§ Motion made, and Question proposed, "That this House do now adjourn."—[Popplewell.]
§ 10.0 p.m.
§ Wing-Commander Roland Robinson (Blackpool, South)
In accordance with notice which I have given to the Chancellor of the Exchequer and the Financial Secretary to the Treasury, I rise to draw the attention of the House to the position arising out of the recent activities of the Co-operative Wholesale Society's Bank. Some little time ago, this particular matter was of small concern But it has changed, and is now, in my opinion, a matter of first-class national importance. These activities constitute a threat to the cheap-money policy of His Majesty's Government and the Treasury. At the same time, they are an example of the way in which the Chancellor of the Exchequer is not exercising his powers fairly, as between institution and institution. The matter arises out of recent vigorous attempts by the Cooperative Society's Bank to take away from the clearing banks the accounts of local authorities throughout the whole of this country. No doubt the Co-operative Wholesale Society thought that, with the Socialist administration, this was the opportunity to cash in on it, and to try to get local authorities to transfer their accounts to a bank in which the party, as such, is interested.
On 28th January I asked the Parliamentary Secretary to the Ministry of Health how many local authorities were affected. He told me at that date that no less than 48 of the local authorities of 609 the country had changed their accounts from the clearing banks to the Co-operative Wholesale Society's Bank. It is quite obvious from Press reports at the present time, that many more local authorities are considering following their example. To my mind, the Co-operative Societies are fundamentally traders, and not bankers. It might be said that they do not offer banking facilities to their customers in the true sense of the word. Money is paid over the counter at the grocer's shop, and, presumably, at the end of the day it is sent by special messenger to one of the clearing banks which do the business for the Wholesale Society. In the normal way, it would seem unnatural that a local authority should seek to place its banking account with such an institution, but, in order to get the business, the Co-operative Wholesale Society are offering bribes by way of high interest rates. It is well known that they are offering 1 per cent on current accounts, and no less than 2 per cent. on seven-day deposit accounts. Those rates, of course, compare with no interest on current accounts, and one half per cont. on deposit accounts, which is only withdrawable on some 14 days' notice, at the clearing banks.
The terms offered by the clearing banks are a direct result of the Chancellor of the Exchequer's cheap-money policy, and the right hon. Gentleman himself, through the Treasury and the Bank of England, effectively controls the rate of interest which a bank can give. A typical example is that, in October, 1945, the Chancellor of the Exchequer told the banks overnight that they could only have five-eighths of one per cent. on their Treasury deposit receipts instead of one and one-eighth per cent., which they had had the day before. It is quite obvious to the Chancellor, and, indeed, to any true supporter of His Majesty's Government, that the right hon. Gentleman must have very low rates of interest in order to make the policy of this Government succeed. He needs cheap money in order to finance his housing programme; he needs low interest rates in order to get away with nationalisation at the cheapest possible cost. But, surely, the activities of the Co-operative Wholesale Society are making the national investments very much less attractive to the public. After all, who wants 2½ per cent. long-term paper from the British Government when 610 one can get 2 per cent. on a seven-day deposit and when one feels pretty certain that the money will be repaid? It is my submission that the Co-operative Wholesale Society, by its policy of anti-cheap money is, in effect, sabotaging the policy of the Treasury. It seems to me that the disloyalty of the Co-operative Wholesale Society, through its bank, places it today in the position of being the "blackleg" of the banking world.
