CURRENCY AND BANK NOTES BILL

HC Deb 26 January 1954 vol 522 cc1655-701

Considered in Committee.

[Sir CHARLES MACANDREW in the Chair]

Clause 1.—(ISSUE AND RECALL OF BANK NOTES BY BANK OF ENGLAND.)

5.36 p.m.

The Chairman

Mr. Norman Smith. Page 1. line 17.

Mr. Norman Smith (Nottingham, South)

On a point of order. Do I correctly understand, Sir Charles, that it is not your intention to select the first Amendment on the Order Paper, which is in my name?

The Chairman

No; in any case, the first Amendment is not in the hon. Member's name; but I am calling the second Amendment, to line 17, which is in the name of the hon. Gentleman.

Mr. Smith

I beg to move, in page 1, line 17, after "denominations," to insert "exceeding ten shillings."

Perhaps the Committee could take this Amendment and the next Amendment together, because they stand or fall together.

The Chairman

That can be done, with the leave of the Committee.

Mr. Smith

Thank you, Sir Charles.

The Amendments are intended to tidy up Clause 1, which, at the moment, has a very extraordinary effect. Subsection (4) lays it down that the holder of bank notes of any denomination shall be able, in certain circumstances, to go into the Bank of England and to receive in exchange for them notes of a lower denomination, that is to say, bank notes which for the time being are legal tender, as he may specify.

The point of the Amendment is that there is no bank note of a lower denomination than the 10s. note. It says on the face of the 10s. bank note, over the signature of a gentleman who is described as the "Chief Cashier" and whose signature is not very clear—I think it is "P. S. Beale"—that the Bank of England promise to pay the bearer on demand the sum of Ten Shillings. If the Bill lays it down that we may take a £1 note to the Bank of England and say, "I want two 10s. notes for it, which I am entitled to have under the statute," the same Bill ought to lay down what we are entitled to do with the 10s. note, on which there is printed this promise to pay.

In the present state of the law, that promise on the 10s. bank note does not mean anything at all, unless we take it at its face value and assume that it means 10 shillings in the cupro-nickel coinage of this Realm. If it means that, there is no need for me to proceed with my Amendment. If it does not mean that, and unless anybody is entitled to take as many 10s. notes as he has into the Bank of England during certain office hours and say, "I want to get rid of these 10s. notes and have cupro-nickel coins," the promise is quite meaningless and the law needs tightening up.

I should like to make a test case of it, but I happen to be a shy and retiring person. I should like to take a 10s. note into the Bank of England. Unfortunately, I have not enough cheek to do that sort of thing. There are other hon. and right hon. Friends of mine who are less retiring than I am, and who would brazenly go into the Bank of England, plank quite a number of these notes down on the counter and say, "I have come for the shillings which the Bank of England promises me in respect of each of these notes."

After all, the whole of this currency business is shrouded about with a lot of unnecessary mystery, not to say superstition. Most people in the country are entirely ignorant of the whole subject. It would not be unreasonable for the Financial Secretary to the Treasury to reply, "What is the hon. Member worrying about? The thing works. Ten shilling notes do change hands, and have been changing hands ever since 1914, in one form or another. People do accept them and have confidence in them, and if the promise does not mean anything, who cares?"

Quite a lot of symbols in our contemporary civilisation are, I suppose, utterly meaningless, and perhaps this is one of them, and does not matter much. I ask the Financial Secretary to say what the position is about these 10s. notes, and what the promise to pay means, if it means anything at all.

Mr. Ian Horobin (Oldham, East)

I am not sure that the Amendment is as innocuous as the hon. Member for Nottingham, South (Mr. Norman Smith) thinks it is. It is true that in the course of time, since the £ sterling ceased to be on the gold standard, the curious promise has been on the face of the notes, but it does not mean what it originally meant.

Few people, and certainly none of the very modernist currency experts whom I see on the Front Bench opposite, would wish to go back to a system in which gold coins in the hands of the public were a large part of our gold reserve. There are arguments on both sides of currency policy, those which are in favour of convertibility, and those which are not by people who would like it to have a gold backing. I very much doubt whether anybody would wish to see us go back by a side wind to a situation in which the public could, as of right, demand their notes to be changed to gold.

Unless I misunderstand the effect of the Amendment, it would mean, in the form in which it is on the Paper, that those who hold a 10s. note could go to the Bank of England and demand a half-sovereign in gold for it, and certainly a coin. We might say that we had selected a coin that we wished to have. In the form in which the Amendment is drawn, if it were passed it would give the public a right to demand payment in half-sovereigns for their 10s. note. If that is the effect of the Amendment, I do not believe it will get very much support from either side of the Committee. It would be contrary to public policy, and we should be very unwise to support it.

5.45 p.m.

Mr. Cyril Bence (Dunbartonshire, East)

According to my reading of the Bill, people can tender notes for £1 and over at the Bank of England, and change those notes into some other currency, but there is nothing to say that if I hold a 10s. note I can go to the Bank and demand coins which are in current circulation. I support the Amendment on those grounds. I want it definitely stated that people can change their notes, specifically the holders of 10s. notes, and that they can submit them to the Bank of England, and can have them changed for notes or coins in current circulation and of a lower denomination.

The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter)

I understand that the point which the first Amendment seeks to elucidate is the meaning of the promise to pay which is upon the notes. The point was mentioned on Second Reading, and I fully understand the wish of the hon. Member for Dunbartonshire, East (Mr. Bence) to elucidate it, since it is not very easy to follow.

The promise to pay is a contract or acknowledgment of a debt by the Bank. The important practical effect of this arises when notes of a particular series have been demonetised or called in and have ceased to be legal tender. A note may cease to be legal tender and it may not be possible to tender it for payments where payments have to be made in legal tender, but such a note can still be cashed by presentation at the Bank.

This is not an academic point. Hon. Members will recall that certain notes of higher denominations were called in for what I think was good and sufficient reason. That did not mean that those who held those notes after a certain date found them valueless. If they presented them to the Bank they would be paid. That is the meaning of the promise to pay.

The second point, which arises on the second Amendment, is whether, on tendering a note, coin can be demanded. The answer is "No." The Committee will appreciate that it is "No" for a very good reason. If one were to say that the presentation of any number of these notes at the Bank entitled one to payment in coin, whether coin of one's own choice, as suggested by my hon. Friend the Member for Oldham, East (Mr. Horobin) or of the Bank's choice, it would theoretically mean that the holders of notes had an unlimited right to demand unlimited change. If that were carried to an extreme, it would cause some inconvenience. As the Committee knows, from time to time apparent shortages of certain coins occur, and the Royal Mint does its best to supply the demand. I have had representations made to me from certain parts of the country on this very point during the last week or two.

The task of the Royal Mint in maintaining an adequate supply of coinage would be made very much more difficult if the holders of notes had the right to demand unlimited quantities of coinage on tendering the notes, and I cannot see what useful purpose would be served by conferring this right upon them. The right which exists—and the right which becomes important from a practical point of view—is that of tendering a note or promise to pay by the Bank of England and of being given in exchange currency which is legal tender. That is the vital point and I think that the Committee will agree that that is the matter which we want to safeguard and which, I think, is adequately safeguarded by the present position.

Mr. Norman Smith

Assuming that this Amendment is agreed to and that the public take advantage of it, the Financial Secretary's argument is that it would create embarrassment, but this is England and things do not happen in that way in this country. It would create an appalling amount of embarrassment to all five clearing banks if everyone at once demanded cash across the counter, but those things do not happen here. The fact that the clearing banks are able to lend up to eight or 10 times what they have is a sufficient answer to the argument that there would be embarrassment. I think that what we ask for is reasonable.

Mr. Boyd-Carpenter

There is a great deal of difference between the amount of coin and the amount of notes in circulation. The same risk is not to be feared in respect of notes because there are probably not sufficient resources available to individuals to create that situation, but with the much more restricted amount of coinage it is—at any rate theoretically—possible that the creation of the right could create that situation, and there seems to be no practical point to be served in creating it. The only thing upon which I agree with the hon. Member is his very clear statement that this is England.

Mr. Hugh Gaitskell (Leeds, South)

I think that we are all agreed that there is not a great deal in this, but there is one point in the Financial Secretary's argument which I did not follow. As I understand it, he said that we could not have a situation where the holder of a note which was to be no longer legal tender could insist upon the coin for it, but he could get another note which was legal tender. In that case, if the holder wanted the coin he could then take the new note back and get it, so there is really no safeguard against the terrible danger, which the Financial Secretary suggested, that people might wish to change all their notes into coins. But perhaps I have misunderstood him?

Mr. Boyd-Carpenter

I am so sorry—it is my fault for not being clearer upon this. There is no distinction. Neither the legal tender note nor the demonetised note entitles one to that.

Amendment negatived.

Mr. Norman Smith

I beg to move, in page 2, line 10, at the end, to insert: Provided that payment to a clearing bank for any notes called in from that bank under this subsection shall not have the consequential effect of diminishing the clearing bank's holding of cash at the Bank of England. This is a very much more serious Amendment and deals with matters of wider scope and of very great import, because under this Bill, for the first time, it is possible for the Bank of England to call in £1 and 10s. notes for the purpose of demonetising them. There was no such power before.

Under the Currency and Bank Notes Act, 1928, the Bank could call them in but could not demonetise them. That point was made very clear in the Explanatory Memorandum which accompanied this Bill when it was first introduced about a year ago. Paragraph 2 of the Explanatory Memorandum contained words which I submit to the Committee are rather significant, although not so significant as their omission from the Explanatory Memorandum in respect of the Bill this year. These are the words which have been omitted from the Explanatory Memorandum of a year ago: The Currency and Bank Notes Act, 1928, gives the Bank power to call in, but not to demonetize, £1 and 10s. notes. Clause 1 of the Bill provides for the Bank of England to call in and demonetize their bank notes of any denomination. The omission of that phrase this year, I can only suppose, was the result of a desire on the part of the Government to conceal from the public—and it may be from the House—exactly what the Government were up to. If this Clause be enacted, then for the first time the Bank of England will hold in its hands the power to call in and demonetise £1 and 10s. notes, which constitute no less than 82½ per cent., by face value, of the total notes in circulation.

It is a very serious thing, for two reasons, to give the Bank of England that power. The first is much less important than the second, although the first is important enough, in all conscience. This Clause is serious because it enables the monetary authorities, who are the Treasury and the Bank of England, to put their heads together to reduce the amount of currency created and put into circulation by a publicly-owned body, the Bank of England.

