that the bankers might very well be left to fight out this matter among themselves. He was not a banker, nor had he a shilling of interest in any bank; but he wished to call the attention of the House to one point which had not been alluded to by any previous speaker. It was, that as regarded the question of competition, banking as a trade stood in a very different position from that of any other business, such as shipping, and matters connected with railways. He did not offer any opinion as to whether they had already in England too much competition in banking, but he thought they had got quite enough of it, for it seemed as if its only result was to make some people rich who were rich enough already. There was this objection to free banking and to Scotch banks coming to London, that when the competition was great, every bank was anxious to use its surplus money, and that money was often used in making advances on rotten securities, and in the end that brought down the just with the unjust, the holy with the sinner. In 1864 a great many finance companies were brought out, which were practically
  2016
  banks. They advanced money on rotten securities, and the effect of that was, that they blew themselves up, blew up the people to whom they lent the money, blew up a great many honest men, and injured thousands more. How many, in fact, had they killed, of whom it might be said they could never be revived? He thought it was not for the interests of banks to issue notes. What was the paper they issued? Nothing more nor less than a mortgage on the little capital they had, and the deposits were already a sufficient mortgage upon it. He had confidence in the Chancellor of the Exchequer, and hoped he would apply the brake, and see the safety valve right, as long as he remained in office, for we were inclined to go too fast, and that was more injurious than going too slow.
  MR. CAMPBELL-BANNERMANsaid, he wished to direct the attention of the right hon. Gentleman the Chancellor of the Exchequer to the condition in which the Scotch banks would be placed during the inquiry which it was proposed to institute. It had been suggested that something should be done to keep up the status quo. He believed that the House was entirely of that opinion, and that the Scotch banks themselves were quite willing to assent to it; but there were some circumstances in the passing of a Suspensory Bill which made them, he thought, not unjustly opposed to the proposal. As the hon. Member for Glasgow (Mr. Anderson) had pointed out, the passing of a Suspensory Bill would convey the idea that the banks had done something which was wrong, while what they had done was acknowledged on all sides to be within the law. In fact, one bank had the direct sanction of Parliament for the step which it had taken. It would, therefore, be rather unfair to place upon these banks the imputation which the passing of a Suspensory Bill would imply. He believed the Scotch bankers were all perfectly willing to declare that they would not extend their business or establish new branches while the inquiry lasted, and he thought such a declaration should be accepted, instead of placing any legislative veto upon them. At the same time, he trusted that some period would be put to the inquiry of the Committee, because as every Member would go into into it with a foregone conclusion, the work might go on

  2017
  year after year, and any prolonged delay would be unfair to those banks which, had not exercised their right to come to England, and which would, during the inquiry, remain at a disadvantage as competitors with their neighbours who had exercised that right. If the status quo was to be maintained, some limit should be put to the sitting of the Committee. The Scotch banks would have no objection to go on as at present for two or three years.
  THE CHANCELLOR OF THE EXCHEQUER: I think, Sir, that those who have been present at the discussion must feel that a great deal of light has been thrown upon a very complicated and important subject, and, although some persons may be disposed to look upon the Bill of the right hon. Gentleman the Member for the City of London (Mr. Goschen) as raising a very small point, or as being simply designed to protect the interests of one particular class in the community against another, yet all who have attended to the debate must feel that the question he has opened is a very large one, and one which presents many aspects beyond what at first appeared. I will not enter at any great length into many of the subjects which have been raised in the discussion, but there are two or three points upon which, before we proceed to a division, I should like to indicate on the part of the Government their views as to the course to be taken. The questions before us may be taken in this way—First, whether there is a case; and, secondly, if there is a case, in what direction we should look for a remedy? Then, do we need inquiry; and, if so, what is the proper form of reference; and, lastly, should we pass a measure in the nature of a Suspensory Bill? Those are the practical points to be decided. First, as to the question whether there is a case. It seems to me that the case originally made out by the right hon. Gentleman opposite, the Member for the City of London, although it is said he has not made out his position, shows that there is by general consent some inequality which ought to be recognized, and which does deserve the attention and consideration of Parliament, with a view to see whether a remedy is not required, and what that remedy should be. Some time ago the representatives of the English country banks
