§ I turn now to the outstanding features of the debt transactions for the year. In the first place, the floating debt on the 31st March, 1919, was £1,412,228,000. On the 31st March last it was £1,312,205,000, a decrease of almost exactly £100,000,000 in the twelve months in the total of the floating debt. But that is not all. The worst feature of that floating debt is the Exchequer borrowing from the Bank of England on Ways and Means, for this is the immediate cause of the inflation of credit and, in so far as the inflation of prices arises from the inflation of credit, it is also the cause of that inflation of prices. Advances made to the Treasury 74 out of moneys in the hands of the National Debt Commissioners and other Government Departments do not have a similar inflationary effect. I have, therefore, in the recent Returns distinguished not merely, as was customary, between Ways and Means advances and Treasury bills, but also between Ways and Means advances by the Bank of England and similar advances by Government Departments. The result is striking, and I venture to say it is important. On the 31st March, 1919, the Bank Ways and Means advances were £228,500,000; on the 31st January last they had been reduced to £34,500,000, while on the 31st March they had been actually wiped out altogether.
§ But I am sorry to say that as regards Ways and Means advances, and I may add as regards Currency Note issues, the first weeks of April have disclosed a much less satisfactory position. In the three weeks which ended on April 7th, the number of currency notes in circulation increased by 14,500,000 and the Bank of England notes by £5,700,000, and the reserve of the Bank of England fell by £11,760,000 to the very low figure of £23,784,000. During the first ten days of April, although revenue exceeded expenditure, I was forced to borrow not less than £55,000,000 from the Bank of England on Ways and Means, owing to the non-renewal of maturing Treasury Bills to the extent of £64,000,000. Under these circumstances, I had no choice but to raise the Treasury bill rate and the Bank of England simultaneously raised the Bank rate. The story of those first days in April illustrates only too vividly the difficulties caused by the existence of this enormous floating debt and the urgent need for an effective remedy. Ways and Means advances from the Bank of England are a justifiable method of anticipating revenue for a short period, but recourse to them to meet the withdrawals of money from Treasury bills involves the creation of new purchasing power based solely on Government credit uncovered and unprotected by any increased production of wealth, and can only lead, if unchecked, to ultimate disaster. I shall have more to say on the subject of the floating debt before I conclude.