HC Deb 19 February 1930 vol 235 cc1415-46
Sir JOHN FERGUSON

I beg to move, That this House is of opinion that large banking units have proved of so great assistance to industry through times of severe depression, while at the same time securing the interests of depositors, that it is expedient that a Standing Committee, consisting of representatives of the banks and of the business men of the country, should be set up to advise the Government, on all questions affecting the relations between finance and industry. Hon. Members are, of course, aware that a committee was recently appointed under the chairmanship of Lord Macmillan to inquire into banking and credit, and their relation to industry. The Motion which I now submit does, not in any way cut across the functions of that committee, which I trust will supply the House with many valuable and practical suggestions for improving the economic conditions of the country. That committee, I take it, will submit its report and thereafter will dissolve. But the Measure to which I would more particularly refer is the Joint Stock Banks Amalgamation Control Bill, 1919, which never received the sanction of this House and was worked subsequently on a Treasury Minute. As was said in the banking papers at the time, a more extraordinary document it would be almost impossible to find. It was ridiculous that the whole interests of the banking profession should for an unlimited period of time be determined by a council of two individuals—one appointed by the Treasury, and the other by the Board of Trade—and, as was remarked at that time, it was like putting a straight jacket on the bankers, whom the Treasury had congratulated again and again for the part which they played in the 1914–1918 period. It is somewhat distasteful to me to refer to the age of two members of that committee. To-day you will find it in any book, so I may as well inform hon. Members that one of them is well over 70 and the other almost 80 years of age.

I hope hon. Members will pardon me if I speak with some confidence regarding this subject as it is one of which I claim to have had a long and not unsuccessful experience. That experience has taught me that in banking, as in other trades and industries, there is a constant tendency towards change or modification in one direction or another, and bankers must ever be prepared to move with the times if the high standard of service which has always been characteristic of English banking is to be maintained. For the past 100 years the banks have steadily and enormously enlarged the sphere of their duties and activities, and they have done it in a way which, far from weakening them, has gradually added to their strength and stability. In 1823–25, a grave crisis overtook the different banks in the country, and no fewer than 500 banks failed in different parts of the country. In his speech to the shareholders at the meeting of the Midland Bank the other day, Mr. McKenna, the chairman, said that in the five years to 1843 there were 82 private bank failures. To-day, I hope that the failure of one of our big banks is absolutely unthinkable. One hundred years ago the country was studded with small private banks. They were very popular in the neighbourhood in which they were at work, and indeed it was stated in this House exactly 100 years ago that the country people of England would rather take the notes of a private banker with £10,000 a year in land than all the Bank of England notes in the world. But when pressure came, as was so well described by Stanley Weyman in "Ovington's Bank," there was something to be said for the logic of the old Scottish banker, who, when asked to make an overdraft, said that he did not want any "Kathleen Mavourneen" overdraft, and when asked to explain said: It may be for Years, And it may be for Ever. 4.0 p.m.

The era of British banking, as we know it to-day, began with the birth of the London Joint Stock Bank and the London and Westminster Bank, and so quickly did these banks and others forge ahead that the House of Commons became seriously alarmed and a committee of inquiry was appointed. The committee was asked for by Sir William Clay in a speech in this House which for knowledge of the subject and directness of demand deserves to rank as a classic, and even now may be regarded as an unequalled exposition of Joint Stock banking. The committee made its reports, and its findings rang the death knell of private banking in England. Decentralisation of operation and concentration of power was the keynote of its finding. I venture to think that that was a decision with which every thoughtful student of banking at the present day is entirely in agreement. A close examination of the subsequent history of our banks shows a most curious cycle of panic periods which instantly disclosed the weak points in our private banking system. We find these panics occurring practically every 10 years. We began with 1925, then 1836–39, 1847, 1857, 1866, 1878 and 1890. Let me take the last two. 1878, hon. Members will remember, marked the failure of the great City of Glasgow Bank, which brought about the limited liability company. The failure of that bank left a train of disaster behind it. The holder of stock had to pay, under the unlimited liability, 37½ times his holding of stock. If he had £1,000 in the bank, he had to pay £37,500. Then we come to 1890. That was the year of the Baring crisis, and at that time Consols, which were then 2¾, rose a few years afterwards to 111, and the Bank Rate, which was 2 per cent., remained at that figure for a very long time. From then onwards the banks had to write down very heavily their investments. The year 1907 was the year of the American crisis. That crisis caused us really much more inconvenience than damage. Then we come to 1914, which was the most disastrous year the world has ever known. I recollect well the paralysing effect that the outbreak of war had on the City of London and the dazed feeling which permeated the whole market when the Bank of England rate was raised from 5 to 10 per cent. Nor shall I ever forget the wonderful assistance which the Treasury gave in restoring the Money Market, which had, of course, come to a standstill. I recollect leaving the Treasury in those days. Coming down the steps to the Treasury, the chairman of one of the big banks said to me, "The Treasury have offered us something to-day, had we asked for which we should have expected to be kicked downstairs." That is the part that the Treasury took in rehabilitating the Money Market. What the effect of the War would have been had the country been studded with small single banks, instead of great Joint Stock Banks, it is impossible to contemplate.

My Motion to-day touches more particularly the period subsequent to the War. Previous to 1913 we had 58 different banks operating in this country, and to-day we have 24. There are between 30,000 and 40,000 different banks in the United States of America. As an indication of the increase in magnitude of the figures of the banks in Great Britain and Ireland, I would like to give a very few figures, omitting the Bank of England. I may mention that deposit money has increased from under £900,000,000 to over £2,000,000,000; bills discounted from about £100,000,000 to just under £240,000,000; advances from £450,000,000 to over £1,000,000,000; and paid-up capital and reserves at all the banks from £90,000,000 to £150,000,000. The point I want to emphasise is that in that time the profits have risen practically less than double, and now stand at £10,000,000. In this connection, I would point out that the profit percentage of the banks has fallen from 4 to 3 of deposits and liabilities added together.

I have often been asked how every pound of profit a bank makes is divided, and it may interest the House to know that, after careful examination over a period three years, we find that one-third of every pound, or 6s. 8d., roughly speaking, goes to the depositors by way of interest. Another third goes to the staff in payment of salaries, pensions and other benefits, including yearly allocations to the superannuation fund, leaving only one-third to meet all other expenses, such as rent, rates and taxes, stationery, special allocations to premises and other accounts, provision of bad debts and, lastly, dividends for shareholders. As regards the large increase in advances, it may surprise hon. Members to know that in the case of over 80 per cent. of the total number of overdrafts, the average overdraft is only about £600, which shows not only how well spread a bank's advances are, but also that thoughtful bankers will also keep in mind that the small man of to-day is the big man of to-morrow.

