THE BANK OF ENGLAND, A History Volume I. 1694-1797. Volume II. 1797-1914 HESE two volumes have' Jt: .JT.1tten Tat the request of the authorities of the Bank of England for its 250th birthday. All its surviving books and papers were thrown open to Sir John Clapham, and he has had full supporting help from the whole staff. The book was, however, allowed to be wholly its author's child; choice of material and expression of opinion were purposely left entirely to his discretion. The History as it is written here ends with the beginning of the first World War. Al­ though the history during the years 1914-1918 might have been written now, that history, says the author, could only be a preface to the story of the years between the wars, a story that cannot yet be written in its entirety; and it seemed better to defer any full discussion until the whole period could be dealt with. An Epilogue, The Bank as it is, rounds off the book for the time being. The design stamped upon the binding of these volumes is taken from one of the old stamps and appears on a Bank Stock Transfer book of 1694, the year of the Bank's foundation. It represents 1 Britannia sitting on a bank of money.' The two volumes 42s. net THE BANK OF ENGLAND A HISTORY IN TWO VOLUMES VOLUME I CAMBRIDGE UNIVERSITY PRESS LONDON: BENTLEY HOUSE NEW YORK TORONTO BOMBAY CALCUTTA MADRAS: MACMILLAN Copyrighted~ the United States of America by The Macmillan Company All rights resfflltd WILLIAM LOWNDES Secretary lo the Treasury 1695-1724 THE BANK OF ENGLAND eA. History BY SIR JOHN CLAPHAM C.B.E., LITT.D., F.B.A. VOLUME I 1694-1797 CAMBRIDGE AT THE UNIVERSITY PRESS 1944 PRINTED IN GREAT BRITAIN CONTENTS Preface page vii Chapter I. The Antecedents and the first Three Years of the Bank 1 II. The Bank and the Government, 1697-1764 5; III. The Organization and Business of the Bank, 1694-1764 104 IV. The Bank and the Bankers, I75Q-1797 In V. The Bank and the Government, 1764-1797 173 VI. The Organization and Business of the Bank, 1764-1797 199 VII. The Bank and the Crises of the Eighteenth Century 224 VIII. The Proprietors of Bank Stock, 1694-1797 273 Appendices A. The Technical Terms in Use during the Bank's Early Years 290 B. Dividends from Profits Declared, 1695-1797 292 C. Bullion, Circulation, Drawing Accounts and 'Rest', 172o-1797 293 D. Discount Rates as shown by the Court Books, 1694-1822 299 E. The Bank's Income from Discounts and Private Loans, 1728-1798 ;ox F. The Books of the Bank, to the End of the Eight- eenth Century ;o; vi CONTENTS PLATES \Villiam Lowndes, Secretary to the Treasury, 1695-1724 Frontispiece The First Page of the First Cash Book facing p. .zo Exchequer Bills: (a) the first, simplest, sort; (b) the sort available for most tax payments ; (c) the fully developed sort , Sir Gilbert Heathcote: an original Director: Governor 1709-17II and 1723-1725 " 74 Bartholomew Burton: Governor 176o-q62 Thomas Raikes: Governor 1797-1799 A Page from the Book of the Subscriptions PREFACE These two volumes have been written at the request of the Bank for its two hundred and fiftieth birthday. They aim at telling its public and economic history, with no more than a light back­ ground of general affairs, economic or political. That the volumes might not grow into three, or even four, the temptation to wander into attractive bypaths has been resisted. For their composition all the surviving books and papers of the Bank have been thrown open to me. Its whole staff, from the Governor to the messengers, have helped me. Retired Directors and Officers have contributed their memories. But selection of material for use, with expression of opinion, is my own throughout. Various Directors and Officers have read the typescript or the proofs, in whole or in part, and have corrected facts or suggested modifications. But nothing whatever has been imposed. Those inside the Bank who have helped me most and most continuously are in the Secretary's Office. It is their wish that I should not name them. From outside, my chief debts are due to Mr W. M. Acres­ once an insider-to Professor Jacob Viner of Chicago, and to Professor F. A. von Hayek of the London School of Economics. Mr Acres' Bank of England from Within (1931) has been my con­ stant companion, and he has seen my proofs. Overlap between us was inevitable at certain points: though the fields-the private and the public histories-can generally be fenced off, each must at times project into the other. Mr Acres' appendices