  2018
  came to me and laid before me, with a view to some action on the part of the Government, the position in which they were placed. I admitted that the position was one which they must naturally and reasonably feel to be embarrassing and unfair, for there was truth in the argument that under the existing state of things the competition which they were called upon to maintain with the Scotch banks was not a purely fair and even competition. But it is not unequal in the sense understood by the hon. Member for Bodmin (Mr. Leveson-Gower). The English bankers do not ask simply to be protected against the Scotch; for if they had, the Government would have said—"Gentlemen, whatever is the case with regard to yourselves, the public interest is not concerned, and we have nothing further to do in the matter." The case of the English bankers is, that the competition is not an equal one, because in fact a subsidy is given on the part of Parliament to one of the competitors. It becomes, therefore, something more than a battle of the gauges, so to speak, between English and Scotch banks. It becomes a matter in which the propriety of the conduct of Parliament is called in question in respect to the unfair advantage alleged to have been given by it to one of the competing parties. It has been contended that it is not a subsidy, because all the advantages are given to the Scotch banks in Scotland, and they do not carry these advantages into England. We need not, however, go fully into the question, which has been amply debated. The statement of the case is clear. I will illustrate it by laying it resembles the case of two steamship companies plying to a distant part of the world, of which one has a subsidy to a certain point—say to the Cape—and the other has no subsidy at all. As between England and the Cape we should say the one has an advantage, but beyond that point both are free, and may compete as they please. The unsubsidized company say—"Yes; but you give our rivals the advantage on one side of the Cape, which enables them to compete with us unfairly on the other." This is the case which the English bankers make—namely, that the advantages given to the banks in Scotland enable them to compete unfairly with the banks in England. Assuming, then,

  2019
  that there is a case of inequality, is it one in which the Government are bound to interfere, and, if so, in what manner? In the first place, the first thing I have to look to is, whether the public interests are involved. Having done so, it seems to me that it is a matter in which—although it does not appear so at first-public interests are deeply involved, and that by whatever step we may take we may be laying the ground for important measures hereafter. Therefore, it be hoves us to be exceedingly careful as to the first step, for we ought to foresee to what it may lead us. I have also to consider some of the complications which have arisen. One of these arises from the surrender by the National Provincial Bank of its issue; another from the admission to London of the Royal Bank of Scotland in 1873, by an Act of Parliament sanctioned by the late Government for removing an obstruction which prevented its coming here; another, as to the position of the Irish banks, one of which has been admitted into the Clearing House by the London bankers themselves; and there are questions with regard to other transactions which have taken place, all of which require to be minutely and carefully weighed before one can decide what will be the just and proper line of action. Beyond that comes the question, in what direction are we to seek for a remedy? An inequality between two parties may be removed by two modes—either by placing restrictions on one party, or by removing restrictions from the other. The discussion this afternoon resolves itself into the question, which of these two courses is the more proper for the House to take? It seems the easiest plan to say—if the Scotch banks come to England, they must surrender the privileges in Scotland which give them an unfair advantage. But that is, to my mind, a very unsatisfactory solution, and one that I will not say we may not be driven to, but which I shall accept with great reluctance, because it is rather in the direction of restriction than of freedom. The Government accept in the fullest manner the principles of the legislation of 1844 and 1845, and on such a question as that the right hon. Gentleman the Member for Greenwich speaks with an authority superior even to his ordinary authority on all questions of finance and currency, because to a great extent
  2020
