A subsidiary change increased this gain at the moment. The interest on the 3 per cent. stock had been paid in July and January; the interest of the new 34 per cents. was made payable in October and April. This alteration in the dates of payment postponed till 1845-46 one moiety of the interest on the new stock. It was clear, however, that this postponement of a charge, while it temporarily increased the existing surplus, did not affect the financial situation. Goulburn, with much prudence, applied the money which he got by an exceptional process to equally abnormal purposes. He reserved a sum of £400,000 for any claims which India might make for the operations of the Chinese War. He threw on the Exchequer the burden of paying off the few dissentients who declined to take the new stock, and whose claims amounted to about £250,000; and he applied a further sum of £239,000 to the extinction of an annuity payable to the South Sea Company. These decisions necessarily affected his estimates for the expenditure of the ensuing year. The normal expenditure of the year was placed at £47,804,000; the exceptional expenditure at £889,000; and the gross expenditure at The Budget £48,693,000. The revenue, which had amounted of 1844. in the preceding year to £52,835,000, was placed with equal. prudence at £51,780,000.1 The surplus at the Chancellor of the Exchequer's disposal thus amounted to about £3,100,000. The revenue is erroneously given in Hansard as £51,790,000, the expenditure as £48,643,000. These erroneous totals have been copied by Sir S. Northcote, Financial Policy, p. 378, and his totals do not in consequence correspond with the sums of which they are composed. Cf. Hansard, vol. Ixxiv. p. 371. A large surplus of this description had been confidently anticipated in the public papers; and many members of Parliament, as well as many other authorities, in consequence expected that Goulburn would be in a position to propose financial changes of importance. One consideration, however, which influenced the Government had escaped their notice. The income-tax was expected to produce more than £5,000,000; and it had only been granted for a period of three years. If the tax were allowed to lapse at the appointed time, the surplus would be converted into a deficit, and all the difficulties which Peel had overcome would be renewed. With this possibility before it, the Government, instead of largely reducing taxation, determined on strengthening the Exchequer balances, and on making only insignificant changes in the rates of taxation. The duty on some kinds of glass, on currants, on coffee, and the stamp on marine insurances were reduced; the duties on vinegar and on wool were repealed. The ministry at the same time decided to reduce the duty on foreign sugar the produce of free labour. These unambitious alterations absorbed some £400,000 of the surplus. The residue of it was retained to strengthen the balances, and to pave the way for more drastic measures in 1845.2 1 Wool had been the subject of taxation from 1802. It gave rise to a good story, which is worth preserving. Canning once amused himself on a wet day in a country house by substituting the letter F for the letter W in Lord Sheffield's treatise on Wools. The leading sentence, after it was altered, ran as follows:-"We have no doubt that, with due protection, the production of British Fools may be rendered sufficient for our national wants, so as to render the importation of Foreign Fools wholly unnecessary." Charles Wood had proposed the reduction of these duties in the preceding July. Hansard, vol. Lxx. p. 1224. 2 The changes cost The duty on sugar, the produce of free labour, was reduced to 345., or to roS. more than the duty on colonial sugar. Ibid., vol. Ixxiv. p. 384. Sugar. An unambitious Budget of this character could not be expected to create enthusiasm. The House, which had been meditating on direct taxation and free trade, laughed when Goulburn became eloquent on vinegar; and the only important debates which the Budget provoked had reference to the proposed alteration in the sugar duties. It is said that the first Pitt, on commencing one of his speeches with "Sugar, Mr. Speaker," was received with laughter, till turning on those who laughed, he added in a voice of thunder, "I say Sugar! Mr. Speaker, Sugar! Who dares to laugh at sugar now?" No one was disposed to laugh at sugar in the later years of the Melbourne and in the earlier years of the Peel Ministry. Sugar had been the proximate cause of the fall of Melbourne; and sugar was still the battleground of Whigs and Conservatives. The Whigs were unanimous in desiring to reduce the protection which discriminating duties afforded to the British colonies. The Conservatives were almost as unanimous in resisting a change which would force the British colonist, dependent on free labour, into competition with slavegrown sugar. Neither Conservatives nor Whigs ventured on propounding a policy of free trade. The Whigs merely insisted. that all foreign sugar should be admitted at the same rates, while the Conservatives desired to keep a prohibitive duty upon foreign slave-grown sugar. Russell himself endeavoured to enforce the views of his friends, and was