HC Deb 29 May 1916 vol 82 cc2415-26

(1) The Treasury may borrow from any person, by the issue of Treasury Bills or otherwise, and the Bank of England and the Bank of Ireland may advance to the Treasury on the credit of the said sum, any sum or sums not exceeding in the whole three hundred million pounds.

(2) The date of payment of any Treasury Bills issued under this Section shall be a date not later than the thirty-first day of March, one thousand nine hundred and seventeen, and Section six of the Treasury Bills Act, 1877 (which relates to the renewal of bills), shall not apply with respect to those bills.

(3) Any money borrowed otherwise than on Treasury Bills shall be repaid, with interest not exceeding five pounds per cent. per annum, out of the growing produce of the Consolidated Fund, at any period not later than the next succeeding quarter to that in which the money was borrowed.

(4) Any money borrowed under this Section shall be placed to the credit of the account of the Exchequer, and shall form part of the said Consolidated Fund, and be available in any manner in which such Fund is available.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. SAMUEL SAMUEL

On Thursday I called attention on the Second Reading of the Bill to the great want of confidence in the commercial world in reference to the Government's system of finance by short Bills. Unfortunately it was late and there was nobody on the Government Bench to give a reply to my criticism. I put down a Motion to-day to leave out Clause 2, not with the object of pressing it to a Division, because I know perfectly well that such a step would be futile, but with the sole purpose of trying to elicit from the Government what their plans are for financing this great War. I mentioned on the Second Reading that the rate of interest had been advanced from 3½ to 5 per cent. during the period of the War on Treasury Bills, and the consequence was that the country was paying a great deal more for the accommodation than was necessary. No doubt the Chancellor of the Exchequer has seen the comments I have made, and will have been in a position to make his own inquiries. We were told that the reason for the issue of Treasury Bills over the counter was originally for the purpose of fixing or helping the exchange. We knew in the City that the issue of Treasury Bills does not have any such effect as that. We saw with alarm that we were being made all the time to pay more and more for the money we were borrowing. As a proof that it was unnecessary to raise the rate of interest on these Treasury Bills, only lately the Government have considered it advisable to—

The CHANCELLOR of the EXCHEQUER (Mr. McKenna)

I desire to ask, Mr. Whitley, whether the hon. Member is in order? It opens up a field of argument which will not be open to me to answer within the limits of order.

The CHAIRMAN

I was listening to the opening of the hon. Member. It appears to me that it would be beyond the limits of what is proper on the Committee stage to enter into a general discussion on the means of raising the money. I understood that the hon. Member's point—having heard something of what he said on the previous occasion—was devoted solely to the question of the additional £300,000,000 of Treasury Bills provided for in this Clause. He should confine himself to that point.

Mr. S. SAMUEL

The only thing I have to say in regard to the method of raising this £300,000,000 at the present time is that we have the strongest objection in the City to increasing the number of Treasury Bills in circulation. We consider that it is not sound finance, and that it would be far better in the interests of the country, and in the interests of getting our money on better terms, if some more permanent way of raising this £300,000,000 were adopted by the Chancellor of the Exchequer and the Treasury.

Sir JOSEPH WALTON

I also desire to raise the question of the unwisdom of pursuing the policy of raising money by Treasury Bills to practically an unlimited extent, and the increased expense that it might entail upon the nation if this £300,000,000 is to be added to the £660,000,000 already issued. The hon. Gentleman who spoke last, I think, spoke under a misapprehension when he said that the interest paid on Treasury Bills for twelve months is 5 per cent. It is 5¼ per cent. I would ask the right hon. Gentleman the Chancellor of the Exchequer to take seriously into consideration the question that when the end of the War appears to be in sight these Treasury Bills will not be renewed, and if we had the huge total of £960,000,000 then in existence it would increase the difficulty of raising by a permanent measure this huge sum of money. It seems to me that the Chancellor of the Exchequer will be well advised if he raises this money by permanent loan instead of depending upon this temporary borrowing to this enormous extent.

