NEW CLAUSE.—(Forward dealings in foreign currency.) (Hansard, 9 December 1946)

§ Colonel Crosthwaite-Eyre
I beg to move, "That the Clause be read a Second time."
I do not wish to detain the Committee by making the case for the Clause in detail. On the Second Reading I dealt with the case in broad outline. To what I said then, I wish to add a single detail which was contained in an answer the Chancellor of the Exchequer gave to a Question asked by me on 3rd December. I asked him what were the currencies in which the Bank of England were prepared to grant forward exchange facilities and he replied: 914 The Bank of England normally provide forward exchange cover for imports and exports up to six months in the following currencies:-U.S. dollars, Canadian dollars, French francs, Swiss francs, Swedish kronor, Dutch florins, Belgian francs, Danish kroner, Norwegian kroner, Portuguese estudos."—[OFFICIAL REPORT, 3rd December, 1946; Vol. 431, c. 32.] I think the Committee will agree that that is a big step. So far as this Committee is concerned, it is merely a question of the Bank of England choosing to which countries it will give foreign exchange facilities and to which it will prohibit them.
The question we are raising in this new Clause is somewhat wider in application. The major objective to be attained is to facilitate our export drive and see that when any of our commercial enterprises does anything to provide foreign exchange, under this Measure the Bank of England—or whatever authority may be designated—will do all in its power to help that export. That is all we are asking. We know from the returns that at present there is a grave shortage of hard currency. There is a grave indication that unless the whole balance of our trade is changed, we shall be subjected in a very 915 short time to immense pressure by the dollar area. This proposed Clause offers a remedy for that position, and provides that if the authorised dealers are entitled to provide forward exchange facilities then, instead of the present position obtaining, the Government can guarantee the exporter's forward exchange position into the hard currency areas, and we shall have from the very start a different trading position.
Secondly, I suggest to the Government that the exporter at the moment is subjected to a great many considerations, none of which the Government are prepared to meet. He is faced with the possible devaluation of currency; he is faced with the possible bankruptcy of the concern with which he is dealing; he is faced with a possible change of politics by the Government—and that consideration is greatly increased by the fact that a great number of people behind the Front Bench opposite are not by any means supporters of the foreign policy pursued by the Front Bench at the moment. He is faced, also, by the fact that he may have to make his arrangements for payments for exports a considerable time forward. There are no facilities granted at the moment, except for those currencies I have mentioned, whereby he can safeguard himself against possible revolution or devaluation. It is a situation in which any exporter who wishes to safeguard the position of his shareholders, or of those whom he employs, must at the moment make his exports to the sterling area, because unless he does that he has no safeguard whatsoever against what may happen in these countries. I admit that, so far as hard currencies are concerned, his position, if he obtains facilities, is more or less secure; but as regards soft currencies, his position is absolutely insecure.
Suppose, for example, we have a British exporter trying to export to Portugal. I know of one such case. There are no facilities whatever provided by the Government—in spite of the assurance given by the Chancellor of the Exchequer—whereby this firm of exporters can in any sense offset, over a year or 18 months, the liability which may accrue through any variation in value. The exporter has nothing to help. He has got to take his chance. I know that the learned Solicitor-General or the Financial Secretary will reply that it should be the duty of exporters 916 to try to make their bargains in terms of sterling, but the fact remains that it is impossible at the moment for an exporter to lay down as a condition of contract that sterling shall be the exchange in order to pay. We have got to remember in this Committee that, whereas a few years ago sterling was currency any country would accept, or in which any contract or bargain could be made, today's sterling, for reasons which have been more than apparent during the course of the discussion of this Bill, is not currency in which anybody is prepared to take anything on as a bargain. That is an effect of the war; it is an effect of this Bill. It has nothing to do with present argument; but it does mean that, whereas in the past one has been able in most cases as an exporter to say, "This bargain will be concluded in sterling," today one is unable to say that, and one has got to face the terms of delivery in whatever may be the legal currency in regard to a particular export.
I do not think I need invite the Committee's attention to more instances of the past than one, the case of Dorman, Long's when they built the Sydney Harbour bridge. There was a case in' which we were unable to make whatever provision was necessary in the forward exchange, and just because the Australian Government—I must say quite frankly—was a Socialist Government, or the equivalent of a Socialist Government, the Australian pound depreciated suddenly 25 per cent., and Dorman, Long, in spite of bringing back to this country an increase in foreign exchange, because of their efforts and their design of that bridge—which is one of the greatest engineering feats in the world—suffered an immeasurable loss, simply because there were not sufficient forward exchange facilities to cover that particular job.
11.45 p.m.
If we turn to imports, one of the things in which the Minister of Food is most concerned is to try to allow private enterprise to import from the soft currency areas. We have, for instance, imports of food from Spain. Under the existing regulations there are no forward exchange facilities to help the importer, and I think it will be agreed in all parts of this Committee that the importers of food from Spain are doing something to help the present food shortage. These imports are not controlled by the Government. They 917 are the result of free enterprise on the part of people who are prepared to stake their own claim, on their knowledge and on their own commercial judgment. The Government give them no help whatsoever to protect themselves against any spoilage, wastage, or depreciation that may occur between the time they make their bargain with the Spanish holders of the goods and the time they arrive in this country. The sole object of this Clause is to try to provide facilities for exporters and importers to compete worthily in endeavouring to solve our problems. Our object is to ensure that the people who are taking part in securing currency for this country should have facilities to protect themselves from a loss which is quite outside their control. Our importers, those outside the Government programme who are willing to stake their ability on getting goods and bringing them in to help the community, should be provided with facilities to offset any loss which, equally, is outside their control.
In conclusion, I would point out that in America all the forward exchange facilities which are necessary are available to enable them to compete throughout the world. They have a free forward exchange; they are able, in so far as their import and export programme is concerned, to set off any liability that any particular exporter or importer may incur. In this country there is nothing like it. We are merely told that there are a limited number of currencies in which the Bank of England may deal, and that outside that each case is treated on its merits. We know what "Each case is treated on its merits" means. It merely means that it goes from one department of the Treasury to the Board of Trade, from the Board of Trade back to the Treasury, from the Treasury to somewhere else, and nothing ever happens. I have had occasion to see that myself, and we simply cannot compete in this modern world unless we are prepared to provide for the people who are getting us the exchange we need to buy the goods we must have the facilities that our competitors give. Therefore I ask the Committee to accept this Clause, because by so doing they will be in no sense invalidating any of the provisions of this Bill but instead, for once, will be doing something positive to help the export drive, and instead of making this Bill merely a black mark on the Statute Book, they will give it a positive power.

