CLAUSE 1.—(THE TWO TREASURY ACCOUNTS.) (Hansard, 8 February 1949)

§ Mr. R. A. Butler (Saffron Walden)
I have nothing of substance to raise on this Clause. I simply want to ask the Economic Secretary to the Treasury, or whoever will reply, whether the elaborate procedure under Subsection (2) for auditing the Account by the Comptroller and Auditor-General will come before Parliament; if he can give any indication of what the procedure will be, and whether the matter will be brought before the Public Accounts Committee or whether this House will give it direct consideration.

§ Mr. Peter Roberts (Sheffield Ecclesall)
I want to raise the question of the "Intra-European Payments Account," which appears in Subsection (1, b), and I 199 should like to have some explanation from the Economic Secretary of how he expects this account to work. In his Second Reading speech the Chancellor of the Exchequer mentioned, but did not go into the details of the working of this account, and I think it is of vital importance that this Committee should have a clear understanding how it is going to work. It is important that in approaching this subject we should realise that we are dealing with the convertibility of currency, in other words, this account would be able to be used to balance accounts between one country and another, even beyond the various national agreements which may have been made between those countries.
The background of my argument is that this Bill, and this Clause particularly, depend for their benefit on whether one looks at the long-term or a short-term policy. I appreciate the short-term necessity of this type of assistance of currency control, but I am very doubtful of the long-term necessity for it. Therefore I should like to put this point to the Economic Secretary. The benefits which this system will give will be benefits derived from bilateral trading. With the help of this money the Government will be able to arrange agreements between one country and another, but these agreements will be on a bilateral basis, so that, if we are trading with France, we shall be able to export to France as much money as France in her turn is prepared to return to this country. I feel that the difficulty that we are up against is that, if we base our trading arrangements upon bilateral trading—and all these agreements are, in fact, based, so far as I can see, upon bilateral trading—we are not going to overcome the essential difficulty of the deficit of dollars with the Western Hemisphere.
This is the point which I wish to put to the Economic Secretary. These bilateral agreements, as I understand them under this scheme, are founded upon a 50–50 basis. If we refer to the White Paper, we see there that, with regard to the Western Hemisphere in 1952, there is going to be an overall deficit of 291 million dollars.

§ The Chairman
I think the hon. Gentleman is going far beyond the scope of Clause 1, which appears to be purely 200 a matter of machinery and relates to the opening of accounts. I do not think the question which he raises is at all appropriate at this stage.

§ Mr. Roberts
With great respect, Major Milner, I feel that it does, to this extent. So far as I understand it, and I am only asking for an explanation, these accounts are to be opened and, where trading is operated under bilateral agreements, in years of deficit a country may draw from that surplus from this account, and that is the point which I am trying to elucidate. So far as I can see, on a bilateral trading agreement, we are only going to deal with an exchange of goods between one country and another on an equal basis. The point I am trying to make is that the whole object of the scheme is that we shall get over our recovery programme by 1952. But, in that year, admittedly, we shall have a surplus on our balance of payments with the whole world, whereas there will be a deficit with the Western Hemisphere of 291 million dollars.
In other words, we shall be trying to trade on a bilateral trading system, and yet we shall have an export surplus with the European and non-sterling areas of something like 600 million dollars, despite a Western Hemisphere dollar deficit. That is the point which I wish the Economic Secretary to answer. It seems to me that the policy which he is pursuing in this Bill is trying to arrange for bilateral trading between this country and the sterling and European country areas on a 50–50 basis.

§ The Chairman
I am sorry, but I really think that the hon. Gentleman's remarks would have been far more appropriate on Second Reading. I cannot see how they can relate to the opening of two specific accounts, which is the specific matter referred to in Clause 1.

§ Mr. R. A. Butler
We have made an exhaustive study of this Bill, and we had envisaged that a Debate on the excellent lines which my hon. Friend has just initiated might take place on Clause 3, which deals with the Intra-European Payments Account, and not so much to the establishment of machinery. On Second Reading we did not go into details, saying that we would raise points in Committee, and I think they would be appropriate to Clause 3.

§ The Chairman
Without necessarily fully agreeing with the right hon. Gentleman, I think that Clause 3 would be a more appropriate part of the Bill on which to raise these wider issues.

