The Peel Web

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The Bullion Committee

In 1815 the government of Lord Liverpool passed the Corn Laws to protect agriculture from foreign imports and the threat of falling profits for farmers, by prohibiting the import of foreign grain until British produce reached 80/- a quarter. The Corn Laws artificially inflated the price of food but also affected industry because there was a restriction on all trade with Europe. Many countries in Europe relied on the export of grain to earn the money needed to buy British manufactured goods. The classical economists like Smith and Ricardo wanted the government to adopt a complete free trade policy, allowing duty-free goods both to enter and leave Britain. However, the government was controlled by landowners that were determined to maintain the Corn Laws under any circumstance.

The government's main problem after the French Wars was to find a way to stabilise the currency and reduce the heavy expenditure of the war years. In 1819 the House of Commons agreed that the Bank of England should resume cash payments: Pitt had suspended these in 1797. Peel was appointed as the Chairman of the Currency Commission. Since Peel knew nothing about the subject, he had to start from the basics to learn about economic matters. Other members were Castlereagh, Canning and Huskisson. The committee recommended a return to gold payments in three stages between February 1820 and May 1823. The gold standard was restored on 1 May 1821.

There was little opposition to the report but too rapid a contraction in note-issuing brought a fall in commodity prices and widespread unemployment. Prices fell sharply between 1819 and 1821: more sharply than had been anticipated. The circulation of notes under £5 in value was reduced from £7.4 million in February 1819 to £900,000 in August 1822. Complaints came not only from landowners but also from industrialists that full employment had been sacrificed to 'sound money'.

Liverpool's policies of convertibility brought hardship to farmers because they had to pay rents and repay loans which they had taken out in a climate of depreciated currency. According to Thomas Attwood, Peel's Act created

'More misery, more poverty, more discord, more of everything that was calamitous to the nation, except death, than Attila caused in the Roman Empire'.

The return to gold led to an immediate improvement in Britain's foreign exchange position and gold started to flow into the country. The cotton masters supported Peel's measures towards a gold standard because they relied on imported raw materials to conduct their businesses. Peel also favoured freer trade and a sliding scale on corn (introduced by Huskisson in 1828).