As I propose to show, the inevitable corollary of that would be that the commercial banks—the so-called "big five" clearing banks affiliated to the London Bankers' Clearing House, joint stock companies owned by absentee shareholders—would be able, to the extent that these bank notes are demonetised, to create and circulate their own particular form of currency, in this case either commercial bills or, strange though it may seem, Treasury bills. It is a serious thing when the Government introduce legislation in circumstances which expose them to the accusation that they are trying to do it behind the public's back, by editing the Explanatory Memorandum and cutting out chunks from it in such a way as to hide a very relevant fact.

There is another and more serious fact. At the present time, a recession in the United States and the possible increase in the depth of that recession is a favourite topic of writers in the financial columns of newspapers, and has been so for the best part of 12 months. There is evidence that if there be a diminution in the proportion of the total currency circulating in the form of bank notes, and if that diminution be accompanied by an increase in the privately-created currency in the form of commercial bills—in other words, if we have a smaller proportion of bank notes comprising the currency in circulation—then we have a condition which is favourable to deep depression and slump.

If I can show, Sir Charles, that the effect of this Clause would be to take away the currency-creating power of the publicly-owned Bank and transfer it to privately-owned banks—greatly to their profit—and can further show that its effect will be to impose a condition favourable to a slump in this country at a time like the present, I submit I shall have made out what is really a very substantial case against this Clause, and a very substantial case for my Amendment, which seeks to put a limitation on demonetisation, namely, that it shall not have the consequential effect of diminishing the clearing bank's holding of credit at the Bank of England.

6.0 p.m.

I propose to trace very briefly the series of events—with which nobody is better acquainted than two of the hon. Members whom I see opposite—which would occur if Clause 1 (5) became law and the Bank of England proceeded to demonetise £1 and 10s. notes on any substantialscale. There is no need to specify the quantity of notes which they might demonetise. Let me hypothecate that they wish to demonetise £x million of £1 and 10s. notes, and that they notify the Midland Bank, saying, "We are calling these notes in and we are going to demonetise them."

The first thing that would happen, as is provided in subsection (5), is that the Bank of England, proposing to demonetise and call in those notes, would have to pay the Midland Bank for them. It would have to give the Midland Bank a substantial consideration in exchange. This Clause lays it down that the Bank of England may call them in, on payment of the face value thereof… How does the Bank of England pay the face value of £x million of £1 and 10s. notes, having called them in from the Midland Bank? The Bank of England will merely give the Midland Bank a draft on its own banking department to the face value of £x million. In come the notes, and they are demonetised, but because they are demonetised there is a state of disequilibrium in the issue department of the Bank of England. £x million of notes have been called in, and those notes, by law, are covered by securities. Therefore, the securities have to come out of the issue department of the Bank of England. That is the inevitable first consequence. Those securities go into the banking department of the Bank of England, where they have to cover the draft which the Bank of England has paid for £xmillion worth of Treasury notes which they have called in for demonetisation.

The transaction does not end there. If it did, it would not make sense. Next, securities which have been transferred from the issue department to the banking department are sold on the open market by the Bank of England, in an operation of the kind with which some hon. Members are quite familiar but which is not understood by the great majority of people whose education has been effected mainly by the newspapers, which do not deal in this sort of thing. The securities are sold on the open market and the draft which the Bank of England has paid the Midland Bank for the demonetised notes must then necessarily come back to the Bank of England for cancellation.

Now let us look at the situation from the point of view of the Midland Bank. Like everybody else, they work to a certain safety rule, which is not what it used to be 25 or 30 years ago. The safety rule used to be rather simpler. The clearing banks or commercial banks—the "big five"—could then lend more money than they had in their tills. There is nothing very esoteric about that. The system is quite well understood, and it has been going on for a long time. But there was a limit to the extent to which they could lend more than they had in their tills, and that limit used to be expressed by the straightforward convention of a proportion of the banks' total deposits. It used to be that the total deposits could be roughly 10 times the cash which the banks had in their tills, but it is a convention of the City of London and of the British financial world that the word "cash" does not only mean notes or coins but also means their balances at the Bank of England. So in the old days cash in notes or coins plus their balances at the Bank of England could be multiplied by about 10, and that fixed the limit of the total deposits they were able to create by lending at interest what they had not got.

However, in recent years there has been a change in the safety ratio. The safety ratio is no longer a straightforward relationship between, on the one hand, coins, notes and balances at the Bank of England, and, on the other hand, total deposits. It is now expressed in a fraction, and the numerator of that fraction is cash plus money market assets. An entirely new factor has come into the picture, money market assets. Cash plus money market assets over total deposits is now not supposed to exceed a fraction roughly of the order of 30 per cent.

Now here we see where the sinister import of this Bill comes into play. The result of the demonetisation transaction by the time the Bank of England has carried out quite automatically the operations which it would have to carry out, calling in notes to demonetise them, is that the Midland Bank finds itself with less than it used to have by way of cash—less because, in the first place, it parted with notes and got in exchange for them a draft with which the Bank of England paid for the notes. To follow up, the consequential result was that it parted with the draft; and so the commercial bank finds itself in this happy position that it has less cash at the Bank of England but its total deposits remain unchanged. It is, therefore, able, without upsetting its safety ratio, to create more of the assets which are called money market assets. In other words, it is enabled to create more by way of bills, either commercial bills, or Treasury bills.

Thus the commercial bank, to the extent that it has less notes, demonetised under this Bill, is able to create its own form of currency, which is loans, which are advantageous to itself and profitable to itself because the paper which it creates out of nothing bears interest. It has substituted £1 or 10s. notes, on which it had to pay interest to the Bank of England, with bills, commercial or Treasury, on which it charges interest, and it has done that without in any way upsetting its safety ratio, being the conventional fraction of which I spoke just now.

That will be the effect of this Measure. The effect, in the first place, is that to the extent that there is demonetisation the total volume of circulating currency which was profitable to a nationalised institution has in fact been diminished, but that diminution can be, and no doubt would be, compensated exactly by the creation of a new form of currency, namely, bills, which would bear interest and be profitable to private concerns owned by absentee shareholders who live by owning and not by working.

I cannot for the life of me understand why the party on this side of the Committee does not get "het up" by a Measure of this kind. One would suppose that the party on this side of the Committee is quite indifferent, when it comes to currency, whether the currency is created by a publicly-owned organisation, and is therefore profitable to the community, or whether the currency is created by a privately-owned organisation and is therefore profitable to some joint stock company which consists of absentee shareholders living without working, living by owing. I should have thought that the Labour Party would have been very keenly interested in that. However, I should be out of order if I proceeded to examine the possible reasons why the Labour Party is not "het up" about that.

I propose, therefore, to turn to the second aspect—the rather more sinister aspect of the problem. The net result of the Bill, if Clause 1 be enacted without any Amendment, will be that the currency which takes the form of £1 and 10s. notes will be a smaller proportion of the total circulating currency. That is so because some of it will have been demonetised, leaving the way open for an equivalent amount of privately-created currency, bearing interest, to take its place.

Let me explain the experience of this and other countries, particularly this country, when the notes in circulation are a substantially smaller proportion of the total currency, the total currency being bank deposits plus notes plus money market assets. When notes become a substantially smaller proportion of the total circulating currency, then we have a condition favourable to mass unemployment—what is generally known as and used to be called a slump but is now known as a recession.

In this connection I think I ought to give the Committee the results of some of my researches on this subject. I will keep these results as short as I can, but this is a very relevant point. Averaging over 1921 to 1925, the Bank of England issue department had £399.6 million of notes in circulation against total deposits at the London clearing banks in that epoch of £1,718.4 million. In that period the percentage was 23.2 per cent. notes to total deposits. I take another period—1925–28. The percentage had not varied very much; it was 22.6 per cent. I take yet another period—1946–51; and it was still 22.6 per cent. The percentage is not very different now.

The period 1929–33 was the depth of the inter-war depression—the world-wide depression which the party opposite managed to lay at the door of the Labour Government of those days but which was in fact world-wide. In that period the notes in circulation were £361.3 million against deposits of £1,820.9 million. The percentage had fallen, therefore, from 22 or 23 per cent. to 19.6 per cent.

At a time when, as I have said, financial writers in all newspapers of all party political colours have, for the best part of 12 months, been speculating on the prospects of a United States depression in 1954; when even Ministers of the Crown and right hon. Gentlemen who used to be Ministers speak and write about those prospects; when we know that re-armament is tapering off; when we know that the activity of industry, as measured by what industry does to equip the Fighting Forces, is declining, I submit that it is a very sinister thing that Her Majesty's Government should come forward with a Bill of this kind proposing to place in the hands of the Treasury and the Bank of England the means of reducing substantially the proportion of the total currency which is represented by the currency notes in circulation when, as experience has shown, that is a condition of things favourable to depression.

It is bad enough that the Conservative Party should look after their friends. I suppose the Financial Secretary and the Chancellor of the Exchequer put their heads together, along with officials at the Treasury, to do what Fagin used to do in "Oliver Twist"; for he used to devise means whereby his friends could run little bits of business profitable to themselves. He organised what he called the "kinchin' lay," which consisted of waylaying children on errands for their parents and taking from the children the money which they clutched in their fingers.

The Chairman

We should be discussing the Amendment.

6.15 p.m.

Mr. Smith

I can only suppose that the Financial Secretary and the Chancellor of the Exchequer spend their time devising methods whereby they can enable their friends—thejoint stock companies dealing in finance—to create currency which at the moment is created by the publicly-owned Bank of England. If I describe this Bill as a sort of "kinchin' lay," I am not far wrong; it is something like that. Here the Government are taking advantage of the lack of interest among most people in these matters—a lack of interest born of their complexity. I have quoted in the House before—and it is a quotation worth repeating—the words of the founder of the dynasty of Rothschild, who wrote, at the end of the 18th Century: Give me control of a nation's money and I care not who makes its laws. The Government are taking good care, during the brief period for which they are destined to occupy those benches, to take as much business as they can away from the publicly-owned finance institution, the Bank of England, and hand it over to their friends. They are doing it by a camouflaged method, a method which looks so innocent; for this Bill is said to be for the calling in and demonetising of £1 and 10s. notes. I move my Amendment because if it were incorporated in the Clause it would take out of their hands—

Mr. A. C. M. Spearman (Scarborough and Whit by)

Could the hon. Gentleman give any estimate of how much gain he thinks there would be for the private banks?

Mr. Smith

Yes. The gain would be firstly what the private banks pay the Bank of England for notes. That is measured in the profit of the note issue, which is dealt with statutorily in the Currency and Bank Notes Act, 1928. That Act laid down that the profits of the note issue should not accrue to the then privately-owned Bank of England but should accrue to the Treasury. There are, therefore, profits in the Bank of England note issue, and there are certainly further profits for commercial banks in lending money which they have not got, in making an entry in their books crediting a borrower with the amount of the loan and proceeding to charge him interest on it. I wish I could lend money I have not got, but they will not let me do it, and if I tried to do it I should be prosecuted either as a forger or as a coiner—I do not know which, but I should certainly be prosecuted. This is a very profitable business for the people concerned.