  the right hon. Gentleman knew the mind of Sir Robert Peel, and was a Member of the Government which originated the legislation of those years. It is therefore a great satisfaction to me to hear from the right hon. Gentleman the complete confirmation of the view which I have always taken of the intention and meaning of that legislation. I understand that that meaning is this—to make a clear distinction between the two great principles of issue and of banking—to put the currency or issue under proper regulations, on the assumption that the privilege of issue belongs to the State, and that the State exercises that right of issue in such a manner as may be most for the convenience and interests of the public. At the same time, with regard to banking, the principle is, that competition should be free, and that no restriction which the State can impose can be so advantageous to the public as free banking. But I have also understood that although these were the principles which Sir Robert Peel laid down as the basis of his legislation, yet he found himself unable, from various circumstances, to carry them to their proper results. He found it impossible for the State to exercise the right of issue for its own profit, and he was obliged to leave that power to some extent in the hands of the bankers. On the other hand, he countervailed the privilege thus conferred by restrictions on the banking system. I believe this to be the truth of the case—that as far as England at least was concerned, Sir Robert Peel looked forward to the time when the provincial issues would be absorbed, and would come into the hands of the Bank of England as the agent of the State. He made certain provisions to meet the interval, and imposed restrictions on the country banks, partly to protect, but partly also to restrain their issue, and to render it their interest to make arrangements for disposing of it which might be satisfactory to all parties. In the same way, certain provisions were made which were regarded by Sir Robert Peel as of a temporary character with regard to the Scotch and Irish banks of issue. There were, however, considerations connected with those countries which made those provisions of a somewhat more durable character than those which applied to England, There is,

  2021
  for instance, that great question of the difference of the amount of the note, which now stands on a different footing in Scotland from what it does in England, and which introduces a very serious complication into the questions we have to deal with. Well, then, how are we to deal with the restrictions that now exist? Suppose we wanted to do away with all these restrictions. Two questions would then arise—first, can you with safety, and consistently with the principles of the currency, do away with any, or all the existing restrictions? If you cannot, ought you, in order to get rid of the restrictions, to make any change with regard to the principles on which you have allowed the currency to remain in the hands of private issuers? These are questions of great magnitude and importance, and it is not desirable that a Government with a great deal of other business on its hands should take them up without first preparing the public mind and endeavouring to ascertain public opinion upon the subject, in order to see how far it is possible and desirable to go. It therefore appeared to my Colleagues and myself that the time is not favourable to our commencing any legislation; but, at the same time, we feel most fully the truth that the responsibility of proposing any legislation on the subject, when the time is ripe for it, must ultimately rest with the Government of the day. I have been twitted with allowing this matter to be taken up by a private Member. I have always said for the Government and myself that the question can never be settled permanently by any one but the Government. There is, however, a great difference between a permanent settlement of the question, and its opening by a private Member, and the appointment of a Committee of Inquiry, which would be desirable before the Government could with any hope of success bring forward a measure to give effect to their convictions. The effect of this discussion, and of the pains that will be taken by the Committee to elicit the facts, will be of very great advantage to Parliament in any legislation which may result there from. The right hon. Gentleman (Mr. Gladstone) intimated some doubt whether there was any necessity for inquiry by a Select Committee. If I were disposed to be personal, I might quote his
  2022
  own authority against himself; because on the last important discussion when the attention of the Government was called to the subject in 1865, the right hon. Gentleman brought forward, and very nearly passed, a measure dealing with the provincial issues, and when on the third reading he was obliged to withdraw the Bill, he said—
  "Her Majesty's Government, however, do not propose to abandon their intention of prosecuting the subject, and, in the absence of such an agreement as I have referred to [between the Government and country bankers] they may conceive it to be their duty to take up the question on a future occasion upon broader grounds, and they reserve to themselves the power of determining whether it would or would not be right that on the first convenient opportunity, which I am not prepared to say will occur during the short remainder of the Session, they should invite the assistance of Parliament to investigate this subject by means of a Committee."—[3 Hansard, clxxix. 1123–1.]
