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Banking Laws (Scotland) Bill

Volume 280: debated on Wednesday 27 June 1883

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( Mr. Anderson, Mr. Barclay, Mr. M'Laren.)

[BILL 78.] SECOND READING.

Order for Second Reading read.

, in moving that the Bill be now read a second time, said, that the 1st clause simply provided against any vested interests. It was unfortunate that in his Act of 1844–5 Sir Robert Peel did not introduce a clause of this nature, for the result of his not doing so had been that the Scotch banks, who had enjoyed a monopoly of issue ever since then, now regarded that as an absolute vested right, and had plainly told the Treasury, in the correspondence which had lately taken place, that they had no power to take it from them. He wished to avoid any such possibility of a vested interest being created under this Bill, if it became law. He also looked forward to the possible time when the Government might be able to change their whole system of issue by adopting a general measure of State paper circulation in place of the present private bank circulation. That was, perhaps, too great a change for the Government to make at present; but if they assented to this Bill that would pave the way for a greater measure in the future, and preclude the possibility of the creation of vested interests, which might be a bar to the change when it was proposed. The first object of the Bill was to provide for a note issue founded upon Government security, and which should be free to all banks, whether existing or now, upon certain terms of security as described in the Bill. For instance, no bank would be entitled to have more than half of its paid-up capital in note issue; and as the Bill provided that all banks should be under the Companies Act, 1879, there would be a further unpaid-up capital equal to the paid-up capital, so that the note issue would really not be more than a fourth of the whole capital. Further, the securities were to be 15 per cent above the amount of issue allowed, and the banks would be required to pay 2 per cent per annum for the use of this issue. That was one of the main features of the Bill. It was held that the hire of note issue, which was really taking the place of a national issue, should belong to the nation which gave the privilege. He did not think the profit upon that currency should belong to the private banks or their customers. As regarded existing banks, he proposed that they should have five years of the use of their present issue free, for another five years the use at half rates, and after ten years they should pay the same as new banks—namely, 2 per cent. That rate was what the Bank of England paid for any excess of issue it got, and they could perfectly well afford to pay that, because the rate was proposed to be charged only on the amount of issue actually in the hands of the public. As ascertained at present, the banks by monthly returns gave the Government information as to the average amount of notes they had out in the hands of the public, and those notes were all that interest would be paid upon; but they were not all that the banks had profit on. The real profit on the circulation of the Scotch banks was not on the notes in the hands of the public, but on a large amount of notes which they had in their own hands as till money for their numerous branches. Of that amount the Government knew nothing, and got no profit upon it. The profit was to the banks themselves, and it was, undoubtedly, a great privilege. If that privilege was to be continued they could very well afford to pay 2 per cent on the notes in the hands of the public. If it was not continued they could not pay 2 per cent; but still they ought to pay something. If existing banks wished to continue their present issue, he proposed by this Bill that Government securities should be lodged to cover that issue, and that the gold which was at present held to secure their surplus should be set aside exclusively as security for the notes issued against it. At present, the gold was nominally held as security for the surplus issue; but, in the event of disaster, was only thrown in with the general assets. In the case of the City of Glasgow Bank, it was found not only that the gold had been tampered with, but all that was left came in as a general asset. That was a wrong system, which ought to be changed, and he proposed to change it. The two main principles of the Bill then were—that profit on the circulation should belong to the nation, and not to the banks or their customers; and, secondly, that the privilege of issue should be more freely attainable, so as to break down the present monopoly of the Scotch banks. That monopoly was in some respects very well managed, chiefly for the interest of the bankers, but partly for the interest of the country. The banks of Scotland were, undoubtedly, very well managed institutions; but by means of their monopoly they paid very largo dividends to their shareholders, and the monopoly was so strict that it was absolutely impossible for any new bank to be created under it. He wanted to prevent the monopoly of note issue being any longer made the means of creating a monopoly of the trade of banking. The issuing of notes and the trade of banking were two utterly distinct things, and they ought to have no such connection with each other; but in Scotland the monopoly of issue was a means of creating a monopoly of the trade of banking. So complete was that monopoly that since Sir