I submit that the Committee should accept my Amendment. What have the Government to worry about? If what I am saying is untrue, they can accept the Amendment. If what I am saying is true, then my party, the Labour Party, ought to rise up in their wrath and denounce this preposterous Bill.

Mr. Bence

I rise to support the Amendment moved by my hon. Friend the Member for Nottingham, South (Mr. Norman Smith) and I do so with much trepidation. I am very thankful, Sir Charles, that you listened attentively to my hon. Friend's thesis, because I feel sure that you must have a complete understanding of it and that if I keep my eye on you, you will immediately restrain me if my speech tends to get out of order.

I started my apprenticeship as an engineer, and if engineers discover that things are missing they always know where to look for them. During my apprenticeship, all my seniors in the engineering industry and my employers, too, seemed to have an awful lot of money, but when I completed my apprenticeship and went out into the industry to stand on my own feet, I discovered that nobody had any money. I always wondered where it had gone. I found no one who had burnt it, and robberies had not been on the increase. My employers, I discovered, were becoming increasingly indebted to the banks. Everybody seemed to have begun to lose his money. Where had all the notes gone? When I was an apprentice some of the senior men were getting 21 £1 notes every week. When I finished my apprenticeship, we were lucky to get three £1 notes every week. Since I could find no one else who was getting them, who had them? I asked my hon. Friend about this—

The Chairman

This Amendment is concerned only with diminishing the holding of the Bank of England and not an individual's holding.

Mr. Bence

This demonetisation, which my hon. Friend has mentioned, has given me the clue. Here is the Bank of England taking powers unto itself to take our notes, which we have managed to collect, and to demonetise them. It seems to me that that may have been done before, and that is where the notes went. I agree with my hon. Friend that if the Government are giving the Bank of England power to destroy these notes, some of us are going to be very short of them. I do not want again to go through what I went through between the wars.

The banks are going to find themselves terribly short of notes if the Bank of England starts calling them in and demonetising them without giving new ones in their place. If the banks are short of ready notes to pay over the counter, they will have to start calling in their bank credits given by way of overdrafts. I know something about that. I am inclined to agree with my hon. Friend that this is a very serious matter indeed. I am not a banker by profession, but I am sorry for the chairmen of the national banks if there is such a shortage of notes in the country that the ratio cannot be maintained unless a notice is sent to the local bank managements to call in their credit.

If the Bank of England were to call in 1,000 million notes, there might be a run on the banks, and overdrafts would have to be called in, all the business men would be broke again, and we should be back where we were. I ask the Financial Secretary to give us an assurance that there will not be a repetition of the mysterious disappearance of notes which occurred between 1919 and 1922 by means of some mechanism in the banks. I do not understand what it was, although I can understand the most intricate mechanism of machinery. This is something beyond my experience. I hope that the Parliamentary Secretary will help me to get rid of the fears that I have that the demonetisation of these notes may lead once again to the mysterious disappearance of notes which occurred when I was a youth.

Mr. Boyd-Carpenter

I can reassure the hon. Member for Dunbartonshire, East (Mr. Bence) at once that neither this Clause nor the powers which, as I shall explain, it replaces can have the exciting but somewhat alarming consequences which he forecast. He may recall, if he was in the Committee when we were dealing with the last Amendment, that I pointed out then that notes which were to be called in could be taken to the Bank of England and legal tender could be obtained for them.

Mr. Bence

I appreciate that, but that did not happen at the time of which I was speaking. They disappeared. It was not a question of handing in notes and getting money for them; the notes had gone. What happened to them?

Mr. Boyd-Carpenter

That is rather a difficult speculation and a most interesting one which I do not think you, Sir Charles, would permit me to follow up. This Bill deals with recall and demonetisation and not with the disappearance of notes.

I suppose that all of us who speak frequently in the House have certain tricks of speech which hon. Members notice. I find that in the speeches of the hon. Member for Nottingham, South (Mr. Norman Smith) the word "sinister" appears in almost every third sentence he utters. His speech this evening was full of drawing "sinister"—to use his own phrase—implications from what is very largely a technical provision.

It may be that, in the first place, the hon. Member did not perhaps fully appreciate that there is nothing new in the substance of this matter. He referred, no doubt by a slip of the tongue, to this provision providing for the first time for the recall of £1 and 10s. notes. I am quite certain that the hon. Member, with his considerable experience of these matters, knows that power has existed for the calling in of £1 and 10s. notes since the Currency and Bank Notes Act, 1928, and so far as notes of higher value are concerned, the power has existed since late in the war, in respect of £5 notes, under Defence Regulation 7AB. Therefore, the effect broadly of Clause 1 (5), which the hon. Member's Amendment seeks to amend, is to put this pre-existing power on the same basis. That is the basis of this Clause, and it enables us, as he will see if he looks at the later stages of the Bill, among other things, to get rid of two Defence (Finance) Regulations.

Therefore, we are not, as one might think when listening to the hon. Member, sailing in uncharted and perhaps sinister seas. We are simply providing that pre-existing powers of recall shall be put into one Clause. If this power of recall can raise such sinister implications as the hon. Member seems to think, it seems remarkable that there have been no proceedings even in respect of £1 and 10s. notes during the 25 years since 1928 by which the hon. Member could have succeeded in both demonstrating their danger and securing their repeal.

The provision, of course, has none of the economic significance which the hon. Member sought to read into it. I may perhaps comment on the terms of his Amendment. It provides that …payment to a clearing bank for any notes called in from that bank under this subsection shall not have the consequential effect of diminishing the clearing bank's holding of cash at the Bank of England. To try to legislate against consequential effects is reminiscent of the legislative methods of His late Majesty King Canute because one cannot legislate against consequential events. But in point of fact this is merely putting into one subsection the necessary power of recall.

I commented on an earlier Amendment on the occasion when the power of recall was used some years ago by the late administration for a very good reason. It may be that it will have to be exercised again. In any event, where the recall takes place from the clearing banks in the normal way, the notes called in will be replaced by notes of the new issue, because in the ordinary way of business these banks will require an adequate supply of notes for carrying on their business. Therefore, the economic effects in these circumstances are precisely nil.

Nor would this particular provision be at all apt for effecting—if anyone wanted to effect them—the rather complicated series of economic transactions which the hon. Member for Nottingham, South appeared to contemplate. This is simply a provision for the regulation and control of the notes issued. It is a technical provision to enable some quite difficult administrative problems to be dealt with. That is its purpose, and even if it were possible to legislate against consequential effects, these are not consequential effects which will be consequential upon this particular Measure.

Mr. Norman Smith

I cannot let the Financial Secretary get away with a reply like that, which assumes that the Committee does not know anything about this Bill, the Act of 1928 or history. The Financial Secretary himself does not understand what it is all about, nor is he familiar with the background of this.

6.30 p.m.

The Financial Secretary began by assuring my hon. Friend the Member for Dunbartonshire, East (Mr. Bence) that even if the notes were demonetised—this is what he said; it will be on record in Hansard tomorrow—the holder of the notes could still exchange them. But who will be the owner of the notes under this legislation? It will be the Bank of England. It is the Bank of England that is given power to call the notes in and demonetise. Is the Financial Secretary trying to tell the Committee that the Bank of England will still be able to exchange the notes with itself?

That part of the right hon. Gentleman's reply is utter nonsense. It is not the only nonsense in this reply. He denied the accuracy of what I said. I said that it has not been possible in the past to call in and demonetise £1 and 10s. notes. The Financial Secretary denied that. One of us must be right and the other wrong. He said that the power to demonetise notes has existed in the past and that it was conferred by the Currency and Bank Notes Act, 1928.

Mr. Boyd-Carpenter

The hon. Member himself used the expression "call in." So did I. If he is now using that expression as synonymous with "demonetisation," perhaps he will explain it.

Mr. Smith

The Financial Secretary—he will see it in HANSARD tomorrow morning—said that the power to demonetise had always existed in the case of £1 and 10s. notes.

Mr. Boyd-Carpenter

I am not going to be misrepresented. I used the expression "call in" quite carefully, and the hon. Member will find that in HANSARD.

Mr. Smith

In that case, the right hon. Gentleman was answering an argument which I had not put up. My argument was based, not upon the calling in, but upon the demonetisation, and the Financial Secretary had the audacity to call in support of his very bad case the Currency and Bank Notes Act, 1928. He wanted the Committee to believe that the Bill marks no significant departure from that Act. If that is so, will he explain why the original Explanatory Memorandum of the Bill a year ago, which he has thought fit to alter at the end of 1953, as compared with the end of 1952, contained these words, which I quoted before but which have since been taken out: The Currency and Bank Notes Act, 1928, gives the Bank power to call in, but not to demonetize, £1 and 10s. notes. Those are the facts, and nothing that the Financial Secretary said answered my case in that respect. He wanted to bluff the Committee into supposing that the Bill makes no difference so far as concerns the demonetisation, as a result of which my hon. Friend the former journeyman engineer could not get work.

The Financial Secretary went on to say—it sounds so clever coming from a lawyer, but it is such nonsense to ordinary plain men—that one cannot legislate against consequential effects, and he cited the late King Canute as evidence of that. He said that the economic effect of the exchanging of these bank notes would be precisely nil. But it is not an

exchanging of notes. It is the destruction of notes, a power which did not exist under the 1928 Act but will exist under this Bill when it becomes an Act. It is the destruction of notes, as my hon. Friend the former engineer rightly pointed out, which constitutes the danger.

The Financial Secretary adduced against me Canute. I adduce against him the Cunliffe Committee. The Cunliffe Committee decided on the deflation that began at the end of 1920, which put my hon. Friend the Member for Dunbartonshire, East and many others out of work. We could have legislated against those consequential effects. The slump of 1920–21 was the direct outcome of deflation. I do not have to prove that. It was in the report of the Macmillan Committee on Finance and Industry, which was appointed in 1930 and reported in 1931. It is all there in that Committee's report. Do we have to go over that again?

I take this opportunity of protesting against the levity and inaccuracy which the Financial Secretary displayed and the apparent contempt with which he chooses to treat the Committee. This is a serious subject, and he is not going to get away on that sort of thing.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 11; Noes, 165.