beaten by a decisive majority. But his motion was immediately afterwards. followed by one much more formidable to the ministry. Many Conservatives complained that, while Goulburn was doing something to help the foreign cultivator, he was doing nothing. to help the colonial trader. Miles, the member for Bristol, accordingly desired to reduce the duty on colonial sugar from 245. to 20s.; and in order to gain the support of the Whigs he concurrently offered to reduce the rate on foreign free-grown sugar from 345. to 30s. To ordinary persons there was not much difference between his proposal and that of the GovernGoulburn was proposing three rates of 245., 345., and ment. VOL. V. 1 By 197 votes to 128. Hansard, vol. lxxv. p. 219. с 635.; and Miles was substituting three others of 205., 305., and 63s. The Whigs, however, supported Miles, and the Government was beaten. Confident in his own policy, Peel had not yet learned to tolerate defeat, and he insisted on the House reversing its vote. The submissive assembly, which on the 14th of June had beaten the ministry by 241 votes to 221, resolved on the 17th of June to retrace its steps by 255 votes to 233.1 This remarkable division lent some significance to the financial policy of 1844. The year was, otherwise, memorable for no great fiscal changes. During the course of it, however, an opportunity occurred for revising the arrangements which subsisted between the nation and the Bank of England. Advantage was taken of the occasion to revise the Bank charter. Charter Act. A bank is an institution which undertakes to receive the money of its customers, and to keep it till they require its The Bank repayment. In the interval it devotes it to profitable uses. Some banks allow their customers an advantage in these speculations, giving them some small interest on the money deposited with them. Others allow them no interest. But, whatever may be their practice in this respect, all banks derive their profit from employing the money deposited with them, and are, in consequence, known as banks of deposit. In addition, however, to this, the primary function of a banker, some banks issue promissory notes representing certain definite sums of money, payable on demand. These 1 Hansard, vol. lxxv. pp. 968, 1082. Peel's menace of important consequences which might result from the ultimate decision is in ibid., p. 1012; but the Conservatives held a meeting at which they assured the Prime Minister of their general and united support, and Peel was thus enabled to secure the vote and go on. Martin's Lyndhurst, p. 106. It ought perhaps to be added that, in the previous year, Ewart had endeavoured to secure uniform duties on foreign and colonial sugar, and was beaten by 135 votes to 50; and that Hawes had endeavoured to reduce the duty on foreign sugar to 345., and had been beaten by 203 votes to 123. Hansard, vol. lxx. pp. 249, 268. Ewart originated the policy of imposing low duties on foreign sugar. See ibid., vol. xxi. p. 947. Any one who wishes to follow the subsequent history of the movement should refer, inter alia, to ibid., vol. xxxiv. p. 724; vol. xxxviii. p. 1609; vol. lv. p. 76; and post, ch. xx. notes are accepted, where the credit of the bank is good, as readily, or more readily than money itself. For many purposes it is easier and safer to carry a piece of paper than the gold and silver which the paper represents. A considerable demand, in consequence, exists for notes of this character. Some profit attaches to issuing them. The banks which issue such notes are technically known as banks of issue. The temptation which such a state of things produces constitutes a serious danger. If an individual can persuade the public to regard the paper on which he prints his name as equivalent to large sums of gold and silver, there will be always individuals ready to issue paper money. Such issues, extravagantly or recklessly made, must necessarily, sooner or later, create confusion and difficulty. Most civilised communities have consequently found it necessary to place bankers under considerable restrictions. In this country these restrictions have been the frequent occasion of violent dispute, the fertile cause of commercial legislation. Banking in Great Britain. From 1694, when the Bank of England was originally constituted, legislation affecting banks has been continuously in force in this country; and in 1708, when the Bank's charter was renewed for twenty-five years, it was enacted that no association having more than six partners should carry on the business of banking in England. This restriction was extended to Ireland in 1783, when the Bank of Ireland was first constituted. But the law of 1708 never applied to Scotland. In Scotland, therefore, from the first inception of banking, any number of individuals were at liberty to open a bank. In England and Ireland no more than six persons were able to do so. The law remained unaltered till the reign of George IV. In 1821, however, jointstock companies were theoretically allowed to be established. in Ireland for banking purposes at a distance of more than fifty Irish miles from Dublin; and in 1825 the Liverpool Ministry, alarmed at the failures of private banks, authorised |