§ 4.34 p.m.
§ Mr. Mabane
I beg to move, in page 3, line 15, at the end, to add:(4) The enactment set out in the Second Schedule to this Act is hereby amended to the extent mentioned in the third column of that Schedule.It might seem to some that this Amendment and the consequential Amendment—to move a Second Schedule to the Bill—are rather more important than the Amendment I moved earlier. On the other hand, it might well be argued that the Amendment, if accepted, would have very little practical effect, because the powers conferred on the Treasury by this Amendment, it might be argued, are powers that they exercise now without having the statutory right to do so. But I am sure my right hon. Friend the Chancellor will, at all events, recognise that the Amendment is a compliment to him and to the Treasury, because the effect of it is to give the Treasury powers beyond those which they now possess, and if the Committee were to accept this Amendment it would be saying that it was quite prepared to trust the Treasury as the most effective manager of our currency that can be found within our borders. I do not think the case for the Amendment need be argued at any length. By the Currency and Bank Notes Act, 1928, in Sub-section (2) of Section 2:The Treasury may at any time on being requested by the bank, direct that the amount of the fiduciary note issue shall for such 1175 period as may be determined by the Treasury, after consultation with the bank, be reduced by such amount as may be so determined.That is to say, the Treasury are given power to reduce the fiduciary issue, but only after being requested so to do by the bank. The first effect of this Amendment is to make it unnecessary for the request to have been made by the bank to the Treasury before the fiduciary issue can be reduced. The second effect of this Amendment is in the contrary sense. In Section 8 (1) of the Currency and Bank Notes Act, 1928, there is the provision:If the bank at any time represent to the Treasury that it is expedient that the amount of the fiduciary note issue shall be increased to some specified amount above two hundred and sixty million pounds, the Treasury may authorise the bank to issue bank notes to such an increased amount ….The second effect of my Amendment is, afterIf the bank at any time represents to the Treasuryto add the wordsor if the Treasury at any time represents to the bank.That is to say, the Amendment, if accepted, would give the Treasury power to increase the fiduciary issue without any preliminary move in that direction having been made by the bank.
Having explained the effect of my Amendment, I think it does not seem necessary to argue it at great length, because it is clear that the effect is to give a rather more complete statutory power of managing the currency to the Treasury than now exists. I am informed by my friends in the City that, in fact, the Treasury already exercise such powers, and that if at any moment the Treasury deem it expedient that the fiduciary issue should be increased to decreased, they do not expect any objection from the bank to that course being adopted. If that be so, my Amendment clearly is of little effect, but it does at least give statutory effect to what my friends in the City tell me is at present the practice.
Many of us remember those Debates in 1931 and 1932 when hon. Members held strong views on the matter of gold and the influence of currency policy on our industrial policy. It was clear that this House, having recognised that the country had passed through a long period of 1176 deflation, with disastrous effects, did not desire any new deflationary period to be possible. I do not think this House would welcome any form of inflation, but I am sure it is far more frightened of deflation. This Amendment, in my view and the view of those who support me, precludes the possibility of the Bank of England pursuing a currency policy contrary to what many of us might consider the best industrial interests of this country.
§ 4.39 p.m.
§ Sir J. Simon
I could not accept such proposals as those which my hon. Friend has put before the Committee, or any proposals which seek, in any way, to alter the very responsible position of the Bank of England in connection with our currency. I think I follow the proposal which my hon. Friend makes, but it is plain, of course, that that proposal does not properly find a place in a Bill which is simply dealing in the ordinary way with matters of currency machinery. There is also the consideration that I do not think it would be at all a businesslike arrangement to make this change. I do not consider that the Treasury are in a better position to know the immediate facts than the Bank of England. The reason for which it might be wished to alter the total of the assets in the Issue Department would be in order thereby to alter the total of notes. Sometimes it does happen that there is a greater public demand which would justify or require that provision being made on the assets side of the account. Who has reason to know that there is such a demand, and how does such a demand show itself? The demand shows itself through the requests made to the Bank of England by the joint stock banks and other banks for an increasing outflow of notes. I do not for a moment accept the suggestion that the Chancellor of the Exchequer is in a better position to know that than the Bank of England. Therefore, I think it is quite proper for the bank, and not the Treasury, to initiate changes in the fiduciary issue. There is a further point which my hon. Friend may allow me to mention. His proposal only refers to the change in the fiduciary issue, but it would be entirely ineffective for the purpose he has in mind. You could equally well increase the note issue by increasing the gold holding. I hope 1177 that my hon. Friend, having ventilated a very interesting point, will not press the Amendment.