My point in submitting these figures is to illustrate the great part that our banks have so generously played, and continue to play, in the trade of the country. While the percentage of English bank advances—and in advances I am including loans, overdrafts and bills—to deposits has increased from about 62 to 64 per cent., in Scotland from 45 to 54 per cent., and in Ireland from 42 to 50 per cent., cash and money at call, which, of course, is the big bank's first line of defence in any kind of trouble, have fallen from 28 to about 23 per cent. Certainly, the banks cannot be accused of timidity if the magnitude of these figures is taken into consideration and thoroughly appreciated. I am not going to divulge any special case which is within my knowledge, but the necessity does exist of obtaining sympathetic consideration for any small bank that wishes to come into the fold of one of the larger banks, in order that it may be in a position to lend its clients every assistance when an increase in trade, for which we all so earnestly look, materialises, and it must be allowed to negotiate with the bank its own directors consider is in its best interest. As I say, I am not discussing an academic question, but a thoroughly practical one. As it is not a question at all of party politics, I would ask the House to support my Motion.

Hon. Members will naturally wish to know what it was that caused bankers to adopt a progressive policy of amalgamation and consolidation. The answer is the needs of trade and industry. Bankers were quick to realise the tendency towards larger and more powerful units of production, and they also realised that they must proceed ahead of those units of industry. They proceeded to rationalise themselves long ago, and, thanks to this process of rationalisation, they are stronger than they ever were. Let it not be imagined for a moment that there is any sort of money trust, or that the bankers have eliminated competition from among themselves. They recognise that the interest of banking and commerce must proceed together. Competition in banking never was keener than it is to-day. Recent deplorable events in the City have proved to be partly due to excessive competition; in fact, I am sure that if there were less competition, there would be fewer bad debts without any injury to any deserving industries. Speaking as a banker, I can assure the House that banks have handed back to industry practically every shilling of extra profit they made during the period of inflation. They did not retain those profits, but gave them back to industry during the trying period of the last decade. The great amalgamated banks to-day render services to the public greater than ever, and, what is more, they render them at a less cost to the public. Many services, for which in the old days a small charge was made, are now rendered free of charge. All this has been done without in any way sacrificing the interests of the worker. On the contrary, the remuneration of bank clerks has greatly increased in the past 10 years in a variety of ways. All this has been possible by reconstruction and reorganisation, by employing new methods and generally improving the efficiency of the banking machine.

There are some misguided people who would seek to set back the clock of banking progress. Some are anxious to stop altogether the process of amalgamation and consolidation. Nothing could be more dangerous or more short-sighted. This much, however, is certain, and is really the reason for my Motion. It is impossible for a small bank working in a special area to enjoy the stability of a great bank whose roots are everywhere. Thus, if disaster falls upon one area, the big bank has other areas from which to draw its sustenance. It is, therefore, a very grave responsibility for anyone to seek to prevent a small bank being absorbed by a large institution, for if anything were to happen to the small bank owing to its forced dependence mainly upon a group of industries in a particular area, the moral liability for that would rest upon the person who had forbidden the amalgamation. It is particularly necessary at this juncture, when an industrial revolution is in progress, to keep our minds free from prejudice and preconceived ideas, and I believe the banks can assist in a very large measure the industrial reorganisation which is so obviously desired at the present moment. The chairman of one of the big banks at its annual meeting the other day said: No doubt banks have an important and useful role to play in providing the necessary temporary finances for the reconstituted industry, if they are satisfied that the position has been sufficiently investigated and that the reforms instituted have reasonable hopes of success. I have no doubt at all that banks will be willing in such an event to do their part.

But they can only render such assistance if they are strong and powerful. Unity and consolidation in banks, above all things, alone can give strength. Let me quote the words of another bank chairman, who said; Our great basic industries—cotton, iron and steel—are all clamouring for further supplies of capital to instal new machinery, to bring processes up-to-date, and to effect such improvements and reorganisation as they confidently hope will enable them to compete successfully in the markets of the world.

Here we have rationalisation at its best. It has been said that ideal rationalisation of industry would include in its objects the abandonment or the scrapping of obsolete or superfluous plant, the concentration of certain factories on particular work and particular classes of production, the establishment of united selling institutions and organisations, and the avoidance of over-lapping. To put such schemes on their feet must involve a considerable writing down of assets, represented by superfluous and obsolete plant, and an inevitable demand for fresh accommodation for the combine, until its anticipated commercial success enables it to raise the money which hitherto has been lent by the bank. That is the position to-day as I see it.

It is within my knowledge that the smaller banks recognise that if and when the time comes that they are asked to give assistance to these schemes they will be unable to do so because their percentage of advances to their deposit money is already so high that it is in some cases periodically raised to what we know as the danger level. They recognise that a cardinal point of sound English banking is that there should be no locked-up capital. It will mean certain death to the little bank because it is unable to retain its customer who requires large amounts, and his business will therefore be taken to another bank. No one is in a better position to know what is best for an industry than the banker who is that industry's banker. My advice or the advice of anyone capable of giving it, far from being resented by men who are in difficulties as regards money advances, would be welcome. I am sure that the people who want money are the last to resent the advice of the banker. It is one of the most heartening things in one's business life to receive, many years afterwards, letters of grateful thanks for service one has been able to render to an institution when one was an official of a bank.

The bankers' knowledge of the present critical position is unrivalled, and with their help a solution of the present difficulties could quite easily be found. As an illustration, let me tell hon. Members that I know of a company which by putting in new and up-to-date machinery not only did away with difficulties in its work, but increased its profits to threefold what they were when it introduced the new machinery. The industrial revolution is not less great in the merchanting and distributing of goods than in manufacture, and those companies that are well equipped and well managed are successful. It is only those that are badly equipped and badly managed that are unsuccessful. I am sorry to say that the former are in the minority and the latter are in the majority, and mostly in the distressed areas. There must be a ruthless scrapping of the inefficient and the obsolete, and I would suggest that that should apply to men as well as to materials. There is no other way to restore prosperity to those industries which are in such a bad state at the present time.

I am not losing sight of the human element in banking. I have myself grown up with banking amalgamations, and I am deeply conscious how much depends on the chairman, the general management and the staff of the big banks. While the maintenance of the present high standard may be difficult to maintain, I think a committee such as I have suggested in my Resolution would be found to be of the greatest assistance, and I feel sure, speaking from a long experience, that it would not be resented. I am firmly of opinion that the best interests of the country and the interests of the requirements of trade and industry can only be served by large and powerful combinations such as our great banks, whose untarnished history is the envy and the admiration of the whole world.

