§ I should like now to deal with two questions of general financial policy. The first is the question of interest rates. In the Debate on the Address on 21st August, I said that I was exploring future possibilities in the field of cheaper money and lower interest rates. I had in mind the possibility of reducing not only the debt charge in the Budget, for that is of great importance, but also the cost of borrowing by industry and by public bodies, including local authorities. There is no sense, or so it seems to me—I hope no high authority will differ from me—in paying more than we must for the loan of money; and I have endeavoured to do my utmost to bring these rates down. I shall say a word in detail in a moment.
§ The problem differs accordingly as we are dealing with short-term or long-term borrowing, and I have begun by concentrating my attention and my efforts on the short-term rates. On the present volume of the Floating Debt, composed, as the Committee will realise, of Treasury Bills, Treasury Deposit Receipts and Ways and Means Advances, the annual interest charge to the Exchequer is£66,000,000 a year, or was so running till last Friday. A good deal of this represents interest paid on funds held by Government Departments; but none the less there is a net gain to the public finances from any substantial saving on that interest-charge. I have discussed this question with the Governor of the Bank of England, and he has discussed it with the Chairmen of 1882 the Clearing Banks; and, as a result, I am glad to say that, as the Committee will already know, adjustments in short-term interest rates have now been made—they were made last week and have been announced—which have reduced the rate on Treasury Bills from about 1 per cent. to about ½ per cent., and the rate on Treasury Deposit Receipts from 1⅛ per cent. to ⅝ per cent.—a reduction of ½ per cent. in each case. This change, which has been made with the co-operation of the Bank of England and the Clearing Banks, and was announced last Friday, will mean a saving to the Exchequer for interest, on the present volume of Floating Debt, of some £32,000,000 a year out of the total of £66,000,000. In other words, we shall nearly cut the charge in half.
§ After this—as I think—hopeful beginning with short-term rates, I shall now turn my attention, in consultation with my advisers, to the possibility of securing lower middle-term and long-term interest rates; but I shall do nothing here to hinder—indeed, on the contrary, I hope that what I am saying now will assist rather than hinder—the success of the National Savings Thanksgiving Weeks which are being held until the end of November in various parts of the country. Our present tap issues will run on during that time; the terms will not be changed. Thereafter, when I feel my hands free, when the Thanksgiving Campaign is over, the terms of lending maybecome less attractive; and this reflection should dispose any person who is in doubt what to do with his money, with his "liquid resources" as they are sometimes called—speaking in a financial sense, of course—to lend these to the Treasury without imprudent delay.
§ It is perhaps unnecessary for me to add that if the Government should at any time decide to reduce the interest on new issues, such reduction would not affect the terms of existing loans made before the date of the change. That applies not only to the market issues—"tap"issues, as we sometimes call them, again speaking in a financial sense—but to Savings Certificates and to Defence Bonds, and also to deposits in the Post Office Savings Bank.