STOPPAGE OF CASH PAYMENTS AT THE BANK.
At the commencement of this year the aspect of public affairs wore a gloomy appearance. The directors of the Bank of England had recently, on several occasions, represented to the chancellor of the exchequer their inability of supplying his increasing demands; and the dread of an invasion had produced a run upon the bank for specie; so that when Pitt requested a further advance, early in this year, of £1,500,000 as a loan to Ireland, he was informed that a compliance with this request would most likely cause the directors to shut their doors. In this state of affairs the privy council, on the 26th* of February, sent an order, prohibiting the directors of the Bank from issuing any cash or specie in payment till the sense of parliament could be taken, and measures be adopted for supporting public credit.
*This was on a Sunday; and it was the first time, during the reign of the present monarch that business had been transacted on that day.
This decisive step was announced by a royal message to parliament on the next day; and the subject was immediately taken into consideration. It was thought by the opposition that this would crush Pitt; and Fox exultingly gave notice that he would move for an inquiry into all the past transactions between the Bank and the minister; and Sheridan, Whitbread, and others made motions all having one end in view—Pitt’s overthrow. But Pitt was too firmly seated to be overthrown by his opponents, however ardently they might seek his downfall. The first step taken was to appoint two secret committees for ascertaining the assets of the Bank beyond its debts; and their reports stated that these amounted to the sum of £3,826.890, exclusive of a permanent debt of £11,666,800 in the three per cent, stock, due from government; and also that the demands which occasioned this drain of cash had of late increased, and that they were likely to go on increasing until the Bank would be deprived of its means of supplying that cash to government which it might require. The committees added, that it, was proper to continue the measures already taken for such time and under such limitations as should seem expedient to parliament. This report was taken into consideration by a committee of the whole house; and Pitt moved for leave to bring in a bill to continue and confirm for a limited time the restriction of the issue of specie by the Bank of England; and after various clauses, added by the ministers themselves, this bill passed. The Bank was authorized to issue specie to the amount of £100,000, for the accommodation of private bankers and traders; and bank-notes were to be a legal tender to all, except to the army and navy, who were to be paid in cash. From this time till 1819 the circulation of gold coin in a great measure ceased, and notes of one pound and upwards became the general medium of commercial intercourse. Pitt’s bill was, indeed, limited in its operation to the 24th of June; but the restriction was afterwards continued from time to time by a succession of new acts, so that the return to cash payments did not take place till the above date, when Sir Robert Peel carried his well-known bill on that subject.
GEORGE III. 1796-1798