Mr. WARD LAW-MILNE

I beg to second the Motion.

I do not claim to have had as long and intimate a knowledge of banking from within, as my hon. Friend, who so ably moved the Motion, although I possibly began my banking knowledge even earlier in life than he did, for I was born in a bank house and brought up in one, and my first job in life was in a bank. Since then, I am afraid that I only know banking from without, except as a director of a bank for a time, and perhaps I know banking conditions best as a borrower. Therefore, I can look at the Motion from the point of view, not only of the banker and of the advantages to banking of the amalgamations that have taken place in the last few years, but also from the point of view of the advantages of those amalgamations to the public at large. I would ask the House, in considering this Resolution, to examine what has been done for trade and industry by the great banks, especially since the War. There can be no question, I think, that the amalgamations to which my hon. Friend has referred have been of the greatest advantage to trade and industry in this country. It is probably true to say that had it not been for some of these amalgamations there would have been failures which would have caused widespread loss in industry. It is essential from the public point of view that we should have a continuance in this country of a strong, well-established banking system.

I do not want to consider the prosperity of the banks particularly from the point of view of the shareholders—not that I do not think that that is an important matter—but I want to look at the question in its wider aspect. These amalgamations have made for stability, and have avoided serious losses, but there are one or two points from which the country might gain if certain advantages of the old private banks could have been continued under the great amalgamations. There can be no doubt that the close and intimate touch which existed between the local private banker and his customer was an advantage, particularly to the small man, and it was inevitable that these great amalgamations would to some extent mean a loss of that intimate touch. That is, however, a matter which is perhaps outweighed by the advantages which the public have gained from the amalgamations. Yet I do not think that it is impossible by a little change in the detailed system of working at some of the great banks, to regain a good deal of what has been lost as regards local knowledge and requirements. It is not for me to enter, into details, but it is a matter For the banks themselves. Perhaps there is too much centralisation at the present time. There is perhaps too much of the system of having details always sent to headquarters in London, thereby creating in the mind of the district bank official a feeling that he has no real responsibility to take a direct decision. I do not know what the remedy may be, whether it could best be applied in the shape of more full-time directors or in the shape of officials being entrusted with more power, but, whichever way it is worked, I do believe that very small changes in the present system would gain for the banks of to-day much of what was lost by the change from the old local banks of the past, and it is most important that that loss should be recovered.

I want to turn now to the effect of these amalgamations upon industry, a matter which is dealt with in the latter part of the Motion. In considering the effect of banking amalgamations and the effect of our banking system upon industry, it is essential that we should consider the position of the Bank of England itself. Does the currency system of this country help industrial expansion or are we working on a system which, however valuable it may be to bankers and financiers, and perhaps to some of the greatest borrowers, is not really of advantage to the producer and the industrialist? I would ask the Members of the House to cast their memories back to last year, when the bank rate had to be raised. The bank rate was raised for the purpose—I do not think there was any concealment of the fact—of bringing back to the Bank of England some of the gold that it had lost. The 10 clearing banks of this country had about £1,000,000,000 at that time in bank advances, in addition to many millions of pounds on short loans and discounts.

It is no exaggeration to say that the rise of 1 per cent. in the bank rate last year was equivalent to an extra charge upon the industries of this country at the rate of £10,000,000 a year. That increased rate did not last a year, but had it lasted a year it would have been equal to an extra charge of something like £10,000,000 upon industry. The inevitable result of the rise in the bank rate was an immediate drop in our trade figures. If that rise in the bank rate had been due to over-trading or over-speculation in this country, there would be nothing to say against it and there could not be any possible criticism, because that would be the proper remedy to deal with such a situation. But it was not due to over-speculating or overtrading. Everyone knows that last year our industries were in the depths of depression. The whole object of the rise in the bank rate was to bring back gold to this country, but the remedy was not successful in curing the ailment. It did not bring back the gold, at any rate not immediately, and probably not at all. The bank rate was raised on the 26th September, and yet in December the Bank of England had only gained £1,500,000 more gold, and was still £20,000,000 below the quantity of gold they had in their vaults a year before.

It cannot be forgotten that the rise in the bank rate was a definite detriment to industry, and caused a distinct decline in our trade figures. I do not want to suggest that the Bank of England could have taken any other course. Under the present system it was the only action they could take, and they waited till the last possible moment before taking that action, almost to what my hon. Friend described as the danger point. They waited until they were bound to act, but the fact is that their action did not effect the result that they wanted, but it did add a heavy burden to industry.

There was, however, another possible remedy that might have been adopted under the provisions of the Currency Act which was passed by this House a year or two ago. If it be the primary function of gold, as I hold it is, to enable us to meet international obligations, it is surely the duty of the Bank of England, as far as our system permits it, to meet the demands of industry for currency. We know quite well that the rise in the Bank Rate was caused by the tremendous attraction of high money rates in New York, and it was clear that nothing that could be done in this country in the way of raising the Bank Rate would help us to compete with the attraction offered from the United States. It is clear that, although application might have been made for an extension of the fiduciary issue limit as a temporary measure, the only real remedy was a diminution of the lending of money abroad and a reduction in imports. A high Bank Rate can improve the exchange at the expense of our trade, but a reduction in the amount of manufactured imports improves both the exchange and our trade balance. I feel on familiar ground in regard to this matter, because I see the Financial Secretary to the Treasury present. I have exchanged views with him across the Floor of the House on this subject, and my views are, I believe, to some extent in agreement with his.

In considering the appointment of a committee to consider and advise on the problems of industry as affected by finance such as my hon. Friend has put forward this afternoon, we should seriously consider whether our financial and currency system is one which enables our bankers really to help industry in the way we want industry to be assisted. On the still larger question of the extent to which our international obligations affect the supply of credit we must really look further even than the Bank of England. Last year we lost a great deal of gold owing to the demand in New York, but is there any reason anyone can tell me why a loss of gold from this country because of the international demand should immediately be followed by a drop in our currency and a curtailment of the internal note issue? I think it is worth while considering how this thing works. Immediately trade shows any sign of improvement there is, of course, an increase in the total of wages and an increased demand for currency. The position of the Bank of England is that the moment they curtail circulation they automatically help to create unemployment. It is bound to be so. And, alternatively, when a period of depression is passed and the total of wages is larger, and the demand for currency is increasing, the Bank themselves are bound to put pressure upon industry to reduce its demands, and thus actually retard the coming prosperity. The Bank of England cannot help itself. It is forced into this position under present conditions.

