arrangement, he thought, would tend gradually to reduce the country issues.1 But its effect proved much slower than its author probably anticipated. A generation after Peel's scheme had been approved by the Legislature, only a little more than £2,000,000 out of the £8,500,000 of country issues had been. withdrawn from circulation.?

His bill of

1845

The Act of 1844 prohibited the formation of any new bank of issue in any part of the United Kingdom; in every other respect it applied to England and Wales alone. Peel forbore, in 1844, from attempting to deal with Scotch and Irish banking. He undertook to do so, however, in the following year; and in April 1845 he rose to redeem his pledge. Banking was conducted on opposite principles in Scotland and Ireland; but the Scotch and Irish were equally agreed in resenting any interference with their domestic arrangements.

The Bank of Ireland.

In Ireland as in England a great bank existed founded on a charter, and enjoying a monopoly in Dublin and its neighbourhood. Like many other Irish institutions it was founded on Orange principles, and the Roman Catholic who happened to be a director was required to take a particular oath which was not necessary in the case of his Protestant colleagues. The average issues of the Bank of

1 When a country bank ceased to issue notes either from its own failure or by arrangement with the Bank of England, the latter was to be at liberty to increase its own issues on securities by two-thirds of the amount which the bank ceasing to issue had been entitled to place in circulation. The scheme, therefore, provided a slight ultimate increase in the issues which the Bank of England was entitled to make on securities, and a rather greater ultimate decrease in the issues of the country banks. It made no alteration in the circulation, since the private banks were forced to retain a reserve of Bank of England notes to the amount of one-third of their own issues. Hansard, vol. lxxiv. pp. 1330 et seq.

2 For Peel's scheme, Hansard, vol. lxxiv. pp. 720, 1330; and cf. the Tracts which Lord Overstone had previously published. The scheme is explained in M'Culloch, ad verb. "Bank of England;" and, more elaborately, by Mr. Courtney in Encyclo. Brit., 9th ed., ad verb. Banking." It is violently attacked by Mr. Tooke, History of Prices, 1839 to 1847, pp. 144-402, and the arguments are repeated by the same author in his less well-known work on the Bank Charter Act, 1844. The whole thing is elaborately summed up by Mill in Principles of Political Economy, book iii, ch. xxiv.

Ireland amounted to £3,706,000; the average issues of other joint-stock banks to £2,565,000. Peel took these figures as 'the basis of his measure, sanctioned the continuance of a circulation to this amount, and provided that any further issues should be made on the security of bullion. He incidentally repealed the monopolies which the Bank of Ireland enjoyed, and the distinctive oath required of the Roman Catholic director. He, at the same time, confirmed a debt of £2,630,000 due from the Government to the Bank, made it a security for that part of the issues of the Bank which were unsecured by specie, and committed the public to the payment of 3 per cent. interest on the loan, on condition that the Bank performed the business of the public gratuitously.1

Scotland.

No bank in Scotland could be compared with the Bank of England or the Bank of Ireland. Nineteen joint-stock banks Banking in of high repute circulated their notes throughout the country; and the amount of their issues, which varied largely in different periods of the year, amounted on an average to £3,041,000. Peel again accepted this sum as the maximum issue of the Scotch banks. Any further issues he required should be based on specie. In all three countries, therefore, existing privileges of issues were respected, but all further issues were required to be based on bullion.

Peel's scheme was received with very general satisfaction. The Scotch especially, who had feared that the minister might endeavour to upset the whole banking arrangements of Scotland, were agreeably surprised at finding that things were left very much as they were. The Irish usually approved the destruction of the monopoly of the Bank of Ireland. The House, engaged on more exciting topics, only languidly discussed a commercial measure of the first importance, and the

1 Hansard, vol. lxxix. p. 1321. It ought, perhaps, to be added that Spring Rice had endeavoured to deal with Irish banking in 1839. He had proposed to continue the charter of the Bank of Ireland, repealing the monopoly of banking which it enjoyed in the neighbourhood of Dublin, but preserving its monopoly of issue. For the scheme, ibid., vol. xlix. pp. 773-910. O'Connell fought the scheme determinedly and successfully; see for instance, ibid., vol. 1. p. 285.

bills which Peel introduced to carry out his proposals became law without material amendment.

