THE UNIVERSITY OF ILLINOIS LIBRARY 332. B875 V.27 SUMMARY STATEMENT 9- ONE POUND NOTE QUESTION. LONDON: G. B. WHITTAKER, AVE-MARIA LANE. /0^ MDCCCXXVIII. T. KNOTT, JUN. miKTER. ADVERTISEMENT. AN opinion has currently prevailed that Country Bankers are more particularly inter- ested in the circulation of One Pound Notes than any other class of persons — that they had some share in the introduction of them in 1797— that this description of currency has been continued with a view rather to the profit of the issuers than as a matter of public accom- modation — and, in short, that Country Bankers might be considered as having inducements to retain One Pound Notes under their special protection. Whilst this fallacy lasted, it is no wonder that expectations were expressed that Country Bankers would exert themselves to obtain the repeal of the Act for limiting the circulation of A 2 IV Small Notes to the 5th of April, 1829. It was not until they declared, through their Committee in London, " that they were prepared to let the law take its course without any interference on their part, and that the issuing or not issuing of One Pound Notes was a question altogether between his Majesty's Government and the people;" — it was not until this declaration had been made, that the truth of the matter began to be recognized ; and it was admitted that other parties might be more involved in the re- sult of the enquiry than Country Bankers, who have only been the agents for putting into exe- cution a measure of the Government. The object proposed in preparing the fol- lowing *' Summary Statement," is to enable the reader to arrive at a correct conclusion upon the subject of the Small Note Circulation in reference to Country Bankers. It has been drawn up without any wish to discuss the ex- pediency or inexpediency of this description of circulating medium, and without regard to the various and conflicting theories and opinions that continue to be entertained respecting it. The great importance of forming a correct judgment upon questions involving the pros- perity of agriculture and internal trade, and the employment of the agricultural and manu- facturing population, must be unhesitatingly admitted ; and the injuries which the want of this correct view of things brings upon national prosperity, has been made but too manifest in our recent experience : — for how large a por- tion of the misfortunes which were inflicted upon the country in 1825 — 6, may be justly at- tributed to erroneous opinions ! SUMMARY STATEMENT, &c. &c. Previous to the year 1774, it was legal to issue Small Notes, and they were circulated in various parts of England, but more especially in the northern counties. In the 15th Geo. III. an Act was passed ** to restrain the negotiation of Promissory Notes and Inland Bills of Exchange for any sum less tka?! Twenty Shillings." In the 17 th of the same reign was passed an Act " for further restraining the negotiation of Promissory Notes and Inland Bills of Exchange for any sum less than Five Pounds.'' These Acts remained in force until the year 1797. On the 26th of February of that year, by a Minute of Council, the Bank of England were restricted from making Cash Payments. 8 The causes which made this important mea- sure necessary were examined into by a Com- mittee of Secrecy appointed by the House of Lords, and were stated to be chiefly as fol- lows : — Alarm of Invasion. Demands made upon the Bank from the Country. Loans to Foreign Powers. Importation of Grain. Export of Gold. Gold sent to Ireland. Exchanges against this Country. Advances to Government. Diminished Issue of Country Bank Paper.* On the 10th of March, 1797, an Act was passed (37 Geo. III. cap. 32) to suspend for a limited period the above-mentioned two Acts, 15th and 17th Geo. III. and at the same time an Act was passed for the Suspension of Cash Payments. • Lords' Keport, presented March 6, 1797- 9 It was under these circumstances that One Pound Notes were put into circulation. They were issued because gold had in a great mea- sure disappeared, and the internal trade of the kingdom could not be carried on without a substitute. Country Bankers had no share in their introduction, which was a measure found- ed on the views which his Majesty's Govern- ment entertained of the necessities of the country. In the same year, the expediency of requir- ing Country Bankers to give security to Go- vernment for the amount of the One Pound Notes which they might issue, came under the consideration of Mr. Pitt ; but on an interview with a deputation of Country Bankers, that Minister consented to relinquish it. To shew that the Small Note Circulation was regarded by his Majesty's Government as a measure of necessity, and that its continuance was altogether under their notice and direction, without any reference to Country