§ 28. Mr. GEORGE OLIVERasked the Chancellor of the Exchequer whether the Bank of England will participate in the cost of the American and French credits; and, if so, to what extent?
§ Mr. P. SNOWDENThe answer to the first part of the question is in the negative and the second part does not therefore arise. The credits of $200 millions and of 5,000 million francs recently negotiated in the United States and in France respectively, are credits to His Majesty's Government and the cost of the credits will be borne by the Exchequer, as in the case of all other British Government loans.
§ Mr. OLIVERFor what reason is the Treasury being mulcted in this cost, when the credits are for the purpose of maintaining the credit of the Bank and not for the credit of the Treasury?
§ Mr. SNOWDENThese credits are not for the purpose of maintaining the credit of the Bank; they are for the purpose of maintaining the credit of the country.
§ Mr. D. G. SOMERVILLEIs any provision made in the Budget for the cost of these credits, if they are so incurred?
§ Mr. SNOWDENI do not know that any special provision will be needed for this purpose. There will, I suppose, be a small charge to be met from the general provision for Debt.
§ Mr. WISEWill the right hon. Gentleman say why the previous £50,000,000 to balance the exchange was borrowed by the Bank, and presumably paid for by the Bank, whereas this latter loan of £80,000,000 is to be a charge on the Exchequer?
§ Mr. SNOWDENI do not know whether I ought to answer a question like that. The answer ought to be perfectly obvious to the hon. Member.
§ Colonel WEDGWOODWould it be possible, without any injury to the position, to say how far the Treasury have a check upon the amount of this credit that is expended, and the price at which it is expended?
§ Mr. SNOWDENThe Treasury, of course, were fully responsible for negotiating these credits.
§ Colonel WEDGWOODI know, but the spending?
§ Mr. SNOWDENThey are for the purpose of meeting the demand on sterling.
§ Colonel WEDGWOODHas the right hon. Gentleman any check upon the price at which sterling is sold now, or does that rest entirely with the bankers?
§ Mr. SNOWDENIt depends on the rate of exchange.
§ 30. Mr. WISEasked the Chancellor of the Exchequer why it was necessary to pay a minimum of 4½ per cent. discount on 90 days dollar bills discounted in New York in connection with the new Treasury credits when the market rate of discount on 90 days bank bills in New York was only 1 per cent.?
§ Mr. SNOWDENThe rates of discount quoted relate to totally different things. The 1 per cent. rate applies to the highest class of paper eligible for rediscount in the Federal Reserve system, that is to a security which the holding bank can at any moment turn back into cash. The British credit is, in view of the power of the Treasury to renew bills, a definite obligation for 12 months and involves the lock up of funds for that period without any such facilities for rediscount.
§ Mr. WISEIs it not the case that even the rate on ordinary commercial bills is less than half the amount that the British Government have paid on British Government securities?
§ Mr. SNOWDENI do not know what the hon. Member means, He had better put a question on the Paper.
§ 31. Mr. WISEasked the Chancellor of the Exchequer whether he is aware that British undertakings holding franc balances in Paris banks in many cases utilised these balances to purchase British franc Treasury bills issued in connection with the new Treasury credits, thus receiving 4½ per cent. interest on their holdings in place of the one half per cent. rate paid by the French banks on deposit balances; what steps he took to prevent this; and what steps were taken during the recent crisis to secure for the support of the pound sterling the considerable balances of this nature held in foreign banks by British concerns?
§ Mr. SNOWDENIn reply to the first part of the question the French banks which issued the franc Treasury Bills undertook to do their best to limit subscriptions to residents in France and I have received no information which would justify the statement that these franc bills have been to any appreciable extent purchased by persons or companies resident in this country. In reply to the last part of the question the conversion into sterling of balances held abroad by British-concerns may be expected to be among the normal results of the rise in Bank of England rate and of the general financial policy of the Government.
§ Mr. WISEWere any steps taken to cheek or verify the measures taken by the French banks, if any, having regard to the fact that it is currently reported in the financial columns of the Press that a very considerable quantity of British money has in fact been invested in this very remunerative venture?
§ Mr. SNOWDENI do not know what statements appeared in the Press, but what I do know is that we had an undertaking from the French Banks that they would take all possible steps to see that what was stated in the hon. Member's question did not take place. They 'examined the applications with a view to restricting as far as possible the issue to French subscribers.
§ Mr. WISEWill the right hon. Gentleman then inquire from his new ally, Lord Beaverbrook, as to what was the authority for the statement in his newspaper?