The Chancellor of the Exchequer has appointed a Commission to examine the Bank Charter Act of 1844, and other kindred matters, a Commission which many of us were very anxious to see set up years ago. I congratulate him on setting up this Commission and also upon having as members of it representatives of both sections of fiscal thought. The only doubt in my mind is whether with these two conflicting views so freely expressed, as I have no doubt they will be, and so well represented, there is any possibility of getting a report, because it seems to me these views are bound to cancel each other out. I have only one regret, and that is that it was not possible to have upon the Commission more direct representatives of industry itself. There are many well-known names on the Commission but I should like to have seen a few more industrialists upon it. I do not propose to deal with the points which are bound to be raised in this report because we must await the report itself. At the present moment, however, this country is working under the system laid down by the Cunliffe Committee, which decreed that, notwithstanding, changed economic conditions and advances in wages and costs of production the selling price of gold should be fixed and stabilised at prices ruling pre-War. It is one of the most extraordinary resolutions I have ever heard of; to say that we shall work the whole of our system on the pre-War value of gold, although we know that for many years past gold has become more difficult to get and has increased in value owing to falling production and the increased cost of winning it.

In the 10 years previous to 1917 the total world production of gold was £934,000,000, but in the following 10 years from 1918 to 1928 it was only £749,000,000. Is it any wonder that the system under which the Bank of England is compelled to supply gold at a standard price under the conditions of 80 years ago results in other countries immediately taking gold from us? Let me give an example of what has happened. Although gold mining is very largely a British industry and worked with British capital and we imported in 1928 from British goldfields the enormous sum of £33,500,000 worth of gold, we exported the whole lot, plus another £12,500,000. It is clear why this is so. Before we returned to the gold standard gold was to some extent finding its own level as a commodity. In February, 1920, the price of gold was £6 7s. 4d. In 1921 it was £5 7s., and in the last five years it has been, of course, the standard price of £4 4s. 11d. I maintain that the bringing of this about and thus enabling us to return to the so- called gold standard has really been deflation, a very serious measure of deflation, which has had far more, to do with the loss which trade and industry has suffered in the last few years than most people imagine. Let me give an example. My hon. Friend the Member for Twickenham (Sir J. Ferguson) quoted from a speech made by Mr. McKenna a few months ago. May I refer to one he made a year ago on the same occasion when addressing the shareholders of the Midland Bank. On the 9th of January, 1929, he showed that the proportion of deposit to current accounts had fallen from 1919 to 1928 from 71.4 per cent. to 55.3 per cent. That is a definite drop by absence of trade demand on the one hand or by a restriction of credit on the other.

A still better example perhaps is our own national accounts. The Budget expenditure in 1920–21 totalled £1,195,000,000, representing 199 million ounces of gold. In 1925–26 the accounts were £826,000,000, representing 194 million ounces of gold. The value of gold in 1921 was £5 7s. 4d. and in 1926 it was the standard rate of £4 4s. 11d., so that while there appears to be an actual saving of £136,000,000 the real cost in gold to the country was almost exactly the same. In making these comparisons I am not suggesting that we were wrong, and I am not opposing the policy of a return to the gold standard. I think it was bound to come, although perhaps it was made too rapidly and perhaps too drastically; but with gold as the standard of international payments and obligations the matter we have to take into consideration is how to avoid a heavy handicap upon our industries as a result of that return to gold. The mind of man has not yet invented anything better than gold, and until we can find something better gold must remain the standard for international payments. But I cannot see why gold should be considered the standard for our internal obligations and transactions.

When the Bank Charter Act was passed 80 years ago conditions were entirely different. Payments were made in sovereigns or in notes. All that has been superseded long ago by cheques, and currency notes are only required now for wages and small payments. What possible reason is there, because a large number of people are speculating in America and offering enormous rates of interest for loans that industries in this country should have to pay extravagant rates for the use of currency which is really only wanted in small amounts and for small payments? To connect our gold reserves too closely with our note issue is to destroy in advance the possibility of extension of currency which industry rightly demands. It is well for us to consider the effect these great banking amalgamations will have in the future and the possibility of their development and still greater value to trade and industry. I want to emphasise that while I believe in what has been done in the past, provided real competition is always preserved, I think it is worth considering what measure of support we can give to the banks to enable them still better in the future to discharge their function of helping industry. In the United States there are over 30,000 banks, but the point in connection with the United States which interests me is not the number of banks but the system under which they work.

I have studied this matter with some attention, and for what my opinion may be worth it seems to me that from the industrialists' point of view the Federal Reserve system is almost ideal. Something like 9,000 banks and trust companies claim membership of the Reserve Banks, and these banks can lend on arrangements which enable them to issue notes against 40 per cent. of gold with the balance covered by good commercial paper. I cannot see any reason why our currency system should not be based on something of that kind. It is true that we have a large Fiduciary issue, but apart from that we are limited by the supply of gold and we are constantly in difficulties because of the increasing shortage of the precious metal. In Germany the Banks of issue have only to keep 33⅓ per cent. of gold or foreign exchange against their Note issue, the balance is covered by commercial bills. Lastly, we have a new factor in the whole procedure in the setting up of an International Bank as the result of The Hague Conference and the Young Plan. I see by the documents submitted to this House that it is to be a central bank for central banks, but apart from that it is empowered to buy and sell gold for itself. I hope and trust that this House before it approves of these arrangements will get some assurance from the Chancellor of the Exchequer that our representatives on the Board of the International Bank will be well aware of the policy of this country and will ensure that we are not setting up another competitor for the limited supply of gold there is in the world. We are very susceptible to monetary changes owing to the advanced state of our industrial development.

It is clear that the gradual increase of world population means that credit must keep pace with development in production otherwise prices immediately fall resulting in hardship and distress. The profits or products of industry are divided into money which goes to labour, to management and to capital. If the volume of that profit tends to fall, and if labour keeps the same proportion in wages as its present share, that is if we maintain our standard of living, then the balance to management and capital must necessarily decline, and if it declines enterprise gradually fades away. It is only the profits and savings of the people of this country which provide the capital necessary for industry.