  Now the same considerations that induced the right hon. Gentleman then to think it might be desirable to have a Committee weighed with us in considering what was the best course to be taken on the present occasion. I do not imagine that any Select Committee would be able to devise, nor is there any intention that they should devise, a Code of Currency Legislation. What I ask the House to do is, to assist us by means of a Committee to investigate the question and to bring the facts fairly before the public, so as to remove doubts, and that we may have the subject fully discussed before we attempt to legislate upon it. We have been told by my right hon. Friend the Paymaster General (Mr. Stephen Cave), in the commencement of the discussion, that there is a question even as to the law of the case. That is not one of the most important points, perhaps, but it may be worth while that it should be made clear, because, while I am not prepared to say that the Scotch banks are not within the letter of the law in what they are doing, I have seen some opinions, given by persons of no inconsiderable authority, throwing great doubt upon their being in that position. My attention has also been called to this curious fact—that in the year 1849, four years after the passing of the Scotch Act, a communication was made by the then Chancellor of the Exchequer, to three Scotch banks who had opened agencies in Berwick, intimating something to them which had the effect of

  2023
  causing them to withdraw their agents. I apprehend that that must have been a communication to the effect that their position was, at all events, doubtful. It will be worth while, therefore, to endeavour to obtain certainty on that point. What is more important, however, is to ascertain the truth of the matter with regard to many of those subjects that have been debated this afternoon, as to the privileges of the Scotch banks, the precise extent to which they can use the privilege of issue, whether the privilege is or is not something beyond the mere power of issuing a thousand pounds worth of notes against a thousand sovereigns; whether by the way in which the averages are taken they obtain even a greater advantage than they seem to obtain. Those points should be cleared up, and there are many other points in respect to the Scotch banks and the English issuing banks which it is extremely desirable to ascertain. No such inquiry as that now proposed has taken place for a great number of years, and none at all has ever been directed to those particular points. We have now a fair and proper opportunity of making such an inquiry. The exact point now is as to the proper form of reference. The particular reference which I propose has been challenged as being too extensive, and the right hon. Gentleman the Member for the University of Edinburgh (Mr. Lyon Playfair) has proposed a form of reference which I at first thought might be more strictly confined than my own. When, however, I came to examine it, I found that it opened a question which goes deeper than mine, and one which I object to have opened. The objection taken to my words is that they are too large, and that they open the question of the issue of the Bank of England. The words of my reference are that the Select Committee shall consider and report upon—
  "The restrictions imposed and privileges conferred by Law on Bankers authorized to make and issue notes in England, Scotland, and Ireland respectively."
  I fail to see how the issue of the Bank of England is taken out of the Order of Reference proposed by the right hon. Gentleman. He says the Committee are to consider—
  "The expediency of maintaining or imposing restrictions upon issuing Bankers, so long as
  2024
  they shall continue to he such, in respect of their banking business.
  That is as wide a term as could be used, and it is as applicable to the Bank of England as to other banks. The right hon. Gentleman opens up the very question which Sir Robert Peel had made up his mind upon—namely, whether, if you entrust the bankers with the power of issue, you are to impose restrictions upon their banking business. So that, if we adopt the right hon. Gentleman's Order of Reference, we are really going to open up the policy of the Bank Act of 1844. I doubt, however, whether there is any great occasion to quarrel about the terms of reference, although I think mine preferable. One thing I want the House clearly to understand—that we do not propose this inquiry with a view of changing the bases of the legislation of 1844, or of questioning whether we are or are not to maintain the distinction which that Act created and recognized between Currency and Credit. That ought not to be an open question, and the Government feel that they would be guilty of a breach of propriety if they threw it down as an open question before any Committee or Commission that might be appointed. They will maintain the principle, that the issue of notes is the right of the State, and ought to be granted only upon such terms as are compatible with the public safety and convenience, while, on the other hand, banking should be as free and as open as possible. Inquiry may be invited, and may usefully be made into the friction which is found to exist in some parts of the machinery of the Bank Act. The Government desire that any points of friction which are found to exist may be carefully examined. Having thus defined the object of the Committee, I may fairly expect that the inquiry will not be of that enormous length and duration which some hon. Gentlemen apprehend. I think that even the remainder of the present Session will be quite sufficient to ascertain the main points to which our legislation should be directed. In proposing this Committee the Government maintain they are not endeavouring to shift from their own shoulders the responsibility which they admit belongs to them. We only desire to bring before the public the facts and bearings of this question. A suggestion has been made in favour

