Gladstone and the Bank of England: a Study in Mid-Victorian Finance, 1833-1866
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GLADSTONE AND THE BANK OF ENGLAND: A STUDY IN MID-VICTORIAN FINANCE, 1833-1866 Patricia Caernarv en-Smith, B.A. Thesis Prepared for the Degree of MASTER OF ARTS UNIVERSITY OF NORTH TEXAS May 2007 APPROVED: Denis Paz, Major Professor Adrian Lewis, Committee Member and Chair of the Department of History Laura Stern, Committee Member Sandra L. Terrell, Dean of the Robert B. Toulouse School of Graduate Studies Caernarven-Smith, Patricia. Gladstone and the Bank of England: A Study in Mid- Victorian Finance, 1833-1866. Master of Arts (History), May 2007, 378 pp., 11 tables, bibliography, 275 titles. The topic of this thesis is the confrontations between William Gladstone and the Bank of England. These confrontations have remained a mystery to authors who noted them, but have generally been ignored by others. This thesis demonstrates that Gladstone’s measures taken against the Bank were reasonable, intelligent, and important for the development of nineteenth-century British government finance. To accomplish this task, this thesis refutes the opinions of three twentieth-century authors who have claimed that many of Gladstone’s measures, as well as his reading, were irrational, ridiculous, and impolitic. My primary sources include the Gladstone Diaries, with special attention to a little-used source, Volume 14, the indexes to the Diaries. The day-to-day Diaries and the indexes show how much Gladstone read about financial matters, and suggest that his actions were based to a large extent upon his reading. In addition, I have used Hansard’s Parliamentary Debates and nineteenth-century periodicals and books on banking and finance to understand the political and economic debates of the time. Copyright 2007 by Patricia Caernarven-Smith ii TABLE OF CONTENTS Page LIST OF TABLES..........................................................................................................vi PREFACE ..................................................................................................................... 1 Chapter 1. INTRODUCTION ..................................................................................... 8 Overview ....................................................................................... 8 Who Was Gladstone .................................................................. 17 The Banking Landscape ............................................................. 25 The Bank of England................................................................... 27 The Structure of this Thesis ........................................................ 30 The Resources for this Thesis .................................................... 34 Sources for the History of Banking.............................................. 46 Conclusion .................................................................................. 72 2. GLADSTONE AS READER—THE SOURCES...................................... 74 Introduction ................................................................................. 74 Gladstone’s Reading Habits........................................................ 81 Gladstone’s Re-reading and Non-reading................................... 94 Coming to the Nineteenth Century............................................ 103 Gladstone’s Practical Reading .................................................. 106 Political and Social Contacts..................................................... 115 Hansard’s Parliamentary Debates as Sources.......................... 117 Gladstone as Autodidact ........................................................... 120 3. LIFE WITH PEEL, 1833-1846.............................................................. 122 Introduction ............................................................................... 122 Reading and Peel...................................................................... 122 Working for Sir Robert............................................................... 129 The Bank Act of 1844................................................................ 138 The Problem with Gold.............................................................. 153 Conclusion ................................................................................ 155 iii Gladstone’s Reading, 1833-1846.............................................. 156 4. PEEL IN DECLINE, 1846-1852 ........................................................... 161 Introduction ............................................................................... 161 Peel Out of Office...................................................................... 166 Oak Farm, Hawarden, and John Gladstone.............................. 179 Gladstone in Opposition............................................................ 182 Preparation for Office ................................................................ 190 Conclusion ................................................................................ 195 Gladstone’s Reading................................................................. 196 5. FIRST CHANCELLORSHIP, 1852-1855.............................................. 201 Introduction ............................................................................... 201 The Bright Hope........................................................................ 201 Deputations, Princes, and Governmental Contacts................... 205 The Budgets.............................................................................. 208 Fighting the War........................................................................ 222 The Government’s Relationship to the Bank of England........... 225 Reform ...................................................................................... 235 Conclusion ................................................................................ 238 Gladstone’s Reading................................................................. 239 6. OUT OF OFFICE AGAIN, 1855-1859.................................................. 244 Introduction ............................................................................... 244 A Statesman Out of Office ........................................................ 244 The Palmerston and Derby Governments................................. 246 The Continuing War .................................................................. 250 The 1856 Gladstone Financial Plan .......................................... 253 The 1857 Bank Charter Debate ................................................ 272 Conclusion ................................................................................ 279 Gladstone’s Reading................................................................. 282 7. SECOND CHANCELLORSHIP, 1859-1866......................................... 286 Introduction ............................................................................... 286 In Office at Last......................................................................... 286 iv The Second Palmerston Government ....................................... 290 The Budgets.............................................................................. 297 The Overend, Gurney and Company Problems, 1860, 1866 .... 312 The Banks of Issue Bill.............................................................. 319 The Exchequer and Audit Departments Act and Reform .......... 324 What Gladstone Wished For and What He Got ........................ 335 Conclusion ................................................................................ 342 Gladstone’s Reading................................................................. 344 8. CONCLUSION..................................................................................... 354 SELECTED BIBLIOGRAPHY.................................................................................... 366 Published Primary Sources ............................................................................ 366 Secondary Accounts....................................................................................... 369 v LIST OF TABLES Page 1. Governmental Expenses and the National Debt............................................... 20 2. Composite List of Gladstone’s Reading by Topic and Year.............................. 83 3. Gladstone’s Reading in Medicine during his Second Chancellorship............... 93 4. Gladstone’s Reading,1833-1846 .................................................................... 158 5. Gladstone’s Reading, 1846-1852 ................................................................... 199 6. Gladstone’s Reading, 1852-1855 ................................................................... 240 7. Gladstone’s Reading, 1855-1859 ................................................................... 284 8. Budgeted and Actual Total Expenditure, 1861-1862 ...................................... 303 9. Budgeted Revenue, 1861-1862...................................................................... 307 10. The Governmental Budgetary Bottom Line, 1858-1869 ................................. 309 11. Gladstone’s Reading, 1859-1866 ................................................................... 348 vi vii PREFACE Finance and politics in nineteenth century Britain went hand in hand, although at times one hand appeared to palsied and the other arthritic, and neither hand seemed to know where the body politic was leading them. In 1854, William Gladstone challenged the Bank of England over a seemingly insignificant cash-flow problem called the Deficiency Note. At first sight this challenge may