ABSTRACT
For Peel, the Bank Charter Act of 1844 represented the achievement of his objective of stabilising the currency supply. This had first been evidenced by his recommendation of a return to the Gold Standard in 1819. Under the terms of the Bank Charter Act, the Bank of England was allowed to issue banknotes to the value of its gold reserves, together with a fiduciary limit of £14m on notes which were not backed by gold or government securities. No new provincial banks were permitted to issue notes at all. It was the beginning of the process by which note issue, which had previously been permitted in a wide range of country banks, came to be centralised in the Bank of England. The government retained the power to suspend the Act in case of financial crisis, as it subsequently did in 1847, 1857, and 1866.
Peel’s speeches in introducing the legislation afforded him with an opportunity to educate the House of Commons in his currency views. On 6 May 1844, he proposed the question, ‘What is the signification of that word “a pound” with which we are all familiar?’ and proceeded to argue that it represented ‘a certain definite quantity of gold with a mark upon it to determine its weight and fineness’. He used a lengthy historical review of the currency to argue that it was this which ‘has constituted, and ought to constitute, the measure of value’.
A fortnight later, Peel expanded upon the details of his measure, paying particular attention to the position of provincial banks and addressing the status of silver as an alternative measurement of value. Peel described the Bank Charter Act as ‘the fulfilment and complement’ of the measure of 1819 with which he had been principally connected.