Division No. 22.]	AYES	[6.35 p.m.
Allen, Scholefield (Crewe)	Lipton, Lt.-Col. M.	Wells, Percy (Faversham)
Davies, Harold (Leek)	McGhee, H. G.
Foot, M. M.	Orbach, M.	TELLERS FOR THE AYES:
Keenan, W.	Stokes, Rt. Hon. R. R.	Mr. Norman Smith and Mr. Bench
Kerr, H. W.	Viant, S. P.
NOES
Allan, R. A. (Paddington, S.)	Burden, F. F. A.	Fisher, Nigel
Arbuthnot, John	Butcher, Sir Herbert	Fleetwood-Hesketh, R. F.
Assheton, Rt. Hon. R. (Blackburn, W.)	Campbell, Sir David	Ford, Mrs, Patricia
Baldwin, A. E.	Carr, Robert	Foster, John
Banks, Col. C.	Cary, Sir Robert	Fraser, Hon. Hugh (Stone)
Barlow, Sir John	Churchill, Rt. Hon. Sir Winston	Fraser, Sir Ian (Morecambe & Lonsdale)
Beach, Maj. Hicks	Clarke, Col. Ralph (East Grinstead)	Galbraith, Rt. Hon. T. D. (Pollok)
Beamish, Maj. Tufton	Cole, Norman	Galbraith, T. G. D. (Hillhead)
Bell, Ronald (Bucks, S.)	Colegate, W. A.	George, Rt. Hon. Maj. G. Lloyd
Bishop, F. P.	Cooper-Key, E. M.	Glover, D.
Black, C. W.	Craddock, Beresford (Spelthorne)	Gomme-Duncan, Col. A.
Bossom, Sir A. C.	Crookshank, Capt. Rt. Hon. H. F. C.	Gower, H. R.
Boyd-Carpenter, Rt. Hon. J. A.	Crosthwaite-Eyre, Col. O. E.	Grimston, Hon. John (St. Albans)
Boyle, Sir Edward	Crouch, R. F.	Grimston, Sir Robert (Westbury)
Braine, B. R.	Crowder, Sir John (Finchley)	Hall, John (Wycombe)
Bromley-Davenport, Lt.-Col. W. H.	Crowder, Petre (Ruislip—Northwood)	Harden, J. R. E.
Brooke, Henry (Hampstead)	Darling Sir William (Edinburgh, S.)	Hare, Hon J. H.
Brooman-White, R. C.	Donaldson, Cmdr. C. E. McA.	Harvie-Watt, Sir George
Browne, Jack (Govan)	Duncan, Capt. J. A. L.	Hay, John
Buchan-Hepburn, Rt. Hon. P. G. T.	Duthie, W. S.	Heald, Rt. Hon. Sir Lionel
Bullard, D. G.	Fell, A.	Heath, Edward
Bullus, Wing-Commander E. E.	Finlay, Graeme	Hill, Dr. Charles (Luton)
Hill, Mrs. E. (Wythenshawe)	Neave, Airey	Soames, Capt. C.
Hinchingbrooke, Viscount	Nicholls, Harmar	Spearman, A. C. M.
Holland-Martin, C. J.	Nield, Basil (Chester)	Speir, R. M.
Holt, A. F.	Nugent, G. R. H.	Spence, H. R. (Aberdeenshire, W.)
Hope, Lord John	Oakshott, H. D.	Stanley, Capt. Hon. Richard
Hornsby-Smith, Miss M. P.	Odey, G. W.	Stevens, G. P.
Horsbrugh, Rt. Hon. Florence	O'Neill, Hon. Phelim (Co. Antrim, N.)	Stewart, Henderson (Fife, E.)
Howard, Gerald (Cambridgeshire)	Ormsby-Gore, Hon. W. D.	Stoddart-Scott, Col. M.
Hutchison, Sir Ian Clark (E'b'rgh, W.)	Orr, Capt. L. P. S.	Studholme, H. G.
Hyde, Lt.-Col. H. M.	Osborne, C.	Summers, G. S.
Jenkins, Robert (Dulwich)	Page, R. G.	Sutcliffe, Sir Harold
Jennings, Sir Roland	Peake, Rt. Hon. O.	Taylor, Sir Charles (Eastbourne)
Johnson, Eric (Blackley)	Peto, Brig. C. H. M.	Thomas, Rt. Hon. J. P. L. (Hereford)
Joynson-Hicks, Hon. L. W.	Peyton, J. W. W.	Thomas, Leslie (Canterbury)
Kaberry, D.	Pickthorn, K. W. M.	Thompson, Kenneth (Walton)
Lambton, Viscount	Pilkington, Capt. R. A.	Touche, Sir Gordon
Lancaster, Col. C. G.	Pitt, Miss E. M.	Turner, H. F. L.
Legge-Bourke, Maj. E. A. H.	Powell, J. Enoch	Tweedsmuir, Lady
Legh, Hon. Peter (Petersfield)	Price, Henry (Lewisham, W.)	Vane, W. M. F.
Llewellyn, D. T.	Raikes, Sir Victor	Vaughan-Morgan, J. K.
Lloyd, Rt. Hon. G. (King's Norton)	Rayner, Brig. R.	Vosper, D. F.
Lloyd, Maj. Sir Guy (Renfrew, E.)	Redmayne, M.	Wakefield, Sir Wavell (St. Marylebone)
Lucas, P. B. (Brentford)	Remnant, Hon. P.	Walker-Smith, D. C.
Lucas-Tooth, Sir Hugh	Renton, D. L. M.	Ward, Miss I. (Tynemouth)
McAdden, S. J.	Robertson, Sir David	Waterhouse, Capt. Rt. Hon. C.
McCorquodale, Rt. Hon. M. S.	Robinson, Roland (Blackpool, S.)	Williams, Rt. Hon. Charles (Torquay)
Macdonald, Sir Peter	Robson-Brown, W.	Williams, Gerald (Tonbridge)
McKibbin, A. J.	Rodgers, John (Sevenoaks)	Williams, Paul (Sunderland, S.)
Mackie, J. H. (Galloway)	Russell, R. S.	Wills, G.
MacLeod, John (Ross and Cromarty)	Sholefield, Lt.-Col. W.	Wilson, Geoffrey (Truro)
Maitland, Patrick (Lanark)	Scott, R. Donald	Wood, Hon. R.
Maydon, Lt.-Comdr. S. L. C.	Scott-Miller, Cmdr. R.
Medlicott, Brig. F.	Simon, J. E. S. (Middlesbrough, W.)	TELLERS FOR THE NOES:
Morrison, John (Salisbury)	Snadden, W. McN.	Major Conant and Mr. Richard Thompson.

Clause ordered to stand part of the Bill.

Clause 2.—(AMOUNT OF BANK OB ENGLAND NOTE ISSUE.)

6.45 p.m.

Mr. Douglas Jay (Battersea, North)

I beg to move, in page 3, line 17, to leave out "either," and to insert "the Commons."

This Amendment, which I hope the Financial Secretary will be prepared to accept, raises a substantial issue. It seeks to take away the power which the Bill at present gives to the Upper House to veto an increase in the fiduciary issue at the end of two years. We say that it is entirely wrong to give to an unrepresentative House this power over the whole economic policy of the Government. That is, in effect, what the Bill does.

Clause 2 (8), by virtue of the words …either House of Parliament enables the Upper House—this I think is not in dispute—to say "No" when a Government with a majority in this House has decided to extend the period of the increase in the fiduciary issue beyond two years.

It is perfectly true, as we agreed on Second Reading, that an increase in the note issue nowadays is not ordinarily the cause of an expansion in economic activity, or of inflation in certain circumstances. But it is equally true that the

expansion very often cannot take place without an increase in the note issue also following it. In a similar way, no doubt, the petrol in a motor vehicle is normally the cause of the engine running. But unless there is also some oil the engine will soon seize up and a crisis will occur.

I thought the Financial Secretary was a little inaccurate when he fell, as he sometimes does, into rather vague language on the Second Reading and said: Today it is fairly generally realised that the size of the fiduciary issue has very little to do with the general broad questions of inflation or deflation."—[OFFICIAL REPORT, 3rd December, 1953; Vol. 521, c. 1328.] It is true to say it is not the cause, but I do not think it is true to say that it has very little to do with it. Perhaps I may take the opportunity at this point to congratulate the right hon. Gentleman. He became a Privy Councillor during the Recess, which I am sure is a just reward for having, with great patience, defended so many indefensible actions of the Government in the last two years.

The situation which we envisage is of this kind. Supposing there were a Labour Government with a majority in this House, which came to power at a time when there was considerable unemployment caused by the actions of a Government of the party opposite. That is a situation which might well occur, Sir Charles, though I do not expect you to agree with that, because we do not expect you to have an opinion on these matters. But that is the situation that might occur, and, indeed, it might occur during the course of the present year.

In that situation the new Government, in order to reduce unemployment, would, if they were well advised, start on an expansionary policy and initiate an expansion of activity generally. Unemployment, one would hope, would go down. But at that point, under the Bill as it stands, it would be perfectly possible for another place to exercise a veto by praying against an Order which would be necessary to continue an increase of the note issue already in existence. That is what we are objecting to in this Amendment.

It is all the more fantastic to give this kind of power to the Upper House, because financial and economic policy has always been the special prerogative of the Commons. Indeed, this House ought to be a vigilant guardian of those privileges and prerogatives. For that was the power of this House which was established against the Sovereign and the other place as long ago as the 17th Century and was reaffirmed against the Upper House in the constitutional struggles from 1909 to 1911. It seems to some of us, therefore, that this provision is contrary to the general doctrine that this House shall have sovereign power over financial and economic issues. To quote Erskine May at the beginning of page 39: The most important power vested in any branch of the legislature is the right of imposing taxes upon the people and of voting money for the exigencies of the public service. The exercise of this right by the Commons is practically a law for the annual meeting of Parliament…and it may also be said to give to the Commons the chief authority in the state. It may be that the Financial Secretary will say that all this relates strictly to Revenue and Supply and not, in the letter—though perhaps he might admit it in the spirit—to the note issue and the matters covered by this Bill. It is the fact, however, and relevant to this argument, that the profit on the fiduciary issue under the 1928 Act is revenue of the Exchequer. I am sure that the Financial Secretary would not question that. It is ordinary Budget revenue, and accrues to the Exchequer just like any other yield from taxation. Erskine May also says on page 780: The modern practice in respect of the Commons' financial privileges is based upon the resolution of 1671— You will recall, Sir Charles, that this was just before an unhappy period of Tory Government under James II, but I only mention that in passing. The resolution was as follows: That in all aids given to the king by the Commons, the rate or tax ought not to be altered by the Lords. I do not think it could be denied, even speaking literally and strictly, that the revenue derived from the profit on the fiduciary issue is "aid" voted to the Sovereign by this House. Therefore, I think the case is strong, even if we take it in a literal and not a general sense.