  2025
  of passing a Suspensory Bill. The Parliamentary position of this question is this—that supposing the House should agree to the Amendment of the Government, the second reading of the Bill will not be proceeded with and the Committee will be appointed. Then, it may be asked, what will become of the Bill? I imagine it will be still in the hands of the House, and it will be competent for the right hon. Gentleman to bring it on for further consideration at a future time, if he should desire to do so, after the Committee have reported. With regard to a Suspensory Bill, it may be a question whether the right hon. Gentleman shall go on with his measure, and try and make it a Suspensory Bill, or whether he should ask leave to introduce a Bill of a different character from the present. I own I think there would be great difficulty in framing a satisfactory measure in the nature of a Suspensory Bill. I also attach great value to what has fallen from the several speakers in the debate, who have declared that a great deal of misconception would be created by such a course. At the same time, I feel that the position of the English bankers is one which naturally makes them very sensitive, and makes them feel that if nothing is done to protect them, their interests may suffer seriously while the inquiry is going on. I do not know whether we may take the statements made by several hon. Gentlemen, especially by the hon. Member for the Stirling Burghs (Mr. Campbell-Bannerman), as formal assurances, that in the event of the inquiry being set on foot, not in a dilatory spirit, but with a view to bring about an early and satisfactory solution of the question, there will be no disposition on the part of the Scotch banks to push their proceedings further, and that they will be willing to let the status quo remain as at present. I do not suppose that the right hon. Gentleman the Member for the City will let his Bill disappear from the Orders. Perhaps, however, it can be ascertained by communication with those who are authorized to speak on behalf of the Scotch banks, whether it is not possible to come to an agreement that would be satisfactory to all parties. Such an agreement would, it appears to me, be preferable to a Suspensory Bill. I hope that the House will be prepared to adopt the course which, in the name
  2026
  of the Government, has been suggested—namely, that the Bill should for the present, at all events, be laid aside, and that we should proceed to appoint a Committee upon the lines which I have indicated.
  MR. LOWE: I think we are very much indebted to my right hon. Friend the Chancellor of the Exchequer for the pains which he has evidently taken with this subject. If he had been a Scotch clergyman instead of merely a lecturer on Scotch banks, he could not have mapped out his subject more clearly than he has done. I am bound to say also that I think he deserves our thanks for the very distinct and explicit manner in which he has delivered his opinion on the merits of this question. He has left us in no doubt either as to his own opinion or as to that of Her Majesty's Government. They are of opinion, as I understand, with my right hon. Friend the Member for the City of London (Mr. Goschen), that the issue of notes is a matter which belongs properly to the Sovereign Power of the State, and that it ought to be placed exclusively in the hands of the State. I understand the right hon. Gentleman further to be of opinion that it is desirable not to proceed by way of limitation in this matter, by limiting, that is to say, the power of the Scotch banks—but rather by way of equalizing the privileges of all bankers—which means, as I take it, depriving in some way or other all bankers in England, Scotland, and Ireland of the power of issuing notes and vesting that power solely in the Supreme Authority. ["No, no!"] That, I understand, to be the declaration which has been made on behalf of Government by the Chancellor of the Exchequer. I understand, moreover, that the right hon. Gentleman adopts the statement of my right hon. Friend the Member for Greenwich (Mr. Gladstone) with regard to the policy of Sir Robert Peel, and that he says Her Majesty's Government take the same view of the Bill of 1844 and the Bill of 1845 as Sir Robert Peel did. So I think nothing Jean be more clear, and nothing—to a person of my opinions—more satisfactory than the views which the right hon. Gentleman has laid before us. We are indebted to him not only for the clearness with which he has expressed those views, but also for the candour with which, so far as theory

  2027
  goes, he has investigated the whole question. In that respect he cannot have failed to satisfy the most ardent Currency reformer. But then comes another question. As long as it is a matter of theory, nothing can exceed the boldness and fairness of the right hon. Gentleman's statement. "We are met, however, by the question—What is to be done? And here I think we have some reason to say that—
  "—the native hue of resolution
  Is sicklied o'er with the pale cast of thought."
