BANK OF ENGLAND. (Hansard, 24 June 1941)

§ Mr. Tinker (Leigh)
I take this opportunity of bringing forward again a matter raised by me in a Question which appeared on the Order Paper on 12th June. It related to the Bank of England and was as follows: To ask the Chancellor of the Exchequer whether, in view of the importance to our war effort of proper control of monetary policy and of the public anxiety in this respect, he will make a full statement of the existing relations between the Government and the Bank of England. In reply the Chancellor said: While fully agreeing on the importance to our war effort of proper control of monetary policy I am not aware of any prevalent public anxiety in this respect. There is, as has frequently been stated in this House, very close and constant co-operation between the Bank of England and myself."—[OFFICIAL REPORT, 12th June, 1941; cols. 340ߝ341, Vol. 372.] Can we be enlightened as to what that co-operation is, or is it too delicate a matter for any information about it to be given to the House of Commons? After all, we have voted a credit of £1,000,000,000 to-day; I expect there will be some monetary transaction somewhere and, I take it, that it will be through the Bank of England. I do not think it ought to be a secret as to how that will be done. I have tried to get to know something about the Bank of England and have looked up "Whitaker's Almanack," 1013 which is a kind of dictionary on all matters. There I found that the Governor is Mr. Montagu Norman—as everybody knows—and that there are 23 other Directors. It is stated that the amount of Government securities in the Bank is £147,812,838—I do not know what form these securities take and I do not think anybody else outside the Treasury knows —and that the amount of capital is £14,553,000. It also states that in 1938 a dividend of 12 per cent. had been declared.
I am anxious to know what are the actual transactions carried out by this body and whether we have any control over them? Do we ask them to lend us money and, if so, do they stipulate the percentage at which they will lend it? If they refuse to lend the money can we take it from them? These are points which are agitating my mind. Other Members of the House have said to me that it is no use attempting to get Questions about the Bank of England on the Order Paper. I have tried a number of times and by persistence I finally managed it, although it took a long time to get it through. This has satisfied me that there is some objection in giving to the House anything like a full statement on this matter. Much money is involved in this war effort and I wonder what kind of monetary transactions will take place. I also wonder whether this dividend of 12 per cent. will be increased.
The Financial Secretary ought to let us know something about this matter. I hope he will take it from me that it is in the interests of the nation that I am asking these questions. When I am addressing war weapons week meetings I want to be in a position to tell people how the money is to be raised. I have been asked whether the money raised is transferred to the Bank of England and whether they get a percentage of the money that is lent to the Government? I have not been able to answer these questions. Therefore, I hope the Financial Secretary will take this opportunity of telling us what the position is: whether Mr. Montagu Norman and his 23 Directors make a good thing out: of dealing with the Government or whether the transactions which take place with the Government are carried out in the same way as in the case of ordinary business people.

