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portion of the amount specified in the act. They never advance any sum beyond the amount to which they are limited in the several acts, nor have the bills issued to them and the bills purchased by them, together, exceeded that amount.

The bills described as " issued" are those which pass directly to the Bank from the Exchequer, under special contracts or agreements entered into; as, for instance, the bills issued upon the credit of annual duties, and upon the advance of L. 3,000,000 as a loan to the public, in consideration of the renewal of the charter.

The bills" purchased" are those which are taken by the Bank (usually on an application from the Treasury), when an issue of Exchequerbills takes place, and when they can

Bank Notes. 1814, Jan. to June July to Dec.

1815. Jan, to June

July to Dec.

1816. Jan. to June

July to Dec.

1817. Jan. to June

July to Dec.

1818. Jan. to June July to Dec.

1790

1791 1792

1793

1794

1795

1796

From the year 1790 to the year 1797, when the Restriction Act passed, the amount of advances made by the Bank to Government, and of the notes outstanding on the 25th of February in each year, was—

Bank-Notes.

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10,217,360

11,699,140

11,349,810

11,451,180

10,963,380
13,539,160
11,030,110

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25,511,012 28,291,832

27,155,824

26,618,210

26,468,283
26,681,398

27,939,768

29,210,035 27,954,558 26,487,859

Advances.

7,908,968

not be sold to the public at a premium. The Bank never credit any premium, nor deduct any discount upon the bills thus taken; nor do they resell such bills to the public.

An account in the Appendix shows the total amount of Exchequer bills authorised to be issued by Parliament in every year, since the year 1792, and the amount which the Bank was authorised to take of each description of bills.

The amount, therefore, of advances to the Government does not ap

The amount of the advances of the Bank to Government, (deducting the sum issued from the unclaimed dividends), on the 26th of February, and 2d of August of each year, since the year 1814, and of the Bank-notes issued during the corresponding half years, appears from the accounts presented to your Committee to have been as follows:

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pear to have borne, for some time previously to the restriction act, a much less proportion to the total amount of notes outstanding than the advances since 1814 have borne to the notes issued in corresponding periods.

9,066,698

It will be seen that a material 5,603,978 reduction of the debt to the Bank 9,839,338 took place between the month of Au8,786,514 gust 1815 and the month of Fe11,114,230 bruary 1816, it having been reduced 11,718,730 in the latter period to the sum of L.18,988,300, deducting the advances from unclaimed dividends.

Advances.

23,607,300

34,937,800

27,156,000 24,079,100

18,988,500 26,042,600

25.399,500

27,330,718

27,002,000

27,060,900 21,930,000

This debt was again increased between February 1816 and the August following.

In that interval, war taxes to a very considerable amount were remitted: a large addition, authorised by several acts of Parliament, was made to the unfunded debt, and to the advances for which the Government were indebted to the Bank. The amount of those advances was again reduced from L.27,060,900 to L.21,300,000, between the 2d of August 1818 and the 11th of February 1819.

It was proposed, in May 1818, to repay to the Bank a sum of from 8 to L.9,000,000, by gradual instalments of L.1,000,000 a month, from the month of May; the Bank having then considered that repayment sufficient (according to the evidence of the Governor) to enable them to make the experiment of the resumption of cash payments."

66

To meet these charges, and the services of the year, and also to effecta further reduction of the unfunded debt, provision was made by a loan of L.3,000,000 in money, and a gradual funding of Exchequer-bills to the amount of about L.27,000,000, with power to the subscribers of making money payments, instead of bringing in Exchequer-bills; and it was understood that the Bank should retain one half of the monies paid in, to the extent of the monthly payments above mentioned.

It appears, however, that the sum paid in money on account of this loan fell short of the amount which was expected, and the repayment to the Bank did not much exceed L.5,000,000 at the end of January 1819, L.1,000,000 of which the Bank do not consider as an effective repayment, interest to that amount being due to the Bank upon the whole of their advances.

The amount of the advances of the Bank to Government was, on the 29th of April last, L.19,438,900; the sum of L.1,098,820 being deducted from the account furnished by the Bank, as the amount of advances on sums issued for the payment of dividends.

