Redlaw is a teacher of chemistry who often broods over wrongs done him and grief from his past.
He is haunted by a spirit, who is not so much a ghost as Redlaw's phantom twin and is "an awful likeness of himself...with his features, and his bright eyes, and his grizzled hair, and dressed in the gloomy shadow of his dress..." This spectre appears and proposes to Redlaw that he can allow him to "forget the sorrow, wrong, and trouble you have known...to cancel their remembrance..." Redlaw is hesitant at first, but finally agrees.
As a consequence of the ghost's intervention, Redlaw is without memories of the painful incidents from his past. He experiences a universal anger that he cannot explain. His bitterness spreads to the Swidgers, the Tetterbys and his student. All become as wrathful as Redlaw himself. The only one who is able to avoid the bitterness is Milly.
With this realization, the novel concludes with everyone back to normal and Redlaw, like Ebenezer Scrooge, a changed, more loving man. Now a whole person, Redlaw learns to be humble at Christmas.
On New Year's Eve, Trotty, a poor elderly "ticket-porter" or casual messenger, is filled with gloom at the reports of crime and immorality in the newspapers, and wonders whether the working classes are simply wicked by nature. His daughter Meg and her long-time fiancé Richard arrive and announce their decision to marry next day. Trotty hides his misgivings, but their happiness is dispelled by an encounter with the pompous Alderman Cute, plus a political economist and a young gentleman with a nostalgia, all of whom make Trotty, Meg and Richard feel they hardly have a right to exist, let alone marry.
Trotty carries a note for Cute to Sir Joseph Bowley MP, who dispenses charity to the poor in the manner of a paternal dictator. Bowley is ostentatiously settling his debts to ensure a clean start to the new year, and berates Trotty because he owes a little rent and ten or twelve shillings to his local shop which he cannot pay off. Returning home, convinced that he and his fellow poor are naturally ungrateful and have no place in society, Trotty encounters Will Fern, a poor countryman, and his orphaned niece, Lilian. Fern has been accused of vagrancy and wants to visit Cute to set matters straight, but from a conversation overheard at Bowley's house, Trotty is able to warn him that Cute plans to have him arrested and imprisoned. He takes the pair home with him and he and Meg share their meagre food and poor lodging with the visitors. Meg tries to hide her distress, but it seems she has been dissuaded from marrying Richard by her encounter with Cute and the others.