In attempting weakly to reply to this argument on the Second Reading, the Financial Secretary said something to the effect that, whatever the merits, this was done under the Defence Regulations, and it was also done in more or less the same way under the 1928 Act; under both those provisions the Upper House had the power to cancel an increase in the note issue. That seems to us to be no answer to the substantial point. First of all, as far as the Defence Regulations are concerned, they were purely temporary arrangements, in force during the war, when a great many of the normal constitutional controls over finance, and indeed some normal privileges of this House, were suspended. In those days we used to conduct expenditure by a Vote of Credit which cut across most of the normal financial arrangements. Therefore, now that we are legislating permanently, it is largely irrelevant what were the temporary provisions in force under the Defence Regulations.

When the Financial Secretary quotes the 1928 Act—I am assuming for the moment that he is right in thinking that additional legislation would be required under that Act for an increase in the note issue—it is rather remarkable for him, as the great opponent of delegated legislation for so many years when he was in Opposition, to quote that Act—which required new legislation—as a defence for making this power available simply by Order under the Bill which he is now bringing before the House. It seems to me that he has all the zeal of a convert for delegated legislation.

Our real objection to the Bill is that we are opposed in principle to the grant of power to a Tory majority in the Upper House to veto the economic policy of a Government having a majority in the Commons. It is no answer to say that this was done by a Tory Government in 1928 which introduced an Act of that kind. Obviously that does not meet our point or satisfy us in the least. It is perfectly true that a Tory House of Lords threw out the Finance Bill of 1909, but I do not think anyone would argue that as a reason for repealing the original Parliament Act today.

I do not think that so far the Financial Secretary can impugn the argument. But he may fall back on saying that, although these powers are open to objection in principle, nevertheless this kind of situation would not arise nowadays; that the other place would never abuse their powers in the way I am suggesting. But that seems to me a rather frivolous and light-hearted attitude towards legislation. We should not put on to the Statute Book powers that will never be used. If we think they should not be used, we ought not to put them on the Statute Book, and we ought to be scrupulously vigilant in defending the privileges of this House in matters of economic and financial policy.

We do not have to go back to 1909 or 1911 to find an occasion when the Upper House resisted a major Measure which had been passed by the Commons. It resisted effectively for a time the will of the electorate and this House in the case of the steel nationalisation Bill in the years 1949 and 1950; so we shall not be satisfied by a casual argument of that kind.

On the assumption that the Financial Secretary will not accept our Amendment straight away, though I hope he will, and even if he thinks that no harm would be done by leaving the Bill as it stands, what objection can there be from his point of view in putting this power solely in the hands of this House? Even if the right hon. Gentleman takes a rather light-hearted view of the privileges of the House of Commons, why should he want to insist on granting this power to the Upper House?

I hope that the right hon. Gentleman will accept this Amendment. But if he refuses, and since I can see no good ground for obstinately refusing to accept this arrangement, some people will draw the inevitable conclusion that the Government are seeking to resuscitate and reinforce the power of another place even in these economic, financial and money matters.

7.0 p.m.

Mr. Eric Fletcher (Islington, East)

My right hon. Friend the Member for Battersea, North (Mr. Jay) has put the case for this Amendment with great clarity and great force, but, nevertheless, there are two or three arguments which I wish to address to the Committee, particularly because the Financial Secretary ventured, during the Second Reading debate, to address strictures to me concerning the argument which I put forward on that occasion.

What I think is most noticeable on rereading the speech made by the Financial Secretary on that occasion is the fact that he did not attempt to justify the merits of the present proposal at all. He merely sought to point out that there was no startling constitutional innovation in the contents of the present Bill. He reserved for himself until we came to the Committee stage the defence which I suppose he is going to put forward to these proposals on their merits.

If I may underline the questions which my right hon. Friend has put to the Financial Secretary, I hope we shall now at last have an answer from the right hon. Gentleman to some of the question which I and other of my hon. Friends put to him during the Second Reading debate, and particularly to the following question. Is it seriously intended that the House of Lords should have the power, by a mere Resolution, to veto the will of the Government of the day and of this House with regard to an increase in the fiduciary issue?

If it is not intended that the House of Lords should have that power, why, then, is it thought necessary or desirable to ask this House to give the other place that power? I still think, as I thought on Second Reading, that this is a matter of very serious constitutional importance. I am not particularly concerned with what the position was under the Act of 1928, which, after all, was an Act passed by a Conservative Government.

We must remember that the constitutional relationship between the two Houses has undergone a considerable change since then. During the last few years, and particularly since the war, there have been some very important debates about the proper position of the House of Lords in our legislative arrangements. It is in the light of the present doctrine and the present well understood relationship between the two Houses that we must tonight seriously consider whether or not it is right, in 1954, to give the House of Lords power by a vote, passed perhaps capriciously in a small House, to wreck the whole economic and financial machinery of the Government. That is what we are being asked to do today.

Since 1928, and, indeed, since 1945, there have been two significant changes in the relations between the two Houses. First, there was the change made by the Parliament Act, 1949, which considerably curtailed the powers of the other place. The second change—the results of which have, perhaps, been too little observed by constitutional lawyers, Members of this House and others—was the giving of increased powers to the Government of the day to deal with delegated legislation.

Whether or not one is in favour of delegated legislation the fact remains that every Government today has much wider powers of delegated legislation than they had years ago. That is accepted in a great many quarters as being necessary in our present economic conditions provided, of course, that there are adequate Parliamentary safeguards. To a great extent, the Statutory Instruments Act, 1946, codified and modernised the law of delegated legislation by making the same kind of procedure applicable to all Statutory Instruments, which was a useful and desirable thing to do.

One of the things that was done under that Act—and in looking back at the debate which took place in 1945 it seems to me that it was, in a sense, done inadvisedly—was to give the House of Lords and this House equally parallel powers of veto on all matters of delegated legislation. I doubt whether that was a wise thing to do, because one reflects that one of the things we did by that Measure was to give the House of Lords a power of veto on financial. economic and all other matters, and in a sense, therefore, to restore to the House of Lords some of the powers which had been deliberately taken from it by the Parliament Act, 1911, and which were further diminished in 1949.

I wonder whether the country was aware of what happened. As the law runs, the House of Lords has the technical power, by passing an appropriate Prayer, to annul any Statutory Instrument, regardless of its importance and regardless of the wishes of this House.

The Chairman

I think that the hon. Gentleman is going rather beyond the present Amendment in discussing the Statutory Instruments Act.

Mr. Fletcher

With great respect, Sir Charles, I think that I am in order because Clause 2 (8) provides, in effect, that Treasury power to increase the fiduciary issue up to two years shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament. The object of this Amendment is to take out, for the purposes of this Bill, the ordinary operation of the Statutory Instruments Act, 1946, and to curtail it. Therefore, if this Amendment is accepted—as I hope it will be, because it is a very serious Amendment—the effect will be, pro tanto, that of the modification of the Statutory Instruments Act, 1946. With great respect, therefore, Sir Charles, I submit that I am in order in addressing these arguments on this occasion, because this Bill is in the nature of a money Bill and affects the finances of the country. It is not unreasonable to ask the Government to accept this Amendment. Statutory Instruments dealing with finance are in a different category from other Statutory Instruments falling under the Act.

I hope that I am not wearying the Committee, but I was trying to explain the law as it stands with regard to Statutory Instruments. I was going on to say that another matter which seems to me of great significance is that, in fact, the House of Lords has never as yet ventured—indeed, I am tempted to say dared—to pass a Prayer to annul any Statutory Instrument of any kind.

That is a matter which ought to be underlined because considerable time has now elapsed since we have had this experience of delegated legislation, and for over six years there was a Government in office which had not a majority in the other place; and, therefore, it would have been open to the other place, on various occasions, had it been so minded, to wreck or seriously interfere with the legislation and administrative programme of a Government to which it was hostile. That opportunity may occur again before very long.

I believe, therefore, that there is a convention in the course of growing up the effect of which is that the House of Lords does not exercise its powers to veto Statutory Instruments. I would hope that we have reached a stage in our Parliamentary conventions similar to the convention which had grown up for about 150 years before the House of Lords threw out Mr. Lloyd George's Finance Bill of 1909 and produced the constitutional crisis of 1910 and 1911.

Be that as it may, it does not seem to me good enough that we should rely on constitutional conventions because if a constitutional convention should be observed in the breach rather than the observance, as was the case in 1909, it leads to unfortunate constitutional crises which are better avoided if we can do so. Therefore, while I take the view that it is very unlikely and would certainly be quite unwarrantable for the House of Lords ever to attempt to exercise the power which this Clause of the Bill, as it stands, will confer upon it, I think it will be much better, in the interests of honesty, reality and common sense to exclude the possibility.

If we were to do so we should not be doing more than restoring the de facto position, namely the kind of position as it was under the Parliament Act, 1911. After all, it is commonly accepted that the House of Lords has some very desirable functions to perform in our constitutional arrangements. It is also accepted that there should be a complete limitation on the powers of the other place to interfere with the exclusive right of this House to deal with what are broadly referred to as money Bills.

That is the phrase intended in general parlance, though perhaps not in strict legal theory, to cover not merely Bills which impose taxation but also Bills and Statutory Instruments passed under Bills which affect the economy and financial arrangements of the realm. This Bill is quite clearly of that character. Therefore, it seems to me that the Bill as it stands without this Amendment will be a monstrosity and a contradiction of the constitutional arrangements about which we have had at least one major crisis and about which we do not want any more.

It seems to me that the sensible, prudent and statesmanlike course for the Government to take today would be to assent to the arguments which have been addressed and to accept the Amendment because the limitation which we want to impose in the Bill is not on something which is required by the Government or intended to be acted upon. Or is it intended that it should be acted upon? That is what I want to know. Is it intended that the House of Lords should be given a real power or not, because if that is so it is a really dangerous matter?

What the Government are asking for is either monstrously dangerous or totally unnecessary. I wish the Financial Secretary to answer. I hope that we shall not pass on from this matter until we have had a thoroughly searching inquiry into what are the intentions of the Government behind this proposal.

7.15 p.m.

Mr. Bence

I wish to support what has been said and I hope that my hon. Friends will divide on this Amendment if the Financial Secretary is not prepared to accept it. It is astonishing that in 1954 legislation can be enacted by this House, particularly, as my hon. Friend has said, on financial matters, that can have very serious effect upon the economy and can overthrow action taken by this House to expand or support the economy of the country. That is very dangerous indeed, and a retrogressive step.