It will be seen, by reference to a communication made by the Court of Directors of the Bank to the Committee, as well as from the whole tenor of the evidence of the Directors who were examined personally before them, that they consider the repayment of a large proportion of those advances essentially necessary, preparatory to the resumption of cash payments. As the notes which are issued by the Bank upon the discount of mercantile bills revert to them at the expiration of the period which those bills have to run, and which never exceeds sixty-five days, it is quite clear that that portion of their issues can be extended or limited at their discretion, whilst over the notes which are issued in consequence of advances to Government they have not practically the same control. To whatever extent these advances may be reduced, the Bank will gain a corresponding control over the amount of their circulating paper, and will be enabled to supply the diminution of notes thus created, by an increase of their issues, either upon the discount of mercantile bills, or by the purchase of bullion; or, if necessary, to make a reduction in the total amount of notes outstanding equal to the whole or any part of the repayment.

The only mode during a suspension of cash payments by which the Bank can effect a reduction of their issues, supposing no part of the advances made by them to the Government to be repaid, is by limiting that accommodation to trade which

they have long been in the habit of granting, by the discount of mercantile bills of undoubted solidity, arising out of real commercial transactions, and falling due within short and fixed periods.

Although the amount of the advances made by the Bank on public securities is accurately stated in the account in the Appendix, and although the Committee strongly advise the repayment of the portion of them required by the Bank; yet they think it necessary to observe, that in determining the actual amount of the debt due to the Bank, on account of these advances, an allowance ought to be made in favour of the public to the extent of the balances of public money deposited at the Bank.

The attention of Parliament appears to have been first called to the extent and operation of those balances in the report of the committee on public expenditure, presented in the year 1807; from which it appears, that the aggregate amount of the public money deposited at the Bank was then calculated to be L. 11,104,919; and a sum equal to 5 per cent. interest on the average balances in question was considered by that Committee not far from the amount of the profits derived by the Bank from this source. The average amount of public balances held by the Bank appears to have been about L. 11,000,000 from the year 1807 to the year 1816; and in consideration of the advantage resulting to the Bank from the possession of them, the sum of L.3,000,000 was advanced by the Bank to Government without interest in 1808, which advance was continued under the authority of acts passed by the Legislature, to April 1818. Since the year 1816, the public balances held by the Bank have been diminished,

and their average amount in the year 1818 did not exceed the sum of L. 7,000,000. Their amount has been still further reduced by the operation of an act which has passed in the present session, which makes the growing produce of the consolidated fund available to a limited extent for the public service; and in a certain degree within those limits lessens the benefit previously derived by the Bank from its accumulation from the first to the last day of each quarter.

It appears, however, to the Committee, that whatever may be either now or hereafter the amount of the public balances held by the Bank, that amount ought always to be kept in view, and allowance made for it when the advances from the Bank to the Government are under consideration; for it is clear, that if a final settlement of this account were to take place, the public money deposited with the Bank must be set off against the advances made by them to the Government upon Exchequer-bills, and the securities bearing interest.

In confirmation of this view of the subject, the Committee beg leave to refer to the evidence of Mr Haldimand, now one of the Bank Directors. He states, that "it is his opinion, that a sum of from 8 to 10 millions should be repaid to the Bank by Government, supposing the public balances to remain without any considerable decrease in amount." And being asked, "Does the aggregate amount of such balances operate as a diminution of the total amount of the total advances made by the Bank to the public?" he answers, "Yes, it does.

For the reasons alleged, it appears to your Committee, that although the amount of the advances of the Bank upon Government securities is accurate

ly stated in the Appendix, vet in determining the effect which these advances have, of diminishing the control of the Bank over their issues, a deduction must be made corresponding in amount to the average sum held for any given period by the Bank as a deposit of public money, since that deposit, by lessening the amount of notes in circulation, restores to the Bank, in proportion to its extent, the power of acceding to the applications made to them for the discount of mercantile bills.