Bankers, it will be only needful to observe the various Acts of Parliament that have been passed limiting 10 the periods for their circulation. The time was first limited to the 1st of May, 1797 (37 Geo. III. cap. 32), then to July 8 (cap. Gl), next to six weeks after commencement of next Session of Parliament (38 Geo. III. cap. 7), to the 1st of February, 1799, to the 25th of March, 1805 (44 Geo. III. cap. 4), and to six months after a peace (45 Geo. III. cap. 25). The whole management of this was in the hands of his Ma- jesty's Ministers, and Country Bankers were never consulted about it. In the mean time. One Pound Notes had been made the subject of taxation. In 1815 the stamp duty upon each was four-pence, and the period for each note to circulate was restrict- ed to three years. There was also an annual licence of £20 to be paid by each banking firm issuing Promissory Notes. Upon the rcvisal of the Stamp Act, Mr. Vansittart, the Chan- cellor of the Exchequer, proposed to increase the above-mentioned duty to sixpence. A ge- neral meeting of the Country Bankers was then held in London, and it was found to be neces- sary that an application should be made to the Chancellor of the Exchequer upon the subject I 11 of the proposed increase of duty. The confer- ences which were held proceeded on the plain grounds that the circulation of One Pound Notes depended upon his Majesty's Ministers for its continuance or discontinuance — that if it was thought expedient to continue them, the proposed duty was higher than the case would admit of, and would amount to a prohibition of them — and that his Majesty's Government had already secured for the country, by means of the stamp duty and licence, a large proportion of any profit that might arise out of the circula- tion. Calculations, shewing the expences and the profits attending an issue of One Pound Notes, were made out and presented to Mr. Vansittart, by which it plainly appeared that this branch of the Country Banking Trade was less a matter of profit to the Country Banker, than of public convenience and necessity. In consequence of these statements, Mr. Van- sittart consented to reduce the proposed in- crease of duty to one penny upon each note ; but at the same time, to do away the restriction as to time upon all rc-issueable notes issued 12 with the new stamp.* The licence was also increased to £30. The attention of Country Bankers was again called to this subject in 1818, by the introduc- tion of a Bill into Parliament by the Chancellor of the Exchequer, requiring Country Bankers to make deposits in the Public Funds or other Government Securities, on account of their Small Note Circulation. What Mr. Pitt had consented to relinquish Mr. Vansittart attempt- ed to enforce. A general meeting of Country Bankers was then held, and it was determined to represent to his Majesty's Ministers their reasons for ob- jecting to give the proposed security. A con- " The following Scale of Duties in 1797 and 1815, will serve to shew the great increase of duty on Promissory Notes between these periods : — 1797. Duty. £2, and not exceeding £30 2d. Above £30 50 3d. 50 100 4d. 100 200 Cd. 200 ., 8d. 1815. Duty. Not exceeding £1 Is 5d. Exc. £1 Is. not exc. £2 29 lOd. 2 2 5 5... Is. 3d. 5 5 10 0,..ls. 9d. 10 20 0...2S. Od. 20 30 0...3S. Od. 30 50 0...5s.0d. 60 100 0...8?.6d* 13 ference took place between Lord Liverpool and Mr. Vansittart, and a deputation of Country Bankers ; during which interview it was stated that if the prolonged circulation of Small Notes was thought inexpedient, the true and consti- tutional remedy was a return to Cash Pay- ments. The following, with other Resolutions, were also presented and fully discussed : — " That such a measure is uncalled for, and is a most severe restraint on that freedom of trade to which the country owes its commercial ascendancy, and which is much better provided for by the watchfulness of indi- viduals than by the controul of Government. " That if such interference be once established it might be a dangerous precedent, capable of being urged as a vindication of future measures to an inde- finite extent, and tending to overturn the whole system of individual responsibility and free commerce. " That the proposed measure, by giving one class of creditors a preference over another, violates the ordinary maxims of British law. " That the operation of the proposed measure would 14 probably be the universal circulation of small Bank of England notes, thereby increasing the temptation to the crime of forgery, and the consequent insecurity of the public. " That the most effectual means of preventing the frequent repetition of that crime, is by protecting a circulation which is constantly passing under the eye of the issuer ; and that even if the Chancellor of the Exchequer should be correct in