Bank statement
MARTIN DAUNTON enjoys a detailed but lively look at the 18th-century Bank of England
In the 1770s and 1780s, ‘economical reform’ was a potentially dangerous combination of parliamentary reform with demands for greater efficiency in public administration. In 1780, Lord North responded by setting up a Commission for Examining the Public Accounts, a pre-emptive strike to show that the state could mend its ways without parliamentary reform. Scrutiny also extended to the activities of the East India Company. In 1781, a secret committee was established to investigate the affairs of the company, and in February 1783 its chairman introduced a bill to establish a Board of Control.
Economical reform was also a potential challenge to the Bank of England, another private company with public functions. Its charter came up for renewal in 1781, and critics complained that the bank’s monopoly corrupted politics and led to higher taxes and economic hardship. Dissolving the bank was not feasible because the state owed it a huge sum, but its monopoly powers could potentially be reduced by establishing a rival or by imposing state control. In March 1783, the directors of the bank embarked on their own pre-emptive strike by establishing a Committee of Inspection.
The minutes of this committee form the basis of Anne Murphy’s fascinating book. She makes the technicalities of financial history accessible and personal by following the inspectors from one department to another. When the bank opened each day, its work started in the Cashiers Department, which issued bank notes and discounted bills of exchange. Later in the morning, the focus of the bank moved to the Brokers’ Exchange, which handled the sale of government bonds and the payment of dividends. In the early afternoon, the senior clerks departed and left their juniors to complete the ledgers in the Accountants Office, before the bank was locked and made secure.
The author paints a fascinating picture of the operations of a major branch of the service economy, a sector that has been neglected by historians despite its centrality to British economic growth. She shows how clerks were recruited, how they did their work, how they were remunerated and, above all, how they were kept (reasonably) honest despite the many opportunities for embezzlement.
The book has still wider significance in extending two ideas that have become commonplace in the history of the long 18th century. The first, the ‘fiscal military state’, successfully raised taxes to pay for the army and navy. It also required the issue of government bonds, a ready market to transfer claims and an efficient system of payment. The result was a ‘contractor state’ in which private concerns supplied services ranging from provisions to the navy to the bank’s management of the national debt. The second idea, ‘credible commitment’, gave assurance to lenders that the state would not default. Parliament is usually given the central role, but Murphy shows how the bank was crucial in mediating the relations between the state and its creditors.
The Committee of Inspection finished its labour with satisfaction that the bank was “the grand Palladium of public credit” and deserved “religious veneration”. This claim was part of a self-interested strategy of containing criticism but, as Anne Murphy shows, the bank was able to sustain both public and private credit.
The author shows how clerks at the bank were kept (reasonably) honest despite the opportunities for embezzlement