The English coinage is regulated under what is called the system of Composite Legal Tender. A particular form of money is said to be legal tender in a country when it must be received if offered in payment of a debt. Money is full or unlimited legal tender if it can be so offered to an unlimited amount. It is limited legal tender if restrictions are imposed upon the debtor's power of compelling its acceptance.

The simplest monetary system is that of a single legal tender, but obviously there are disadvantages which outweigh the benefits conferred by simplicity. If the single metal is a dear one, like gold, it is difficult to coin pieces of sufficiently small value for everyday retail transactions. If, on the other hand, the single metal chosen is a cheaper one, the cost and inconvenience of transporting large amounts become insufferable. Of course a State can issue coins of two metals and make no proclamations or enactments at all, allowing the coins to circulate at a ratio varying with the market ratio of the metals of which they are composed, but such a system, or rather want of system, hardly commends itself to modern business methods.

If both metals are made unlimited legal tender and the ratio at which they are to circulate is fixed by the State, the operations of Gresham's law in its second form makes it a matter of extreme difficulty to keep both metals in circulation together for any length of time, as we shall see more plainly in the chapter on Bimetallism.

To obviate this difficulty, the English Government in 1816 adopted the compromise which is called the composite legal tender system, and which has been copied more or less closely by nearly all the civilised nations.

Gold is the sole unlimited legal tender in the British islands. Bank of England notes are full legal tender in England except by the Bank and its branches; silver is legal tender in amounts not exceeding forty shillings, and bronze not exceeding one shilling.

In order to overcome the difficulty arising from the operation of Gresham's law, the Act of 1816, which is still the basis of our coinage system, enacted that silver, then worth about 5s. an ounce, should be coined at the rate of 5s. 6d. an ounce. In other words, there was in future to be only five shillings' worth of silver bullion in five and a-half coined shillings. This reduced our silver coins to the rank of "tokens," a token being a coin whose exchange value is greater than the value of the metal contained in it.

A little consideration will show that this would effectually prevent gold driving silver out of circulation. No one would export or melt silver coins, because they would lose sixpence on every ounce while the market ratio remained at the level at which it then was. Silver was the over-rated metal, - very considerably over-rated. It would tend rapidly to drive gold from circulation; but to prevent this the Government retained in its own hands the right of coining silver, and this power was only to be exercised sufficiently to provide the country with silver coin for small payments. This limitation of its amount effectually prevented silver from driving out gold. There was only sufficient in circulation for the purposes of small change, and in order still more effectually to prevent silver from being used in heavy payments, and also in order to protect creditors from being forced to receive large quantities of token coins which would not circulate at full value outside the kingdom, its tender was limited to forty shillings.

Our bronze coins are also tokens, and they are issued under similar conditions to those just described.

Gold then is the only unlimited legal tender in this country, and gold is the standard of value. All other forms of money retain their value, because they are legally exchangeable for a certain quantity of gold.

Any individual can take gold bullion to the Mint and demand sovereigns in exchange at the Mint price of £3 17s. 10 1/2d. an ounce, free of all charge for coining. Previous to the Coinage Act of 1666 (18 Car. II. c. 5), the Crown made the public pay for this privilege. Not only was there a Mint charge to cover the expense of coining, now usually called "brassage," but the Crown retained a varying proportion of the metal as a toll, called "seigneurage," though this latter term is often used to cover both these charges. The result of such charges was found to be a reluctance on the part of the public to bring- bullion to the Mint, and the Crown was often compelled to call in older issues to provide metal for the new ones. Since 1666, therefore, the coinage of gold has been free in England, although many nations have retained the charge.

In practice, gold bullion is hardly ever taken to the Mint directly by the public. The Bank of England acts as the intermediary between the Mint and the public, and makes a small charge of 1 1/2d. an ounce for so doing. The Bank is compelled by the terms of its charter to buy all gold offered to it at the fixed price of £3 17s. 9d. an ounce, and in return for the charge it gives the holder of bullion immediate payment, whereas if taken direct to the Mint a considerable delay would ensue.

English gold coins are made of standard gold, which is an "alloy" or mixture of eleven parts pure gold and one part of copper. Standard gold is therefore said to be "eleven-twelfths" fine or twenty-two carats fine, a carat being a goldsmith's term for a twenty-fourth part of an ounce. Most of the continental nations coin gold nine-tenths fine, and it is unfortunate that some international agreement on the subject has so far proved impossible, as this difference in fineness makes it necessary to refine foreign gold brought to the English Mint and vice versa.

At the Mint price of £3 17s. 10 1/2d. an ounce, a sovereign should weigh 123' 27447 grains troy, but since absolute accuracy in weight was in former nines, when the machinery was somewhat primitive, a matter of difficulty, the Mint is allowed a slight deviation called a "remedy," amounting to two-tenths of a grain in each sovereign. There is also a remedy in the fineness of the gold of two parts in a thousand. The remedy in weight is still allowed to the Mint, but with the perfect machinery now in use, they are capable of working within much narrower limits, and no new sovereign would now be issued varying as much as two-tenths of a grain from the standard weight. Half-sovereigns are issued of a proportionate weight and with a remedy of three-twentieths of a grain, and two pound pieces and five pound pieces are occasionally coined in strictly limited quantities.