of Directors and Officers I have consulted daily. \'Vhen my work began, at the end of 1938, I found at the Bank an inquiry from Professor Viner about that then very obscure affair the Subscription for the Circulation (of 1711-1759). He supplied printed references which might otherwise have escaped vill PREFACE me. Guided by these, I think I have now completed the story from the MSS. (vol. I, pp. 67-72). I have also made free use of Professor Viner's published work. Professor von Hayek found time, during enforced residence in Cambridge, to read all my typescript and leisure to discuss many points with me. His masterly knowledge of our economic litera­ ture has been at my command; and to him I owe a number of pamphlet and press.references. His edition of Henry Thornton's Paper Credit was always on my table for the period 178o-x82o. The Bank and I are indebted to Colonel William Selby­ Lowndes of Whaddon Hall for access to the portrait of his ancestor, William Lowndes, which serves as frontispiece to this volume. The portrait of Charles Montagu, political father of the Bank, appears in Mr Acres' book. Of William Paterson, the projector, there is no good portrait. If there were, I doubt if I should have used it, as I think him an over-rated person. Lowndes, Secretary of the Treasury from 1695 to 1724, was the permanent man with whom the.Bank dealt during the thirty years in which it passed from an experiment into a public institution. He, as much as anyone, was responsible for that progress (vol. I, PP· H-4, 63, 67 and Index). Other portraits, all in the possession of the Bank, are of leading Governors or Directors of whom good pictures exist. The man and the portrait had both to be considered. We do not know that Bartholomew Burton, Deputy and Governor during the Seven Years' War, was a great figure; but his is an excellent picture from a period otherwise not represented. For the Waterloo age, I should have preferred Jeremiah Harman to William Manning, even though Manning was the Cardinal's father. But we could not hear of a good picture of Jeremiah; and Manning, with his background of Soane's buildings, represents his generation admirably. Besides Lowndes, the only portrait not of a Governor is that of George Warde Norman. But he was a Director, with a few PREFACE ix brief intervals, for half a century (x82.1-1872.). The Index will tell how important he was. The portrait, recently acquired by the Bank, shows him a young man, as he looked when he became an original member of the Political Economy dub, with David Ricardo. He has a further claim on any historian of the Bank to-day as grandfather of another Norman. The writing of the book has all been done during war. The State asked only for fractions of my time. The Bank has had most of the rest. At black moments the work has been an anodyne; at all times a privilege and a pleasure. As this is not an official history I may perhaps be allowed to say that I have found the wartime atmosphere of Threadneedle Street tonic. A French­ man would no doubt have expected to discover "le fiegme britannique" in the ascendant at the Bank of England: he would not have been disappointed. JOHN CLAPHAM z6 :JI.O!yember 1943 REFERENCES USED IN THE FOOTNOTES BANK MSS. G.C.B. I, II, etc. General Court Books (of Minutes). C.B. A, B, etc. Court Books. C.T. x, .a, etc. Committee of Treasury Books. L.B. various series Letter Books. G.L. I, II, etc. General Ledgers. Other MSS are quoted by their full titles. PRINTED SOURCES A.&P. Accounts and Papers (of Parliament). Et:.H.R. Economic History Review . E.H.R. English Historical Review. E.]. Economic Journal. E.]. (Hist.) Economic Journal. Historical Supplement. ].H. C. Journal of the House of Commons. ].H.L. Journal of the House of Lords. Q.J.E. Quarterly Journal of Economics. APPENDIX A THE TECHNICAL TERMS IN USE DURING THE EARLY YEARS OF THE BANK'S HISTORY A Director of the Bank who read the proofs thought that it might be a convenience to other readers if the various technical terms were collected together and explained in an Appendix. They are mostly explained in the te}>..1: as they occur, but the explanations are here repeated, amplified, or made more precise. Accomptable Note: one of the original forms of Bank paper: in effect a deposit receipt: a depositor could draw against it or write off from it, the withdrawals being endorsed on the note. In 1701 an Accomptable Note payable to A. B. or bearer was sanctioned (C.B. D, 20 Aug.