Mr. McKENNA

My hon. Friend asked me to raise the money under this Bill by permanent loan. He points out that Treasury Bills for one year raise the equivalent rate of interest to 5¼ per cent., and he asks for an assurance that none of the Treasury Bills authorised by this Bill shall be renewed.

Sir J. WALTON

If the end of the War is in sight.

Mr. McKENNA

May I explain to my hon. Friend that this Bill authorises the issue of no Treasury Bills for one year. Therefore no question can be initiated between us as to the rate of interest on Treasury Bills for one year. In the second place, no Bill issued under the authority of this Bill can be renewed. That disposes of my hon. Friend's second point. In reference to his third point that we should raise the necessary amount by permanent loan, I would remind my hon. Friend that the purpose of this Bill is to authorise the Treasury to raise money by loan in anticipation of revenue, and as the Bills cannot be renewed, and as they must be for less than one year, how is it possible to raise this money by permanent loan?

Sir J. WALTON

That does not apply to the £660,000,000.

Mr. McKENNA

I can only deal in this Debate with this Bill and what this Bill authorises. I can assure my hon. Friend that every point which he has made, however valuable these points may be on another' occasion, have no relevance whatever to this Bill. It simply authorises the Treasury to raise by Bills, in anticipation of revenue, the amount that we are authorised to spend under the Vote of Credit. The issues under this Bill are so limited, being strictly confined to what I have stated, that it is quite impossible for me to enter into the larger question that has been raised by the hon. Member opposite (Mr. S. Samuel). My hon. Friend behind me (Sir J. Walton) speaks as a Member of the House of Commons, but, as I understand, the hon. Member opposite speaks on behalf of the City.

Mr. SAMUEL

I did not speak as the representative of the City at all. I spoke as a man in business in the City of London who comes daily into contact with the financial and commercial interests of the City and who knows their opinions.

Mr. McKENNA

I am not disputing that. I only distinguish between the character in which my hon. Friend opposite spoke and that in which my hon. Friend behind me spoke.

Sir J. WALTON

Have I not an interest in the City too?

Mr. McKENNA

When the hon. Gentleman speaks of himself as representing a body of opinion in the City, I can only assure him that I take every measure in my power to inform myself of City opinion. I am in constant communication not only with the Governor of the Bank of England, but with the representatives of the great banks of London and the provinces, and I should be very glad if they would include the hon. Member opposite among those whom they send to represent them to speak to me on behalf of City opinion. I should be always most anxious to conform in my action to the needs of the City, but I would deprecate the attitude taken by hon. Members in the House of Commons that they speak on behalf of the City when the City itself has given me no indication of the views which are put forward here in its name. I am afraid that it is not open to me to answer the larger question raised by the hon. Gentleman, but on a suitable occasion I shall be most anxious to do so.

Sir F. BANBURY

I do not think that I quite understand the statement of the right hon. Gentleman that this Bill does not permit him to borrow money under Treasury Bills.

Mr. McKENNA

It does not enable me to borrow under yearly Treasury Bills. It does not enable me to renew a Treasury Bill which would extend beyond the period of the financial year.

Sir F. BANBURY

Section 2 says that the Treasury may borrow by the issue of Treasury Bills or otherwise. There is nothing about time; and it says that the Bank of England and the Bank of Ireland may advance to the Treasury on the credit of the said sum, any sum or sums not exceeding in the whole £300,000,000.

Mr. McKENNA

Go on!