  I cannot say that I feel the same satisfaction when I come to consider the step which the right hon. Gentleman advises us to take. The Government have clear and distinct views on the subject. They have the power, moreover, to give effect to their wishes—a power which carries with it a great responsibility. They are met nowhere with any doubt or difficulty as to the principle of the question. Under these circumstances, it seems to me that the only thing that remains for the Government to do is to introduce a measure immediately to give effect to their views, and to put an end to all the inconveniences of the present system. If they had felt difficulties or doubts, or if they had been led away into the flowery paths in which the hon. Member for Glasgow (Mr. Anderson) tempted them to stray, the case would have been very different. But as they have surmounted all difficulties, and have reached a serene height of contemplation, where all is light and brilliant, I cannot conceive why they should falter on the very threshold of action, and tell us that while they are fully prepared, as far as opinion goes, yet they are not disposed to do anything. Nothing could be more marked than the contrast between the speculative opinions and the practical proposals of the speech of the right hon. Gentleman. As clear as he was in the former, he became vacillating and nebulous in the latter. It seems we are to have a Committee; but when I try to find out what the Committee is to do, I entirely fail in discovering any reason for its appointment. The right hon. Gentleman said something about ascertaining what profit was made by different banks from the issue of notes. That is a very pretty little inquiry, but what does the profit signify? Why should the assertion of a great principle, upon which the Cabinet and
  2028
  both sides of this House were agreed, wait till you have gone into these little peddling details? Then, we were to get at the facts of the case. What facts? This is not a question of facts. It is a question of abstract opinion which has been worked out painfully and laboriously by the ablest men in the country till they have come to be pretty nearly unanimous upon the subject. It is not proposed that the theory should be considered by the Committee, but only that certain facts should be elicited. The matter is to wait till next year in order that those facts may be found out. Why wait till next year? Why lose the opportunity which we have at present? We have got a Government with strong convictions on this subject, and with an undoubted power to give effect to these convictions. It is evident the right hon. Gentleman is firmly convinced of the importance of the proposed change, and unless something is to be done, it is not fair to interfere with the operations of these Scotch banks. The only justification for interfering is, that the Government are prepared to act now, and I cannot see what state of things can give them any better assurance in taking action. I can regard the proposed Committee as nothing more nor less than a pretext for getting rid of a troublesome subject, with which the Government would rather not deal. Committees are appointed to an extent which is almost too much for human patience. Every question which is not actually before the House is either before a Committee, or before a Commission. I really think we have reached the limit beyond which the force of Committees can no further go. But who among the already over-tasked Members of this House are to carry on the inquiry which is proposed? If you assign the duty to hon. Gentlemen who are not already familiar with currency matters, they will barely have learnt their first lesson before the Committee comes to a close. And as to persons who are qualified to serve on such a Committee, such as the English, Irish, and Scotch bankers, there is not one who has not made up his mind on the subject long ago. Moreover, it is likely that the men of experience and the men whose names would give weight to the Committee are already so fully occupied that it would be impossible for them to give

  2029
  their services in this matter. I have stated some objections which occur to me as to the course pursued by the Government. It is a great step gained that the House has heard the intentions of the Government; but unfortunately the world is not governed by people's good intentions, unless they are prepared to take some step towards giving effect to them. It seems that having found out what is right, the whole object of the Government now is to find out the way not to do it. I see no good that can result from an attempt to oppose them in their course; but it is fair to point out the difficulties I have suggested as to the working of the Committee, and as to the utterly unsatisfactory nature of the inquiry which is to be delegated to it. It is very well to regulate the circulation of the currency, but there is another circulation which, I think, needs to be regulated. I mean the circulation of the blood which courses through the veins of right hon. Gentlemen opposite. I should like them to have an amount of vitality which would enable them to have the courage of their opinions and act for themselves, without seeking a shelter behind Committees and Commissions from the responsibility which properly belongs to them.
  SIR EDWARD COLEBROOKEhoped that when the Committee was appointed it would not be restricted in its inquiry, but that it would be enabled to go into the question, as it affected the whole Kingdom, and not merely the action of the Scotch banks.
  MR. GOSCHENfelt that, as a private Member, he had no course open to him but to leave the matter in the hands of Her Majesty's Government. He would leave the Bill however, in the hands of the House, and endeavour to confer with Her Majesty's Government as to the support they would give to a Suspensory Bill, or to some arrangement with the Scotch banks. He understood the Government to think that the present status quo should be no further maintained, but that they wanted time to consider what the future status quo should be. If he were right in that impression, he would at a later stage put himself into communication with the Chancellor of the Exchequer, if he should think it necessary. He might add, in reference to the appointment of the Committee and the terms of reference, that he did not wish to be considered as wedded to any particular
  2030
  form of proceeding or terms of reference.