That is particularly so when one remembers that in the other place, which has, I think, 700 Members, the quorum happens to be three, one of whom may be the Lord Chancellor, the second of whom may be a new Member being introduced and the third an old Member, perhaps in his 90th year—the new Member being perhaps in his 91st year; and those three noble gentlemen will be able to frustrate the declared policy of the House of Commons.

I hope that the Financial Secretary will appreciate that it will cause great disturbance among the mass of the people when they know that three noble Lords can frustrate the declared policy of the elected representatives of the people, especially when we have been moving forward, up to two years ago, at a rapid pace. We may now be moving backwards, unfortunately, as a result of the actions of the present Government. I beg the Financial Secretary to accept the Amendment.

Mr. Boyd-Carpenter

The right hon. Member for Battersea, North (Mr. Jay) was good enough to preface his observations with an agreeable personal reference to what he described as my reward for defending indefensible causes. If that be so, I must say that the one which fell to him some years ago would appear, on that reasoning, to have been given for defending indefensible causes far longer than I have done.

The right hon. Gentleman correctly stated the effect of his Amendment. As the hon. Member for Islington, East (Mr. E. Fletcher) said, it has the effect of taking out of the normal operation of the Statutory Instruments Act, in its application to this matter, the power of another place to annul one of the Orders made under this Clause. That is perfectly accurate, and would be the effect of the Amendment.

I do not quarrel very much with the degree of importance which the right hon. Gentleman attributed to the size of the fiduciary issue. I rather thought he was trying to have an unnecessary quarrel with me and that, perhaps subconsciously, he realised that we are really more or less of the same mind on this point.

I come to the question, which, I agree, is one of some interest, which is posed by the Amendment. I would suggest that the right general line of approach is that this is, after all, a Bill dealing with currency and bank notes. Whatever our views may be upon the relative authority of this House and another place, we ought not to use this Bill as a vehicle for effecting alterations in their relative authority and position. If there is a case for alteration in the relationship of the two Houses, that is a high constitutional matter which I should have thought would have been more appropriately dealt with in some major constitutional Measure.

I suggest that the right approach is that we should not seek to alter the relationship between the two Houses by any small sidewind such as this but that, if there be a case for its alteration in the broad sphere, it should be dealt with in the normal way. I do not think that the right hon. Gentleman would quarrel with that approach. Therefore, if one accepts that, we come to the question as to whether the Bill as it stands or the Bill as it would stand if the Amendment were put into it more correctly follows the general position and more correctly approaches the question of the existing relationship between the two Houses.

Mr. Jay

I hope that the right hon. Gentleman will not assume that I am agreeing with his argument up to now. I attempted to argue not on the ground of the existing situation, but on the real constitutional merits of the case.

Mr. Boyd-Carpenter

In that case I take the argument further. Whatever one may think of the general relationship between the two Houses, it is not the right way to tackle it to take advantage of one Measure dealing with only a very small fraction of the field in order to alter that relationship. That is the view that I would suggest is the right one. I certainly would not seek to attribute it to the right hon. Gentleman, but that is the spirit in which I approach the matter. During the period since the Second Reading, and in view of the speeches made then, I have made a careful investigation into the subject. As a result I approach this matter in that spirit.

I was most surprised when the right hon. Gentleman, as I understood him, apparently referred to the existing position as being that this House—and I quote his words—has sovereign power over economic and financial business. I am surprised to hear a former Fellow of All Souls use the word "sovereign" in so loose a sense. Even pardoning that lapse, it is not an accurate statement of the existing position. The best possible answer to the right hon. Gentleman was given by his hon. Friend the Member for Islington, East, who speaks with great authority on these subjects. He pointed out that the whole of the economic controls operated, in great degree by the Labour Government and in much less degree by the present Government, under the Supplies and Services (Transitional Powers) and the Emergency Laws (Miscellaneous Provisions) legislation on the basis that the Orders made under the authority of that legislation are subject to annulment in either House.

That is the existing position. I do not seek to make a party point of it, but it is an existing position brought into being by legislation for which righthon. and hon. Gentlemen opposite were responsible. That is the fact. I propose to remind the Committee of other examples. We can start from the fact that that great body of authority in matters financial and economic which is embodied in the Supplies and Services and Emergency Laws legislation gave to another place equal powers with this House, and that that was enacted under the Labour Administration.

That being so, it is nonsense for the right hon. Gentleman to suggest that the existing position is that this House has, as he put it, sovereign power over economic and financial business. The right hon. Gentleman is at liberty to take the view that it ought to be; that is another matter which we can discuss on another occasion. That as a statement of the existing position simply does not stand up to analysis.

I carry the point a little further. I do not want to inflict on the Committee again the exact precedence of this subject of currency and bank notes. I need only remind hon. Members that under the Act of 1928, so far as one can judge, this matter of extending after two years the limit of fiduciary issue depended upon legislation in which another place would take part, and the position was the same under the Defence (Finance) Regulations. Therefore, we start on the basis that on this topic of the control of the size of the fiduciary issue another place has had powers broadly equal to this House, subject only to the qualification of the Parliament Act.

But the matter does not by any manner of means stop there. I have collected a number of Measures in which power to make delegated legislation was allowed with control given to both Houses. The one point in common that all those Measures have is that they were all Measures enacted under the Labour Administration. Therefore, presumably, they can be free from any suspicion that they were tainted with some arrière-pensée, a desire, as the right hon. Gentleman said, to resuscitate another place.

Grants under Section 2 of the Inshore Fishing Act, 1945, are effected by Regulations subject to annulment in another place. Orders varying the rates of contribution under the National Insurance Act, 1946, are in the same category, as was the Order approving the supplementary scheme under Section 27. In another Act close to this Bill, the Coinage Act, 1946—and, after all, coinage is very close to currency—the Regulations making consequential modifications of enactments are subject to annulment in another place. The right hon. Gentleman will no doubt recall the Exchange Control Act, 1947, and Orders restricting transactions in securities—that is as economic or financial as one could find—which were subject to annulment in another place.

Orders imposing levies on industry under Section9 of the Industrial Organisation and Development Act, 1947, are in exactly the same position, as are Regulations for grants under the Fire Services Act, 1947. Regulations relating to transport stock and securities are in the same category in the Measure of which hon. Gentlemen opposite are so proud, the Transport Act, 1947. And, lest other right hon. Gentlemen responsible for other nationalisation Measures feel that they have been left out, the position is the same under the Electricity Act, 1947, which was followed a year later by the Gas Act. 1948. If we want another financial and economic matter over which we are told that this House has sovereign power, there is the Savings Bank Act, 1949. Under Section 3, the Order limiting deposits of the trustee savings banks and the provision under Section 9 for regulating the rate of interest paid, is subject to annulment by either House of Parliament.

This goes on until one comes to the Iron and Steel Act, 1949, which is another of the nationalisation statutes. The Regulations relating to the iron and steel stock are in the same category. If the right hon. Gentleman wants another—a Measure which by its very name comes within the category—there is the Miscellaneous Financial Provisions Act, 1950, Section 3. Therefore, it is simply not in accordance with the facts to suggest that the existing position is that another place is so completely kept out of financial and economic matters as not to have power to annul Statutory Instruments.

7.30 p.m.

Mr. Jay

Would the Financial Secretary not agree that those Measures do not include or affect actual Budget revenue, as this does in the matter of profit on the fiduciary issue?

Mr. Boyd-Carpenter

I do not know what the right hon. Gentleman describes as Budget revenue, but if one alters the rate of contributions under the National Insurance Act one imposes a charge on a large number of one's fellow-countrymen and one makes a relief or a charge on the Budget, as the case may be.

Mr. Jay

Surely the right hon. Gentleman knows that the contributions are paid to the Insurance Fund and not to the Exchequer.

Mr. Boyd-Carpenter

The right hon. Gentleman must be aware that the Exchequer, from time to time, has to make contributions to the Insurance Fund. This suggestion that we are altering the existing position just will not wash. The hon. Member for Islington, East who, with respect, knows far more about these matters than does the right hon. Gentleman, gave the complete case away on the subject of the existing position when he invited the attention of the Committee to the position under the Supplies and Services (Transitional Powers) Act, 1946.

Mr. E. Fletcher

I do not know whether the Financial Secretary is trying to drive a wedge between my right hon. Friend the Member for Battersea, North (Mr. Jay) and myself, but they have never dared to use any of their powers.

Mr. Boyd-Carpenter

I do not like reference to another place which uses pejorative words such as "they," but I understand that the noble Lords have not seen fit to exercise these powers for some time. That may be a somewhat double-edged argument from the point of view of the hon. Members. It should still any fears which he may have that the following of what has been, without disaster, the normal practice for a great many years will suddenly land us, for some odd and inexplicable reasons, in difficulties now. I am grateful to him for his assistance. He knows a great deal about the subject and has done most valuable work on the Select Committee on Statutory Instruments.

We come, therefore, to the position that unless we want to use currency and bank notes legislation as a means, by a side wind, to alter the relations between the two Houses, we are bound to reject this Amendment. On this Bill I am not concerned to argue the high constitutional case between the two Houses. Apart from anything else, I should require a good deal of time, as no doubt would hon. and right hon. Members opposite in reply. I suggest that that general issue does not arise. We are doing nothing by this Bill which alters the relationship between the two Houses or which would prevent another place, if it saw fit to act in such a manner, no doubt causing considerable inconvenience.

Mr. Jay

Will the right hon. Gentleman answer the plain question put by my hon. Friend the Member for Islington, East which so far he has evaded? Does he or does he not contemplate that the other place might use the powers given to them?

Mr. Boyd-Carpenter

I was coming to that point, and I hope that the right hon. Gentleman will admit that my argument is clearer and more comprehensible in the order which I have selected than it would be if I adopted the order which he kindly suggests to me.

I was saying that another place has already, and very largely under powers which flow from Measures passed by hon. Members opposite, the power if they so wish to act in such a way as to cause very serious consequences indeed. After all, the other place could annul practically all the Orders affecting all the major economic controls. That power hon. Members opposite thought it quite right to introduce, because they knew perfectly that it would be exercised responsibly. I see no reason why we should not show similar confidence in the sense of responsibility of another place to that which was shown by hon. Members opposite.

The emphasis throughout this debate has been on the actual act of annulment. It is perfectly clear that if either another place or this House, in fact, annulled an Order of this kind the consequences might be highly inconvenient. For that very reason, we are entitled to assume that this House and another place would act responsibly. But the purpose of this provision is not merely to give power to annul but also power to discuss, and that is somewhat relevant to this matter.