Robert Peel passed his Bill in 1844, while many banks had ceased to exist, not one new bank had come into existence. Every other trade in the country—all the manufactures of the country, the mining, the railways, and every industry of the country—had enormously extended; but the trade of banking was now in a smaller number of hands than it was at that time, and it would continue to grow less and less. At present there were only 10 banks in Scotland altogether. They had a paid-up capital of only £9,000,000; but they held deposits amounting to £80,000,000. They had an authorized note circulation of £2,676,000; but they had actually an average note circulation of £5,640,000. He thought that large amount of deposits ought to be distributed over a greater number of banks. The result of its being in so few hands, and of the banks having so complete a monopoly, was that they had actually more money than they knew what to do with, and accordingly they sent part of it to London and competed with the London banks in the London Money Market; and in order to pay a high rate of interest to their depositors and make up for the loss through the low rate of discount they charged in the London Market, they were obliged to charge traders in Scotland a higher rate of discount than they were charging in London at the same time. That, he thought, was by no means a healthy state of matters, and he should like to see it abolished, because all monopolies were pernicious. On the ground of its being a monopoly, some means of getting rid of that monopoly ought to be found. At present there were no means of doing that, and he saw no way in which it could be done, except by opening up the privilege of note issue to any new bank. In this Bill he had supposed that now banks would be created, and would apply for note issue to the extent of £4,000,000; but even if that privilege were given there would not be a single note more in circulation than at present. The banks could not force their issue. No banks could send out the issues in excess of what the public required, because they came back immediately. The system of giving interest on the daily balances of traders' accounts absolutely precluded Scotch banks from issuing any excess of notes, for, oven if issued, it could not remain out. Therefore, although great latitude was given to circulation by the Bill, the result would be that there would not be a single note more than there was at present. The only difference was that, by establishing new banks, the issue of the country would be distributed over a greater number of banks, and the monopoly of the present banks would be broken. English Members, he thought, did not understand how a monopoly of note issue in Scotland gave a monopoly to the trade of banking, because in England there was also a monopoly of note issue, but not of the trade of banking. The reason was easy to see; it was due to the existence of £1 notes. The Scotch circulation being so largely in £1 notes, that gave the bankers a power that in England they had not. The value of the privilege of note issue was not so great in England as in Scotland. There was no great profit to be made on the notes of larger denomination—£5, £10, or £100 notes—and there was, therefore, not the same advantage in it. That was the reason why the profit on the note currency was larger in Scotland in proportion to its extent than in England; but such profit as there was ought to be in the hands of the Chancellor of the Exchequer. When he first brought in this Bill it was of larger scope; for he proposed to have £1 notes in England also. If they were introduced into England the profit would be something enormous. At present the loss of interest on gold in circulation was very great; but the loss by the mere attrition of the gold was also very great. Some day he supposed there would be an application for £500,000 to cover the loss for the wear of the gold in circulation. Scotland was free from any share in causing that less; but she would have to pay her share of that amount. These were the principles of the Bill. He hoped the Government would assent to the second reading, because it was a Bill in the direction which he knew was cherished by the Government—namely, having a State issue of paper money. This would pave the way towards it, in the first place by breaking up the monopoly, and in the second place by handing over to the Government the profit of the note circulation in Scotland, with a view to ultimately enabling them to have the profit of a paper-note circulation to take the place of some considerable part of the gold that was now wearing away in the pockets of the people of England. The banks of Scotland had, undoubtedly, done service to Scotland; but the best service was in the past, when they were free, and before they were fettered by the Act of 1844–5. This was objectionable at the time; but it had been the means of fettering the public far more by creating a pernicious monopoly, and preventing any new bank from starting. He believed that at present the monopoly was so great that, even if the Bill were passed, there would be considerable difficulty in a new bank establishing business in Scotland against the "Boycotting" influence that would be exerted by the existing banks. But, at all events, he thought the people of Scotland were entitled to have an opportunity of trying it. The fact that no single bank had been started since 1845 was of itself a proof that something of this kind required to be done. He begged to move the second reading of the Bill.

