FINANCE (EXCHANGE EQUALISATION ACCOUNT) (Hansard, 17 April 1946)

§ Mr. Peake
I think that, even at this late hour, the House should understand what it is passing. We previously allowed this Resolution to go, although I do not think anybody on this side of the House, or on the other side, had the slightest idea of what it was. The Resolution is to the effect that it is expedient to authorise the extension of the purpose for which the Exchange Equalisation Account shall be used to acquire funds in the national interest and the means of making payments abroad; but the Exchange Equalisation Account is veiled in secrecy. It was established some years before the war to enable fluctuations in rates of exchange to be ironed out by means of transactions carried out by the Bank of England on behalf of the Treasury. It had 2844 put at its disposal, I think, some£150 million. Only the Public Accounts Committee sees what are the resources of the Exchange Equalisation Fund, and I am therefore in a privileged position. I am not free to disclose the results of my inquiries in the House. At the same time I am deeply puzzled by this Resolution. The Exchange Equalisation Fund may already hold, and does, of course, hold, foreign currencies of all descriptions, and I hope the Chancellor of the Exchequer, or his willing assistant, the Financial Secretary, will explain what is meant by the words, "Conservation or disposition in the national interest as a means of making payments abroad "; and how, in fact, the addition of these words will broaden the scope of the work of the Exchange Equalisation Fund.

§ Mr. Glenvil Hall
I will do my best to reply to the right hon. Gentleman, in so far as I am able at this late hour. As the House knows, the Exchange Equalisation Account was set up by the Finance Act of 1932. Later on, just before the war broke out, or almost immediately after—at any rate in 1939—the Currency (Defence) Act was passed. This provided that, notwithstanding anything in the Act of 1932, the funds of the account could be invested in securities or for purchases of gold in such manner as the Treasury thought expedient for securing the defence of the realm and the prosecution of the war. Quite obviously, the Act of 1939, now that the war is over, will have to be abrogated. It is also clear that in view of conditions generally we cannot go back to the provisions of the Act of 1932. Therefore, it is essention some time quite soon to make provision for this account to be widened in scope in order to meet the present and future needs.
We are later in the year, as I think the House knows, going to introduce an Exchange Control Bill. It was hoped to introduce it fairly soon, but the possibilities now are that we may not get it until the autumn. But that is some time ahead, and it is felt by the Government that to wait until the autumn to make some changes in the law, which in our view are necessary, is too long to wait. Therefore, this Budget Resolution has been proposed which will allow us to bring this account up to date, without waiting to include provisions for so doing in the 2845 Exchange Control Bill, which may not, as I say, be presented to the House until later this year.

§ Mr. Stanley
The Financial Secretary has not explained why the 1932 Act is not sufficient to the purpose today.

§ Mr. Glenvil Hall
I cannot. This account is a peculiar and special one. I can say no more tonight than that in the view of the Government, following on the war, and the conditions prevailing in the world and in this country, the provision, laid down in, I think, Section 24 of the Finance Act of 1932, are quite insufficient now for the control of exchanges.

§ Mr. Stanley
The hon. Gentleman has still not explained. Can he tell us exactly what the Section does, and why it is not sufficient?

§ Mr. Glenvil Hall
The Resolution is broad in its scope; it gives powers for changes to be made. What those changes will be is a matter for the House to decide in due course. I would point out that these Resolutions often appear to be obscure and to be drawn in fairly wide terms.

§ Mr. Stanley
One does not expect particularity in Resolutions, because you get that in the Bill, but we passed a Budget Resolution in the knowledge that in a few weeks we should have a Bill which would give a full explanation. We are now told that the Bill to be founded upon this Resolution may not be introduced until next autumn.

§ Mr. Glenvil Hall
rose—

§ Mr. Deputy-Speaker (Major Milner)
The hon. Member may speak again only by leave of the House.

§ Mr. Glenvil Hall
Perhaps, with the leave of the House, I might apologise if I have misled right and hon. Members. It is because the Exchange Control Bill will not be introduced in the near future, not until next autumn, that it is essential that these powers should be taken. The proposal is that the changes should now be made in the Finance Bill which will be introduced in a few weeks' time.

§ Colonel Crosthwaite-Eyre (New Forest and Christchurch)
How do these powers square with Bretton Woods? How is it 2846 that we are introducing an exchange control for ourselves, when the Chancellor has made it perfectly clear that we joined Bretton Woods?

§ Mr. Dalton
On the contrary, all persons who joined the Bretton Woods "club" are required by the terms of the "club" to introduce and operate an exchange control on capital transactions.

