NATIONAL LOANS (No. 2). (Hansard, 23 May 1940)

§ Sir K. Wood
This Ways and Means Resolution consists of two parts, and it is the Resolution upon which it is proposed to found a Bill which will be, in the main, an extension of the powers taken under the National Loans Act, 1939. Section 1 of that Act gave the Treasury the power to raise, in such manner as they thought fit, any money required for the Supply grants for the year ending 31st March, 1940, and, in addition, a margin of not more than £250,000,000. It is now necessary to take comparable enabling powers in respect of the Supply grants for the year ending 31st March, 1941, with, of course, a similar margin of not more than £250,000,000. Except for the £250,000,000 the powers conferred by the 1939 Act were related to the expenditure of 1939–40. Since borrowing to meet the expenditure of any year must take place in that year, the power lapsed at the end of March. It is, therefore, necessary to seek further powers. This Resolution is the preparatory stage for a Bill for this purpose. Our financial policy has been discussed in the Budget Debate and it can be raised again on the Finance Bill. It is, perhaps, proper 379 for me to say now, however, that while the new powers given to the Government yesterday will enable us better to strengthen our financial defences as and when necessary, I ask this evening for further borrowing powers on the basis that the general balance between taxation and borrowing will be maintained. We should not forget that the financial weapon will continue to be used as a powerful instrument in this great struggle, and I am sure that no one will underestimate its value.
The second part of the Resolution is designed to take power to release the Treasury from any contractual obligations to issue securities under the National Loans Act in the form of bearer bonds or bond certificates. This provision is consequential on measures recently taken to tighten up our exchange control with special reference to the ability of the Germans to get hold of the sterling assets of the countries they have over-run. Control of the transfer of bearer securities is much more difficult than such control in the case of registered securities. Under the Defence Regulation issued on 11th May the issue of bearer securities of any kind in future is prohibited. There are, however, two instances in which the Treasury are at present under a contractual obligation to issue bearer bonds which could not be covered by the Regulation for technical reasons. These instances are the 2 per cent. Conversion Loan offered in January last in exchange for the 4½ per cent. Conversion Loan to be repaid on 1st July, and the 3 per cent. War Loan issued for cash in March. In both these cases the position up to yesterday was that legislation was necessary to relieve the Treasury of their obligations and this Resolution was accordingly drafted. I was advised this morning that under the Emergency Powers Defence Act of yesterday action could now be taken by Regulation, but I thought that on the whole it was right that I should proceed with the matter in this way so that I could explain it to the Committee. The House would probably prefer me to do that rather than issue a Regulation in view of the fact that I had already tabled the Resolution.

§ Mr. Pethick-Lawrence (Edinburgh, East)
I do not think the Committee will 380 wish to spend many words in discussing this proposal. It is, of course, one of tremendous significance and involves sums which are astronomical in their size and which, in the course of their issue and expenditure, will involve exceedingly large and grave problems. That is not a reason why we should waste words in talking about them. I can only say that I shall offer no opposition to the proposal. With regard to the second part of the Resolution, I think it is wise in this instance, at any rate, to have a specific proposal which, I gather from the right hon. Gentleman, will be carried out in legislative form, rather than to proceed through Regulation in accordance with the wide powers that were conferred on the Government yesterday. Both parts of this proposal have my agreement and support.

§ Mr. Benson (Chesterfield)
One phrase was used by the Chancellor of the Exchequer of which I did not understand the implication. He said that the general balance between taxation and borrowing was to be preserved. Are we to understand that he means that the very inadequate proposals that were outlined to us in the Budget are accepted by him as the balance between borrowing and taxation which is to be preserved? If so, I think the Committee will be very much disappointed with his first utterance as Chancellor of the Exchequer. There was a heavy body of criticism from all sides of the House on the inadequacy of the taxation proposals, and I hope the Chancellor will be able to say that he proposes to alter the present balance between taxation and borrowing.

§ Sir K. Wood
All I want to say at this moment is that I did not intend to indicate that. This Resolution will enable us to raise the whole of this terrific sum, to which my right hon. Friend has referred, by borrowing alone, and I would like to correct any impression that there was any intention on the part of the Government that there should not be a fair allocation between borrowing and taxation.