§ 6.40 p.m.
§ Mr. Norman Smith (Nottingham, South)
I beg to move, in page 2, line 13, to leave out from "interest," to "out," in line 14.
The effect of the Amendment would be to delete from the Clause any reference to interestnot exceeding three pounds per cent. per annum, …2094 I am hopeful that the Financial Secretary will be induced to accept my Amendment, which I have worded very carefully in order to help him, and to show him how co-operative we can be when we are doing something more than usually reasonable. I have not proposed to delete the words "with interest." I propose to leave them in, as I think the Financial Secretary will then probably accept the Amendment.
In a Bill concerned expressly and exclusively with short-term borrowing, with loans which have to be repaid at the end of the financial year—that is to say, in this case, by 31st March, 1952—it is a most extraordinary and anomalous thing that there should be a reference to a rate of interest of 3 per cent. per annum. But it is not so anomalous as it used to be, because I find, on looking into the history of the Bill, that it is largely a matter of tradition and convention.
I do not want to blame the Financial Secretary or the Government for that, because, if I sought to do so, I should open myself to the retort that the Bill has been drafted in this way for many years. But the curious thing about this 3 per cent. interest is that it really does not mean anything. In loans of this kind there is no such thing as a rate of interest of 3 per cent. How could there be, when they are loans the currency of which could not be more than four months and will probably be less than three months? How could one have a rate of interest of 3 per cent. on such a short-term loan?
I find that for the past 71 years, strange as it may seem, believe it or not Mr. Bowles, the reference to 3 per cent. was not in the Bill, which was a recurring Bill brought in annually or more frequently than annually. The reference was not to 3 per cent., but to 5 per cent. per annum. I notice that the Financial Secretary indicates assent. I find that in February, 1941, when the Consolidated Fund Bill was before the House and when for many years the formula or, if I may so put it, the mumbo-jumbo had been 5 per cent. per annum, one of my hon. Friends who is no longer here moved an Amendment to take out 5 per cent. and substitute 2½ per cent.
That was while the war was on, and I suppose he was rather shocked by the idea that anybody should be paid 5 per cent. for lending money to the Government 2095 when the country was fighting for its life. Indeed, he made that clear; and the then Chancellor, the late Sir Kingsley Wood, reassured Mr. Tinker and said he had no intention whatever of paying anybody 5 per cent. for any loan to the Government to enable the war to be carried on. The late Mr. Tinker—I am not sure whether he is "late"—who was a rather simple person in many ways—asked why 5 per cent. was mentioned in the Bill if there was no intention of paying anybody 5 per cent.
The Chancellor of the Exchequer gave what I thought was a very weak and lame reply. I am perfectly certain that the present Financial Secretary, who has a reputation to make, is not going to make a weak and lame reply of that kind on this occasion. Sir Kingsley Wood then said:The figure of 5 per cent.…is the ordinary stock form which, I understand, is always used."—[OFFICIAL REPORT, 12th February, 1941; Vol. 368, c. 1381.]There is a pretty kind of thing—"the ordinary stock form which, I understand, is always used. "But Sir Kingsley was very explicit. He said he had no intention whatever of paying 5 per cent.
I hope, hon. Members opposite will not oppose this Amendment and say, "We have always put in 5 per cent. It is true 5 per cent. is irrelevant and there has never been any 5 per cent., but because it has always been in, we should like to leave it." That may have seemed a good argument to the late Sir Kingsley Wood, but it did not take him more than 20 minutes' discussion in the Committee of those days to realise that he was in an indefensible position. And then he put a wonderful piece of bluff over the Committee. He said, in effect, "All right, I will take back the 5 per cent.; I will not insist on that any longer. I will not have the proposed 2½ per cent., but I will compromise on 3 per cent." Three is just as irrelevant as 5 per cent. It is just as meaningless in this context.
The reason I hope the Financial Secretary will give me this Amendment is that, if I may say so without presumption, the Financial Secretary, whatever his faults and whatever the wrongness of his political views, does use very accurate English. He is careful in the matter of words. 2096 That is the only thing that he and I have in common. The Parliamentary Secretary to the Board of Trade, who is sitting next to the Financial Secretary, is also interested in the use of words and I know that he will confirm that his colleague the Financial Secretary is meticulous in his choice of words. I put to the Financial Secretary that there is no more sense in leaving in 3 per cent. now than there was in the days of the late Sir Kingsley Wood in leaving in 5 per cent.