Sir F. BANBURY

"That date of payment of any Treasury Bills issued under this Section shall be a date not later than the 31st day of March, 1917." That is ten months instead of a year. The principle remains the same. My hon. Friend is not discussing whether the right hon. Gentleman should issue three months, six months, nine months, or yearly bills. He says that the principle of too many Treasury Bills is bad. Though I happen to be a Member for the City, I do not pretend for a moment to speak for the City, as I have not consulted anyone on this special question, but having spent forty years of my life in the City I would imagine that opinion in the City would always be that it was fatal to have a large amount of floating debt which might become renewable in a time of panic or at a time when it might not be possible to renew it. That is as I understand the point of my hon. Friend, and it is not really worthy of the right hon. Gentleman to try to ride off on whether or not the bills are renewable for three months, six months, or ten months. I think that my hon. Friend is quite right. I think that we are approaching perilously near the point—

Mr. McKENNA

I submit that the general question of the amount of Treasury Bills outstanding and the policy of issuing Treasury Bills is not in order on this question.

Sir F. BANBURY

This is a Clause empowering the Government to raise £300,000,000 by Treasury Bills. My hon. Friend has moved to omit the Clause. If we think it advisable to support my hon. Friend and vote against the Clause, I submit that we are entitled to advance reasons why we object to the raising of the £300,000,000 by Treasury Bills, and to urge that one of those reasons is that there are already too many Treasury Bills.

Sir T. WHITTAKER

I support the right hon. Gentleman opposite on the point of Order, and submit that it would be better to raise this money by permanent loan than by this particular method' of raising the sum of money required, and I think we should be able to discuss, the various methods by which it should be done.

The CHAIRMAN

I think that would be going too far. This is a proposal which merely authorises the drawing on the Consolidated Fund to the amount of the Vote in Supply. The Clause now under discussion, if I am not mistaken, is exactly the usual form of Clause, no more and no less, than is usually put in the Consolidated Fund Bill, namely, to authorise the Treasury during the period of the year, not going over the end of the current financial year, to temporarily raise sums by means of Treasury Bills. I am of opinion that it would be out of order to go into the whole question of raising money by loan. But, of course, it is in order to argue or to refuse the power to raise any of this £300,000,000, even temporarily, by means of Treasury Bills. That is clearly within the competence of the Committee, but a general Debate on methods of finance will not be in order.

Sir T. WHITTAKER

Would it not be in order to discuss this particular £300,000,000 in regard to whether it should be raised by loan or by Treasury Bills?

Mr. McKENNA

I submit that the general question by which the money should be raised is a question which is proper on a discussion on a Loan Bill. Under this Bill we take power to borrow this sum up to the total of £300,000,000 in order to make good the supply which has already been authorised. We have only taken powers, following the ordinary precedent in connection with the Consolidated Fund Bill, to raise that money by the usual method within the financial year, that is to say, we are taking power to get the sum necessary to meet the expenditure which has been authorised to be spent within the financial year. But when we get to the larger question of the general powers of borrowing, whether it is £300,000,000 or any other sum voted in Supply, that is a question which should be raised upon a Loan Bill. We have already under the Loan Act authorised by the House got an authority, which we have not yet exceeded, for raising money, and the House has given an unfettered discretion to the Treasury as to the method of raising the money within the Loan Act, but we have not gone outside that authority, and I submit to you, Sir, that what the right hon. Gentleman opposite and what my right hon. Friend behind me are intending to do is to raise questions which were settled under the Loan Act, and are not facing this mere question of authority under the Consolidated Fund Bill.

Mr. ANNAN BRYCE

Before you decide the point of Order, Sir, I wish to refer to what the Chancellor of the Exchequer said, that the question can only be discussed on a Loan Bill. I wonder under what rule of order we are to be able to stop the indefinite issue of Treasury Bills. It appears to me that the right hon. Gentleman the Member for Spen Valley (Sir T. Whittaker) and the right hon. Member for the City (Sir F. Banbury) are perfectly right in contending, with regard to this particular £300,000,000, that under your ruling, Sir, we can refuse this method which is proposed, and if that be so, surely we must be able to discuss other methods.