Motion made, and Question proposed, "That the Bill be now read a second time."—( Mr. Anderson.)

said, he regretted to have to move that the Bill be read a second time that day three months. No Member of the House held in higher estimation than he did the industry and common sense of the hon. Member for Glasgow (Mr. Anderson); but he was sorry to say he could not follow his hon. Friend in his views with regard to banking arrangements in Scotland. He was sure that in Scotland there was no demand for such a Bill as this. The existing banks fully satisfied the wants of the community; and there was no public necessity, nor was it a matter of public benefit, that further banking facilities should be established in Scotland, at least under such provisions as those embraced in the Bill. His objection to it, however, was more on grounds of principle than with regard to the question of the extension of banking facilities; and he would just call the attention of the House to a contradiction between Clause 12 and Clause 6 of the Bill. By Clause 6 banks were to be allowed to issue notes on deposit of Government securities. These notes were to bear, on the face of them, according to Clause 12, that they were redeemable in gold. Supposing a panic overtook the country and a run took place upon these banks, they would have to transmute their securities into gold, and they would have to go to the Bank of England for that gold, so that the tendency of the Bill was to limit and reduce still further the very scanty supply of gold now existing in the Bank. He was afraid that would be fraught with great mischief in a time of public disaster. As a matter of principle, the Bill was utterly unsound, and he hoped the House would reject it. The notes to be issued were also of a contradictory character. According to Clause 12, they were to be payable in gold on demand; but they were also to bear the statement that they were issued against Government securities. Thus, on the very face of the notes there would be a contradiction. Altogether, the Bill was utterly opposed to what he considered sound banking principles; and, therefore, he was bound to move its rejection. The hon. Member for Glasgow said that Scottish banks enjoyed a very great monopoly and divided great profits, and he had given the House to understand that that arose from their power of issue. The fact was that these banks had very large undivided funds, consisting of accumulated profits. These gave great profit and advantage, and a bank that on its own capital might earn 5 per cent, by employing these large reserves, as they naturally did, easily earned and divided 10 per cent. So much the better, so much stronger were these banks; and they were in so strong and satisfactory a condition that they were all the better fitted to meet and supply the banking necessities of the country. There was no necessity for the Bill, and no public demand for it. It was unsound in principle, and he again begged that the House should reject it.

Amendment proposed, to leave out the word "now," and at the end of the Question to add the words "upon this day three months."—( Mr. Williamson.)

Question proposed, "That the word 'now' stand part of the Question."

said, he was very sorry he could not support the second reading, and all the more because he sympathized with the hon. Member for Glasgow in his desire to do away with this monopoly that, he said, existed in Scotland. But representing, as he did, a constituency on the Borders of Scotland, he was obliged to look with considerable suspicion upon the Bills which were promoted by Scottish Members from time to time in that House, because they had a very happy knack of obtaining for themselves, when they were united—he was afraid they were not on this occasion—privileges which were denied to those who lived in other parts of the Kingdom. There had been for a long time a considerable grievance with regard to Scottish banks in Cumberland, owing to the circulation of Scottish notes on that side of the Border, and the establishment of Scottish banks. It was only in consequence of the exceptional privileges enjoyed by the Scottish banks that they were enabled to come over the Border and compete with the local banks, while it was the want of these privileges which prevented the Cumberland banks from going over the Border and competing on equal terms with the Scottish banks. In the Bill of 1879, as drafted, there was a clause, the object of which was to restrict the operation of these Scottish banks which desired to avail themselves of the privileges of that Bill to the limits of Scotland; but on its being found that there was considerable opposition to the clause it was dropped, and the Bill confined entirely to England. On looking back over the Act, however. he found that the Scottish and the Irish banks, too, were enabled to take advantage of the measure. They had lest that opportunity of trying to place the banks of England and Scotland on an equal footing; and, as he read the Bill, it seemed to him that the grievance from which they had suffered so long in regard to the extra issue of notes would be considerably aggravated. In Clause 8 it was provided that the privilege of the issue of notes on gold should continue as regarded old banks, and be available to new banks also. That would tend to aggravate the grievance and injustice under which Cumberland already suffered. If the hon. Member would alter his Bill so as to place English banks on the same footing as Scotch banks, he might get some support for it. But there were wider reasons why this Bill ought not to pass at present. It seemed to him that the Bill was conceived in a spirit entirely opposed to the principle which had guided all legislation on this subject since 1845. In many important respects the Bill departed from the policy referred to as having been followed, and as being adhered to in the Correspondence which took place in 1881 between the Lords of the Treasury and the Scottish banks. He thought it would be very much better that when this subject was dealt with it should be dealt with by the Government itself. The hon. Member who moved the second reading (Mr. Anderson) had said he hoped the time would come when a general measure would be brought forward for the State circulation of notes. He hoped the hon. Member would wait till that time came, and that, when it did, the Government would take up the question and deal equally between England and Scotland. For these reasons, he would support the Amendment moved by the hon. Member for St. Andrews Burghs (Mr. Williamson).

