§ MR. GRANTsaid, he would beg to ask the Chancellor of the Exchequer the question of which he had given notice, Whether, if the Bank of England was to reduce their rate of discount below 10 per cent per annum, the power granted to them by the Government Letter of issuing a larger amount of notes than is fixed by Law would cease. As it might be necessary to say a few words in explanation of the ques- 468 tion, he should conclude with a Motion, that he might put himself in order. He understood that by the Letter addressed to the Governors and Deputy Governors power was granted to the Bank of England, contrary to the terms of their Charter, to issue a number of notes in excess of the amount fixed by law as proportionate to their reserve, on condition of the rate of discount being fixed at 10 per cent. A Court of Directors was held accordingly, and passed a Resolution by which the rate of discount was raised to 10 per cent to meet the exigencies of the case. It was rumoured amongst commercial circles that the hesitation of the Bank of England now to reduce the rate below 10 per cent was not so much owing to its position as to the fact that they were under the impression that the Government Letter would at once be at an end if they reduced their rate of discount below 10 per cent. He therefore wished to ask the right hon. Gentleman, Whether the Letter would be null and void so soon as their rate of discount was reduced below 10 per cent? He begged to move the adjournment of the House.
THE CHANCELLOR OF THE EXCHEQUERSir, as this is a question of great importance I will endeavour to make it perfectly clear, though I may be somewhat lengthy in the answer I give to it. The question appears to me to involve the prior question, whether the Bank of England, under the Government Letter, can issue a larger number of notes than is allowed by law. It is desirable, in a matter so important, to define quite accurately the meaning of the terms employed, because the ideas entertained on a very important question may materially depend on the meaning of the terms employed. No power, strictly so called, has been granted by the Government to the Bank to issue any amount of notes beyond the quantity determined by the Act of Parliament. The letter to which the hon. Member alludes is an engagement on the part of the Government, in a certain contingency, to make an application to Parliament, and that is the whole extent of it, the Government having themselves no power in the matter, which would enable them to confer powers upon others. I will, therefore, construe the question of the hon. Gentleman in this manner, in accordance with what I take to be his meaning, whether the engagement by the Government would be still in force in the event of the 469 reduction by the Bank of the rate of discount to a lower rate than 10 per cent. With respect to that, all I have to say is that it is simply a question of the construction of a document—nothing else, and the hon. Gentleman is quite entitled to ask us what construction we put on a document for which we are ourselves responsible—and I will tell him. I think it quite certain that the letter only applies to advances which are made at a period at which the rate of interest at the Bank of England is not less than 10 per cent. Now, it does not admit of doubt, on the simple, and natural, and fair construction of the document, that the engagement is limited to a period for which the Bank of England continues to charge interest at the rate of 10 per cent; The House will observe that I distinguish entirely between the question of the construction of the document and the question of policy as to the course proper to be taken in any future circumstances which may occur. If the Bank of England thinks it expedient, and considers themselves warranted in any future circumstances to reduce the rate of interest, then, in my opinion, the engagement will cease to be in force; but if I am asked what the view of the Government will be upon any subsequent circumstances in which the Bank of England may find it necessary, if so the case should be, to raise its rate of interest again, my answer would be that the event must be considered a new event, and dealt with on its merits, and that the same principles on which they have acted in this case would govern the Administration in any similar contingency. I have thus endeavoured to answer the hon. Gentleman's question, which I consider to relate—first, simply to the existence of a covenant on the part of the Government; second, to what I consider the primary object of his question, the nature of that covenant; and thirdly, also, to the policy which may be pursued in any future contingency that may arise, and which, when it does arise, must be dealt with on its own merits.