§ Sir Frank Sanderson (Ealing, East)
I support this Clause, and I find it difficult to believe that the Government will not see their way to accept it. All those who have experience of the export trade know full well that goods are sold for delivery three to six months and in given circumstances up to two or three years ahead, and if it is not possible for a manufacturer or an exporter to cover his Exchange against the sale he makes for a forward position, it can only result in one thing. It will mean that this country will not be able to compete favourably against other countries in the export markets. If this Clause is not accepted, I believe it will toe the greatest blow that the Government can strike against our export trade. I regard it as vital that a Clause of this character should be inserted in the Bill. As I have said, failing that, it will not be possible for this country to compete in the markets of the world. I recall that a few years after the former world war, some of us assumed the responsibility of exporting goods to Russia. It will be known by some that in those days it was necessary to give a five-year credit, but it was possible to cover exchange. How is it going to be possible in the future for a manufacturer in this country to sell goods for forward delivery, if he is not able at the same time to cover the exchange? I hope that if the Government are unable to see their way to accept this Clause, they will give an undertaking that they will favourably consider an appropriate Clause covering the point raised between now and the Report stage.

The Solicitor-General
The real object of this new Clause is, as I read it, to provide that, in respect of foreign currency forward, there should be no control at all. If there is no control in respect of foreign currency forward, it seems quite illogical and absurd to have Clause 1 of the Bill. Why should we introduce into the Bill a control over the immediate provisions of foreign currency, and make the future provision of foreign currency completely free from control? That position would be utterly nonsensical. If hon. Members opposite had moved an Amendment to Clause 1 of the Bill, this Clause would, at least, have been intelligible, but to propose this Clause after allowing Clause 1 to go into the Bill, is completely illogical—it is a contradiction. If pro- 919 vision of foreign currency is to be controlled, and it obviously must be—and no one suggests that it should not be—then obviously the control should extend not only to the immediate future, but also to all currency at any time in the future.