said, the Bill would revolutionize the present banking system in Scotland. The hon. Gentleman had said that banking in Scotland was a monopoly. No doubt, there had been no new banks started of late years; but the same might be said of England, for very few new banks had begun of late years here; and those banks were doing little business and less good. The old banks had almost a monopoly of trade, not because they had a note circulation of their own, but because they did their work so well that there was no opening for new banks. The existing monopoly, if it was a monopoly, was in the interest of Scotland. A Committee had sat on this subject some years ago, and he thought the Scottish system of banking had come out triumphantly before that Committee. He had not expected the Bill to come on that day, or he would have called the attention of the House to the evidence then taken. It was proved, if he was not mistaken, that the number of branches of banks throughout Scotland was about eight times in proportion to the population that it was in England; and, if he remembered rightly, the proportion of the deposits in Scottish banks was about four times what it was in England. The fact was that a branch bank was put down in every little village throughout Scotland, and people had facilities at once to ledge their money. There were now £80,000,000 of deposits in Scotland; and the fact was that the banks in Scotland had got so much money deposited from the thrifty people of Scotland, that they could not employ it in Scotland, and had been obliged to send the money to England in order to use it. Could there be a stronger evidence of the immense advantage to the people of Scotland of having so many branches spread throughout the land? He felt sure that this Bill would not receive a second reading, and he hoped no Bill would be brought in to alter their circulation. It was true that a higher rate of discount was given in Scotland than there was in England; and that was why the Scottish banks always paid a higher rate to their depositors, and small depositors had the advantage of that. There were other advantages in the Scottish banks. In England, when a dark day came, when there was excitement in trade and want of confidence throughout the country, men of business found it almost impossible to get money at any price whatever. In Scotland that was never the case. However dear money might become in England, however scarce it might be, the Scottish banks were ever ready to support their clients; and another thing was that they never charged within 1 or 2 or 3 per cent of the extreme rate obtaining in London. That was an immense advantage—an advantage so great that he was willing to pay a little more discount in prosperous times—which would probably not be more than ¼ or ½ per cent—to be able to get money when there was a strain. For these reasons, he hoped the Bill would not succeed in passing the second reading.