I ask the House, How long has it been the policy of the Labour Movement to support a "blackleg"? I raised this question with the Chancellor on 28th January, and in his reply the Chancellor made it clear that he did not like the interest rates paid by the Co-operative Wholesale Society. He said:I am aware of these facts, and am in touch with the Co-operative Wholesale Society on this subject.I pressed him further and he said:They"—that is, the Co-operative Wholesale Society—are well aware that I should welcome a reduction in interest rate—they know that, and I have told them."—[OFFICIAL REPORT, 28th January. 1947; Vol. 432, c. 766.]He added that he was raising the matter with them again. Several weeks have gone by and the House still has no answer as to how the Co-operative Wholesale Society are going to toe the line. I ask the Financial Secretary to say, if it is going to be done, why it should not be done now, or whether there is any reason for believing that they are seeking to get in as many more local authorities as they can when interest rates are high, and then to cut down the rates of interest as they have recently done with the Corporation of Newport. My contention is that in finance, the Treasury has many powers of compulsion. If any one of the clearing banks did not loyally observe the Treasury policy, there is no doubt they would get no tolerance from the Bank of England. I ask the Financial Secretary to say whether the Chancellor is afraid to act against his so-called political friends and supporters in the same way as he would act against other public institutions in this country Have recent events in the industrial sphere throughout the nation made the Government so weak that they have to try to buy support from their so-called friends, even at the cost of sabotaging their own financial policy? All that we on this side of 611 the House ask is that in matters of finance there should be equal treatment between man and man, and between institution and institution, and that we should not have what looks suspiciously like a policy of the loaded dice.
On 28th January, the Chancellor of the Exchequer tried to hide the true situation, saying that the Co-operative Wholesale Society held £200 million Government securities which, he said, was more than most private enterprises held. Presumably, these securities which the Co-operative Wholesale Society held were the normal Government loans available to the public. That they should hold them is a very good thing indeed, but the practice of holding these Government loans is not a new one; neither is it confined to the Co-operative Wholesale Society, because practically every trading company in the country holds them. I do not think it is any more to the credit of the Co-operative Wholesale Society than to anyone else in the country, that in that respect they are loyal to the Government policy. Obviously the clearing banks are doing their duty. A statement issued in January this year by 11 clearing banks showed that they had deposits to the extent of £5,629 million. They lent direct to the Government over £1,562 million on Treasury deposit receipts for which they only got five-eighths of one per cent. interest. They have got well over half a million pounds in Treasury bills of which they are getting half of one per cent., and, in addition to that, they have some £1,420 million mostly in Government short-term securities. Therefore, they have roughly £3,490 million, or 62 per cent. of their deposits, lent directly to the Government, assisting them with their cheap money policy by taking the lowest rate of interest from the Government. In addition to that, they have some £427 million at call which is mostly money put out as loans against Treasury bills. I think it is fair to say, taking into account other facilities offered to the bank, something like 80 per cent. of their money is out in the service of the Government. That being so, it seems to me that every local authority which takes away its money from one of the clearing banks is taking away from the great reserves of money which is being used loyally to support the Government in order 612 to give them the cheap money they need to carry out the policy of this Government.
From the point of view of local authorities leaving their money in the bank, they do need, above all, liquidity, to get their money back again whenever they need it. That is what is given to them under the present banking system. The figures for the clearing banks show that in cash in the till and in their deposits with the Bank of England they have 8.4 per cent. of their money; on call money 7.6 per cent.; short-term bills 11.9 per cent., and Treasury deposit receipts 27.7 per cent; that is, 55.6 per cent. of their money is liquid in case they are called upon by any local authority to meet their commitments. What does the Co-operative Society offer? Call money 3.6 per cent., cash 0.6 per cent.; so the liquidity is only 4.2 per cent. If the Co-operative Society do not give the support they should to the Chancellor of the Exchequer he might well draw their attention to the fact that there is a lack of liquidity, which might well be dangerous, especially in the case of trade recession.
After all, the Co-operative Societies themselves bank with the Co-operative Wholesale Society; four-fifths of the deposits are represented by that money, and one-sixth of the current account is represented by that money, too. But if there is a trade recession and only 4.6 per cent. is liquid, there is very little on which to call at short notice to meet withdrawals. Take the example of the trade unions who bank with them, or the workers. Suppose there were a great strike which was widespread, embracing pretty well the whole country. The trade unions would need to draw their funds to support the strike, and they would have to go to the Co-operative Wholesale Society; and the workers, who were no longer getting wages, would probably have to call for their savings from the bank. But the liquidity is so small that I do not think they would have very much chance of getting it speedily—
§ Mr. Robens (Wansbeck)
Is not the hon. and gallant Member aware of the job they did during the general strike in connection with that particular matter?
