§ The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George)
I beg to move, "That the House do now adjourn." I submit this Motion with a view to make the statement which I promised yesterday.
§ Sir A. MARKHAM
Before the right hon. Gentleman proceeds with this Motion, may I ask you, Mr. Speaker, whether we shall be limited to half an hour's discussion?
§ Mr. LLOYD GEORGE
I propose to withdraw my Motion after the conversations on this subject come to an end. Owing to the remarkable and quite unprecedented financial situation created by the events of the past few weeks, I deemed it to be my duty to summon conferences of the leading bankers and merchants and manufacturers of this Kingdom at the Treasury in order to confer as to the best way to meet it. The emergency is purely a temporary one, due to temporary causes and due very largely to the interruption of the flow of remittances from abroad, which are necessary in order to enable the discount market to meet its liabilities. There is no failure of credit, and I think it is a matter of overwhelming importance that that fact should be thoroughly realised. There was no failure of machinery, but there was a temporary stoppage of machinery, and that is all that occurred. It was just a temporary dislocation of machinery which might have caused very great inconvenience, and might undoubtedly have led to financial collapse in certain cases if it had not been dealt with promptly. I have had a number of conferences at the Treasury, and I am very glad to be able to say that the right hon. Gentleman the Member for West Birmingham (Mr. Austen Chamberlain), at the invitation of the Prime Minister and myself, 1992 has taken part in those conferences, and his assistance and advice has been invaluable. The conferences are not quite over and, therefore, I am not in a position to state the whole of the arrangements which are likely to be come to because there is a good deal of work still to be done.
I thought, however, that the House would like to know some of the decisions at which we have arrived. We had already taken steps in anticipation of a possible emergency to suspend the Bank Act, in order to enable the bankers to secure an adequate supply of notes. We came to the conclusion, after very careful consideration—I am proud to say with the unanimous assent of every interest—that it was not necessary to suspend specie payments, and that we were able to meet the emergency without in the slightest degree interfering with our present basis. But at the same time we thought it desirable to make arrangements with a view to economising the supply of gold. There was a danger that individuals—I am sorry to say that that was a peril which the bankers had good reason to anticipate after what happened on Friday—might selfishly attempt to hoard gold in order, conceivably, to put themselves in a better position than their neighbours. I think it is vital that it should be made clear to those individuals, and to the nation at large, that any man who does that is inflicting a great injury on his fellows. In this tremendous struggle finance is going to play a great part. It will be one of the most formidable weapons in this exhausting war, and anyone who, from selfish motives of greed or from excessive caution or cowardice, goes out of his way to attempt to withdraw sums of gold and appropriate them to his own use—let it be clearly understood that he is assisting the enemies of his native land, and he is assisting them more effectively probably than if he were to take up arms. Perhaps it will be an additional inducement to him not to do so if he knows that he will not benefit himself in the end. This is of enormous importance, with a view to what will happen when the banks open on Friday.
1993 We must appeal to the patriotism of every citizen in this land. Every man, not merely the armed forces of the Crown, but every citizen as well, must assist to carry the country through this terrible emergency. Everyone knows that the difficulty during the last few days has been that your £5 notes are not convertible. You cannot induce anybody to take them, unless the bill is represented by £5. You get no change, and the result is, undoubtedly, a very great inconvenience to the public. With a view to effecting an economy of gold without causing any inconvenience to the public, whilst at the same time maintaining the gold standard here in its integrity—because after all we have got to think of what will happen after the war—we have got to maintain the credit of this country, which has been due to a very large extent to the fact that this has been the free market for gold in the world—we propose to issue £1 notes and notes for 10s., convertible into gold at the Bank of England. They will be available on Friday morning. Of course, it is a process that takes some time. The machinery for the purpose is a very limited one. You have got to print them on a certain type of paper, and it may well be that on Friday morning we shall not have a sufficient supply, but we shall be able to turn them out on Friday morning. We hope then to have about £3,000,000 ready, and after that we shall be turning them out at the rate of about £5,000,000 a day until there is a sufficient supply. We came to the conclusion, after a very anxious discussion, that on the whole it had better be a Government note on the security of the Government, for reasons I need not enter into at the present moment. I need hardly say that there are arguments on both sides, but on the whole we came to the conclusion that it was better to make it a Government note, with, of course, Government security, and convertible into gold at the Bank of England. At the same time I hope it will not be converted. As these notes may not be available in sufficient number by Friday morning, it is proposed to make postal orders legal tender on the same terms. They will be convertible 1994 into gold at the Bank of England. [An HON. MEMBER: "What about the Post Office? "] They will be convertible at the Post Office in the ordinary course of business. At the same time, you do not want to draw a postal order at one counter and then go to the next and ask for gold. That certainly would not be economising gold.