Sir, I think it may be convenient to the House that the Government should state, at an early part of the debate, what their view is of the Bill. Although I shall not speak at great length, or follow the hon. Gentleman into the details of Scotch banking, I will deal with the proposals as set out in the hon. Gentleman's speech and in the Bill before the House. My hon. Friend will forgive me for saying that I do not think I ever read a Bill the drafting of which gave one so much trouble to understand its purport. I had to peruse it several times before it was possible to understand even such a simple matter as what was meant by "issue." At last I reached the Interpretation Clause, and there I found that issue might mean two different things—authorized issue, and authorized unsecured issue—or, rather, that they both meant the note issue permitted by the Act to be issued without specified security. And then, when I went back to the clause which speaks of the amount of issue, it was impossible to say whether that meant the secured issue, or the secured and the unsecured also. Of course, on points of that sort, a great deal turns in discussing the merit of a Bill of this kind. But, without criticizing the draft of the Bill, may I point out to my hon. Friend that he has omitted to explain, or even state, one or two of the most vital points in the Bill? I take it that the most important proposal in the Bill is one which he never mentioned at all, and which lurks at the bottom of the 16th section, and as to which my own impression is that the Resolution passed by the Committee on which the Bill is founded is really hardly adequate. I repeat that the most important provision of this Bill is one that my hon. Friend has not spoken of—the provision that in future the whole note issue of Scotland should be guaranteed by the Consolidated Fund. For the first time, by a provision in this Bill; it is proposed to give holders of notes in Scotland, in the event of anything happening to the bank of issue, the security of Parliament. I think my hon. Friend would have done wisely if he had explained the proposal to the House, because, if he does not think it one of the most important, I certainly do. What are the proposals of the Bill? The first is that the future note issue of Scotland should have the security of Parliament. The second is that the Scotch Bank notes should bear on their faces that they were issued against Government securities held by the Treasury. But that would not be true. The Bill proposes expressly to keep alive the issue of Scottish notes against the gold and silver held, on the average, during four weeks by each bank; and, therefore, not only is this note issue to have, in this concealed way, the security of Parliament, but the notes themselves are to bear on their faces a declaration of a fact which is not a fact at all. I take it that two such principles as those introduced into a Bill are sufficient to make us view the whole Bill with suspicion. My hon. Friend said be did not propose to add to the aggregate note issue of Scotland; and my hon. Friend the Member for East Cumberland (Mr. E. S. Howard) pointed out what danger lurked in some of the provisions in the way of increasing the advantages of Scottish banks in competition with banks in England. But the whole principle of the Bill is that the note issue of Scotland may be increased by £4,000,000. He almost anticipates that the note issue shall go further, for he begins with £4,000,000, and then he says, when it reaches £4,000,000, no further privileges should be granted without fresh sanction, evidently anticipating that the day would come when the note issue of Scotland is to be still further increased beyond that figure. But how is this to be carried out? I am bound to say that, taking the 6th clause with the Interpretation Clause, I fail thoroughly to understand what my hon. Friend's proposal is; but I think it means that in future the Scotch banks, whether already existing or hereafter to be created, after a term which they are allowed for purchasing Government securities, are to hold Government securities to the amount of what is called their unsecured issue, and they may issue as much as they choose, provided they have in their till gold and silver in certain proportions sufficient to meet the issue. My hon. Friend then proposes that there should be one curious difference between old banks and new banks. He proposes that the new banks shall not have an issue—and hero again I do not know whether he means secured or unsecured issue—exceeding half of their paid-up capital nor a sum of £400,000; whereas the existing banks are also limited to half their capital, but, apparently, are not restricted by the sum of 400,000. So that, although he proposes to get rid of what he calls the monopoly of the existing banks, and to put future banks on the same footing, he really does not do so, but retains a restriction which is not to apply to existing banks. I have, I think, given good reasons why the first proposal is one that could not be tolerated for a moment. With respect to the second proposal, I think it also could not be tolerated, because it would be putting on the face of the bank note something as a fact which is not a fact. The third proposal would very largely increase the bank note issue of Scotland. In London, and within a certain mileage of the Metropolis, partly by custom and partly by law, the issue of notes is limited to the Bank of England; and that issue is governed by a certain precise law, under which what is called the unsecured issue cannot exceed a certain amount, liable, however, to be increased, and the rest is based on the bullion and coin held by the bank. These notes are legal tender. When you go beyond that district, the Bank of England is competed with by private banks, whose notes are not legal tender, and whose issue is regulated by a different law from that of the Scottish banks. You have thus a competition in England away from London between legal tender notes on the one hand and non-legal tender notes issue on the other. But when you cross the Border to Scotland, you have no legal tender issue. But all the arrangements made by Sir Robert Peel in 1841–5 had one object —that was to restrict the issue of private notes, with the view ultimately to lay down in practice the position which my hon. Friend the Member for East Cumberland quoted from the Treasury Minutes of 1881—that is to say, that in process of time the whole of the issue of notes should be in the nature of legal tender, and under the control of the State, and that meanwhile the issue of notes should be so restricted, and should be a privilege granted by the State itself. That being the state of the law and the policy of the Government—not only that of Sir Robert Peel, but equally of those who sit opposite with ourselves—I say nothing could be more unwise than to do what my hon. Friend the Member for Glasgow (Mr. Anderson) proposes to do—namely, to allow, as he says, Scotland to make an experiment with respect to the matter. My hon. Friend says—"Let us make this trial in Scotland." Of all countries in the world, I should say Scotland was the worst to try such an experiment in. Everybody admits that the system of banking in Scotland stands on a very high level indeed; and to take Scotland and make it the seat of a perfectly fresh experiment, with some remote analogy to the system of the United States, would be, in my opinion, a detrimental step. On that ground I should certainly counsel the House to adopt the Amendment. I will not go further into detail. It is quite sufficient to point out that the proposal departs from, instead of approaching to, the principles which governed the Acts of 1844 and 1845. These principles are approved by the great majority of the House; and without any hesitation I shall support the Amendment.

