might be the policy, and however laudable the intentions of the Bank, in engaging to make partial issues of coin in payment of their notes, yet, when the exchanges became unfavourable, and the price of gold rose above the Mint price, the only mode by which they could have retained the coin in circulation would have been a contraction of their issues; and unless the Bank at that period possessed such a control over the amount of those issues, as would have enabled them to effect that object, your Committee must consider it to have been expedient in the then state of the exchanges, to undertake an extensive though partial issue of coin, which subjected the Bank to considerable loss, and a great drain of treasure.

Under these impressions, and from a firm conviction that the continued issue of coin from the Bank, by diminishing the amount of their treasure, would have the effect of postponing the period at which the termination of the restriction can take place, without producing, on the other hand, any advantage whatever to the country, while the exchanges and the price of gold are in their present state, your Committee were induced to recommend to the House, in their first report, the immediate enactment of a law to suspend all payments in gold coin by the Bank, until your Committee might be ena bled to present to the House their view of the whole subject which has been referred to their consideration. The next important point to which the Committee will call the attention of the House is the amount of the issues of the Bank of England, which are outstanding upon Government securities; or, in other words, the amount of the debt due by the public to the, Bank of Eng

land.

The necessity of the repayment of a large portion of that debt has been so earnestly insisted on by the Bank, and the nature and extent of the connexion between the Government and the Bank involve so many important considerations, that your Committee deem it incumbent upon them to enter into some detail with respect to the origin and gradual increase of the advances made by the Bank on behalf of the public, and the effect which they have, when carried to the amount at which they at present stand, of depriving the Bank of that control over their issues of notes, the possession of which is deemed by them an essential preliminary to the resumption of cash payments.

In the Appendix to the Report will be found an account of the amount of advances made by the Bank of England to Government on Exchequer Bills and other securities, from the year 1792 to the latest period to which it can be made up.

The first item of this account, entitled, " An advance out of sums issued for the payment of dividends now amounting to the sum of L. 1,098,820," ought not, in the opinion of your Committee, to be considered as any portion of the debt due by the Government to the Bank. It arises from money originally lodged by Government at the Bank, for payment of dividends to public creditors, which, not having been claimed, has been withdrawn from the Bank, and applied to the public service, under the provisions of acts of the Legislature passed in the years 1791, 1808, and 1816. It is not therefore an advance from the funds of the Bank, but it is the property of the public creditors, which has been made available for public purposes, until demanded by them.

It will be seen from the account,

that a great proportion of the advances of the Bank are at present made under the two heads of " Exchequer bills issued," and "Exchequer bills purchased;" and before the Committee point out the distinction between those heads of the account, they will shortly advert to the laws which have been passed since the institution of the Bank for the regulation of their advances to Go.

vernment.

On the original establishment of the Bank, by the 5th and 6th William and Mary, a penalty is imposed upon the Directors, if they purchase, on account of the Corporation, any Crown lands, or if they advance to his Majesty any sum of money by way of loan or anticipation on any branch of the public revenue, other than on such funds only on which a credit of loan is or shall be granted by Parliament. Such credits have ever since been granted from time to time, and advances made upon them. The amount annually, from the year 1777 to the year 1792, extracted from the documents published in the Report of the Committee of Secrecy of 1797, will be found in the Appendix.

In the year 1793 an act was passed, protecting the Governor and Company of the Bank of England from any penalty, on account of their having advanced, or advancing in future, any sums of money in payment of bills of exchange accepted by the Lords of the Treasury, and made payable at the Bank, but not charged on any branch of the revenue. The motives for passing this act are fully detailed in the evidence given by Mr Bosanquet, then a Director of the Bank, to the Committee of Secrecy in the year 1797. He states, "that it had been the custom of the Bank, time out of mind, to advance,

for the amount of such Treasurybills of exchange as were directed for payment to the Bank, until the amount was about 20 or L. 30,000, when the Treasury usually sent orders for the amount of such advance to be set off from the respective accounts to which the bills properly belonged. In the American war, they had been permitted to run to a larger amount, but he believed they never exceeded L. 150,000. Doubts occurred to him, when Governor, whether the penalties of the Act of William and Mary did not extend to this transaction; and for the purpose of removing them, the Act of 1793 was introduced and passed,” It appears to have been originally proposed, that the Bank should be empowered to advance to a limited amount of L. 50,000 or L. 100,000; but the act passed without any limitation; its operation being of course confined to advances upon Treasury bills of exchange; on which species of security, however, no advances appear to have been made since the restriction.

By an act which passed very shortly after the first restriction act, the Bank were prohibited from making any loan or advance on account of the public service during the continuance of the restriction; but at the commencement of the following session it was enacted," that the Bank may make an advance on the credit of duties on malt, and on the land-tax imposed in that session, and any other advance which may be authorised by any other acts which may be passed during the continuance of the restriction."

In almost all the acts authorising the issue of Exchequer-bills passed subsequently, a special clause has been introduced, empowering the Bank to advance the whole or a

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 Exchequer bills takes place, and when they can

Bank Notes.

1814. Jan, to June

July to Dec.

1815. Jan. to June

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 Parlia ment in every year, since the year 1792, and the amount which the Bank was authorised to take of each description of bills.

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:

Feb. 26, 1814, Aug. 2,

Advances.

Feb. 26, 1815,

27,156,000

July to Dec.

24,079,100 18,988,300 26.042,600

Feb. 26, 1817,

July to Dec.

27,330,718 27,002,000

July to Dec.

Feb. 11, 1819,

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.

not ap

This debt was again increased be. tween 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 resump. tion of cash payments.'

To meet these charges, and the services of the year, and also to ef fecta 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 neces sary, 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 to 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 Direotors. 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 ba. lances 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,