But that is not the end of the story. This little discussion evidently made some impression on the Members of the House of Commons in those days, notwithstanding their preoccupation in winning the war. In the following year, in August, 1942, my right hon. Friend the present Member for Ipswich (Mr. Stokes) got busy on this, and put down an Amendment to the Consolidated Fund Bill to make it 2 per cent. instead of 3 per cent. He might just as well have made it 1½ per cent. He was answered not by the then Chancellor of the Exchequer but by no less a Minister than the present Leader of the House, who, in those days, was Financial Secretary. He made a valuable concession to the then Opposition. I only hope that the present Financial Secretary will be as candid on this occasion as his predecessor was then.
The present Leader of the House, in replying to my right hon. Friend, said that the sub-sectionhas nothing to do with medium or long-term loans. What this subsection refers to are … Ways and Means advances … by the Banking Department of the Bank of England which are day to day borrowings".Then he gave the rate if interest—one half per cent. per annum.
Any ordinary person, having an ordinary sort of brain and not being given to tolerating non sequitur, would have thought that that was the prelude to a concession by the present Leader of the House, the then Financial Secretary. Anybody would have thought that he would have gone on to say, "Seeing that this Bill is concerned exclusively with borrowings at one-half of 1 per cent. from the Bank of England, and seeing that this has got nothing whatever to do with long-term or medium loans which might conceivably carry interest at 1 per cent., I will accept the Amendment of 2097 the right hon. Member for Ipswich and will make it 2 per cent. instead of 3 per cent." But he did not do that. He gave an extraordinary excuse for keeping this amazing, monstrous and, perhaps not fictitious but irrelevant, figure of 3 per cent. His excuse was this. I ought to quote him because he is the Leader of the House, and far be it from me to undermine his reputation. He said:That figure of 5 per cent. had been in Consolidated Fund Bills for 71 years. As it bore no relationship at all to what, in fact is the cost of these Ways and Means Advances, my right hon. Friend accepted that in the circumstances of today 3 per cent. was perhaps a tidier sum"—"perhaps a tidier sum."—for the reason that it is the maximum at which we have been borrowing on long and medium terms"—That is to say, the terms which had nothing to do with the Bill—and therefore, it was most unlikely ever to be reached for this type of borrowing."—[OFFICIAL REPORT, 5th August, 1951; Vol. 382, cc. 1067–68.]If ever there was a non sequitur, that was one. If ever there was muddleheaded thinking, that certainly was it. People like me are inclined to be suspicious where anything to do with high finance is concerned. I have been suspicious about it for the last 25 years. Nothing that I hear from the Front Bench mitigates my suspicions. Why was this 3 per cent. put in? The Financial Secretary, who is a clear-thinking person, will admit that the Bill is not concerned with long or medium term borrowing. If he says it is, I shall quote his words of last Friday in the Second Reading, when he said:The borrowings authorised by this Bill are Ways and Means borrowings, and the right hon. Gentleman knows that though, technically, power is taken in an emergency to use the Treasury Bill system of borrowing, in fact this borrowing, which represents a very small proportion of Government borrowing, is effected in the first place by loans from balances available to the other Departments of State, and secondly, if necessary, from the Bank."—[OFFICIAL REPORT, 30th November, 1951; Vol. 494, c. 1986.]—Bank with a capital "B", meaning the Bank of England.
He admitted, in the course of the Second Reading debate on Friday, that the whole of this Bill from start to finish is concerned with short-term loans. Having regard to that admission, why does he now want to bring in 3 per cent.?
2098 I am sure he does not, and I feel confident that he is going to admit that "three" ought not to be there; either that, or he will give a wonderful explanation, much more convincing than that given by his hon. Friend in 1942, as to why three is left in. If he can, I shall be mighty interested in it.
§ Lieut.-Colonel Marcus Lipton (Brixton)
Having added my name to the Amendment which has just been so forcefully moved by my hon. Friend the Member for Nottingham, South (Mr. Norman Smith), there are one or two further observations that I should like to make. I was disappointed with the reply made by the Financial Secretary when the matter was raised on the Second Reading. I feel that he did not treat the point made by my hon. Friend with the seriousness or the attention it deserved.
The Financial Secretary said that we are only theoretically concerned in this Bill with the Treasury bill rate. That seems to lend force to the argument which has been presented by my hon. Friend. I interpret that as an admission that the insertion of the rate of interest in this Clause is theoretical. I would, however, say, on the other hand, that in view of the odd ideas on the subject of interest rates held by the present Administration, it may be more than a purely theoretical consideration or insertion that has been made.
