HC Deb 17 May 1928 vol 217 cc1339-94

Again considered in Committee.

[Mr. JAMES HOPE in the Chair.]

Postponed Proceeding resumed on consideration of Clause 2.

Mr. PETHICK-LAWRENCE

I beg to move, in page 3, line 9, at the end, to insert the words: (3) Any minute of the Treasury directing a reduction of the amount of the fiduciary note issue shall be laid forthwith before both Houses of Parliament. I move this Amendment, which stands in the name of my hon. Friend the Member for Peckham (Mr. Dalton). I should perhaps remind the Committee that Sub section (2) of Clause 2 deals with the power of the Treasury, on being requested by the Bank of England, to direct that the amount of the fiduciary note issued shall for such period as may be determined by the Treasury, after consultation with the Bank, be reduced by such amount as may be so determined. That is to say, it may be reduced below the figure of £260,000,000 at which the amount of the fiduciary issue is fixed. The result of the Amendment is this. In a later Clause of the Bill, Clause 8, the famous elastic Clause of the Bill by which the Bank is entitled to represent to the Treasury that it desires an extension of the fiduciary issue and, under certain circumstances, the Treasury is entitled to allow such extension. There is a Sub-section (3) which says that any minute of the Treasury authorising an increase of the fiduciary note issue under this Section shall be laid forthwith before both Houses of Parliament. The view that my hon. Friends and I take is that, as the Bill stands, if there is to be deflation, that is to be a private matter resting between the Bank and the Treasury, but, if there is to be what some people might call inflation, an increase in the fiduciary issue, then at once that is to be laid before both Houses of Parliament. We cannot see, to use a colloquialism, why what is sauce for the goose should not be sauce for the gander, and, if we are to have this Minute laid before Parliament in the case of any desire to increase the issue, we think a similar provision should also be in existence with regard to any power to decrease it.

We have used words in the Amendment which are slightly different from the words that are already in the Bill in the third Sub-section of Clause 8, because the actual words employed in the earlier parts of the two Sub-sections are not precisely the same. So far as we could, we have endeavoured to use the right words, and I suggest to the right hon. Gentleman the Secretary of State for War and to the others who are defending this Bill that this is an Amendment which they might just as well accept. It seems to me not in the smallest degree to conflict with any of the principles which they have endeavoured to embody in the Bill, and it would give a certain small amount of reassurance to those who want the thing to be dealt with along the right lines. It would give a certain amount of balance to the Bill which it lacks in its present form, and I hope very much that they will therefore meet us by accepting this very small amelioration of the position as we find it in the Bill at present.

The UNDER-SECRETARY of STATE for SCOTLAND (Major Elliot)

The Amendment asks for what is in one sense a perfectly reasonable thing, that the people should know if a reduction is taking place, but I hope to assure the hon. Member for West Leicester (Mr. Pethick-Lawrence) that that will take place automatically. That will appear in the weekly returns, and therefore there is no question of this being done in any way secretly. As for the power, it is a power that has always been inherent in the Bank. It dates back to the Act of 1844, and, in fact, that power has never necessarily been the subject of consulting the Houses of Parliament. In the case of the increase of the note issue, at first sight it may appear that there is a difference between the two operations, in that the decrease is merely published in the weekly returns while the increase is brought to the attention of Parliament by a Minute, laid on the Table of the House. The reason for that is that an increase presupposes that at the end of a certain time legislation may be necessary. Therefore, the attention of Parliament is called to it at as early a date as possible in view of the fact that legislation may possibly ensue.

Mr. PETHICK-LAWRENCE

Do I understand that the weekly returns will show in both cases precisely the amounts of the full authorised increase in the one case and the full directed decrease in the other?

Major ELLIOT

Oh, yes, undoubtedly.

Mr. GILLETT

There is another point I want to put, and it is rather a peculiar one. The Clause under discussion gives the Bank, with the consent of the Treasury, power to reduce the figure of £260,000,000 which has been so far agreed to. Supposing that was done and the figure was altered to £250,000,000 and then in the course of time the Bank wanted to raise that figure again. You will find that Clause 8 only makes provision in the case of the Bank wanting to raise the figure back again right above £260,000,000.

The CHAIRMAN

That is a matter that could be raised on the Clause rather than on the Amendment.

Mr. GILLETT

Then I will ask it afterwards.

Amendment negatived.

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

Mr. GILLETT

Suppose the figure is reduced to £250,000,000, and then, there is a change in the position, and the Bank wants to raise the figure to £255,000,000—if you turn to Clause 8, it means simply if the Bank want to raise it above £260,000,000—I want to know if anyone can tell me what the procedure is and whether the Bank will have power to raise it to £255,000,000 without in any way consulting anyone, or whether all the various procedure laid down in Clause 8 for raising the figure above £260,000,000 would also apply to raising it from £250,000,000 to £255,000,000. It seems to me as if between these two Clauses there is a gap with no provision for going down and then wanting to return part of the way.

Mr. RUNCIMAN

I would like to ask a question with regard to the period to be determined by the Treasury. I understand the information will be given to the world as to the reduction in the weekly returns, but there will be no indication in the returns as to the period for which the Treasury has granted it. In what way could the House and the country be informed?

Major ELLIOT

If questions were addressed to the Chancellor of the Exchequer, he would be able to indicate for what period it was to operate. As to the further point, whether or not, the maximum having been reduced, it could be expanded again without a Treasury Minute. Of course, as soon as a period which had been agreed between the Treasury and the bank expired, it would automatically revert to the £260,000,000, and therefore no Treasury Minute would be required.