§ Mr. LLOYD GEORGE
No. Anyone, for instance, drawing from a savings bank, instead of getting £5 notes or gold, will get these postal orders.
§ Mr. LLOYD GEORGE
No, it is really in order to meet the difficulties of printing. It is not proposed that they should be part of the permanent arrangement. We cannot by Friday morning, as a physical process, have an adequate supply of £1 notes, and therefore we have got to think of another sort of Government document that can be used for the moment as a substitute. There are about £2,000,000 of these bank notes—
§ Mr. LLOYD GEORGE
I am much obliged to the right hon. Gentleman. With the small notes, there are about £4,000,000. They will be of very great convenience to the public, but I hope they will be withdrawn after a short time, when we are able to establish our system of £1 notes. There is another very important decision which was taken. I am very glad that the Bank of England have found themselves in a position to say that they can reduce, as from Friday next, the Bank Kate from 10 per cent. to 6 per cent. After the fullest investigation, they feel confident of their strength to be able to get through this emergency without this abnormal Bank Rate. That will assist the business community very considerably. On Monday we issued a Proclamation for a limited moratorium. It was limited because we 1995 had to deal with one special emergency which had arisen on Tuesday morning in the bill market. We took full powers for a wider moratorium, but we had to issue that one, so as to give notice in time that on Tuesday morning the bill market would be relieved of its very great anxiety. It was not intended to be the final form of the Proclamation. It is generally felt by-traders, as well as by the banks, that the moratorium ought to be more extended; otherwise you will be relieving a certain section of the community of their liability to discharge their debts for the time being, whilst at the same time people who are depending upon them to meet their debts will be left in a difficulty. Of course it is quite obvious that there must be exceptions to that moratorium. The Government must be an exception. The Government must discharge its debts—old age pensions, insurance, and liabilities of that kind. Wages, of course, must be paid. [HON. MEMBERS: "Rent"?] That is one of the topics under discussion at the present time.
§ Mr. LLOYD GEORGE
I would rather these things were not entered into at the present time, because we have not quite come to a conclusion at the conference we are holding upon the extent of the limit of the exceptions. It is felt that the moratorium ought to be for a month, and that will leave ample margin to enable trade to adapt itself to its present conditions, and to resume its ordinary course. Of course, it is only in respect of debts contracted before the moratorium. Everybody will realise that. Bills, cheques and drafts, presented at the Clearing House, will be dealt with as usual, subject to a discretion to be used in exceptional cases. Crossed cheques, therefore, should be used in the ordinary way wherever possible.
I will point out what that means. It means that the bankers consider themselves in a position to resume the ordinary normal course of business, but when they say that they must have discretion in exceptional cases, with regard to cheques 1996 passing through the Clearing House, it means that it must not be used for the purpose really of defeating the moratorium by passing cheques through the Clearing House in order to be able to withdraw an exceptional amount of gold, or for some purposes of that kind. Any ordinary transaction that would have taken place if we had not had the present condition of things—that kind of transaction will be treated in exactly the same way as it used to be before the present moratorium. They feel themselves in a position to do so. The bankers are making arrangements whereby cash and legal tender will be available for wages, salaries and the normal cash requirements of daily life. These decisions are taken with a view of restoring the normal in business as quickly as possible, and the bankers and traders are all confident that if these steps are taken, as they will be taken on Friday morning, with the patriotic assistance of the public, because that is really essential, business will be resumed on Friday morning; and, what is so very important, there will not be the necessity which otherwise might arise for closing mills and factories and throwing hundreds of thousands out of work. So far has the decsion been taken. There are a few more decisions which will have to be taken, and it will be necessary for me—perhaps to-morrow—to introduce a Bill with regard to the issue of the notes, and one or two other matters which may be decided upon in the course of the afternoon's discussion. At the same time I think it desirable the public should know, at the earliest possible moment, the steps that are being taken.