§ Colonel Crosthwaite-Eyre
rose—

§ Mr. Deputy-Speaker
I would point out that the hon. and gallant Member is not entitled to speak twice without permission.

§ Colonel Crosthwaite-Eyre
May I ask leave of the House?

Hon. Members
No.

§ Captain Crookshank
I have not spoken yet and perhaps I may intervene. Since the Financial Secretary has spoken I have taken advantage of the opportunity to get hold of the Finance Act.

§ Mr. Deputy-Speaker
I would point out that the right hon. and 'gallant Gentleman is not allowed to address the House twice.

§ Captain Crookshank
With great respect, I only interrupted the Financial Secretary to ask a question.

§ Mr. Deputy-Speaker
I understood that the right hon. and gallant Gentleman had already spoken.

§ Captain Crookshank
Then may I put another question? Will the Financial Secretary say specifically what is inadequate for present purposes in Section 24 of the Finance Act, 1932? We are talking about changing the law and we are entitled to know. The Financial Secretary quoted the Act, but he did not say what was wrong with it. I do not propose to quote it, but if any Member wishes, I will read out the Section.

§ Mr. David Jones (The Hartlepools)
Is the right hon. and gallant Member asking a question or making a speech?

§ Captain Crookshank
I do not know myself which I am doing. Section 24 of the Finance Act, 1932, is the Section which sets up the Account. Subsection (2) says it may be wound up, and Subsection (3) says that: The Treasury may cause any funds in the Account to be invested in securities or in the purchase of gold. 2847 Subsection (4) states that there should be issued to the account a sum: not exceeding in aggregate one hundred and fifty million pounds. That has since been amended. Is it Section 5, 6 or 7? If the Financial Secretary will kindly let us know we shall be better able to judge between now and the next day for financial business. If not, we shall want to protest further and put down Amendments to these proposals. But the House is entitled to know.

§ Mr. Glenvil Hall
By leave of the House I will answer that point, but this must be my last intervention on this Resolution. It is perfectly true, as the right hon. Gentleman says, that the Finance Act, 1932, particularly Section 24 (3), would appear to give us all the powers we want, but it has to be remembered that that Section has been greatly modified by the Currency Act which we passed in 1939, and which still subsists. It is the superimposing of the 1939 Act on the Act of 1932 which gives us the situation as it exists today and to which we must direct our attention. We can repeal the 1939 Act if we choose, which would take us back to the Act of 1932. As a matter of fact, owing to the conditions during the war and the passing of the 1939 Act the operations of this Account, which the right hon. Gentleman the Member for North Leeds (Mr. Peake) knows something about, now go far beyond the conditions laid down in the Act of 1932. So something has to be done. We therefore propose that the best place to do it is in the Finance Bill which will be introduced in a few moments. When that Bill comes to be discussed hon. Members will have ample opportunity of discussing the points to which reference has been made tonight if they so desire.

§ Mr. Boyd-Carpenter (Kingston upon Thames)
The Financial Secretary to the Treasury has referred to the Currency Act of 1939, which he has informed the House still subsists. Perhaps he would be good enough to explain to those hon. Members of the House who have not fully appreciated the force of the argument he has so far adumbrated the reasons why, if the 1939 Act is still on the Statute Book, it is necessary to take these further powers. I do not know, but perhaps he will tell the House whether this Act is due to expire and on what date. If it is due to 2848 expire in the near future, there is ample precedent for continuing it in force for a further time. If that be so, is not that a simpler process? He has told us the position is confused through superimposing the 1939 Act on the 1932 Act. Will he tell the House if the position is changing and why it is changing? It is not satisfactory to leave the matter in its present form, and, therefore, even if the Financial Secretary has to ask leave of the House to speak again, and even though he told us that his previous speech was his final one, will he explain the position which he has, so far, signally failed to do?

§ Mr. Assheton
I have not yet had an opportunity of intervening in this Debate. I should like to ask the Financial Secretary whether, in fact, the answer to my right hon. and gallant Friend the Member for Gainsborough (Captain Crookshank) is not this. The right hon. Gentleman asked whether it was Section I, 2, 3, 4, 5, 6, or 7 which was causing the trouble. Is it not really Subsection (3) of Section 24? That Subsection says: The Treasury may cause any funds in the Account to be invested in securities or in the purchase of gold in such manner as they think best adopted for checking undue fluctuations in the exchange value of sterling. Is it not a fact that the Chancellor wants to use this fund for powers in excess of controlling undue fluctuations in the exchange value of sterling? Is not that the true reason for the Resolution brought forward tonight?

§ Mr. Dalton
We cannot tell the right hon. Gentleman any more.