Mr. PETHICK-LAWRENCE

Suppose they fixed six months, and, before that time expired, some crisis arose which made it desirable to raise it back again earlier than they anticipated, either wholly or partly. I do not see any means of adjusting that, and I should be glad to have an explanation.

Mr. GILLETT

The crux seems to be if they wanted to go to £255,000,000. They might go back to £260,000,000, but I cannot see any provision for any figure in between.

Major ELLIOT

Oh, yes, the Subsection says: The Treasury may at any time on being requested by the Bank, direct that the amount of fiduciary note issue shall for such period as may be determined by the Treasury, after consultation with the Bank, he reduced by such amount as may be so determined. That refers to the figure of £260,000,000 that may be reduced.

Mr. GILLETT

But it is not reducing it, and as far as I can see, it does not say anything about it in the Bill.

Major ELLIOT

The figure of £255,000,000 is still the figure of £260,000,000 reduced by £5,000,000. Any figure up to the maximum can appear as a reduction, and that is where it comes in. If it is over that, it needs to be explained. If it is under that, it is the figure of £260,000,000 reduced by a certain amount.

Mr. GILLETT

I certainly cannot see that in the Bill in any place. It is not in Clause 8, which says only: If the Bank at any time represent to the Treasury that it is expedient that the amount of the fiduciary note issue shall be increased to some specified amount above two hundred and sixty million pounds … That cannot possibly apply to any increase below that amount, and it does not say that that sum of £260,000,000 only holds unless this is operative, and therefore, unless the Government can point out some place in the Bill where that is specifically mentioned, I confess I am unable to follow the hon. and gallant Gentleman's explanation.

Major ELLIOT

I am very sorry if I had not made it clear. It is the point of having this fixed sum of £260,000,000, which acts as a minimum, and anything under that is a reduction of the fiduciary issue. Therefore, the words are not to be sought in Clause 8, but in Clause 2, which clearly states that the Bank shall issue banknotes up to the amount … of two hundred and sixty million pounds. Then in Sub-section (2) it states that the Treasury may at any time on being requested by the Bank, direct that the amount of the fiduciary note issue"— that is the £260,000,000— may be … reduced. If anything is issued under the £260,000,000, that is a reduction, and any figure up to the £260,000,000 does not mean laying a Minute, as proposed by Clause 8, and calling the attention of Parliament to the fact that the statutory fiduciary issue is being exceeded.

Mr. SNOWDEN

I do not think that covers quite clearly the point of my hon. Friend. There is a little more in it than the Under-Secretary has explained. As I understand it, what they are trying to get at is this: Suppose that the power given under this Clause is exercised, and that the fiduciary issue is reduced from £260,000,000 to £250,000,000; suppose that the Bank want to raise it to £255,000,000, would that be regarded as an application to the Treasury for increasing the fiduciary issue, requiring all the procedure of six months' notice, and ultimately an appeal to Parliament, or can it be moved, as it were, anywhere between £250,000,000 and £260,000,000 without having to undergo all this procedure?

Major ELLIOT

That is the fact. It can be moved anywhere up to £260,000,000 without the procedure of Clause 8, and the procedure of Clause 8 begins to function only when a movement above £260,000,000 takes place.

Mr. PETHICK-LAWRENCE

That is not in the Bill. The hon. Member may be right, but there is not a single word in the Bill which sustains his contention. There ought to be some words in the Bill explaining it at the end of Sub-section (2). I do not know where the power comes from; it is not provided in the Bill, unless it is just common sense. What I take the hon. Gentleman to mean is that if, before the expiry of the period referred to in Sub-section (2), the Bank changes this amount, and decides that it cannot go through the whole period, it will come to the Treasury; if there is no authorisation needed in the Bill for the Treasury to agree to the proposal, it does not say so, and we ought to understand where that authority rises.

Major ELLIOT

It seems to me that the power arises from Sub-section (1) in the words, "that the Bank shall issue." It would not have arisen if the hon. Member's Amendment had been carried, "that the Bank may issue." It is incumbent on the Bank to keep the circulation up to £260,000,000. If it is below that it is an exceptional case. It is like a spring; when the pressure is released, the thing goes automatically to £260,000,000.

Question, "That the Clause stand part of the Bill," put, and agreed to.

    cc1344-50
  1. CLAUSE 3.—(Securities for note issue to be held in issue department.) 2,218 words
  2. Clause 4 (Transfer of currency note issue to Bank of England) ordered to stand part of the Bill.
      3. cc1350-3
    1. CLAUSE 5.—(Transfer to Bank of certain part of assets of Currency Note Redemption Account.) 876 words
      2. cc1353-5
    2. CLAUSE 6.—(Profits of note issue to be paid to Treasury.) 2,040 words, 2 divisions
  3. Clause 7 (Amendment of Section 6 of 55 & 56 Vict. c. 48) ordered to stand part of the Bill.
    4. cc1355-83
  4. CLAUSE 8.—(Power to increase amount of fiduciary note issue.) 11,482 words, 5 divisions
    5. cc1383-4
  5. CLAUSE 9.—(Amendment as to issue of notes by banks in Scotland and Northern Ireland.) 292 words
    6. cc1384-9
  6. CLAUSE 10.—(Amendment of s. 6 of 7 and 8 Viet. c. 32.) 2,690 words, 4 divisions
    7. cc1389-94
  7. CLAUSE 11.—(Power of Bank of England to require persons to make returns of and to sell gold.") 2,012 words, 1 division