§ The Financial Secretary to the Treasury (Captain Crookshank)
If I may briefly answer the hon. Gentleman, my right hon. Friend's reply of 12th June was comprehensive. The hon. Gentleman has said there is great difficulty in getting a Question on the Order Paper and I congratulate him on having succeeded in doing it, because the rules and regulations which govern our procedure for the putting down of Questions are always strictly interpreted and, of course, the Bank of England is not an institution over which the Government have a responsibility in the same way as we here have a responsibility for instance for the Ministry of Health or the War Office. The Bank of England is a private concern and obviously it is much more difficult to get Questions asked in this House about private concerns than it is about Government Departments. However, the hon. Gentleman did put a Question down and my right hon. Friend in his reply repudiated the suggestion that there was any public anxiety about the relationship between the Government and the Bank of England. That was my own view as well.
I must say that I have not heard anything about great public anxiety anywhere at the present time and, if there is any, I hope it will hereafter cease because there is no cause for any anxiety whatever. The Chancellor said there was very close and constant co-operation between the Bank of England and himself. The hon. Gentleman asked a series of questions to which the answers, I agree, would be interesting. He asked about the position of the Directors, the Government securities that were held by the Bank, the amount of dividend paid in 1938 and the like, but they are not questions which can properly be addressed tome. I do not know in any detail how the Directors of the Bank of England manage their affairs. Perhaps the hon. Member will allow me to let him know about this afterwards, but I think he will find that, if he wants to know more about the general arrangements of the Bank of England, there are other publications which go into them in greater detail than does "Whitaker's Almanack." I imagine that a great many writers on financial matters have given their own views as to what they think are or ought to be the relations between the Government and the central bank, and I have no 1015 doubt that a whole series of books has been written in which these matters have been investigated by students of these affairs; but I do not think it would be reasonable for me to start an impromptu lecture on the subject.
As far as I know, there is nothing particularly secret about the Bank of England. The Bank of England is not a new institution, it has figured very largely in the financial history of our country, and its records are there to be read by those who are interested, and the readers can make their own deductions there from. It is true that the Treasury and my right hon. Friend the Chancellor have a very close connection in the way of co-operation with various branches of the Bank, and this is particularly the case in war time. The hon. Member may have noticed the great number of things in respect of which the Bank's services are being used by the Government, but when he asks whether we can take over money from the Bank, if the Bank will not lend it to us, that is not quite the sort of question which I would like to answer. I can, however, assure the hon. Member that by law the Bank is not allowed to lend money to the Government without the express permission of the House. If the hon. Member wishes to take his studies further into the general reasons for the Consolidated Fund Bill, the clauses of which are very technical and time-honoured in their form, he will -find that those very provisions in each Consolidated Fund Bill passed by the House are passed in order that the Bank can lend money on Ways and Means. A Ways and Means Resolution has just been passed by the House arising from the passage in Committee stage of the Supplementary Vote of Credit. Under the financial procedure, Supply is voted by the House on Report after going through the Committee stage, and it is then necessary to have a Ways and Means Resolution in order to introduce the Consolidated Fund Bill, without which Bill and the powers which Parliament gives therein it would not be possible for the Bank to lend money to the Government.
As to the means of keeping in touch with the Bank of England, I can only refer the hon. Member to a reply given 1016 by Lord Simon on 21st November, 1939, when he said that the Chancellor—and this applies to all Chancellors, at any rate in war time—was in constant communication with the Bank of England, and especially so in war time; the methods of communication were mainly informal, and such as were most convenient from time to time. I am sure the hon. Member will appreciate that. The Chancellor cannot say that he will see the Governor, whoever it may be, at a certain time every day, or every other day, or, say, on Tuesday of each week. The matter must be arranged, in these difficult days, in an informal manner, whenever it is necessary to have these consultations.
With regard to the Bank rate, which is one of the points which the hon. Member has in mind, this might be a relevant matter on which to say something on the Third Reading of the Finance Bill. As a matter of fact, I made a considered statement on the subject about a year ago in the House. The decision as to changing of maintaining the Bank rate is made by the Court of the Bank of England. It is the case, as was stated on 4th June, 1940, that the Chancellor has, under the Emergency Powers Regulations of May of last year, power to give directions to the Bank about the Bank rate, but up to now he has not had any reason for supposing that the situation required any such directions. As hon. Members will see, all this merely means that there must be very close contact between the Chancellor and the Bank of England. Of course, it is for the Chancellor and this House to frame their own financial policies, but it is not for the Chancellor to have to defend the action of an outside body, like the Bank of England, over which he has no control. It is obvious to all concerned that an ancient institution like the Bank of England is in a position to give certain advice to the Chancellor of the day. We are sometimes told in other connections that we do not take enough advice from outside people; at other times, we are told that we ought not to listen to outside people, and that we ought to make up our mind and go straight ahead; but I think that in difficult and technical problems a combination of both is useful, and that no harm is done by taking advice where we can find the best advice, although we must form our policy for ourselves and 1017 defend it ourselves. I do not think there is any widespread anxiety on this question, and I should like to commend to the hon. Member's attention a quotation from the Macmillan Committee on Finance and Industry, which reported 10 years ago. Incidentally, the hon. Member will find a good deal of information about the Bank of England in that report. The committee referred to the Bank of England in terms which I think rather sum up the whole point which the hon. Member has in mind; they referred to it as functioning solely in the public interest…entrenched at the centre of the struggle for profit, and with access to the arcana of the market, yet itself aloof, and untinged by the motives of private gain Those are not my comments, but the comments of an important Committee, and they are comments which still hold good to-day, although they were made 10 years ago. The Committee was a very representative body, and it went into these matters at very great length. I am sorry I cannot carry the subject any further along the lines the hon. Member wants, beyond repeating the Chancellor's statement that there is very close and constant co-operation between the Bank of England and himself. It is obvious that, particularly in war time, constant contact has to 1018 be established and it is at the present time very informal in order that, as I am sure hon. Members would desire, the best possible advice can be tendered from all quarters to my right hon. Friend so that he may come to the right decisions with regard to policy.

§ Sir Robert Tasker (Holborn)
Do I understand the Financial Secretary to say that the Bank of England cannot lend money to the Government without getting the permission of this House, because if so, that is a most extraordinary situation?

§ Captain Crookshank
That is what I was saying. By law the Bank of England is not allowed to lend without the express permission of Parliament, and Parliament gives that permission in each Consolidated Fund Bill in order that the Bank may lend to us on Ways and Means. That is the technical position under the law to-day. It is for that reason that we have to go through the process of Supply, Committee of Ways and Means, Consolidated Fund Bill; as the result of that the Bank may lend to the Government on Ways and Means in the way I have explained.