§ Mr. CHAMBERLAIN
I hope the House will permit me to say a few words. I had, I need scarcely say, no hesitation in accepting the invitation of the Prime Minister and the Chancellor of the Exchequer to co-operate with the Chancellor of the Exchequer in this action, and I need scarcely say also that my action in so doing had the full approval of my Leader and of my colleagues. I think a satisfactory feature of the conferences which, under these circumstances, I have attended, has been the exhibition of a common desire on all sides to meet the 1997 present emergency with the least possible disturbance, and the least inconvenience possible to all the different interests concerned. I can say, as the Chancellor of the Exchequer has said, that the Bank of England, the great Joint Stock Banks, and the other financial and trading interests are working together, and that the decision which he announced are the result of their common deliberation, and are what they all believe to be the best in the present circumstances. No doubt there is a certain difficulty, a certain anxiety in the mind of many members of the public today, and especially of the smaller public, quite apart from the very big interests affected, arising out of the shortness of currency, and especially of small currency. The steps that have been taken will rapidly place a large supply of additional currency and of small currency at the service of the public. They need not, therefore, be under any anxiety lest they should be embarrassed by a shortness of supply, and under these circumstances I am sure that we can count on them in their own interest, as well as because it is their duty to the nation, to co-operate with the great traders and with the great banking interests to facilitate the measures which the Government and those interested are taking, and carry on business as far as may be in the normal and usual way—without panic, without excitement, and without undue anxiety.
I am perfectly confident, if the public keeps its head, the public will be safe. If all of us go about our affairs in the normal way, asking no more than is required to carry on our normal business, all will get what they want. But if in any quarter panic is encouraged, either by selfishness or greed, it might produce difficulties in other quarters, reacting in the end, if those difficulties arise, with as much force on the original offenders as on any of those on whom they will have brought suffering. I want to make one appeal to the House if I may make it. I confess it may be said I am not in a position to make it, because I have sat with the Chancellor of the Exchequer yesterday and to-day, and have taken part in his deliberations. But I submit to the House that the Chancellor of the Exchequer has made a statement of broad principles and of the main methods by which it is proposed to deal with this crisis, and I appeal to the House, as all the details cannot and have not been settled yet, to avoid discussing them as far as possible, and to refrain from asking questions 1998 which will be fully answered in due time, but which it might be difficult to meet in full at the present moment.
§ Sir GEORGE YOUNGER
I rise to ask the Chancellor of the Exchequer whether he is in a position to say if the Scottish banking question has been considered, and if the bankers of Scotland have been granted powers in regard to the issue of the new notes?
§ Mr. LLOYD GEORGE
We could not consider a pecuniary question without giving some thought to Scotland. We are considering the question of Scottish bank notes. Perhaps I had better not say more at the present moment. But the Treasury have their own views, and I think those are the views of the traders, but we have not yet placed the matter before the bankers, and perhaps it would be better not to make any announcement. I think the hon. Gentleman will find, however, that it will be perfectly satisfactory to every patriotic Scotsman. The right hon. Gentleman the Member for West Birmingham has suggested that I should intimate that we are coining additional silver.
§ 4.0 P.M.
§ Sir THOMAS ESMONDE
In banking matters Ireland and Scotland occupy very much similar positions. I believe the right hon. Gentleman is considering the position of banks in Ireland. Some slight modifications may be necessary in their case. We are extremely pleased to hear from him that the general financial position is very satisfactory. So far as the Irish people are concerned, I think they may be trusted to keep their heads in the matter. We have all to keep our heads, and we propose to do so in Ireland. My only reason for speaking at all is that I know the right hon. Gentleman has been consulting the representatives of the Irish banks, and it would satisfy those gentlemen if he were to say now that their representations were receiving his attention and that they would be dealt with to-morrow.