§ Mr. Roberts
I bow to your Ruling, Major Milner, and I hope I may be fortunate enough to catch your eye when we come to that Clause. I did confine my argument to asking for an explanation of the working of this account, because, if this account is merely to be used for the payment of debts between one country and another on a bilateral trading basis, it will not affect the problem which I want to tackle. If he could give us some indication on that, it would help us when we come to Clause 3. At the moment, I should like some information as to how the account will work.

§ The Economic Secretary to the Treasury (Mr. Douglas Jay)
The right hon. Gentleman the Member for Saffron Walden (Mr. R. A. Butler) asked me first for some elaboration of the machinery for the auditing of these accounts by the Comptroller and Auditor-General. The arrangement will be that the money paid out of the Special Account will go into the Exchequer. When it is spent, of course, it will be paid out of the Exchequer. The Comptroller and Auditor-General will then audit the payments made from the Exchequer in the case of those moneys. The matter will come before the Public Accounts Committee and the procedure will be the same as that for the accounting of any monies paid out of the Exchequer. That applies to the Special Account.
In the case of the Intra-European Payments Account, the money will, of course, not pass through the Exchequer, because this is money not spent ultimately by the British Government, but by the other Governments who exercise their drawing rights. Nevertheless, the Bill lays down that in that case, so far as the Comptroller and Auditor-General and the Public Accounts Committee are concerned, the procedure will be the same. It really amounts to the fact that Parliament will not have control over the spending of these monies in the sense that they are monies voted by this House, because, of course, the monies do not originate from taxation in this country, but from 202 the American Government, although there will be full accounting afterwards by the usual procedure showing how the money has in fact been spent. I think that explains briefly what the machinery is.
The hon. Member for Ecclesall (Mr. P. Roberts) put a rather more general question which I am not quite sure that I followed. He asked, I think, how the working of the Intra-European Payments Account was related to the various bilateral trade agreements being made between European countries at the present time. Of course, there is really no direct relation between the two. The Intra-European Payments Account is merely a piece of United Kingdom machinery. The account is held in London, and is not the account at Basle. It is the medium by which the Marshall Aid made available to other European countries through the United Kingdom is handed over to them.

§ Mr. P. Roberts
Handed over in sterling?

§ Mr. Jay
Yes, handed over in sterling. The actual way in which it works is that the sterling counterpart of the dollars which we get as conditional aid is paid into the Intra-European Payments Account in this country, and then, in turn, when the other countries which are members of O.E.E.C. exercise their drawing rights, the sterling in that account is paid over to those countries by the British Government. But there is no direct relation between the working of this account and the various trade agreements.

§ Mr. Roberts
Assuming that there is a debt between Italy and France, could the Italian Government draw on this account in order to pay France, or must they draw it between this country and Italy?

§ Mr. Jay
That would depend on whether in the agreement made at the beginning of the year for the working of conditional aid generally under the Intra-European Payments Agreement, drawing rights had been established by France in favour of Italy, or whatever it might be.

§ Mr. Roberts
Assuming they had?

§ Mr. Jay
Assuming they had, the drawings would be from some account in Italy by France.

§ Mr. Roberts
And not on this account?

§ Mr. Jay
No, the only people who can draw on the United Kingdom Intra-European Payments Account are the other O.E.E.C. countries for whom we agreed under the agreement of last summer to make drawing rights available. That is the whole significance of the account.

§ Mr. Roberts
Therefore, it does not help the problem of getting a free convertibility of currency; it cannot be used in that way at all?

§ Mr. Jay
This is a device to allow trade to go on in the meantime.

§ Mr. Benson (Chesterfield)
Of course, the drawing rights are not normally convertible, but, assuming that France has drawing rights to the tune of 200 million dollars, and assuming she wanted gold for the goods which she bought from this country and sold to Portugal or Switzerland where gold is available, is there anything in the rules of trade that have been accepted which would prevent the siphoning of these drawing rights, which are essentially sterling drawing rights and limited to a particular country, in such a way that the other country could collect gold?

§ Mr. Jay
There is, of course, a general principle laid down and agreed to between all the O.E.E.C. countries that they will endeavour not to use gold for settlements in connection with intra-European trade. Unfortunately, we have not been able to carry that out in 100 per cent. of the cases, and, as the House knows, we are now making gold payments to Belgium and Switzerland, but that is a principle which we are attempting to carry out.