THE GOVERNMENT AND MR. GOSCHEN'S SCOTCH BANKS' BILL.
THE Cabinet have given another proof of the radical weak- ness which seems to be almost the very principle of the
present Government. The Prime Minister eats his own words as soon as they are found to give umbrage in Germany ; the Lord Chancellor withdraws without debate a measure he had supported alike in Opposition and in Office the moment an irresponsible meeting of Conservative Peers is got together to condemn it; the Chancellor Of the Exchequer brings in a Friendly Societies' Bill which allows the rotten Societies to choose their own auditors, a step which pleases best those who most need independent audit ; Lord Sandon cannot, even at the request of his own party, supplement the glaring defects of the Agricultural Children's Act without waiting a year or two more on public opinion ; the recommendations of the Com- mission on the much-needed reform of our marriage laws are postponed for consideration to an indefinite future ; and now, even on a matter so minute as the privileges of the Scotch Banks, we find the Government retreating behind the aegis of a Committee of Inquiry, and this in spite of the fact that Sir Stafford North- cote appears to be so clear as to the principles of the problem at issue, that there does not seem to be anything intelligible to inquire about.
The case for Mr. Goschen's Bill is a very simple one, and it seems to us extremely difficult to understand how it is that so many good Free-traders have misapprehended and misstated it. Sir Robert Peel left the Scotch Banks, after the Act on the Issue of Bank-notes in Scotland, in a position very different indeed from that of the English Banks. He allowed the Scotch Banks to issue notes, from .£1 notes upwards, without holding gold against them so long as their circulation did not exceed the average of the year before the Act passed, and as many as they pleased beyond this number, so long as they held gold against them. Nor was any limitation put on the multiplication of the branches of such Banks. With the English Banks, his procedure was very different. He allowed certain of them to retain a limited circulation of their own, some private Banks absolutely, and others so long as they did not come within sixty-five miles of London, but he did not allow of any increase of that circulation at all, even against a reserve of gold of equal nominal value. As the Economist has pointed out, the result has been that while competition has multiplied rapidly amongst English Banks, competition has diminished amongst Scotch Banks. The valuable monopoly of issuing £1 notes to any value against a reserve in gold has given the Scotch Banks which were already Banks of issue in 1844 so vast an advertising power,—for the great medium of advertisement is the note, —that while branch banks have multiplied rapidly, the number of the Scotch Banks themselves has diminished from twenty to eleven. But these eleven Banks have achieved such a prosperity, that they are now beginning to invade England, and even London, where none of the English Joint-Stock country banks of issue are allowed to establish themselves at all.
The question, then, is whether these subsidised competitors, —of the possibility of whose appearance in London Sir Robert Peel never had the least dream, for he did not know what a valuable privilege he was conferring when he left to the Scotch Banks not only the privilege denied to the English of issuing £1 notes, but the privilege of issuing to any extent beyond their unsecured issue, so long as they kept gold against the excess,—ought to be permitted to appear here. The Times maintains that it is the truest free-trade to give them that additional privilege and this though it is perfectly certain that the English Banks cannot return the compliment by going to Scotland, and there establishing an effectual competition with the Scotch Banks. They could not do so, for very obvious reasons ; for they could not issue their own notes when they got to Scotland, and would have to buy all their notes from existing Scotch Banks, and by the use of these notes they would advertise not themselves, but the Bank from whom they got the notes. But the Scotch Banks in London, though they can, of course, make no use here of their privilege of issue, would compete on per- fectly equal terms with all the ordinary London Banks, which also have no privilege of issue,—nay, on more than equal terms, since they would draw from Scotland the moneys they had made by the use there of their special monopoly, and use them in competing with Banks which had had no such special source of profit in England. The Times, however, asks,—Why raise at all the question, where the capital to start a competi-
tion is gained? y England, not allow competitors rs one of el n equal them has on advantage in Scotland which the other is not in that country allowed to share ? Well, the reply seems to us very clear. We should ask no questions as to where the capital for the new compe- tition was gained, if it were merely a question of the source of gain. No one would dream of asking that money gained in a railway or gas company (say), or any other company that had legally acquired a temporary monopoly, should not be employed in setting up a fresh competition with English Banks, merely on the ground that the English Bankers had no such source of profit to draw upon for their capital. That would be childish and impracticable in the -highest degree. But when you are laying down the extent of two conterminous mono- polies of the same kind, and give quite different terms to the two, and as it turns out, more favourable terms to one of them than you give to the other, it does seem monstrous, and if not exactly fatal to the principles