  LORD ESLINGTONsuggested that the right hon. Gentleman should move the adjournment of the debate, so as to carry out his own proposition that the Bill should not now be dealt with, but should be simply "hung up."
  MR. GOSCHENsaid, he did not consider it necessary to take that course.
  Question, "That the words proposed to be left out stand part of the Question," put, and negatived.
  Words added.
  Main Question, as amended, put, and agreed to.
  Select Committee appointed, "to consider and report upon the restrictions imposed and privileges conferred by Law on Bankers authorised to make and issue notes in England, Scotland, and Ireland respectively."
  And, on April 13, Committee nominated as follows:—Mr. CHANCELLOR of the EXCHEQUER, Mr. GOSCHEN, Mr. STEPHEN CAVE, Mr. CAMPBELL-BANNERMAN, Sir GRAHAM MONTGOMERY, Sir JOHN LUBBOCK, Mr. HUBBARD, Mr. ANDERSON, Mr. MULHOLLAND, Mr. LEVESON GOWER, Mr. BALFOUR, Mr. NORWOOD, Mr. ORR EWING, Mr. MUNDELLA, Mr. TORR, Mr. WILLIAM SHAW, Mr. BECKETT DENLSON, Mr. BACKHOUSE, Mr. KAVANAGH, Mr. SAMPSON LLOYD, and Mr. HUSSEY VIVIAN:—Power to send for persons, papers, and records; Five to he the quorum.

OPEN SPACES (METROPOLIS) BILL.
(Mr. Whalley, Sir George Bowyer.)
OPEN SPACES (METROPOLIS) BILL.

  [BILL 50.] SECOND READING.
  Order for Second Reading read.
  MR. WHALLEY, in moving that the Bill be now read a second time, said, its object was to give facilities to not less than two-thirds of the owners of any open space in the metropolis to throw it open for public use, leaving the power to any dissatisfied owner to bring an appeal before the Local Government Board, with a view to inquiry and redress, so that the smallest objection of the humblest individual so interested might not be overruled, excepting by means of a Provisional Order of the Local Government Board sanctioned by Parliament. The hon. Member concluded by moving the second reading of the Bill.
  SIR GEORGE BOWYEE, in seconding the Motion, hoped the second reading would be agreed to, and the details left to be considered in Committee.
  Motion made, and Question proposed, "That the Bill be now read a second time."—(Mr. Whalley).
  SIR JAMES HOGGsaid, that speaking on behalf of the Metropolitan Board of "Works, he must express the opinion that the measure would be quite useless. With reference to the improvement of Leicester Square, the experience as to the cost incurred and likely still to be incurred in connection with it was a warning to the Board, rather than an example, in taking upon their hands any other of the metropolitan open spaces.
  2032
  And it being a quarter of an hour before Six of the clock, the Debate stood adjourned till To-morrow.

  PRISONERS ON REMAND BILL.
  On Motion of Mr. H. B. SHERIDAN, Bill to amend the Law relating to the treatment of Prisoners on Remand and persons awaiting hail, ordered to he brought in by Mr. H. B. SHERIDAN, Mr. LOCKE, Mr. GOURLEY, and Mr. MACDONALD.
  Bill presented, and read the first time. [Bill 99.]
  House adjourned at ten minutes before Six o'clock.

MINUTES.
PUBLIC BILLS—First Reading—Consolidated Fund (£7,000,000)*.
Second Reading—Elementary Education Provisional Order Confirmation (Brighton) * (32); Consolidated Fund (£822,661 8s. 11 d.) *.
Committee—Report—Superannuation Act (1859) Amendment* (37).
Third Reading—Registry of Deeds Office (Ireland) * (25); Land Drainage Provisional Order* (30), and passed.
Their Lordships met;—And having gone through the Business on the Paper, without debate—
House adjourned at (Six o'clock, till To-morrow, half past Ten o'clock.