§ Wing-Commander Robinson
I am well aware of what they did in the general strike, and I am very interested in the point made by the hon. Member. What 613 I am trying to do is, not to take the viewpoint of the Socialist and look back on the past but to look at the future and to see how we can establish our financial stability, so that we do not again have the troubles we had in the past.
§ Mr. James Callaghan (Cardiff, South)
If, in fact, they are offering such superior services as the hon. Gentleman suggests, and their liquidity is so much lower, is not that a case for giving a higher rate of interest?
§ Wing. Commander Robinson
The higher rate of interest is most certainly not offered because the liquidity is lower. It is offered as a bribe to local authorities to get the accounts away from the joint stock banks. I think that matter is quite clear. Even the Chancellor of the Exchequer has said it is directly contrary to his own cheap money policy; he has said he does not like it. In my humble way, I am trying to see that he gets support from his friends as well as from the banks. If they do not do their job, the Chancellor has the opportunity of pointing out to local authorities that if they want banking facilities they should take advantage of true banking facilities. The Co-operative Wholesale Society, if it is to go on banking, ought to face up to the best banking practice, and give liquidity and a proper rate of interest.
§ Mrs. Wills (Birmingham, Duddeston)
Is the hon. and gallant Gentleman asking the Government to give full banking rights to the C.W.S.? Is that the point he is trying to make?
§ Wing-Commander Robinson
If the lion. Lady had listened, I do not think she would have had to ask that question at all. All I said was that if the Co-operative Wholesale Society wishes to act as a bank it should act in accordance with the best banking practice. That does not mean it should act as a bank, or only as a trading organisation. It must make up its mind, and if it decides to do the banking job, it is hoped that it will do it properly.
I end by making an appeal to the Chancellor of the Exchequer through the Financial Secretary to do something to stop this threat to his cheap money policy, and to check in this country any unsound banking practices, in the interests of the 614 local authorities and of the other people who make use of them; and, in addition to that, to try to give us equality of treatment, as between institution and institution, carrying out the Government's financial policy.
§ 10.17 p.m.
§ The Financial Secretary to the Treasury (Mr. Glenvil Hall)
The hon. and gallant Gentleman the Member for South Blackpool (Wing-Commander Robinson) has raised this particular matter on more than one occasion during the past months by way of Questions to my right hon. Friend the Chancellor of the Exchequer, and I do not think he will be surprised when I tell him straight away that there is very little that I can add to the answers—I think the fairly full and complete answers —which my right hon. Friend has given him from time to time. I have no intention tonight of following him into the by paths into which he strayed in the course of his speech. He will not expect me to do that, because he knows, none better, that many of the suggestions he made for action on the part of the Chancellor of the Exchequer would, in his view as well as in the view of others, be an unwarrantable interference by the Chancellor of the Exchequer in the affairs of the Co-operative Wholesale Society Bank.
It is the case that the Co-operative Wholesale Society Bank does offer 1 per cent. on the current accounts of its nonmembers and 2 per cent. on the deposits, subject to seven days' notice, of nonmembers; and it is also true that the joint stock banks give nothing on current account and offer only ½ per cent. maximum on deposits subject to notice. It is, as I have already indicated, a fact that my right hon. Friend the Chancellor of the Exchequer has indicated his desire that the Co-operative Wholesale Society Bank should, if it possibly can, further reduce its rates in order to come into line with the joint stock banks during this particular phase in our financial history. In February, 1946, over a year ago, the Cooperative Wholesale Society Bank, in response to a request made by my right hon. Friend, did reduce the current account rate from 1½ per cent. to 1 per cent. But, as he indicated to the hon. and gallant Member for South Blackpool as recently as January this year, the Chancellor would welcome a further reduction. The Co-operative Wholesale Society 615 Bank directors were, as he then said, fully aware of his desire.
§ Mr. Marples (Wallasey)
What has been the response of the C.W.S. Bank to the request by the Chancellor of the Exchequer? Have they, in fact, reduced their rate to the level of that of the joint stock banks?
§ Mr. Glenvil Hall
I do not know when the hon. Gentleman came in, but I am in the middle of making a speech in reply to the hon. and gallant Gentleman the Member for South Blackpool.