I should like the House to turn their attention to this further fact. It is all very well for us to talk about reorganisation and rationalisation in industry, but industrialists in this country know that in many cases industry is not nearly so backward as many people would have us believe. There are doubtless many cases in which our plant could be improved, but there are many cases in which it is up to date and probably the best in the world. You cannot teach the bulk of our industrialists anything about rationalisation or reorganisation which they do not know already. The fact of the matter is that reorganisation means money. Where is industry in this country going to get the money? That really is the problem before the country. It is not a question of inducing certain industrialists to put their house in order; it is a question of providing them with the means of putting their house in order. You may say they should have preserved the means to do this in some way from the past, but we have to consider the facts as they exist to-day. To-day the industrialist has eight bad years behind him, in which, largely from no fault of his own, his record of profits will not enable him to go to the public for money. He cannot hope to raise it in the ordinary way. The banks, perfectly correctly and rightly, as they stand at present and under existing conditions cannot possibly fill that want. It would be quite improper for banks to invest large sums of money in bricks and mortar with a doubtful date for the redemption of such loans. It is not a feasible suggestion for our banks as they exist to-day.

Therefore it comes back to this: Where is the industrialist going to get the money? I suggest that a new outlook is needed. It would be out of order, perhaps, to go too far now into what is required. There are many suggestions that have been put forward. Whether some form of Government assistance or semi-Government assistance is necessary; whether some great institution fathered by the banks, in the way of a trust company which will be able to lock up money, is necessary; or whatever the means that may be adopted, I suggest that the thing to which this country wants to turn its attention more than anything else at this moment is not to keep preaching to the industrialist to re-organise, but to show him how he can get the money to do it. That is what he wants to know, and until we face that question we shall not get that prosperity in industry which we all want to see. Banks, however, are as dependent on industry as the rest of us. In the end their prosperity must depend upon the country having a prosperous industry.

We have forgotten too long in this country the producer, and I think we have forgotten the small man. The people whom we want to consider are the men who really produce, upon whom everyone else is dependent, whether we be lawyers or doctors or tradesmen or anything else. Everything we get comes out of productive industry, and it is productive industry that we have to consider. I want to see this committee which my hon. Friend has suggested set up, because I believe that the banks themselves must be made still stronger with a new and wider field of usefulness, and must be given new facilities to help industry. In what form I cannot say, but they must be given assistance, so that they will be in a position to give the country real help in the reorganisation of industry, and, above all, to give this country, and particularly the industrialists of this country, new hope that they will be able to compete on reasonable terms with the many competitors that they have abroad.

The FINANCIAL SECRETARY to the TREASURY (Mr. Pethick-Lawrence)

I had hoped that many other hon. Gentlemen might have addressed the House on this question before it became necessary for me to say a few words from the point of view of the Government. The House, I am certain, is much indebted to the hon. Member for Twickenham (Sir J. Ferguson), who moved the Motion, for introducing the House to matters which too rarely come before us for discussion. I am sure that the House followed with great interest, as I did, the information which he gave us, from his long experience and great knowledge, as to the part which the banking community plays in the affairs of the country. I need hardly say that the remarks of the hon. Member for Kidderminster (Mr. Wardlaw-Milne), who seconded the Motion, were also of very great interest. He quite correctly said that on several previous occasions in former Parliaments he and I had debated on the matters to which he alluded. His speech was largely devoted to discussing questions of currency and the relationship of the Bank of England to the monetary policy and to the Joint Stock Banks. That is a matter of very great moment and importance, but I am not quite clear how much it is directly concerned with the particular Motion that is before the House.

I should hesitate to follow him in discussing those very interesting matters. Though I have no complaint to make of his doing so, I think that, perhaps, I ought to confine myself more particularly to the Motion and to the proposal which is definitely made in it. I do so more especially as there is already sitting a Committee, to which the hon. Member for Kidderminster referred, which is discussing the very question to which the hon. Member directed our attention. Until that Committee has ended its labours and produced a report I think it would be premature for me to express any opinion on those matters.

The Motion before us expresses the view That this House is of opinion that large banking units have proved of so great assistance to industry through times of severe depression, while at the same time securing the interests of depositors, that it is expedient that a Standing Committee, consisting of representatives of the banks and of the business men of the country, should be set up to advise the Government on all questions affecting the relations between finance and industry.

I gather that the object of the hon. Member for Twickenham was that he wanted to see additional amalgamations. The actual fact is this We have had two committees which have dealt with this question. The first was the Colwyn Committee which was set up, I think, in 1918. It must not be confused with the Colwyn Committee of 1924. The Colwyn Committee of 1918 was set up to discuss this question of bank amalgamations. That Committee recommended that legislation should be passed requiring the prior approval of the Government before any amalgamations were announced or carried into effect. There was some proposal actually to introduce legislation into this House, but that proved abortive. However, the objects that the Colwyn Committee had in view have been effected for practical purposes in another way. As the Mover of the Motion incidentally mentioned, there is already in existence a committee which advises the Treasury on these matters, and in giving that advice it takes into account the recommendations which form part of the proposal of the Colwyn Committee.

The words of the recommendation are to the effect that where a scheme is proposed for amalgamating or absorbing small local banks, and that scheme would give additional facilities to the public, it should be viewed with favour, but that where there was proposed an amalgamation which would rather limit the interests and rights of the public and tend to something in the nature of a money trust or money monopoly, that was to be avoided. It is along the lines of those general principles that the committee of the Treasury has acted since. There has been an honourable understanding on the part of the banks that they would submit their proposals to the Treasury before carrying them into effect, and that they would not carry out amalgamations unless the Treasury, after the advice of its committee, expressed a favourable opinion.

Mr. GRANVILLE GIBSON

Were there any industrialists sitting on the Committee?

Mr. PETHICK-LAWRENCE

Yes. As the hon. Member knows, the Committee consists of two individuals, one appointed by the Board of Trade to represent industrialists, and the other appointed by the Treasury to represent banking interests. The names of those two individuals are quite well known. They are Lord Colwyn and Lord Inchcape. They advise the Treasury on these matters.

Mr. WARD LAW-MILNE

I understand that the Committee has no statutory authority at all?

Mr. PETHICK-LAWRENCE

No, that is quite correct. The Committee has no statutory authority, but there is an understanding that the banks have agreed not to promote amalgamations unless they are favoured by the Treasury, and the Treasury has appointed this committee to advise it in such matters.

Mr. CHARLES WILLIAMS

There are only two members?

