ROYAL PROCLAMATION. (Hansard, 15 December 1919)

§ The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

I trust that, having regard to the importance of this matter, the House will excuse the length of my reply.

The Committee reaffirm the views set forth at greater length in their first interim Report as to the importance of restoring at the earliest possible moment the pre-war methods of controlling the currency and credit system of the country and re-establishing the free market for gold in London. They point out that the difficulties of the foreign exchange position are aggravated by the grant of loans and credits to enable foreign States to pay for exports from this country when we in our turn have to pay cash for imports of necessities from America, North and South, and they recommend that preference be given to exports to countries which are able to make payment in the ordinary course of trade.

The argument as to the exchanges is, obviously, true, and we are fully alive to the importance of this aspect of the question. There are, however, other considerations arising out of our relations with our Allies and out of the economic condition of Europe to which due weight must be given in particular cases. Subject to the fulfilment of these obligations I agree with the Committee.

The Government further agree with the Committee's view that increased production, cessation of Government borrowings, and decreased expenditure both public and private are the first essentials to recovery. As far as I can foresee, the highest point of the National Debt will be reached in the course of the next month or six weeks, and I have every hope that thereafter we may be in a position to effect a gradual but steady diminution of the gross debt.

In paragraph 4 the Committee reaffirm their view that the principles of the Bank Charter Act of 1844 are well adapted to the needs of this country.

44 In paragraph 5 the Committee express their gratification at the efforts now being made to reduce the amount of Ways and Means Borrowings from the Bank of England, and express the hope that, with the return of more normal conditions, the Government will confine the use of such advances to what the Committee describe as their legitimate function, namely, to tide over a few weeks' shortage. I am in entire agreement with the Committee on this matter, and every effort will be made to continue the process of paying off such advances.

The question of the position of Foreign Banks in this country, referred to in paragraph 6 of the Report, is already under the consideration of the Board of Trade. In paragraph 7 the Committee recommend that the legal tender status accorded to the notes of Scottish and Irish Banks as an emergency measure in August, 1914, be withdrawn, and pre-war conditions restored.

I propose to give effect to this recommendation forthwith, and a Proclamation will be submitted this week to His Majesty in Council to take effect as from 1st January, 1920.

In paragraph 8 the Committee make three recommendations, namely (a), that the actual maximum fiduciary circulation of Currency Notes in any one calendar year be fixed as the legal maximum for the next; (b), that the practice of placing Bank of England notes in the Currency Note reserve as cover for the note issue as opportunity arises, be continued; (c) that the Treasury Minute made under section 2 of the Currency and Bank Note Act, 1914, providing for the issue on loan of currency notes to Joint Stock Banks be now withdrawn.

I propose to give immediate effect to the first and third of these recommendations, and to continue the policy recommended in the second. I propose to circulate in the OFFCIAL REPORT copies of the Treasury Minutes issued on these points.