HC Deb 17 May 1928 vol 217 cc1350-3
Mr. GILLETT

I beg to move, in line 20, to leave out Sub-section (3).

The Committee will remember that the amount of securities at present held by the Government against the note issue is estimated to be in excess of the requirements that will be needed for covering the £260,000,000 by about £13,000,000, a suns of money which, I understand, has been accumulated during the years the issue has been in existence as cover against any depreciation that might take place in the stocks. Now that the issue is to be handed over to the Bank of England this hidden reserve, for that is what it practically becomes, is set at liberty, and it is not surprising that the eagle eye of the Chancellor, looking for any kind of reserve, has lighted upon this. In the Budget statement the Chancellor of the Exchequer first set aside a sum of £50,000,000 for sinking fund, and then raised it to £65,000,000, stating that the larger part of the extra £15,000,000 would come from this £13,000,000 which he was going to take out of what is really a hidden reserve. It is a very good piece of specious window-dressing by the Chancellor of the Exchequer, but it really is nothing more. It is what is often done in private firms. A private firm has accumulated a certain sum of money in what is called hidden reserves, and when it takes it out and puts it into its balance sheet everyone says it has made £10,000 or £20,000 more. As a matter of fact, anybody who knows the inner history knows that the position of the firm may be exactly the same. What the Chancellor of the Exchequer seems to be doing is saying to the public, "We have arranged a sinking fund of £65,000,000 and we are going to have the benefit of £65,000,000." As a matter of fact he has done nothing of the sort, because this £13,000,000, it is presumed, is already invested in some kind of security.

The first point I wish to make is this. The Government have to invest a certain amount of the sinking fund in special definite stocks. Are there none of these securities held amongst the £260,000,000 or £270,000,000 of cover? Are there none of the stocks in which the money has specially to be invested in that category? If so, why does the Government take power so very definitely to say, first, that the stock must be sold and then that something else will have to be bought? First you sell a stock and then you buy it. It seems to me you might actually sell the very stock you wish to invest money in in regard to the Sinking Fund, and no provision is made for a simple book-keeping entry that might have pre- vented those various transactions. The other point I wish to raise with regard to the importance of the Sinking Fund is that while there is a saving in the interest the real advantage of the Sinking Fund is the fact that you are bringing a new demand for a definite stock into the stock market. If you are selling with one hand and buying with the other there is no advantage whatever, and therefore I suggest that the Chancellor of the Exchequer is only juggling with things, and that the Sinking Fund for this year is only £50,000,000, and that the rest of his proposal is in keeping with much of his other finance, quite unsound and a pure fallacy and in no way adequate to the actual financial position.

Mr. SAMUEL

I think my hon. Friend is under something of a misapprehension. The Currency Note Redemption Account is separate and entirely apart from the revenue account. It is not a book-keeping entry. When the securities which are held as cover for our fiduciary note issue came to be reckoned up it was known that they were worth more by £13,200,000 than the amount necessary to cover the fiduciary Treasury note issue. That being so the Chancellor has taken them and put them aside for paying off debt. I do not think the hon. Member realises that it is a separate fund.

Mr. GILLETT

What the hon. Member said is exactly the position.

Mr. SAMUEL

As a surplus amount accumulated out of earnings on the securities which cover the fiduciary issue, it is taken out and appears on page 18 of Financial Statement H.C. 62 in the form of special receipts amounting to £13,200,000. Adding the £800,000,of which the hon. Gentleman knows, makes the £14,000,000. This £14,000,000 added to £51,000,000 makes £65,000,000, and that £65,000,000 forms the Sinking Fund. If this Amendment becomes operative this curious paradox will occur, that the £13,200,000 worth of securities in the hands of the Government will remain in the hands of the Government without any direction as to what we are to do with them. We therefore ask the permission of the House to do what we desire, to carry this money from the Treasury Note Redemption Fund, so that it may be transferred from there into the general revenue and then operate as part of the Sinking Fund.

Amendment negatived.

Clause ordered to stand part of the Bill.