Mr. PETHICK-LAWRENCE

Only two members. It was the recommendation of the Colwyn Committee that it should consist of two members. The Colwyn Committee recommended that a special statutory committee should be set up to advise the Treasury and the Board of Trade, consisting of one commercial representative and one financial representative. Apart from the fact that it is not a statutory committee, that has been done. It is now suggested that a different committee should be set up. I am not quite sure why the hon. Member wants a different committee. I think he wants a committee with a different type of personnel, in the first place, but I do not know that there is any particular ground for that view. In the second place, I think the hon. Member wants the committee, to start from different premises and to work on different principles; he wants it to promote amalgamations instead of sitting in criticism upon them. With regard to that matter, I have only to say that since the Colwyn Committee was set up we have had another committee, the Balfour Committee, which examined this question, among others. The House will remember that the Balfour Committee issued its Report last year, and that it took the view of the Colwyn Committee. The Report states; The fact that bank amalgamations have not so far resulted in any of the evils of unrestrained monopoly should not, of course, make us disregard the possible danger that some change of policy might take place,… The general effect of this recommendation was that the policy which was being pursued, of preventing amalgamations on a scale which I rather gather that the hon. Member for Twickenham favoured, was sound. Let me say what the actual policy is. It was announced by my right hon. Friend the Chancellor of the Exchequer during his term of office in the previous Government. My right hon. Friend then said: Any proposal for amalgamation is now submitted to the Treasury and the Board of Trade, who take the advice of an advisory committee. I may add that further amalgamation of the larger banks would not be likely to be viewed with favour."—[OFFICIAL REPORT, 26th May, 1924; col 228, Vol. 170.] 5.0 p.m.

My right hon. Friend's successor, the Member for Epping (Mr. Churchill), who was Chancellor of the Exchequer in the late Government, took the view of his precedessor, and the same policy was pursued. As the Treasury have taken up the position recommended by a committee specially appointed to consider this question; as that is the policy which my right hon. Friend announced to the House in 1924, and to which no exception was taken, and is also the policy announced by his successor, the late Chancellor of the Exchequer; as it has been recommended by a committee which reported as recently as last year, and as we have no body of opinion taking a contrary view, I think, in view of those facts, we Cannot be expected, and the Government certainly do not intend to take a line diametrically opposed to the policy which has been pursued during all these years. Therefore, although, as I said at the beginning, I have been most interested in this discussion, I am afraid that the Government could not possibly accept the Motion proposed by the hon. Member for Twickenham. I hope that when the time comes for the House to give its decision on thi3 Motion the hon. Member, having had this discussion, will see his way to withdraw it. If he does not take that course, I am afraid I shall have to ask those Members of the House who agree with the Government in this matter to vote against the Motion.

Mr. WARDLAW-MILNE

May I ask, with all respect, if the Financial Secretary is not labouring under a slight misapprehension. The words of the last line of the Motion are: to advise the Government on all questions affecting the relations between finance and industry. That, I submit, is quite a different proposition from the one to which the hon. Gentleman has referred. The committees to which he referred were, as he pointed out, dealing with amalgamations between great groups of banks, but that is not the point in the Motion at all. It may, or it may not, be desirable to have such a committee, and I can quite understand that the hon. Gentleman may not wish in this Debate to commit himself to having it, but it seems to me that the point of the Motion has not been met by the argument which he has put forward.

Mr. PETHICK-LAWRENCE

We must take the earlier part of the Motion in relation to these final words. The two parts of the Motion hang together, and I certainly understood that the final words related to a committee having as its main subject of discussion the question of bank amalgamations. If the final words of the Motion are to be taken in a wider sense and if they have nothing to do with bank amalgamation, I do not see why these two matters have been put into one Motion. But I have no wish to quarrel with the hon. Member on that point at all. The fact is that we already have the Macmillan Committee which is discussing the whole question of the banks. If that committee were to make a recommendation of a certain kind, such as that some permanent body should be created to advise on these matters, no doubt that recommendation would be considered carefully by the Government. What I understood the Motion to ask was that the Government should forthwith set up a special committee whose main preoccupation would be the question of bank amalgamations. To that proposal, as I understood it, I replied that the Government could not accept it. If the definition intended by the hon. Members opposite is wider than I understood, then it is a matter which can be considered by the Government in the light of any interpretation which may be put upon the Motion by other hon. Members who speak in the Debate. As it is, so far as the Motion relates to the question of bank amalgamations, I cannot go beyond what I have already said, namely, that the Government could not accept it, and I think probably the hon. Member for Twickenham when the time comes will see his way to withdraw it, since the question has now been discussed and to that extent he has achieved his object in putting it forward.

Mr. WARDLAW-MILNE

I take it from what the Financial Secretary has said that, after the report of the committee which has been set up by the Chancellor of the Exchequer, the hon. Gentleman is not opposed to considering the idea of having a Standing Committee to advise the Government, but that he is not prepared to accept the suggestion at this moment?

Mr. PETHICK-LAWRENCE

There is a committee advising the Government on this question of bank amalgamations, but it is not a statutory committee, because it has been found simpler to proceed according to the existing arrangement. There are special reasons involved which have not been elaborated in this Debate, but perhaps there will be further speeches now in which they will be elaborated. Of course, the Government will give full consideration to any arguments put forward for changing the status of the committee, but I certainly could not promise that this proposal would be accepted.

Sir J. FERGUSON

In the case of a small bank, wishing to amalgamate with a large bank—will that receive consideration from the Treasury now?

Mr. PETHICK-LAWRENCE

I think that is covered by the quotation which I have already given. I do not want to go outside the actual words which have been used because the words are of importance in this matter. They are: Further amalgamations of the larger banks would not in principle be regarded with favour. That does not solely mean amalgamations of two of the larger banks with each other, but it does mean amalgamations between one of the larger banks and other banks up and down the country. I cannot go beyond that statement in those broad general terms, but no doubt any particular application would be considered on its merits when the time came.

Mr. HAMMERSLEY

I find considerable difficulty in understanding this Motion. It is supposed to deal with bank amalgamations, and it sets out by reciting that bank amalgamations are acceptable, and then it suggests that a committee ought to be set up to advise the Government on all questions affecting the relations between finance and industry. It seems to me that two important points are involved here, one a narrow point concerning bank amalgamations and the other the very much wider issue raised in the last line of the Motion. I quite appreciate that the Government would say in reference to the last line of the Motion that the Macmillan Committee had already been set up and that it was dealing with that side of the problem. We have to consider, however, this narrow issue of bank amalgamations. The Financial Secretary pointed out that a committee had already reported on that subject, and that their main recommendation was that there should not be any more large scale bank amalgamations, but that statement does not quite cover the point raised by the Motion. My hon. Friends who put forward the Motion, as I understood them, were concerned about smaller banks with limited financial resources who desired to amalgamate with larger banks.