§ Colonel Crosthwaite-Eyre
If that argument is true, would the Solicitor-General state why it is that the Chancellor is prepared to give foreign exchange facilities, in certain limited currencies, up to six months? That must invalidate his argument equally.

The Solicitor-General
On the contrary, what I was saying is that there should be power of control, but there should be relaxation of that control administratively, and forward exchange facilities are provided by administrative relaxation, as indicated by the Chancellor of the Exchequer in answer to the hon. and gallant Member, on 3rd December. Administratively, forward exchange facilities are provided up to a period of six months in the limited list of currencies. But that list is not exhaustive, other currencies are considered on their merits. The list which is available does meet requirements of most traders, so far as my knowledge goes. In so far as their requirements are not met other currencies can be included, and I can tell the Committee that there have been no complaints, either during or since the war, in regard to the provision of currencies other than those included in the limited list. The terms on which foreign currency is provided for administratively are more generous to the trader than those which would be imported into the Bill if the Amendment were accepted. They differ in various respects. The Amendment seeks to provide that foreign currency should freely be made available without any control in respect of import and export. In actual fact foreign currency is provided forward for any bona fide commercial transaction, whether import or export, so the relaxation, as framed, is on more generous lines than the provision which the hon. and gallant Member would contain in his new Clause.
There are other differences; there are also qualifications. The provision of foreign currency is on the condition that it is not for swop purposes. A form has to be filled in so that foreign currency can be procured. This system has been in 920 operation through the war and since without any complaint, and traders, so far as can be ascertained, are perfectly satisfied with its operation. Instructions are about to be issued to the banks crystallising the system which now operates and defining the conditions under which foreign currency is to be provided for forward trans actions. In those circumstances, the question is whether a case has been made out for making an exception on the general principle that administrative machinery should not be incorporated in the provisions of the Bill itself. Members on both sides have accepted the general scheme of the Bill, which is to impose general control, and then relax. Members who have supported the new Clause are asking that for some reason or other there should be an exception made to that general principle in case of the forward provision of foreign currency. The terms on which foreign currency can be provided on a forward basis must involve questions of considerable technical application. Changes may be necessary from time to time. This is particularly an example of machinery in which change might be necessary from time to time, and it would be most unfortunate to endeavour to introduce into the Bill this particular case, because it is complicated. It may need change, and there is no reason why this particular piece of machinery should be singled out when, from its very nature, it is far less suitable than many other types of administrative machinery which will have to be applied. No case has been made out for the Amendment. Forward exchange facilities are provided. May be the hon. and gallant Gentleman is right in his case that they should be provided on more general lines, or he may be wrong, but that is not the question which arises out of this Clause. It introduces different questions than whether hon. Members are right or not in their contention that there should be more generous provision of foreign currency for forward transactions. For these reasons this Clause should not stand part of the Bill.

§ Mr. Assheton
I think the Committee have enjoyed the speech by the hon. and gallant Member for the New Forest and Christchurch (Colonel Crosthwaite-Eyre) 921 and the very careful presentation which he made of his case. I listened with great care to the speech of the Solicitor-General, in reply and I appreciate the point which he makes. Although the only object of this Clause is to facilitate trade, its actual terms make it difficult for the Government on their view of the Bill to accept it; I hope, none the less, that the Solicitor-General will convey to the Chancellor of the Exchequer and the Treasury the grave anxiety expressed by those who have spoken in this Debate. If one cannot have reasonable facilities for forward exchange, it is impossible to do business in a big way with foreign countries. Anyone with experience of importing and exporting knows that. There is considerable anxiety in commercial circles on this score, and I hope the Treasury will do their best to see that more arrangements for forward exchange for soft currency countries are provided.

The Solicitor-General
I willingly give that assurance. I assure the Committee that the provisions for forward currency will be kept under review, and I will convey what has been said in this Debate to my right hon. Friend.