Your Committee trust they shall not be considered to have entered into unnecessary details in having thus given a full exposition of the relations between the Government and the Bank. It will be seen by reference to the evidence, that the amount of their advances to the public is urged by the Bank as one of the main impediments to the early resumption of cash payments; and that in order to make preparation for their resumption, the Bank require a repayment to the extent of ten millions. The Committee was anxious, therefore, that the amount and operation of these advances, and the degree to which their effect is counteracted by the balances of public money held by the Bank, should be clearly understood; and this appeared to them the more necessary, as the Committee feel it their duty to close this branch of their inquiry, with an earnest recommendation to the House to make immediate provision for the gradual repayment to the Bank of that portion of the debt which the Bank require to be repaid, and to establish some permanent provisions, limiting and defining the authority of the Bank to make advances to the Government, and to purchase Government securities; and bringing under the constant inspection of Parliament the extent to

which that authority may be in future exercised.

II. Your Committee proceed to the next head of their inquiry-the expediency of reverting to cash payments, at the period fixed by law for their resumption.

It will be seen, by a reference to the papers in the Appendix, that the Bank, without departing from the principles upon which their issues on the discount of mercantile bills have long been regulated, have made a very considerable reduction in the amount of notes outstanding, compared with their amount at the commencement of the year 1818.

From July to December 1817, the average amount was L.29,210,035 From January to June

27,954,518

26,437,859

1818,
From July to Decem-
ber, ditto,

The average amount for the three months to the end of March 1819, 25,794,460 Should the Legislature determine on the restoration of cash payments on the 5th of July next, the Directors of the Bank would naturally feel themselves compelled to postpone the consideration of all other interests to the security of the establishment over which they preside, and would make a further and very sudden reduction of that portion of their currency which they have immediately within their control.

Much important testimony will be found in the minutes of evidence, with respect to the effect to be apprehended from a very rapid diminution of the present amount of currency upon the trading and agricultural interests of the empire, of which evidence your Committee deem it incumbent on them to extract a portion, sufficient to give the House a

-just idea of the opinions upon this subject prevailing amongst the persons whom they examined.

Mr Alexander Baring, being requested to state in what manner an attempt to effect the restoration of cash payments within the period of a year would operate upon the commerce and internal concerns of the empire, replied, "The resumption of cash payments can only be effected by drawing bullion into the country, by a reduction of the issues of the Bank. I cannot think that the Bank could pay in specie, with any expectation of continuing in that state, until there was a considerable portion of specie already in the circulation of the country. I apprehend that by no process, even if the effects of any sudden reduction of issues were totally disregarded, could the sum necessary for the purpose be brought into the country within the period mentioned. I am further of opinion, that the operation of reduction necessary for the purpose I have mentioned must always be accompanied by some restraint and inconvenience to every branch of industry; and that if it were forced, with a rapidity at all approaching to what would be required for the payment in the course of a twelvemonth, the injury would be intolerable; the reduction of paper would produce all those effects which arise from the reduction in the amount of money in any countryan effect which I think is well described in Mr Hume's ' Essay on Money.' The consequences of a contraction or expansion of the amount of money in a country seem more felt during the progress of such contraction and expansion, than from any positive amount of money at any one given period. It is not, in my opinion, of great importance what amount of money may exist in any country; but that the question of,

whether it is on the increase or decrease, is one of great importance to every branch of its industry."

Mr Haldimand stated, "that he conceived it to be necessary that the Bank of England, in order to be enabled to resume the payment of its notes in specie, should reduce their present amount to the extent of three or four millions forcibly." He explained," that by the term forcibly he meant a reduction, not arising from three or four millions less being demanded, but from three or four millions being demanded and refused by the Bank to the public and Government. He considered this forced reduction of the issues of the Bank of England to be necessary, in order to restore the rest of the paper in circulation to its ancient value in gold, and the exchanges to par." Being asked if," in order to produce the effeet which he anticipated from a forcible reduction of the issues of the Bank, it would be necessary that the reduction should be sudden?" he replied, "In my opinion every possible disadvantage and inconvenience to the public would arise from a sudden reduction; I should certainly recommend its being gradual."

Mr Gladstone, a Member of the House, and a merchant principally engaged in trade with the East and West Indies, and occasionally in general trade, gave an opinion, "that the influence which the reduction of the Bank issues produce is of a secondary nature; that in other times, the alteration of two or three millions in their issues would not have been at all felt; but that in the present state of the trade of the country, after a year of much overtrading, and a great accumulation of foreign goods in the country, and of British goods for British account in foreign markets, whatever tends to narrow the means of circulation acts in a much

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