I wish to put a specific point in relation to the smaller north country banks which are prevented by their financial commitments from giving those credit facilities which they themselves may regard as desirable. Because of their financial commitments those banks find that to give the desirable credit facilities, they would have to stretch the ratio of their cash to their liabilities to a point beyond what they regard as safe. It is within the knowledge of most people and particularly of Members for north country constituencies, that in the boom period in Lancashire the local banks did provide a great deal, of credit facilities which they anticipated, in the light of their special knowledge, would quickly be liquidated by good trade. Unfortunately, the good trade did not materialise and they are now left with, at least, frozen credits and with their liabilities bearing such a ratio to their cash that they do not consider it safe to give assistance, however financially desirable or industrially sound any scheme which is put before them may be. They are forced to say that their commitments in a particular industry, as, for example, the cotton industry, are so great that they cannot do anything to help. That is the narrow point which has been raised, and I think it is not entirely met by quoting from the Colwyn Committee Report or the Balfour Committee Report, because the circumstances which have led to further credit facilities being required from these small banks are new circumstances. They are circumstances which have been brought about by the recognition on all sides of the desirability of rationalisation and large-scale amalgamations, and I think the Government ought to consider whether or not applications on the part of smaller banks to be absorbed in one or other of the larger banks, are not worthy of consideration.

I do not know whether it is in order or not to discuss the wider issue raised by the suggestion that a permanent committee should be set up to consider the relationship between industry and the banks. When we look around the country and appreciate the depressed state of industry and the gloomy prospect which faces most producers, it seems a strange thing that while our productive machine should be criticised, while our men are described as not being efficient and our employers are described as not being sufficiently up to date, the only thing which is not criticised is our financial policy. It may well be that in such a depressing state of affairs we have not been sufficiently careful in looking after our producers. I do not wish to emphasise that point however, because it seems to me that it would lead to an argument in which we would never find a solution, and which would not be appropriate to a small Debate like this. As far as the Motion suggests that it is advisable to bring the producers of the country into closer relationship with the direction of the State, I think a Motion of that character would be welcomed by a large section of opinion represented in all parts of the House.

Sir WALTER PRESTON

If the proposal in the Motion means that it is sought to limit still further the number of large banks to which the trader can go for assistance, then from my point of view, it is a Motion to which the House ought not to agree. In the old days when we had a large number of banks every trader and everybody who wanted to borrow money from a bank, was personally known to the bank manager, and the bank manager really lent money on the strength of his knowledge of a man more than on the assets which the man possessed. Nowadays when loans are sought, everything is referred to head quarters. It may be that there is a trader in a town in the North who wants accommodation. A report upon his application goes up to headquarters from the local bank manager. That report is considered only by the general manager of the bank and the chairman of the bank. I believe I am right in saying that the directors of the banks take very little interest, or are allowed to take very little interest, in these matters. The banks are run by the chairmen and general managers and I understand from directors of banks themselves that their interference is not welcomed, although they may be experts.

Any bank will lend 20s. on an asset worth 30s., but the distressed traders at present, who are finding it very hard to fight against the world, I know to my cost, are finding it very hard to get accommodation from their banks unless some rich person will step in and personally guarantee an overdraft. An hon. Friend behind me said there was plenty of competition among bankers still. I venture to challenge that. If you have a fat bank account of seven figures, then there is competition, and every big bank wants your account, but if you are in the unfortunate position of having an overdraft, I believe that any trader would find it almost impossible to get any of the big banks to take over an account from any of the other five.

I want to refer to another remark of my hon. Friend the Member for Twickenham (Sir J. Ferguson), when he said that the trader welcomed advice from the banks and never resented it. May I put it this way? Can a borrower resent advice from the mat from whom he is trying to borrow? Dare he? I can tell the House, from personal knowledge, not only of advice given by banks, but of actual interference with commerce by banks. I know of one big concern whose chairman was forced upon the directors by one of the big banks. The other directors did not want him, because they did not think he was the right man to be chairman, and they held the appointment over, but the bank's message was, "Unless you appoint him as your chairman, and on the terms which we state, we shall withdraw our accommodation." That man was appointed chairman. Unfortunately, he was the wrong man for chairman, and that company has gone steadily downhill year after year. The bank themselves finally had to step in and remove the man whom they had appointed. They appointed somebody else, and he did not please them, so they pushed him out, and now they have appointed still another chairman. That, to my mind, is gross interference by a bank with the duties of the shareholders of a company. In my humble opinion, as a trader, if your bank account is on the right side, and your bank is your servant, then it is a most excellent servant, but if your bank is your master, it is a very hard taskmaster; and I suggest that any proposal still further to limit the very limited competition which there is among banks is opposed to the commerce of this country.

Mr. WISE

The speeches that have been made have raised some very interesting points, and I think we are all very grateful to the hon. Member for Twickenham (Sir J. Ferguson), who moved the Motion, for the interesting survey which he gave of the development of the banking system. I think he is qualified for that high post of bank chairman which one day, no doubt, he will occupy. But he did not carry us very far into the details of the proposals which he had in mind. I think most of us on this side would agree that an arbitrary limitation of the number of big banks to five is just arbitrary, and that any attempt to stop it at five, instead of four, or three, or two, or one requires far greater justification than has been given either in the Report of the Committee which sat, in quite different circumstances, in 1919 or thereabouts, or in the later Reports to which references have been made.

When the hon. Member talks about the efficiency, the resources, the capacity, and the public spirit of the great banks, I do not think we should challenge very strongly his very great authority to speak on these matters, but, as later speeches have shown, other hon. Members do not share to the full his enthusiasm for the wisdom which the banks have always shown in the use of their resources. It is true that they have safeguarded their depositors' money; it is equally true that over a period of years they have paid a steady 17 or 20 per cent. or more, apart from occasional bonus shares, to their shareholders; and it is perfectly true that, apart from occasional awkward incidents such as that which happened a few weeks ago, to which I need not refer, because I am aware that it is a painful subject in banking circles, they have not lost very much money in their operations. But, as things are, industry expects a little more from the great banks than that they should successfully play for safety.