In two sessions, for good or for evil, Peel had placed the whole banking system of the kingdom on a new basis. But the commercial legislation which he thus carried in 1844 and 1845 attracted less attention than the brilliant Budgets which characterised his ministry. In 1842 he had imposed an income-tax, reformed a tariff, and terminated a disastrous deficit. Yet the Budget of 1842 was surpassed by the memorable financial policy which he pursued in 1845.

of 1845.

On the 14th of February, almost at the commencement of the session, Peel brought forward the Budget. One disadvantage inevitably arises from introducing the The Budget financial scheme of one year before the close of the old one. The estimates on which the new scheme is framed are necessarily imperfect. Peel, for instance, instead of furnishing the House with the full figures for 1844-45, was forced to rest his statement on the returns for the twelve months concluded on the 5th of the previous January. In those twelve months the revenue had reached £54,003,000, the expenditure had only amounted to £50,646,000. The revenue had exceeded the expenditure by £3,357,000, and Peel confidently believed that this surplus would be increased to £5,000,000 by the close of the financial year.

Cautious, wise, and resolute finance had entirely reformed. the financial situation. The constant deficits into which Spring Rice had drifted, and which Baring had been unable to deal with, had been effectually terminated, and the country had the satisfaction of knowing that its regular income exceeded its normal expenditure. But this reflection depended on one consideration. The deficiency had been terminated by the imposition of an income-tax, and the loss of the income-tax, which expired in 1845, might possibly produce a fresh deficit. On the assumption that no additions were made to the estimates, the regular expenditure of 1845-46 could not be placed at less than £48,557,000. The regular income, without the income-tax, could not be reckoned at more than £47,900,000.

It was true that, if the income-tax were allowed to expire, the Treasury would receive one half-year's arrears of the tax, £2,600,000, in the ensuing financial year; and that in the same period an indemnity of £600,000 was due from the Chinese. But these windfalls could not, of course, be expected to recur; and the Treasury, therefore, unless the revenue increased or the expenditure were contracted, would be confronted with a fresh deficiency. Retrenchment in the expenditure was indeed almost impossible. Economy had reached. its limits; the country was alarmed at the rapidity with which its nearest neighbour was adding to her fleet, and demanding increased outlay on its own; and the minister decided on increasing the expenditure from £48,557,000 to £49,690,000. This decision made it at once apparent that the whole of the income duty could not be spared. The revenue of the country, including the Chinese indemnity and the income-tax, could only be placed at £53,700,000. The loss of the income-tax would inevitably lead to fresh deficits.1

Peel, indeed, though he fortified himself with these figures, did not personally require the argument with which they supplied him to justify his decision. A three years' experience had convinced him of the benefits which had been derived from the changes in the tariff, and he was naturally desirous to carry the policy of 1842 further. In that year the alterations made in the tariff had been based on protectionist principles, 1 The revenue and expenditure were placed by Peel as follows:

and had been purposely designed to relieve the consumer only so far as relief could be given without injury to the producer. The tariff still enumerated 813 separate articles on which import duties were charged. More than half of these produced little or no revenue to the State; many of them were commodities the very existence of which were only known to persons possessed of antiquarian or technical knowledge. At one stroke, Peel decided on purging the tariff of 430 items. The tariff So insignificant was their produce that the abolition of the whole of them only involved a loss of £320,000. By another stroke, which cost the country £118,000, he took off all the duties on British exports. The only one of them to which much significance was attached was the duty on coal. The gloomy forebodings of a great geologist that the coalfields. were approaching exhaustion had induced Peel to place a duty on the export of coal in 1842. The injury which the duty occasioned, and the remonstrances of colliery proprietors in the North,1 induced him to remove it in 1845. By two strokes of his pen, at a sacrifice of less than half a million a year, Peel had done more to free trade from the shackles with which his predecessors had bound it than all the financiers who had held office from Pitt to Baring.

These two sweeping changes, effected at a comparatively slight cost, formed the most important features of the great Budget of 1845. But, in addition to these, Peel decided on remitting the auction duties, the tax on glass and on cotton wool, and on further reducing the duties on foreign and colonial sugar. The tax on glass was one of the most inju- Glass. rious of the excise duties. Its amount depended on the kind of glass which was made. Its existence consequently necessitated the constant supervision of the manufacturer; and the rules which were adopted to prevent fraud had the inevitable effect of checking enterprise. The British manufacturer found that the expenses to which he was subjected dwarfed his home trade and prevented his competing with the foreign

1 See the debate on Lord H. Vane's motion for the removal of the duty in 1844. Hansard, vol. lxxv. pp. 227-272.