The CHAIRMAN

I really do not think there is any difficulty in understanding what the point is. The Committee will remember that the form of the Vote of Credit is that of all other Votes in Supply, namely, for the current financial year, the year ending the 31st day of March, 1917, and this Bill is necessarily confined to that year; so that, obviously, a general discussion of a loan policy could not arise. The only thing we can discuss is this particular point as to how, during this current financial year, this money can be temporarily raised.

Sir F. BANBURY

I do not wish to raise any point except that this particular Clause gives powers to issue Treasury Bills for a brief period. In my opinion, that is a wrong provision. I do not want to argue, however, what we should do in place of it, but I have a right to give reasons why I object to this particular form of borrowing which is proposed in Clause 2. It will be evident that, unless we can do that, the whole of our proceedings would be merely a farce, and the Government could at any moment put into the Consolidated Fund Bill power to borrow for a short period any sum of money they liked.

Mr. McKENNA

dissented.

Sir F. BANBURY

My argument has already been advanced, and I do not want, to take up the time of the Committee by repeating it too often; but I will just emphasise my objection to this particular Clause, and it is. that, in my opinion, it is fatal to borrow a very large sum of money on Treasury Bills. What the exact sum at which you ought to stop may be I do not say, but I consider that the Government have very nearly approached, if they have not passed, that sum. I would say, further, that this is really a very serious and important question, and, with, all due deference to the Chancellor of the Exchequer, I think that he might at any rate consider seriously the point raised by my hon. Friend (Mr. S. Samuel), who has very great experience in the City, who does not speak often in this House, and who, when he does speak, does not speak lightly. His point was also emphasised by right hon. and hon. Gentlemen opposite. The right hon. Gentleman apparently thinks that the right hon. Gentleman behind him has nothing to do with the City.

Mr. McKENNA

I did not say that.

Sir F. BANBURY

Then I withdraw that. Two Members sitting on different sides of the House, the hon. Member below the Gangway and the right hon. Gentleman behind the Chancellor of the Exchequer, have spoken, and there has at any rate been a consensus of opinion, among those who watch these matters for themselves, and who have some knowledge of finance, that this method has been pursued too long, and I really hope that the right hon. Gentleman will consider the statements that have been made in all seriousness.

Sir T. WHITTAKER

I am very sorry that this Debate is to be so limited, though I fully recognise, Sir, that your ruling must be followed. I do, however, express the opinion that it is undesirable to issue more Treasury Bills. There is the fear of their going abroad, and I have heard that a number of them have gone abroad. If that be so, that is a point of danger. To have so large an amount of floating debt is, in my judgment, undesirable, and I submit to the Chancellor that is a reason why these bills should not be issued under this power and in this way. As to the wider subject, I would only say that it would be well if the right hon. Gentleman would enable us to have an opportunity of discussing this subject.

4.0 P.M.

Mr. LOUGH

I should like to add one word to what has been said by my right hon. Friend near me (Sir F. Banbury) and my right hon. Friend on the other side (Sir T. Whittaker). The amount of Treasury Bills is very large already, and this is a very substantial addition to it. Will not the right hon. Gentleman take the House into his confidence and say if it is necessary to go any further in this direction and thus meet the criticisms which have been offered?

Mr. McKENNA

I shall be quite prepared to do so on an appropriate occasion. If I were to attempt to do so now I should be hopelessly out of order, but on a suitable occasion I shall be perfectly willing to defend the financial policy of the Government, for which there is a defence which has not even been suggested by hon. Members who have spoken. I am sure that the Chairman would call me to order at once if I attempted to deal with the matter generally.

The CHAIRMAN

An hon. Member asked just now whether there was any occasion on which the use by the Treasury of its powers in these matters could be criticised. It may help the Committee to state that that can be done when the right hon. Gentleman's salary is put down.

Mr. McKENNA

Certainly.

The CHAIRMAN

There could then be a discussion as to how he has used the powers which the House has given to him.