anticipating a very extended and distant circulation of the proposed fund notes, such advantage would be more than counter- balanced to the public aud the banker by an increased liability to forgeries. " That an uncontrouled command of the capital of private bankers is equally essential to their indepen- dence, to tlie punctual fulfilment of their engage- ments, and to the interests and accommodation of the public. " That even if the measure could be carried into effect, its certain and immediate operation would be to draw off several millions of capital from the coun- try, by compelling large investments in Government securities, thereby limiting the accommodation which hitherto has been so beneficially afforded by Country Banks to the trading and agricultural part of the com- munity. 15 " That no advantages which the Chancellor of the Exchequer, in Ills financial arrangements, may ex- pect to derive from such a measure, would by any means compensate the public for a pressure on all the various branches of industry which afford such exten- sive employment to the labouring classes, and are the great sources of national prosperity. " That in the year 1797, a question of a similar na- ture came under the consideration of Mr. Pitt, but on an interview with a deputation of country bankers, that minister consented to relinquish it." In consequence of these representations the Chancellor of the Exchequer announced to the House of Commons the ** determination of his Majesty's Government to abandon the proposed Bill." By the 55th Geo. III. c. 6, One Pound Notes had been continued until 25th March, 1816. By the 56th Geo. III. c. 21 (1816), One Pound Notes were allowed to circulate " until two years after the resumption of Cash Pay- ments by the Bank of England." By the 3rd Geo. IV. c. 70, the circulation of One Pound Notes was continued until the 5th IG of January, 1833. The Act is here inserted in order to shew how the law then stood in refer- ence to the subject under consideration. An Act to continue until the fifth day of January, 1833, an Act of the thirty-seventh year of his late Majesty, for suspending the operation of an Act of the seventeenth year of his late Majesty, for restraining the Negociation of Promissory Notes and Bills of Exchange under a limited sum, in England. 22d July, 1822. , Whereas an Act was passed in the seventeenth year of the reign of his late Majesty King George the Third, for restraining, for a limited time, the Negociation of Promissory Notes and Inland Bills of Exchange for Twenty Shillings, or any sum of money above that sum and under Five Pounds : And whereas the said Act was, by an Act passed in the twenty-seventh year of the reign of his said late Majesty, made perpetual: And whereas by an Act passed in the thirty-seventh year of the reign of his said late Majesty, the said first recited Act, so far as the same relates to the making void of Promissory Notes, Drafts, or Undertakings in Writing, payable on demand to the bearer thereof for any sum less than the sum of Five Pounds in the whole, and also to the restraining the publishing, or uttering and negociating of any such Notes, Drafts, or Under- 17 takings as aforesaid, was suspended until the first day of May then next : And whereas the said Act of the thirty- seventh year of the reign of his late Majesty hath by several subsequent Acts been continued and is now in force until two years after the expiration of the Re- striction upon Payments in Cash by the Bank of Eng- land, and it is expedient that the same should be fur- ther continued: Be it therefore enacted by the King's Most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, that the said Act of the thirty- seventh year of the reign of his late Majesty, so far as the same suspends the said Act of the seven- teenth year of the reign of his late Majesty, shall be further continued until the fifth day of January, one thousand eight hundred and thirty-three. The Bank of England having resumed Cash Payments, and One Pound Notes having be- come convertible into gold at the will of the holders. Country Bankers had reason to con- clude that the 5th of January, 1833, would be the final period for their circulation ; and rely- ing on the good faith of Parliament, and on the avowed intentions of his Majesty's Government, they made their arrangements accordingly. It is to be observed, that Ministers, in coming to B 18 their conclusions, were not influenced by any representations of Country Bankers, for none such were made.