of free-trade, cer- tainly fatal to the principles on which alone you ought to permit that limitation of free-trade implied in the creation of monopolies, to let the more favoured monopolist invade the territory of the less favoured monopolist, when the very terms you have imposed, themselves prevent the converse process, and exclude the latter from any effectual raid into the terri- tory of the former. Is it not plain that if territorial monopolies in the same commercial province, as it were, are to be created by the same Government, they must be either excluded altogether from mutual interference, or else placed on equal terms, so far as the State can so place them ? Now this is not the case, when the very terms of the grant to the English and Scotch Banks respectively, prevent the English Banks from interfering effectually with the Scotch, but do not prevent the Scotch Banks from interfering effectually with the English. Indeed it is in the strictest sense an extension of the principles of Free-trade, to take care that the Government does not bestow exclu- sive advantages for competition on one of two competitors, for Free-trade means leaving the natural advantages of genius, soil, and skill to take their own course, whereas such grants of monopolies interfere seriously with the effects of natural advantages, and divert to one competitor what nature would give in an equal or greater share to the other. Hence the Times seems to us to be going lamentably astray from the real lines of the argument, when it argues that because the Scotch Banks have no power of issue for England, they are competing with the English Banks here on equal terms. It would be on equal terms, if the English Banks had the same chance of competing with the Scotch Banks in Scotland. But as it is, you might as well say that if the Corporation of Liverpool could and did prohibit a London tradesman from esiablishing a branch house there, while the various munici- palities of London had no similar power to prevent the Liver- pool tradesman from establishing a branch house here, the two houses would compete in London on equal terms. The power of wide ramification is one of the first conditions of economical and profitable organisation, and the competitor who is shut out from his rival's special field of operations, while that rival is not similarly shut out from his own, is unquestion- ably treated in a manner which the principles of Free-trade utterly condemn.
Moreover, when the Times suggests that it is the true course at once to take off the embargo placed on all English Joint-Stock Banks of Issue from coming within sixty-five miles of London, and then to let the Scotch Banks set up what branches here they please, it forgets that if the Government is ultimately to take the right of issue completely into its own hands,—and this is a policy which the Times itself approves,—nothing can be more foolish than to enhance in the mean time the value of .the limited privilege of issue still enjoyed by certain English Banks, for which compensation must be paid whenever the Government comes to reconsider the subject in a large way and to place it on some definite footing of principle. Yet, if it would be most inexpedient, in view of such a measure, to give any English Bank of Issue additional privileges to those which it now enjoys, it would clearly be most unfair to give the Scotch Banks the right of establishing branches in London while certain English Banks of Issue of far more limited privileges are prohibited from doing the same. Take it which way you will, every mode of considering the subject comes to the• same result,—that the favoured Scotch monopolists should be confined to Scotland until the whole subject is reconsidered with a view to some more coherent and organic mode of dealing with it than Sir Robert Peel, in the tentative measures of 1844 and 1845, was either able or inclined to propose.
But whatever the result is to be, one thing seems pretty certain,—that the Committee proposed by the Government is a mere bit of feebleness, which cannot enlighten the Government, and in all probability will not enlighten the House as to the proper mode of proceeding. If the Government had no time to introduce a complete measure this Session, it should have supported a suspensory Bill, and promised legislation in a large sense for next Session. This Committee will be another drain on the legislative strength of the House, and yet will do nothing either for that very vague, but now much- pursued purpose called the maturing of public opinion,' or for any other. That the Government ought ultimately to take the privilege of issuing Notes completely into its own hands we do not at all doubt, and there seems to UB no reason why that consummation should be long de- layed. The means of compensating the Scotch and Irish and remaining English Banks of Issue could easily be covered, without any drain on the public purse, by the issue of £1 notes throughout the United Kingdom,—a change which might also be so carried out as to strengthen very much the too slender metallic reserve on which at present the Banks of all Three Kingdoms rely for their solvency in times of alarm. But all this is beyond the scope of this week's debate. To our minds, Wednesday's discussion proved conclusively the strength of Mr. Goschen's case, and still more conclusively the timidity, irresolution, and fibrelessness of this Cabinet, even on matters which no one can pretend to think of a party nature. The Chancellor of the Exchequer wants "grit." He is as "intelli- gent and devoted" as M. Buffet's administrative staff, but he does not understand the operation which Mr. Lincoln used to call "putting your foot down."
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