Sir F. BANBURY

We had no difficulty in keeping within order, and I do not think the right hon. Gentleman would have had the slightest difficulty either. If we are to have a discussion on the salary, perhaps he will state when that discussion will take place.

Mr. McKENNA

There is the Motion for the Adjournment on Thursday.

Sir F. BANBURY

We never can catch Cabinet Ministers on those days.

Mr. McKENNA

If the right hon. Gentleman will take the question on the Motion for the Adjournment I will undertake to be here. I cannot raise the whole Debate on the subject without saying things which must be out of order now.

Sir F. BANBURY

I do not want to attack the right hon. Gentleman's conduct in detail. I think this method of procedure is wrong and that we ought to have an answer now. This Clause only takes us to next July, and what is he going to do after that? Are we to have more Treasury Bills? The right hon. Gentleman says "Yes," and that emphasises the necessity of dealing with the question now. I do hope the right hon. Gentleman will endeavour to keep in order.

Mr. LOUGH

You have ruled, Sir, that it is in order now to raise the question of the advisability of adding three hundred millions to the existing amount of Treasury Bills. Surely that would give the Chancellor of the Exchequer ample opportunity. The Chancellor shakes his head, but if he will not accept the authority of the Chairman of Committees, what authority will he accept? It is all very well to consult the Financial Secretary to the Treasury beside him, but he is not an infallible guide. I hope the right hon. Gentleman will give us some reasons why he cannot accept the suggestions which have come from hon. Members.

Mr. PRINGLE

It seems to me that the analogy between this Bill and an ordinary Consolidated Fund Bill is one that is completely misleading. Under an ordinary Consolidated Fund Bill the Treasury borrow on Treasury Bills in anticipation of revenue. Already on the existing financial year Treasury Bills are in existence far exceeding the revenue which can be collected.

Mr. McKENNA

This is under a Loan Bill.

Mr. PRINGLE

I am pointing out that the analogy between this and an ordinary Consolidated Bill does not apply. This is becoming the method of general borrowing rather than anticipation of revenue. Under those circumstances I think that my right hon. Friend would have been well advised to meet the criticisms which have been levelled against his methods of finance. It is inconvenient that he cannot do here what he does outside and take the House completely into his confidence. He takes up this narrow point of order; but why should he not deal with the House of Commons as he has dealt with editors of newspapers, and tell them precisely what the financial position is?

Mr. DILLON

I only wish to enter a protest against what I gathered to be the intention of the Chancellor of the Exchequer, that is to mortgage the Debate on the Adjournment Motion on Thursday to a discussion on these Treasury Bills. That is a very important matter no doubt, but I think the present condition of affairs in this country is much more important. I certainly can be no party to any understanding or agreement for the mortgaging of the whole or the main portion of the Debate on the Adjournment to the question raised here to-day.

Mr. McKENNA

I quite realise that it would be inexpedient to mortgage the Adjournment Debate on Thursday to this somewhat technical subject. I suggest as an alternative raising it on an Amendment to the Finance Bill in Committee. It is quite possible in that way to raise the whole subject, and that would be a convenient time. Of course, on the next Loan Bill would be another convenient time.

HON. MEMBERS

When?

Mr. McKENNA

Would it be proper for me to give that information in reply to a question of that sort—information which might be misused to the great financial advantage of a number of enemies of this country?

HON. MEMBERS rose—

The CHAIRMAN

If I may say so, this is evidence that the Chairman was right in holding that those wide considerations cannot arise in Committee on a Clause in this Bill.

Sir T. WHITTAKER

The right hon. Gentleman says that we can discuss this question on an Amendment to the Finance Bill. Can we do that?

Mr. McKENNA

Yes, there is a borrowing Clause in the Bill.

The CHAIRMAN

I cannot give any opinion in advance on that matter.

Question put, and agreed to.

CLAUSE 3 (Short Title)ordered to stand, part of the Bill.

Bill reported, without Amendment; to be read the third time to-morrow (Tuesday).