"The bank directors, as well as some of the merchants who have been examined, showed a great anxiety to state to your committee a doctrine, of the truth of which they professed themselves to be most thoroughly convinced: that there can be no possible excess in the issue of Bank of England paper, so long as the advances in which it is issued are made upon the principles which at present guide the conduct of the directors - that is, so long as the discount of mercantile bills is confined to paper of undoubted solidity, arising out of real commercial transactions, and payable at short and fixed periods. That the discounts should be made only upon bills growing out of real commercial transactions, and falling due in a fixed and short period, are sound and well-established principles. But that while the bank is restrained from paying in specie, there need be no other limits to the issue of their paper than what is fixed by such rules of discount; and that during the suspension of cash payments, the discount of good bills falling due at short periods cannot lead to any excess in the amount of bank paper in circulation, appears to your committee to be a doctrine wholly erroneous in principle, and pregnant with dangerous consequences in practice.
"Upon a review of all the facts and reasonings which have been submitted to the consideration of your committee in the course of this inquiry, they have formed an opinion, which they submit to the House - That there is at present an excess in the paper circulation of this country, of which the most unequivocal symptom is the very high price of bullion; and, next to that, the low state of the continental exchanges: that this excess is to be ascribed to the want of a sufficient check and control in the issues of paper from the Bank of England, and originally to the suspension of cash payments, which removed the natural and true control.
"Your committee would suggest, that the restriction on cash payments cannot safely be removed at an earlier period than two years from the present time; but your committee are of opinion that early provision ought to be made by parliament for terminating, at the end of that period, the operation of the several statutes which have imposed and continue that restriction."
This report was delivered late in the session, and was not taken into consideration by the House until the following year.
1811. The commercial distress of the country had become so great, that parliament authorized the sum of six millions to be advanced to merchants on their giving sufficient security; but such had been the fall in the price of mercantile property, that not many could give the required security, and bankruptcies were numerous. Whether this distress arose from any preparations of the bank to return to cash payments, from the American embargo, or from Buonaparte's Berlin and Milan decrees, was a matter of much controversy. From the accounts since published, it does not appear that the bank had taken any measures to increase its stock of gold; but during the years 1810,
1811, and 1812, it considerably reduced its private securities and increased the amount of its public securities. Thus on the last day of February, 1810, the public securities were £14,322,634, and the private securities £21,055,946. On the same day, in 1813, the public securities were £25,036,626, and the private securities £12,894,324. This progressive reduction of the discounts no doubt occasioned great distress, though it was in some degree counteracted by an increase in the same period of above two millions in the circulation.
The report of the Bullion Committee was taken into consideration by the House of Commons, and after much discussion rejected. Instead of the measures recommended by the committee, the House adopted certain resolutions proposed by Mr. Vansittart (afterwards Lord Bexley), declaring that the value of bank notes was not depreciated, but that the value of gold was enhanced; and that the political and commercial relations of Great Britain with foreign States were sufficient to account for the unfavourable state of the foreign exchanges and the high price of bullion.
July 24. Lord Stanhope's Act passed. This Act (51 Geo. III. c. 127) is entitled, "An Act for making more effectual provision for preventing the current gold coin of the realm from being paid or accepted for a greater value than the current value of such coin; for preventing any note or bill of the Governor and Company of the Bank of England from being received for any smaller sum than the sum therein specified; and for staying proceedings upon any distress by tender of such notes." It enacts that the taking of gold coin at more than its value, or Bank of England notes for less than their value, shall be deemed a misdemeanour. This Act was to be in force until the 25th of March, 1812. It was introduced by the Earl of Stanhope, in consequence of the following notice having been addressed by Lord King to his tenantry: -
"By lease, dated 1802, you have contracted to pay the annual rent of =£47 5s. in good and lawful money of Great Britain. In cod sequence of the late great depreciation of paper money, I can no longer accept any bank notes at their nominal value in payment or satisfaction of an old contract. I must, therefore, desire you to provide for the payment of your rent in the legal gold coin of the realm; at the same time, having no other object than to secure payment of the real intrinsic value of the same, stipulated by agreement, and being desirous to avoid giving you any unnecessary trouble, I shall be willing to receive payment in either of the manners following, according to your option: - 1st. By payment in guineas: 2nd. If guineas cannot be procured, by a payment in Portugal gold coin, equal in weight to the number of guineas requisite to discharge the rent: 3rd. By a payment in bank paper, of a sum sufficient to purchase (at the present market price) the weight of standard gold requisite to discharge the rent. The alteration in the value of paper money is estimated in this manner: the price of gold, in 1802, the year of your agreement, was £4 an ounce; the present market price is £4 14s., arising from the diminished value of paper. In that proportion an addition of £17 10s. per cent. in paper money will be required as the equivalent for the payment of rent in paper."