The hon. Member for Cheltenham (Sir W. Preston) has referred to the difficulties of the small manufacturer, of the man who is trying to branch out on a new enterprise, just that type of enterprise which, in the present circumstances of the industrial position of the country, ought to be encouraged. When the bankers congratulate themselves on the successful way in which they have maintained their reserves and paid their profits during these last 10 years, it is only fair to point out that, though the bankers have been prosperous, the rest of the country has been very far from prosperous, and that the two things are not entirely unconnected. I do not say that the bankers by making an enormous profit have hurt industry, though I should like to know a little more as to what are called the hidden reserves, which, with super-caution, they hide away, but which are displayed on the best streets in the best sites in every country town. You will generally find that the five best buildings in the town are the hidden reserves, very obvious, of the great banks. Except for the Mover of the Motion, we are not able to express any opinion on these matters, because, apart from the general observations, very interesting and sometimes quite helpful and relevant, with which the bank chairmen delight us at their annual meetings, they give us very little information about their internal operations—far less information than is vouchsafed by the American or German bankers or by the bankers of most other countries.

The hon. Member for Twickenham refers in his Motion to the relations between the banks and industry, and he proposes to set up a committee to deal with that very important problem. I think it is very important that we should reconsider the whole relation of the banking system to industry at this moment. Some 80 per cent. of all the available current capital, the working capital, in the country is more or less under the control of the five big joint stock banks. That is a tremendous power, a power which could be used, if they so desired, to thwart the policy of any Government or of this House, a power which can make prosperous one industry and destroy, or send into bankruptcy, another, a power whose exercise seems to me to be entirely at variance with those conceptions of democratic government which we all so loudly protest on election platforms.

I am not for one moment suggesting that in the exercise of that power the bank chairmen and the bank directors are moved by any but the highest considerations of public duty, but the fact is that they are a more or less self-appointed oligarchy controlling the bulk of the trading resources of this country, responsible in a sort of way to shareholders who never attempt to exercise any direct form of control over them, and to whom very little information on which they could, if they so desired, exercise control is vouchsafed. I dare say it will be said by hon. Members opposite that if any of the great banks showed signs of getting into a financial mess, their shareholders would quickly sit up and take notice, but, as a matter of fact, on the only occasion when that happened, when the real test was made as to the solidity and safety of the banking system of this country, in 1914, as the hon. Member for Twickenham said—and he was very frank in his expression of gratitude—the first thing that happened with the shareholders was that the State had to step in and save the banks from bankruptcy; and, of course, it is plain that if any of the big joint stock banks got into financial trouble, such as happened not so many years ago to one of the corresponding institutions in Italy, the State would have to step in.

The real guarantee of the operations of these joint stock banks at the present moment is not the shareholders, but the community as a whole. We could not afford to let them go bankrupt, and we should have to prevent the discord and chaos which would result. Therefore, we are entitled to examine a little more closely the relations which exist. Here is this great organisation, exercising powers of immense importance to every industry, to every trader, and, I would add, to every worker in the country, controlled by men who are, despite their merits, responsible practically to nobody but themselves. Yet, as a matter of fact, this enormously important and powerful institution has behind it, not really the money of its shareholders, but the whole forces and resources of the State, which, as they know, and as we know, would have to come to their rescue if they got into trouble at all.

Add to that, as the hon. Member for Kidderminster (Mr. Wardlaw-Milne), who seconded the Motion, said, in the present circumstances they are inadequate, they are unable to deal with the problems of financing with which industry is faced. Their methods are suited to the ordinary short-term day-to-day finances, admirably suited to the operations of the stock market, fairly well suited, though not perfectly, to the operations of foreign trade, but not at all suited to those longer term operations, the lack of facilities for which is the chief trouble in industry at this moment. As the hon. Member opposite indicated, though he did not proceed very far with it, the only way in which they could meet that situation—and, I suppose, it is one of the points with which it is contemplated that this Committee which has been referred to will have to deal—would be if the State came in behind them.

I want to submit that, as things are, as the banking system is developing, and as the policies of Governments and the problems of industry as a whole are becoming more and more interlocked with the day-to-day operations of the banking system, it is impossible that it can stand out in its present position of more or less irresponsible and dangerous independence. We have had the spectacle in this House, on two or three occasions lately, of the Minister responsible for dealing with unemployment telling us, in a vague and uncertain sort of way, that he hoped that the City would come to his assistance. He told us that he could not answer any questions about it, that he could not in any way be held to explain exactly how it was going to be done, but that he was making an appeal, in some sort of way, to the City to come in and help him to discharge functions which the City can discharge, because of its control of the resources of the country, but which, as we understand, the Government cannot discharge, because it has not that control.

This is a suggestion which, sooner or later, we shall have to face. It is absolutely illogical and anomalous that the banks should exercise these vast powers without any sort of reference or responsibility to public control. If they had exercised them in the last few years with great wisdom, criticism no doubt would be stilled, but right through industry, not only among working people, but among manufacturers, traders, merchants, importers and exporters, there is constant criticism. Only the other day I was talking to a great export merchant who was explaining to me a phenomenon which I have observed in my own business experience, by which it is easier for foreign manufacturers to get credits from this country to sell goods abroad, than it is for British manufacturers to get credits from British banks for exactly the same purpose. An Italian manufacturer, selling cotton goods to Egypt, can get finance from the Italian banks, which comes direct from London, but a British manufacturer, selling to the same customers, in the same way, can go to a London Bank, as happened in this particular case, and be refused.

The joint stock system, with all its merits, is out of touch with the industrial and commercial problems of the country, and the whole relation of it to the State needs to be reconsidered. I am not going to discuss the question of the gold standard or the relation of the Bank of England to industry. The Bank of England and the joint stock banks are part of an enormously important financial machine, which at the present moment controls industry. That machine has within its hands the power to make decisions, which are of vital importance to industry, and for these decisions it cannot be held to account by anybody. There is only one way out, and that is for this House by using all the great skill of those who have conducted banks in the past, and using all the expert advice inside and outside the House, to provide machinery, which I cannot explain at this moment, to take into its control the responsibility which it ought to exercise, and which, sooner or later, it must exercise.

This proposed committee might pave the way for such a development, although I would point out the extraordinary omission that it is proposed to set up a committee to deal with the relations between finance and industry, without, apparently, putting any representatives of labour upon it. Has the hon. Member forgotten the existence of the trade union movement, and the important interest which it represents? The Mond-Turner Conference has been doing valuable work on a recognition of precisely the fact which the hon. Member has overlooked. This Debate has been very useful in drawing our attention to a very important question, but I cannot agree with the very narrow view of the problem which the hon. Gentleman has taken. I am sure that we are all grateful to him for having raised it.

Sir J. FERGUSON

In view of the helpful and courteous reply which I have received from the Financial Secretary, I beg to ask leave to withdraw the Motion.

Motion, by leave, withdrawn.