* Such was the state of the law as it regarded One Pound Notes until the end of 1825. Coun- try Bankers issued them in their respective dis- tricts as the trade of those districts required, keeping in mind the period of the 5th of Ja- nuary, 1833, when, according to Act of Parlia- ment, they were to be no longer issued. But in February, 1826, his Majesty's Minis- ters announced it to be their intention to shorten the period for issuing One Pound Notes from 1833 to 1829. " The sentiments of his Majesty's Ministers respecting a Small Note Circulation may be collected from the following extract from the Marquis of Londonderry's Speech on Agricultural Distress, Fe- bruary 15, 1822:— " It was gratifying to find that there was such a disposition in the country to use paper ; so far were the people from being disposed to call for gold in preference to paper ; so high was the public credit, that he believed he was correct when he stated, that whenever gold had been sent to the provinces, it had manifested a disposition to return. That inordinate desire to possess gold which had been ap- prehended, was not found to exist, and paper in many, in most instances, seemed to be preferred." 19 Country Bankers were in no manner con- sulted upon this alteration. No parliamentary enquiry was entered upon to ascertain whether the wants of the public would be interfered with, or the regular em- ployment of the people would be interrupted by such a sudden alteration — or whether a sup- ply of gold could be ensured equal to the amount of Notes to be withdrawn in England and Wales. The period of 1829 being thus fixed upon by his Majesty's Ministers, those Country Bankers who had not a sufficient quantity of stamps by them to keep up their issues until 1829, applied to the Stamp Office for the needful supply. But here an unexpected impe- diment was raised against their application. His Majesty's Ministers, by an official letter addressed to the Commissioners of Stamps, for- bade them to issue any stamps for One Pound Notes to any Country Banker whatsoever; thus anticipating, on their own responsibility, the 20 prohibition intended to be included in their Act of Parliament. By this proceeding. Country Bankers were severally placed in different relative situations. Those who had by them a sufficient stock of stamps, were enabled to prepare to issue One Pound Notes until 1829 — whilst those who had relied upon the law of the land as it previously stood, to procure, as occasion might require, the needful supply of stamps, were disabled from making any further issues ; at the same time the new Act of Parliament made it lawful for all Country Bankers indiscriminately to continue the issuing of One Pound Notes until 1829. The natural consequence of this " tamper- ing with the Currency," and the harsh pro- ceedings of his Majesty's Ministers, was to pre- cipitate the payment of One Pound Notes, and indeed Notes of all amounts. No care had been taken by his Majesty's Government to ensure an adequate supply of 21 gold to be given in exchange for the notes thus driven in upon their respective Issuers. Country Bankers possessed of the most ample funds in Bank of England Notes, applied to the Bank of England for gold in exchange for them, and were informed that the Directors had not gold enough to take them up. The Bank Directors informed the London Bankers of their inability to pay all their notes in gold, and requested that Country Bankers might be prevailed upon to take small bank notes into the country, and not press them for gold. At this time the Law required the Bank Directors, equally with Country Bankers, to pay all their notes in gold on demand. The Country Bankers exercised the greatest forbearance towards the Bank of England, and took their small notes instead of gold. At the time when, without enquiry, these material alterations respecting th6 One Pound 22 Notes of Country Bankers in England and Wales wai decided upon, an enquiry was en- tered into in regard to One Pound Notes issued by Bankers in Scotland, and it was determined by Government not to bring the Scotch notes under the new limitations enacted for the Eng- lish notes, and the former may be issued with- out limitation of period By this anomaly, the issuing of One Pound Notes will be prohibited in England and Wales after April, 1829 — whilst in Scotland, the same description of notes may be legally issued. It will be seen by the foregoing statement, that the first issuing of One Pound Notes in 1797 was a measure of the Government. That Country Bankers have been only the agents of issuing such notes, according to the views which his Majesty's Ministers entertain- ed of the wants and convenience of the British Public. That whatever profit might have arisen from the circulation of Small Notes in tranquil times. 23 the Public have partaken of a large proportion of this profit by the heavy stamp duties which have been attached to them. That the expediency or inexpediency of continuing this kind of circulating medium is a subject of enquiry altogether resting, as it hi- therto has rested, between his Majesty's Go- vernment and the Public. May 9, 1828. I