§ 4.44 p.m.
§ Mr. Dalton
I have been interested in the duel which has just taken place between the right hon. Gentleman and one of his followers. We on this side have always felt that where the interests and judgment of industry come into conflict with the interests and judgment of finance capital, the former should be allowed to prevail. We think that the bankers have too much and the industrialists too little to say on questions of banking and monetary policy generally. I do not know whether the hon. Member for Huddersfield (Mr. Mabane) is going to withdraw his Amendment, but if he persists in it I will ask my hon. Friends to give him their support. In spite of the fact that the Chancellor of the Exchequer may have been able to make certain debating points of detail, we believe that, broadly speaking, the hon. Member is on a good point.
It would be out of order to develop the past history of these events which many of us have in mind, but certainly during recent years the setting up of the Exchange Equalisation Account and the placing of it under the Treasury as distinct from the Bank of England has encouraged the hope that the Treasury were getting on top of the Bank of England, and that Mr. Montagu Norman was getting his orders in the last resort from the Government, and that the Government were being guided by fresh-minded Treasury advice to a greater extent, and by old-fashioned bank advice to a less extent, than a few years ago. In the second Amendment, if I have understood it aright, the hon. Member for Huddersfield wishes to give greater powers than at present exist or greater facilities and quicker methods of achieving what is desired when an increase in the Fiduciary Note Issue is in question, and I understand, from the comment of the Chancellor of the Exchequer that it is the hon. Member's intention to make it more easy and more speedy to secure an increase in the Fiduciary Note Issue. That seems to be a very desirable object. I am not very greatly impressed by the argument which the Chancellor used, and which we have often heard before, that the demand for these notes is a matter 1178 which is, so to speak, automatic. The way he stated the case, and the way the case often is stated, is that the demand for these notes is independent entirely of the fixation of the Bank Rate, and so on, but in the view of many of us that is not so at all. The demand for notes is, no doubt, due in the last resort to a number of causes together, and at least one is undoubtedly cheap money. If the Governor of the Bank of England should unhappily be able to persuade the Government of the day that they should put up the Bank Rate, that would have a repercussion on the note issue. It would check the demand for notes and the Fiduciary Issue would be reduced. Without developing that argument at any length, certainly my hon. Friends on this side of the House will look sympathetically upon any change which will have the effect of further increasing the control of the Government and the Treasury over the Bank. We hope that at a later stage control will be established firmly and legally over the Bank of England, and that in this country the Central Bank will be reduced to that status of subordination to the Government which it occupies in a great number of other countries and, indeed, in other British countries in several of the Dominions. The present legal position of the Bank of England is an anachronism and is against the public interest. We want to see it under the control of the State. Therefore, we welcome any step which strengthens the Treasury at the expense of the Bank of England and contributes towards the termination of the present position. But, of course, we have it in mind that Mr. Montagu Norman, or his successor, or other officials of the Bank of England should have access to the Chancellor of the Exchequer to put their point of view. If the hon. Member for Huddersfield will show a certain intractability and intransigeance, in spite of the cracking of the whip by his leader, we will back him up in the Division Lobby.
§ Amendment, by leave, withdrawn.
§ Motion made, and Question, "That the Clause stand part of the Bill," put, and agreed to.