FINANCE [POWER TO BORROW FOR CERTAIN FINANCIAL PURPOSES]. (Hansard, 4 May 1938)

§ Sir J. Simon
The House will probably wish me to make a short statement upon this Resolution. It is to enable a Clause to be introduced into the Finance Bill which in case of need could be used to enable us to borrow to meet Sinking Fund charges on the contractual Sinking Funds. The House may remember that for some years past the Budget arrangements have provided £224,000,000 as the fixed debt charge. That £ 224,000,000 is intended primarily to pay the interest on debt, together with the cost of the management of the National Debt, and includes the interest upon savings certificates actually cashed during the year. The figure has been £224,000,000 year by year for the last four or five years, and down to last year it was sufficient, not only to meet completely the primary purpose of paying for the interest and management of the National Debt but to leave a margin which was enough to provide in full for the statutory Sinking Funds. The figure needed for that purpose varies from year to year according to changing conditions, and at present is in the region of £10,000,000 or a little more. Last year, as I told the Committee of Ways and Means when I opened my Budget, the provision of £224,000,000 was not enough to meet the whole of the cost of providing for the statutory Sinking Funds, but was sufficient to provide most of what was needed. There was a balance of some 970 £2,770,000, which was met out of revenue and which, in effect, reduced the surplus last year.
I have announced that it is my intention this year, and a Clause will be included in the Finance Bill, to provide £ 230,000,000 for the fixed debt charge, and not £ 224,000,000, and I gave my reasons in the Budget speech. The reference will be found to it in column 49 of the OFFICIAL REPORT of Tuesday, 26th April. I hope and believe that that £ 230,000,000 will be sufficient to cover the interest and management of the National Debt, and the interest on the savings certificates cashed and to leave a margin sufficient to serve the statutory Sinking Funds, but according to our ordinary practice, which has been followed year after year, as a precaution one also takes power in case of need to borrow for that last purpose. This proposal is exactly in line with the provision which has been adopted by the House for a number of years past, and I ask the House to give me this Resolution in order that I may include the ordinary Clause in the Finance Bill.

§ Mr. Pethick-Lawrence
If I understand the Chancellor aright, he has properly recognised the conditions with regard to savings certificates. They always have an interest for me, because they were one of the questions which I constantly raised as a junior Member of the House. I pursued the right hon. Member for Epping (Mr. Churchill) on this point in every one of the years of his Budget, and I think that in the end he had to make some concession to my protest. I am glad that the Chancellor has recognised that if he were not to make an allowance for the accruing interest on those certificates he would be borrowing even more than he is borrowing at the present time, and therefore, in so far as he has put up the charge which he expects to cover this point, and others, I feel that he has acted correctly. He has arranged to borrow so large a sum of money altogether that it does not, of course, seem to be a very great matter whether he borrows a little more or a little less. When we are borrowing £100,000,000 or more a few odd millions almost pass out of our ken as a matter of small importance, but we have argued that out on previous occasions and I do 971 not think it is necessary to go through it again to-night. We do not find it necessary to oppose this Resolution.

§ Mr. Benson
With regard to the payment of these contractual obligations I am not quite clear why it is necessary to take power to pay these Sinking Funds out of borrowed money if necessary. I should have thought that the State would have had to pay the statutory Sinking Funds whether they had taken powers or not, and that if there were a deficit the payments would take their place in the normal payments for the year irrespective of any power to borrow. Assuming that the Chancellor were unduly optimistic and felt there was no danger of having to borrow to pay those Sinking Funds and omitted to take the power, if by some mischance there were a heavy deficit what would constitute the position then?

§ Mr. A. V. Alexander
It is difficult for the ordinary Member of the House always to understand exactly what the position is in some cases. I wonder whether the right hon. Gentleman can give us an idea of how the Sinking Fund arrangement is working in relation to reduction of the National Debt. We understood the position very well before 1930£ 31, when we had a fixed sum always put before us representing the Sinking Fund of the year, but we are not clear now whether a fixed sum is actually placed aside for debt reduction. If the right hon. Gentleman has figures available to put before us easily, perhaps he would give them to us, as they might reassure us.

§ Sir J. Simon
I quite understand the nature of the question put to me, and I will say a word briefly upon the point but hon. Members, and the right hon. Gentleman, will probably agree that it might be better to authorise the Clause, after which we shall be able to consider it. As regards the question put by the right hon. Gentleman, I understand that it is undoubtedly the case that we have to provide money for the contractual Sinking Funds. If there were no specific authority to borrow and there was still a charge to be met, the right hon. Gentleman will apprehend, that would either reduce the surplus or increase 972 the deficit, as the case may be. Assuming that it is a case of a deficit, it would be necessary to find the money by borrowing. It is a matter of precaution, and it is desirable to have two ways of dealing with the matter. This is now our regular system, followed year by year. In practice this amount is found out of revenue.
As regards the question put to me by the right hon. Gentleman from the Front Bench opposite, I would remind him that I did endeavour in my Budget statement to make the position clear regarding the position of the National Debt. Perhaps he will be good enough, at his leisure, to look at the passage, which in the OFFICIAL REPORT begins in column 48. He will see whether I have provided the information which he has in mind, and, after he has refreshed his memory, if he does not feel that it gives him all he wants and will let me know, I will gladly see whether there is something more that I can say. I do not want there to be any misunderstanding. The reason why we make this provision for paying off, even in these difficult times, a portion of the Debt against us, is, among other things, that if we did not do so, we might imagine that we were standing quite still, whereas we should really be increasing our liability. As I explained in the Budget speech, the savings certificates which are outstanding and are not presented for payment in cash in the course of the year, are earning interest all the time. Good bookkeeping requires that we should take that fact into account. I am not open to reproach in this respect. That £ 230,000,000 should properly be regarded as an effort, at a time when there is a debt operation going on, to secure that our capital liabilities are not, as it were, secretly increased. With that explanation I hope that I shall earn the commendation of the stern and unswerving rectitude of the right hon. Gentleman opposite.