The right hon. Member fox Battersea, North spoke very good sense when he pointed out that to a considerable extent an increase in the size of the fiduciary issue was the symptom rather than the cause of inflation. Consequently, an Order of this kind may give a considerable opportunity for debate in either House, not with the intention of solemnly reducing the size of the fiduciary issue by an arbitrary act, but to allow analysis of the policy of the Government. That would be most conveniently effected on this Order.

What we are doing is fully in accordance with the relationship of the two Houses, as it has been laid down and continued under a variety of Governments for a number of recent years. Once one accepts that, it would be wholly wrong for us to use this Measure to effect a change, however small, by means so devious.

Mr. Roy Jenkins (Birmingham, Stechford)

Whether or no the Financial Secretary was elected to the Privy Council for defending indefensible causes, he has lost no zeal in presenting argument. He has made a case to show that my right hon. Friend the Member for Battersea, North (Mr. Jay) and other Members of the late Government possibly ought not to have been as zealous in granting the House of Lords powers in this direction. I was not a Member of the late Government, but I would say that whilst the late Government might have been suspected of many sinister designs which the Financial Secretary attributed to my hon. Friend the Member for Nottingham, South (Mr. Norman Smith) rather earlier, I do not think that anyone has ever thought that the Labour Government wished to increase the powers of the House of Lords.

The Financial Secretary says that the provision in this Bill is in accordance with a good deal of practice, but he did not show any strong arguments why that practice should be continued. It has been said already that this matter raises high constitutional issues. It has been a firm constitutional principle for 300 years that on the whole their Lordships should not be trusted with money matters. That has not been observed continuously. They rejected Mr. Gladstone's Paper Duty Bill of 1861, and there was the Finance Bill of 1909.

But the whole relationship between the Houses on matters of finance is not as close today under the Parliament Act, 1911, as is sometimes thought. Under that Act it is laid down that, as opposed to ordinary legislation, in the case of Money Bills their Lordships can only hold up those Bills for 28 days. But that does not by any means include all Money Bills, even defining Money Bills in the strict sense of Bills which raise taxation. Since 1911 rather less than half of the Finance Bills have received Mr. Speaker's certificate as being Money Bills.

It is obviously the fact that since their Lordships burned their fingers so much in 1909, it is pretty well outside the bounds of possibility that their Lordships should now reject a Budget or a Finance Bill. But that depends still upon convention and not upon law in the case of a great number of Finance Bills and probably of the more controversial ones. This Bill would not be protected by Mr. Speaker's certificate nor by the provisions of the 1911 Act. Indeed, after the Act of 1911 Mr. Speaker Lowther said that he would not have given his certificate if he had been called upon to do so under the operation of the Finance Act of 1909, which was followed by two years of constitutional crisis.

It is extremely important to maintain in all ways, and for it to go out that this House is intent on maintaining always, that money matters in a broad sense and not merely Bills which attract Mr. Speaker's certificate are the exclusive concern of this House and should not be discussed, let alone voted upon, by their Lordships' House. It is difficult to imagine a Bill which in a broad sense would foe more of a Money Bill than this one. It is unfortunate that in such a Bill, in 1954, a Conservative Government should be doing this—for, after all, it has been a Conservative House of Lords egged on by Conservative Governments which has created trouble in the past—and that this Government should put into a Bill a provision which, perhaps more in form than in substance, gives the House of Lords specific power to annul an order dealing with the size of the fiduciary issue.

In this case we are not asking the right hon. Gentleman to put something into the Bill specifically to cut down the powers of the House of Lords, but we are asking him not to leave in the Bill something which specifically invites the House of Lords to annul a regulation dealing with a matter as directly financial as the size of the fiduciary issue and the amount of currency to be circulated in the country. I think it is unfortunate that such a Bill should leave this House at present. It is unfortunate that such a Bill should go up as perhaps one of the last Bills to come from this Government under the leadership of the present Prime Minister. One does not wish to lend currency to rumours when an hon. Member so well informed and discreet

as the hon. Member for Louth (Mr. Osborne) is sitting opposite, but one cannot but pay great attention to what an hon. Member like the hon. Member for Louth has to say on these matters.

The Deputy-Chairman (Sir Rhys Hopkin Morris)

That matter does not arise on this Amendment.

Mr. Jenkins

I was, Sir Rhys, within two or three sentences of concluding. I was saying that, having regard to what the hon. Member felt it necessary to say last weekend, and having regard to what the Prime Minister has said and done about the House of Lords in the past, nothing could be more unfortunate than that one of the last Bills to go from this House under his Premiership should invite the House of Lords to take more powers.

Question put, "That 'either' stand part of the Clause."

The Committee divided: Ayes, 181; Noes. 139.

Division No. 23.]	AYES	[7.45 p.m.
Aitken, W. T.	Darling, Sir William (Edinburgh, S.)	Lancaster, Col. C. G.
Anstruther-Gray, Major W. J.	Donaldson, Cmdr. C. E. McA.	Leather, E. H. C.
Arbuthnot, John	Duncan, Capt. J. A. L.	Legge-Bourke, Maj. E. A. H.
Ashton, H. (Chelmsford)	Duthie, W. S.	Legh, Hon. Peter (Petersfield)
Assheton, Rt. Hon. R. (Blackburn, W.)	Fell, A	Linstead, Sir H. N.
Baldock, Lt.-Cmdr. J. M.	Finlay, Graeme	Llewellyn, D. T.
Baldwin, A. E.	Fisher, Nigel	Lloyd, Maj. Sir Guy (Renfrew, E.)
Banks, Col. C.	Fleetwood-Hesketh, R. F.	Lockwood, Lt.-Col. J. C.
Barlow, Sir John	Ford, Mrs. Patricia	Lucas, P. B. (Brentford)
Baxter, A. B.	Foster, John	Lucas-Tooth, Sir Hugh
Beach, Maj. Hicks	Fraser, Sir Ian (Morecambe & Lonsdale)	Macdonald, Sir Peter
Beamish, Maj. Tufton	Galbraith, Rt. Hon. T. D. (Pollok)	McKibbin, A. J.
Bell, Philip (Bolton, E.)	Galbraith, T. G. D. (Hillhead)	Mackie, J. H. (Galloway)
Bell, Ronald (Bucks, S.)	Garner-Evans, E. H.	Maclay, Rt. Hon. John
Bevins, J. R. (Toxteth)	George, Rt. Hon. Maj. G. Lloyd	MacLeod, John (Rose and Cromarty)
Birch, Nigel	Glover, D.	Macpherson, Niall (Dumfries)
Bishop, F. P.	Gomme-Duncan, Col. A.	Maitland, Patrick (Lanark)
Black, C. W.	Gough, C. F. H.	Manningham-Buller, Sir R. E.
Bossom, Sir A. C.	Gower, H. R.	Markham, Major Sir Frank
Boyd-Carpenter, Rt. Hon. J. A.	Grimston, Hon. John (St. Albans)	Marples, A. E.
Boyle, Sir Edward	Grimston, Sir Robert (Westbury)	Maydon, Lt.-Comdr. S. L. C.
Braine, B. R.	Hall, John (Wycombe)	Medlicott, Brig. F.
Brooman-White, R. C.	Harden, J. R. E.	Mellor, Sir John
Browne, Jack (Govan)	Hare, Hon. J. H.	Morrison, John (Salisbury)
Buchan-Hepburn, Rt. Hon. P. G. T.	Harrison, Col. J. H. (Eye)	Neave, Airey
Bullard, D. G.	Harvie-Watt, Sir George	Nicholls, Harmer
Bullus, Wing Commander E. E.	Hay, John	Nicolson, Nigel (Bournemouth, E.)
Burden, F. F. A.	Heald, Rt. Hon. Sir Lionel	Nield, Basil (Chester)
Butcher, Sir Herbert	Heath, Edward	Noble, Cmdr. A. H. P.
Campbell, Sir David	Hill, Dr. Charles (Luton)	Oakshott, H. D.
Carr, Robert	Hill, Mrs. E. (Wythenshawe)	O'Neill, Hon. Phelim (Co. Antrim, N.)
Cary, Sir Robert	Holland-Martin, C. J.	Ormsby-Gore, Hon. W. D.
Churchill, Rt. Hon. Sir Winston	Holt, A. F.	Osborne, C.
Clarke, Col. Ralph (East Grinstead)	Hope, Lord John	Page, R. G.
Cole, Norman	Hornsby-Smith, Miss M. P.	Peto, Brig. C. H. M.
Colegate, W. A.	Howard, Gerald (Cambridgeshire)	Peyton, J. W. W.
Conant, Maj. R. J. E.	Hulbert, Wing Cdr. N. J.	Pickthorn, K. W. M.
Cooper-Key, E. M.	Hutchison, Sir Ian Clark (E'b'rgh, W.)	Pilkington, Capt. R. A.
Craddock, Beresford (Spelthorne)	Jenkins, Robert (Dulwich)	Pitman, I. J.
Crookshank, Capt. Rt. Hon. H. F. C.	Johnson, Eric (Blackley)	Pitt, Miss E. M.
Crosthwaite-Eyre, Dol. O. E.	Joynson-Hicks, Hon. L. W.	Powell, J. Enoch
Crouch, R. F.	Kaberry, D.	Price, Henry (Lewisham, W.)
Crowder, Sir John (Finchley)	Kerr, H. W.	Raikes, Sir Victor
Crowder, Petre (Ruislip—Northwood)	Lambton, Viscount	Rayner, Brig. R.
Redmayne, M.	Spence, H. R. (Aberdeenshire, W.)	Vane, W. M. F.
Rees-Davies, W. R.	Spens, Rt. Hon. Sir P. (Kensington, S.)	Vaughan-Morgan, J. K.
Remnant, Hon. P.	Stevens, G. P.	Vosper, D. F.
Renton, D. L. M.	Stewart, Henderson (Fife, E.)	Wade, D. W.
Roberts, Peter (Heeley)	Stoddart-Scott, Col. M.	Walker-Smith, D. C.
Robinson, Roland (Blackpool, S.)	Stuart, Rt. Hon. James (Moray)	Ward, Hon. George (Worcester)
Rodgers, John (Sevenoaks)	Summers, G. S.	Ward, Miss I. (Tynemouth)
Russell, R. S.	Sutcliffe, Sir Harold	Waterhouse, Capt. Rt. Hon. C.
Scholefield, Lt.-Col. W.	Taylor, Sir Charles (Eastbourne)	Williams, Rt. Hon. Charles (Torquay)
Scott, R. Donald	Thomas, Rt. Hon. J. P. L. (Hereford)	Williams, Gerald (Tonbridge)
Scott-Miller, Cmdr. R.	Thomas, Leslie (Canterbury)	Williams, Paul (Sunderland, S.)
Shepherd, William	Thomas, P. J. M. (Conway)	Wills, G.
Simon, J. E. S. (Middlesbrough, W.)	Thompson, Kenneth (Walton)	Wilson, Geoffrey (Truro)
Smyth, Brig. J. G. (Norwood)	Thompson, Lt.-Cdr. R. (Croydon, W.)	York, C.
Snadden, W. McN.	Touche, Sir Gordon
Soames, Capt. C.	Turner, H. F. L.	TELLERS FOR THE AYES:
Spearman, A. C. M.	Tweedsmuir, Lady	Mr. Studholme and Mr. Allan.
Speir, R. M.
NOES
Allen, Arthur (Bosworth)	Harrison, J. (Nottingham, E.)	Popplewell, E.
Allen, Scholefield (Crewe)	Hastings, S.	Porter, G.
Anderson, Frank (Whitehaven)	Hayman, F. H.	Price, J. T. (Westhoughton)
Awbery, S. S.	Herbison, Miss M.	Proctor, W. T.
Bacon, Miss Alice	Hewitson, Capt. M.	Pryde, D. J.
Bartley, P.	Holman, P.	Rankin, John
Bence, C. R.	Houghton, Douglas	Rhodes, H.
Benson, G.	Hoy, J. H.	Richards, R.
Bing, G. H. C	Hughes, Hector (Aberdeen, N.)	Roberts, Albert (Normanton)
Blackburn, F.	Hynd, H. (Accrington)	Robinson, Kenneth (St. Pancras, N.)
Blenkinsop, A.	Hynd, J. B. (Attercliffe)	Ross, William
Blyton, W. R.	Irving, W. J. (Wood Green)	Shackleton, E. A. A.
Boardman, H.	Jay, Rt. Hon. D. P. T.	Short, E. W.
Bowden, H. W.	Jenkins, R. H. (Stechford)	Shurmer, P. L. E.
Braddock, Mrs. Elizabeth	Jones, David (Hartlepool)	Simmons, C. J. (Brierley Hill)
Brock, Dryden (Halifax)	Jones, T. W. (Merioneth)	Skeffington, A. M.
Brown, Thomas (Ince)	Keenan, W.	Slater, Mrs. H. (Stoke-on-Trent)
Burke, W. A.	Kenyon, C.	Slater, J. (Durham, Sedgefield)
Butler, Herbert (Hackney, S.)	Key, Rt. Hon. C. W.	Smith, Ellis (Stoke, S.)
Callaghan, L. J.	King, Dr. H. M.	Smith, Norman (Nottingham, S.)
Champion, A. J.	Lee, Frederick (Newton)	Snow, J. W.
Chetwynd, G. R.	Lee, Miss Jennie (Cannock)	Steele, T.
Clunie, J.	Lewis, Arthur	Summerskill, Rt. Hon. E.
Collick, P. H.	Lipton, Lt.-Col. M.	Taylor, Bernard (Mansfield)
Craddock, George (Bradford, S.)	Logan, D. G.	Taylor, John (West Lothian)
Cullen, Mrs. A.	MacColl, J. E.	Taylor, Rt. Hon. Robert (Morpeth)
Davies, Harold (Leek)	McGhee, H. G.	Thomas, George (Cardiff)
Edwards, Rt. Hon. Ness (Caerphilly)	McKay, John (Wallsend)	Thomas, Ivor Owen (Wrekin)
Evans, Albert (Islington, S.W.)	McLeavy, F.	Thornton, E.
Fernyhough, E.	MacPherson, Malcolm (Stirling)	Timmons, J.
Finch, H. J.	Mallalieu, E. L. (Brigg)	Wallace, H. W.
Fletcher, Eric (Islington, E.)	Mann, Mrs. Jean	Warbey, W. N.
Foot, M. M.	Mason, Roy	Watkins, T. E.
Forman, J. C.	Messer, Sir F.	Webb, Rt. Hon. M. (Bradford, C.)
Fraser, Thomas (Hamilton)	Mitchison, G. R.	Wells, Percy (Faversham)
Gibson, C. W.	Morley, R.	Wells, William (Walsall)
Glanville, James	Morris, Percy (Swansea, W.)	West, D. G.
Grenfell, Rt. Hon. D. R.	Mort, D. L.	Wheatley, Rt. Hon. John
Grey, C. F.	Moyle, A.	Wheeldon, W. E.
Griffiths, David (Rother Valley)	Murray, J. D.	White, Henry (Derbyshire, N.E.)
Griffiths, Rt. Hon. James (Llanelly)	Neal, Harold (Bolsover)	Whiteley, Rt. Hon. W.
Griffiths, William (Exchange)	Orbach, M.	Wigg, George
Hall, John T. (Gateshead, W.)	Oswald, T.	Williams, Rev. Llywelyn (Abertillery)
Hamilton, W. W.	Paling, Will T. (Dewsbury)	Williams, W. R. (Droylsden)
Hannan, W.	Pargiter, G. A.	Woodburn, Rt. Hon. A.
Hardy, E. A.	Pearson, A.
Hargreaves, A.	Peart, T. F.	TELLERS FOR THE NOES:
		Mr. Royle and Mr. Holmes.