said, that there was the greatest anomaly and injustice, as regarded the Provincial English banks, in the system by which Scottish banks obtained a domicile in London, and retained their paper issue; and he should not be inclined to give any more privileges to the Scottish banks until that whole question was considered. If they were to deal with the question, they ought to have a Royal Commission to consider and discuss the matter as a whole; but to pass a measure of this kind on a Wednesday was ridiculous. He agreed with the Chancellor of the Exchequer that there was no necessity for the Bill. They had an excellent banking system in Scotland, and nobody was harmed by the monopoly that was complained of. If the Bill were passed they might have some extraordinary experiments with finance, which the country would not care for. The banking system in Scotland had been extraordinarily successful; and, though there had been terrible panics and large failures of banks, the other banks had sustained their position in a way which did them infinite credit, and testified to their high reputation. The idea that underlay this Bill, that the country wanted more bank notes in order to do more business, was, in his opinion, a pure fallacy. If any man had good credit he did not need bank notes. His cheque would go anywhere. The truth was, the more complete their machinery for business was, the less they wanted bank notes, and the more they used credit. The people who cried out for more bank notes were very often those who were deficient in currency at home. He did not deny the importance of having a good issue of the right sort of note; but he thought they were gradually getting to a state of things in which they were less dependent on that. He should certainly vote against the Bill.

said, he must honestly confess that he did not understand his hon. Friend's Bill; but, as a similar confession had been made by the Chancellor of the Exchequer, he failed in very good company. As a rule, he was rather given to praising Scottish institutions; but in this instance he was going to say something in depreciation. It seemed to him that they did want some legislation in respect of Scottish banking, because it was at this moment the closest possible monopoly. If any one doubted that, let him go to Scotland, and take up any newspaper, arid he would find it advertised that the Scottish associated banks had fixed the rate of interest at so-and-so. Now, it was surely not a good state of things when a close body could fix the rate of interest, not with regard to the market value of money, but solely from its own views of what the rate should be. Not only was Scottish banking a close monopoly, but it became closer every day; for, having a privilege of issuing notes which no other association could obtain, it was quite impossible that new banks could be established; and, on the other hand, every bank that burst up diminished the constituent members of the monopoly. Some years ago there was a much larger number of banks than there was now; and it followed that in course of time the monopoly might be limited to one or two. Therefore, he thought some legislation in regard to Scotch banking was undoubtedly required. He understood that the Bill before the House was, to some extent, founded on the National Banks of America. He know there were differences of opinion as to that system; but he thought, in the main, it was a good one. With reference to the remarks of the hon. Member for Cambridge (Mr. W. Fowler) as to credit and the use of cheques, speaking as a layman, he thought that the more a country could do without gold and silver, and could carry on its business with paper, so much was there a saving to the country. Therefore, it seemed to him that any system by which they could substitute the active use of paper for the active use of gold and silver would be an advantage.

said, he did not think the speech of his hon. Friend (Sir George Campbell) had added very much to the information of the House on this question; and as he had frankly confessed at the outset what his speech proved, that he did not understand the Bill, which was the only subject of the debate, he (Mr. Webster) would not make further reference to his observations. He rose to say how much he, in common with other Scotch Representatives, felt obliged to the Chancellor of the Exchequer for the admirable exposition he had made of the Bill, and for the decided opposition he had offered to it. He wished also to express his general concurrence with the hon. Member for Cambridge in his condemnation of the Bill. It was intolerable that a system which, whatever faults might be found with it, had been confessedly of immeasurable advantage to Scotland, should be dealt with summarily at the instance of one private Member on a Wednesday afternoon, and in so thin a house as at present. The thinness of the House he could easily understand, as it was not expected the Bill would be reached today; but there was another reason why more attention was not given to the measure. He had received many communications from banking, commercial, and other bodies, as well as individuals in Scotland, regarding the Bill to the effect that it seemed so wild and so absurd a conception that they did not think they need give themselves any trouble to explain by Petition to the House their views on the subject. There was a strong and general opinion in Scotland that the Bill was altogether a mistake, and that it proposed to disturb unnecessarily a system with which the prosperity of Scotland had been interwoven for more than a century. He hoped the House, therefore, by rejecting it, would put an end, for a time at least, to any such uncalled-for and ill-advised attempts to interfere with the banking system of Scotland.