The Financial Secretary went on to say that the argument, however interesting, did not relate very seriously to the subject matter of the Bill. I beg to differ. He put forward as an argument for the continuation of the conventional form of words, the fact that the same figure had been included in every Consolidated Fund Bill since 1942. That, of course, is so, but in my view the fact that something wrong has been going on for nearly 10 years is not a decisive argument for the perpetuation of that convention.
I was hoping that the Financial Secretary, being a new broom, would start sweeping up some of the cobwebs which he has inherited not only from the previous Labour Administration but from previous Conservative Administrations. I hope that he will treat the point which my hon. Friend and I are putting forward with rather more seriousness than he was disposed to show when the similar point was put forward on the Second Reading.
2099 It is, of course, true to say that the Financial Secretary said that the points made by my hon. Friend would be considered. But that, of course, is a very vague statement which I am not prepared to accept unless he also says that in the Consolidated Fund Bill for next year, if he is still Financial Secretary, this form will no longer be followed, in which case I would seriously reconsider my own position and be disposed to advise my hon. Friend to withdraw the Amendment.
Failing such an assurance, I would ask the Financial Secretary to take the bold course and make the concession that we are asking him to make. He will not lose anything by it. The figure of 3 per cent., even with the present Administration, is completely meaningless, as my hon. Friend has pointed out; and I hope that in these circumstances he will have no difficulty whatever in accepting the Amendment.
§ The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter)
I listened with great interest to the two speeches which have been made in support of this Amendment, but I am bound to say that I find it a little difficult to relate the arguments adduced in favour of the Amendment with the terms of the Amendment itself. If hon. Members will look at the Bill they will see that if this Amendment were accepted the only effect would be to remove from the Bill the limit imposed upon the rate of interest at which the Government are authorised to borrow. That is the effect of the Amendment.
It is an unusual situation to find two hon. Members on the Opposition benches forcing on a shy and diffident Government powers for which that Government has not asked. But that is what the hon. Member for Nottingham, South (Mr. Norman Smith), is, in fact, doing. I appreciate, on behalf of my hon. Friends on this Bench, the confidence which he shows in the present Administration in desiring to entrust it not only with greater powers than any of its predecessors since before 1870 have enjoyed, but powers which were not even asked for by its immediate predecessors. We feel that it is unnecessary, even with this display of confidence that the hon. Gentleman has shown in us, to remove the limits upon our powers which this Bill imposes.
2100 The hon. Gentleman has said with great truth that this is short-term borrowing with which we are now concerned, and that the rate of interest on short-term borrowing of this sort is much below the 3 per cent. level. The hon. Gentleman is perfectly right in saying that, and he is equally right in giving the history of this matter. I will take him back a little further. The rate before 1870 was £5 7s. 5d. per cent. It dropped to £5 in 1870, and it was reduced to 3 per cent. in 1941.
That is all true. But the object of having a figure of this sort in the Bill is this: it is to impose what my hon. and learned Friend the Parliamentary Secretary to the Board of Trade always calls "a ceiling"—
§ Mr. Boyd-Carpenter
—that is to say, an upward limit upon what can be done. It is desirable that some margin should be given to the Government in respect of its borrowing in case some grave emergency arises.
It is arguable that that figure should be higher than the 3 per cent. for which we ask, but we cannot go as far as the hon. Member and suggest that there should be no limit. Therefore, while I fully appreciate the force of the considerations which the hon. Gentleman has put forward in support of this Amendment, the very logic of those considerations makes it quite impossible to accept the terms of his Amendment.
I will say a few words, if I may, about the speech of the hon. and gallant Member for Brixton (Lieut.-Colonel Lipton). I am sorry if, on Friday, in reply to a very considerable number of hon. Members, I did not reply to his hon. Friend the Member for Nottingham, South, as fully as he thinks I should have done. I have had no such complaint from the hon. Member for Nottingham, South, himself. Of course, I was right in saying then, as I say now, that we are only theoretically concerned, in connection with Ways and Means borrowing, with the Treasury bill rate. In point of fact, this method of borrowing has not been used for Ways and Means borrowing for a good many years and the fact that the 2101 power is taken to borrow in this way is simply another part of the emergency provisions.
In these circumstances, I hope the hon. Gentleman will not persist in his attempt to thrust upon the Government powers for which they do not ask and which they do not desire to exercise. I hope he will allow us to agree that the Committee shall insert a maximum percentage at which we can borrow in this way.
§ Amendment negatived.
§ Clause ordered to stand part of the Bill.
§ Clause 3 ordered to stand part of the Bill.