§ Mr. Marples
On a point of Order. May I call the attention of the Financial Secretary to the fact that I was here from the beginning?
§ Mr. Glenvil Hall
That makes the hon. Member's intervention even more strange, because I was not on the point of finishing my speech. I was about to indicate what the response of the directors of the Co-operative Wholesale Society has been to the representations of my right hon. Friend. As I have said, the Bank have made one response by reducing the rates of interest they allowed to their nonmembers. I was going on to say that we have quite recently been in touch with the directors again, and that on behalf of my right hon. Friend I recently saw a deputation, when we discussed the whole matter in the frankest possible way. In my view, and in the view of the directors, that meeting was fruitful. It must be remembered that the Co-operative Wholesale Society Bank is not in the same position as one of the joint stock banks. The Co-operative Wholesale Society Bank is a democratically run institution, and that means that before it makes any major change in policy, it consults its members. When the hon. and gallant Member realises that, he will see it is not so easy for the Co-operative Bank to make a change of this kind in response to representations of my right hon. Friend, as it may have been for the joint stock banks.
It is well known in every quarter of the House that some time ago, in response to representations made by my right hon. Friend, the joint stock banks reduced the interest which they allowed on deposit accounts, and decided that they would give no interest at all on moneys deposited on current accounts. No pressure was brought to bear on them to do this. They 616 did it from a sense of public duty, and I think it is only fair that I should pay tribute to them from this Box for having done this. The reason why, at this time, it is desirable for banks to give the minimum of interest on moneys, deposited either on current or deposit accounts, is the need to support the cheap money policy of the Government. As the House is well aware, it is essential at this time that money should be cheap so that local authorities can borrow for housing and many other activities, and so that industrialists can borrow to re-equip their factories and workshops economically. It is also essential, in view of the enormous burden of debt which this country now carries, that the rate of interest on Government debt should be as low as possible. For these reasons, it has been essential for the Government to indicate to the banks, both the joint stock banks and the Co-operative Society Bank, that it would welcome a lowering of interest rates.
§ Colonel J. R. H. Hutchison (Glasgow, Central)
The Financial Secretary talks about responses and indications, but is it not a fact that under Section 4 of the Bank of England Act the Treasury has power to impose and to demand that these conditions which it requires from the joint stock banks, including the Co-operative Wholesale Society Bank, shall be adhered to?
§ Mr. Glenvil Hall
It is quite true that under the Bank of England Act it is possible for the Treasury, through the Bank of England itself, to give directions to the joint stock banks, but I think the hon. Gentleman who interrupted me would be one of the first to complain if the Treasury began to give directions of that kind on a matter like this.
§ Mr. Glenvil Hall
It has not been done so far, and we have no intention of doing it just now. I was in the middle of explaining why it is essential at this particular time that we should get the banks to reduce their interest rates to the lowest possible level. The reason is that we should be able, as a nation, to borrow money as cheaply as possible. It may be said that money on deposit in a bank, even when it is earning interest there, is complying with the cheap money policy, because it can be lent and used in the 617 national interest. But it is part of the cheap money technique of the Government that money on deposit in banks is not regarded as the same thing as money put into securities arid investments. All I can say to the hon. and gallant Gentleman tonight is this; my right hon. Friend is in touch with the Co-operative Wholesale Society Bank directors who have, in the past, acted in a very patriotic way in assisting the nation to the utmost. The bank is not an organisation run on a profit making basis—
§ Mr. Glenvil Hall
The word "co-operative" means, and the rules of the organisation themselves state, that any profits it makes have to be distributed 618 amongst those who help to make them. That puts the organisation into quite a different category from the joint stock banks, which are out to make a profit—I am not blaming them—which is distributed in due time among the shareholders. The position of the Co-operative Wholesale Society Bank, therefore, is not on all fours with that of the joint stock banks. But I can claim, and I do claim, that the Co-operative Wholesale Society Bank has played its part in assisting the work of this Government.
§ Question put, and agreed to.
§ Adjourned accordingly at Twenty-nine minutes past Ten o'clock.