Sir, I am ready to confirm what has just been said by the hon. Member as to the unexpected discussion of this Bill. I came down to the House without the slightest idea that the Bill would come before us to-day; and I am ashamed to say that I have not even gone so far as to read, far less to understand, the proposals of the hon. Member for Glasgow (Mr. Anderson). But I think so large and important a question could not, with advantage, be taken up at the instance of a single Member upon a Wednesday afternoon; and that it would be a very great pity if some of the questions which the hon. Gentleman raises should be disposed of as summarily and suddenly as would necessarily be the case on an occasion like the present. I quite agree with the Chancellor of the Exchequer that the Bill, as it stands, is one which we could not possibly take as the basis for an alteration of, or an experiment on, the banking system. I think it would be very unwise—though I do not say the Scottish system of banking stands in no need of reform—to take up this question on a Bill of this character; which, even if it were read a second time, could not be fully discussed during the present Session; and I entirely agree in the discretion of the Government in rejecting the Bill. I do not altogether deny that the observation of the hon. Member for Glasgow as to the monopoly which is now possessed by the Scottish banks is founded upon the truth, and is a very reasonable matter for our consideration. I do not think that the monopoly which the Scottish banks enjoy has to be taken absolutely as a proof that they are so excellent that it is on account of their excellence that there could be no competition with them. No doubt, the present state of the law does give them a monopoly, which, however excellent they are, they would hardly dare to demand on account of their own merits alone. Everyone must see that the monopoly they have of issue gives them a great power, and makes banking a monopoly; whereas the issue was not intended to be a monopoly. I hope the House will come to the conclusion that the Bill had better be laid aside.

said, he thought the hon. Member for Glasgow was not so sanguine as to expect the second reading of his Bill to-day. The matter came on rather unexpectedly, and, no doubt, that accounted for the thinness of the House; but if his hon. Friend wont to a Division he should certainly support him, not because he approved of the Bill, or the provisions it made for the amendment of the present system, but as a protest against that system being thought satisfactory as it now stood. The subject was pretty fully discussed in the House five or six years ago, when a Bill was introduced for the purpose of preventing the Scottish banks doing business in London; and on that occasion the right hon. Gentleman who had just addressed the House, and the present Prime Minister, expressed themselves in favour of the principle of the State providing a paper currency, in the same way as it provided a metallic currency. He (Mr. J. W. Barclay) thought that was a sound principle to adopt in any reform which might take place in the supply of currency throughout the country. Both functions should be under the control of the State, very much as the Mint was under the control of the State. He thought this would be of great benefit to the country generally; there would be a great economy in the use of gold, and they would not have these panics which constantly arose when one or two millions of gold were taken out of the country. The great objection to the present system was the necessity for the note currency being supported by a stock of bullion. The arrangements of the Scottish banks were very absurd. Once or twice a year, two or three millions of gold were sent down to Scotland in boxes, and after lying in the banks for a month or two they were sent back again. He did not think the American system of note currency was the best that could be adopted, and that system was not working very satisfactorily. He thought, if they were going to make any change in the present system of banking, it should be in the direction of making the State responsible for the supply of the paper currency of the country, as it was for the metallic currency. They could both be worked on a similar basis. So long as paper money was only used for the purpose for which it was intended—namely, the supply of currency—no danger could arise to the country from an excess in its issue. The danger could only arise if the State attempted to make the paper currency take the place of capital, and that could be effectually prevented. His hon. Friend the Member for Glasgow had accomplished a considerable part of his object in having the attention of the House and of the country called to this question of the issue of notes by the Scottish banks; and he thought he would do well to be satisfied with what he had accomplished at the present moment, in the hope that a reform would ultimately be made which would throw open the banking business in Scotland and England, but particularly in Scotland, to greater competition.

, in reply, said, the Chancellor of the Exchequer taxed him with not alluding to one of the principal provisions of the Bill. He could return the compliment. What be considered one of the principal provisions of the Bill was, that the State should have a profit from the national currency. That was never alluded to by the right hon. Gentleman, and yet it was a matter within the right hon. Gentleman's own province. There was another principle of the Bill which was not alluded to by the Chancellor of the Exchequer—the breaking up of the monopoly of the Scottish banks. As to the other points, he had no wish to go through the whole of them; but there were one or two that required a word. The right hon. Gentleman repeated what the Treasury letters stated—that the policy of the Government was to bring the issue under the control of the State. The Bill exactly brought the issue under the control of the State. The banks claimed as their absolute property the privilege of issue which they enjoyed at present. Therefore, it was not under the control of the State; but his Bill proposed to bring it under the control of the State. Undoubtedly, the breaking up of the monopoly was the most important point of the Bill. That the Bill had not received much support was partly to be accounted for by the fact of its coming on so unexpectedly; and he was not surprised that those hon. Members who took an interest in the subject were not present to take part in the debate. Under those circumstances, he could not expect to carry the Bill, and he would not put the House to the trouble of dividing upon it.

Amendment, by leave, withdrawn.

Motion, by leave, withdrawn.

Bill withdrawn.