BURMA MONETARY ARRANGEMENTS (Hansard, 17 July 1946)

§ Mr. A. Henderson
I beg to move, That an humble Address be presented to His Majesty in pursuance of the provisions of Section 157 of the Government of Burma Act, 1935, praying that the India and Burma (Burma Monetary Arrangements) (Second Amendment) Order, 1946, be made in the form of the draft laid before Parliament. The House will be aware that, on the separation of Burma from India in 1937, the necessary provision with regard to me currency of Burma was made in an Order passed in that year. For present purpose, 1295 the chief point of this provision was that the Burma rupee should be linked to the Indian rupee and that Burma's currency should be managed by the Reserve Bank of India. The fact that it was recognised that it might be desirable later to alter the arrangements thus made is evidenced by the provision in paragraph 21 of Part II of the 1937 Order that its operation might be determined by two years' notice given to the Governor-General of India by the Governor of Burma or vice versa. The House will remember that last month an Order was made, the main object of which was to regularise the currency position in Burma as from the time of the Governor's return in October of last year. To do this, it provided that the Governor should be responsible for managing the currency, using the Reserve Bank of India as his agent. His responsibility was to continue until 30th September of this year. Following the promulgation of this Amendment Order, the long-term position has been considered in Burma by the Governor and his Executive Council, and a with the agreement of the Executive Council, the Governor has recommended that, as soon as possible, the currency link with India should be severed and a Currency Board established for Burma.
This Order now presented is designed to meet the wishes of the Government of Burma. In the first place, it prescribes that the two years' notice which was contained in the 1937 Order shall be reduced to six months' notice. The object is to enable the Government of Burma to give notice that the present arrangements should terminate on 31st March, 1947, the day following being regarded as the earliest date upon which the proposed Currency Board could take over the management of the currency of Burma. The second Amendment referred to in the draft Order is to authorise the Governor to continue his function to manage the currency until 31st March, 1947, it being obviously undesirable to require the Reserve Bank of India to resume its former control for six months from 30th September of this year until 31st March of next year. The effect, therefore, will be to empower the Government of Burma to continue, until 31st March of next year, to manage the currency. These Amendments have been considered and agreed to by the Government of India.

§ Earl Winterton
I am afraid that this Order is not quite as simple as the last one, and I wish to put some questions to the Under-Secretary of State which I hope he will answer, by leave of the House. There 's an explanatory note to this Order, and I should like to take this opportunity of saying that it is a very good practice to have explanatory notes to Orders, especially when they affect overseas Governments, with the machinery of which hon. Members may not be familiar. In the second paragraph, the note reads: Under these Orders the Governor of Burma is responsible for the management of the currency, but the Reserve Bank of India acts as the Governor's agent in currency matters and is banker to the Government and to other Banks. The currencies of India and Burma are effectively linked together by the facilities for the free exchange of Burma and British India currency through the Reserve Bank. That is quite clear. It then goes on to say: It has now been recommended by the Governor of Burma, that the currency' link with India should be severed, and that the sanction of Parliament should be sought to shorten the period of notice prescribed in the Monetary Arrangements Order of 1937. I listened carefully to the hon. and learned Gentleman's explanation but he did not give any very long or adequate reason why this action has been taken. This seems to me to raise a big question of principle. I was not familiar with the course of legislation of Orders in Council affecting Burma which passed through this House. Has there been any previous Debate on this matter? As we know, the Government of Burma at the present time are merely an interim Government on their own. Has the opinion of His Majesty's Government been sought on this currency matter? Has it any bearing, and if so what, upon Burma's foreign trade—its trade with this country and with India? There seems to be a question of principle involved, or am I wrong in this contention, and is it merely a question of convenience? Perhaps the hon. and learned Gentleman will answer those questions?

§ Mr. A. Henderson
I quoted the Order that was made in 1937. Paragraph 21, which is the relevant Section, provides as follows: 1297 Subject to the provisions of this paragraph, this part of this Order shall cease to have effect on the expiration of two years from the date on which a notice determining the operation thereof is given to the Governor-General by the Governor of Burma or to the Governor of Burma by the Governor-General, so, however, that no such notice shall be given before the thirty-first day of March, nineteen hundred and thirty-eight. I am advised that it was the intention of Parliament at that time that following the separation of Burma from India, for at least two years, as provided in this paragraph, the currency of Burma would be linked up with that of India, and indeed, the Federal Reserve Bank was made the manager of the Burma currency. The object was that after two years had expired it would be possible for the Legislative Assembly and the Government of Burma to decide what currency arrangements they wished to establish in Burma. It is true that at the present moment the Governor is enjoying what is called direct rule, that is to say, he has not only his own reserve powers under Section 7, but all the legislative power of the former Legislature under the Government of Burma Act, 1935, Section 33. Under Sections 7 and 33 the Governor of Burma, acting with the Executive Council as his advisers, can in present circumstances, once notice has been properly given, determine what currency arrangements should be made for Burma.
The details of the scheme have not yet been finalised, but discussions have taken place not only with the representatives of the Government of India and the Federal Reserve Bank of India on the point of terminating the present arrangement, but also with representatives of the Treasury, the Bank of England and the Burma Office on this side in order to settle the basis of the proposed currency law. I am advised that it is within the constitutional powers for the Governor, even in present circumstances, to determine, once the present arrangements have been brought to an end, what shall be the basis of the currency and whether or not it is desirable to have a particular currency arrangement. Only last month Parliament altered the previous arrangement by transferring the management of the currency from the Reserve Bank of India to the Governor of Burma, pending, as I indicated during the discussion at that time, the settlement of the long-term proposals.

§ Earl Winterton
This is really a very important matter. As I understand it, the effect of what the hon. and learned Gentleman has said—and I hope the House will take note of this—is that this Government, which is practically an autocratic Government, as the hon. and learned Gentleman himself admitted, is being given by this Order a completely free hand to do what it will with the currency of Burma.

§ Mr. Henderson
No, the Governor of Burma himself is subject to the control of this House through the Secretary of State, and, therefore, anything that the Governor of Burma does under Section 7 can be controlled, first of all by the Secretary of State for Burma and secondly through the control by this House of the Secretary of State.

§ Earl Winterton
There is one further question I should like to ask the hon. and learned Gentleman. It would not require a fresh Order. Is it not a fact that this Order confers upon the Governor of Burma, or the Secretary of State, whoever it may be, complete power to deal with the currency of Burma without recourse to this House?

§ Mr. Henderson
No, this House can always insist, as the noble Lord knows as well as I do, on its right of scrutinising anything any Government Department does in the way of policy. Surely, the noble Lord will accept that?