§ Mr. C. E. PRICE
I would ask the Chancellor of the Exchequer to take into consideration the desirability that traders shall not sue for a debt in cases where a man presents a bank note or cheque in payment. A case has come to my notice where a trader demanded payment in cash for an account of £20. It would be a very great hardship if traders were to refuse legal tender at the present time.
§ Sir A. MARKHAM
I desire to ask whether the Government have not the power, with the consent of the House, to have the speech of the Chancellor of the Exchequer and that of the right hon. Gentleman the Member for West Birmingham (Mr. Chamberlain) circulated in every town in the country. This is a matter of vital importance, and I do not think the country, or the ordinary man in the street, appreciates the importance of not hoarding gold. That should be brought home to everyone in the country. The Press have not given anything like the notice to this matter that they might have done. If the Government have that power, will they exercise it?
Mr. J. W. WILSON
In strongly supporting the appeal just made, may I also ask the Chancellor of the Exchequer to emphasise a remark which fell from him, which was not very distinct, with regard to the use of crossed cheques. I think a number of people who use crossed cheques nowadays do not appreciate that in paying an ordinary account with a tradesman or business person who has a bank that if they cross the cheque they cannot immediately demand cash in exchange for it. That will exercise some check on the amount of gold that is demanded. A person will have to draw his own cheque in order to get some more out.
§ Mr. ROBERT HARCOURT
In making a general reply, will the Chancellor of the Exchequer make it absolutely clear that poundage on postal orders is not to be charged, and that if a man tenders a £5 note for the purpose of getting change and receives five £1 postal orders, he will not have to pay the poundage on the postal orders?
§ Mr. KING
I venture to make a suggestion on the lines followed by the last two speakers. Could not the Chancellor of the Exchequer circulate through all the post offices in the Kingdom some notice indicating the nature of these arrangements, and, if possible, include a photographic representation of these new notes? [HON. MEMBERS: "Sit down!"] A great number of people, when they first use these notes, will probably hand them back and ask for cash. If some means were taken to inform the public of these notes it would assist them.
§ Mr. LLOYD GEORGE
I have a specimen of the notes here: it is not a very pretty picture, because it is the first proof. I can assure the hon. Gentleman opposite (Sir Thomas Esmonde) that the question of the Bank of Ireland is being considered. There is only one special difficulty there, which, I think, can be surmounted with very great ease. That is a question on which we have not yet come to a decision. I have no doubt it can be settled in twenty-four hours, and probably I shall be able to make an announcement to-morrow. As to the-crossing of cheques, I am very much obliged to my right hon. Friend (Mr. J. W. Wilson) for calling attention to it. I have no doubt at all that the observations he made will be reported. They will be a very useful contribution to what has been stated. With regard to poundage for the-purposes indicated by my hon. Friend (Mr. Robert Harcourt), there will be no poundage at all, because it will be legal tender. The hon. Baronet (Sir A. Mark-ham) suggested that the Press might be used to call attention to the dangers of hoarding gold from a national point of view. I hope notice will be taken of what he has said. The action of the Press would be exceedingly helpful to the Government if they took special notice of that point. The gold supply is adequate and sufficient. As a matter of fact it is still coming in. We have substantial consignments which I have no doubt will reach these shores before very long. I have not the faintest doubt on that head. I think there will be a continual flow, but at the same time we must give this assistance to the public. I can assure him that the Press would afford enormous assistance to us in calling the-attention of every individual throughout the country to the danger of hoarding gold at the present moment. I agree with the right hon. Gentleman (Mr. Chamberlain) that this is not quite the moment to press-questions such as those of my hon. Friend with regard to the details of the moratorium which are still under discussion. Any suggestion he can make I shall be very glad to bring to the notice of the Conference. I shall be better able to give an answer to the questions to-morrow.
§ Motion for Adjournment, by leave, with drawn.