Question put, and agreed to.

Mr. E. Fletcher

I beg to move, in page 3, line 18, to leave out "A minute of the Treasury," and to insert "An order."

The Deputy-Chairman

I think it would be for the convenience of the Committee if this Amendment were discussed with the next Amendment on the Order Paper, in line 19, leave out "laid before Parliament," and insert "a Statutory Instrument and shall be subject to

annulment in pursuance of a Resolution of the Commons House of Parliament."

Mr. E. Fletcher

The last Amendment dealt with the relationship between the House of Commons and the House of Lords. This Amendment deals with the relationship between Government and Parliament. It is, therefore, very convenient that we should have present in the Chamber both the Prime Minister and the hon. Member for Louth(Mr. Osborne). The relationship between the Government of the day and the House of Commons is a matter about which, as the Prime Minister knows, there has been a certain amount of speculation as the result of the speech made by the hon. Member for Louth two or three days ago, and on which we shall no doubt now be receiving some authoritative enlightenment.

The Prime Minister (Sir Winston Churchill)

Delusion.

Mr. Fletcher

We shall all know how to interpret that oracular interjection.

Mr. James Callaghan (Cardiff, South-East)

The hon. Member for Louth is waiting to take over.

Mr. Fletcher

This Amendment seeks to deprive the Treasury of the power to increase the fiduciary issue merely by making a minute. If the Treasury wish at any time, even temporarily, to increase the fiduciary issue it should do so, not by a mere minute over which the House of Commons has no control, but by Statutory Instrument laid before Parliament, upon which there could be a discussion and concerning which, if necessary, a negative Resolution could be moved.

We heard nothing in the course of the Second Reading debate to justify the claim of the Government to take—or to retain, if the Government so prefer to regard it—the right to change the fiduciary issue by minute. The object of this Amendment, also, is to ask the Financial Secretary to explain why it is still necessary—granted it has been the case in the past—that the Treasury should by minute be able to increase the fiduciary issue.

The Prime Minister would be the first to agree that it is always desirable, and particularly in these days, that there should be the most effective Parliamentary control over the Government of the day. Distinguished writers point out that in recent times the power of the Executive seems to be increasing at the expense of the House of Commons, and that it is an undesirable thing. It is always desirable that there should be adequate Parliamentary control over the actions of the Government and we do not approve of the tendency of the present Government to adopt this attitude towards the rest of the House of Commons. It would be simple for the Government to make a Statutory Instrument if they desire to change the fiduciary issue. Why should they claim the right to do so by minute?

The matter is of particular importance in these days when, if we are to believe the hon. Member for Louth, the resignation of the Prime Minister is impending. Is not that an additional reason why the House of Commons should have adequate control? All hon. Members of this House have the greatest admiration and affection for the Prime Minister. I may say with respect that today he is universally beloved, and a great many of us read with the greatest misgivings, disquiet and doubt the news which the hon. Member for Louth allowed to break loose—

Mr. Callaghan

Especially if the hon. Member for Louth takes over.

Mr. Fletcher

—on the country and the world this week-end. Whether he did so with any justification at the moment we do not know. I think we are entitled to know. The Government are asking for this power to increase the fiduciary issue by minute and surely we are entitled to know the intentions of the Government and the Prime Minister. Can we be left in suspense like this?

The Prime Minister

I am sorry I did not bring my hearing aid.

Mr. Fletcher

Hon. Members on this side of the Committee are always anxious to do everything possible to study the personal convenience of the Prime Minister.

8.0 p.m.

I very much hope that the Financial Secretary will take the Amendment seriously. It is most desirable that the House of Commons should keep continuous watch over the amount of the fiduciary issue. The object of the Amendment is to ensure that the Government of the day shall not be able to change the fiduciary issue without laying an Order which can be discussed in the House. It is particularly important at the present time that the House should have that control in view of the statement made at the week-end by the hon. Member for Louth about the intentions of the Prime Minister.

I was saying that in view of the great affection for the Prime Minister we are disturbed—

The Deputy-Chairman

The hon. Member's argument is very entertaining but, although it may not be tedious repetition, it is getting near it.

Mr. Fletcher

I do not want to explain, Sir Rhys, why I felt that on this occasion a modest amount of repetition would be permissible.

We are anxious that all Members of the Government shall have the opportunity to give any answer they can to the Amendment. I hope we shall now have an authoritative pronouncement from the Treasury Bench about whether there is any connection between the news which came from the hon. Member for Louth about the Prime Minister's intentions and the object of the Bill, which is to take away a very desirable measure of control of the House of Commons over the Government of the day.

Mr. Boyd-Carpenter

If I may disentangle that part of the speech of the hon. Member for Islington, East (Mr. E. Fletcher) which did not refer to my hon. Friend the Member for Louth (Mr. Osborne)—a feat of some intellectual difficulty—I shall endeavour to deal with the points of substance that he made.

The effect of the Amendment is to provide that the Treasury Minutes, by which are effected the variations from time to time in the permitted level of the fiduciary issue, should be turned into Statutory Instruments subject to the normal Statutory Instrument procedure.

I feel I am entitled to claim that by this Measure in general we give a greater degree of Parliamentary control than has been the case up to date. Under the provision which we debated a few minutes ago affecting the maintenance of the fiduciary issue above the base level for two years, we gave a power to proceed by Statutory Instrument, whereas during the war and under the Defence Regulations there has been no direct Parliamentary control at all. To that extent we are entitled to claim that we have paid some attention to what the hon. Member for Islington, East said as to the need to make sure that Parliament is properly informed.

But here we are not dealing at all with the provision for maintaining the fiduciary issue after two years at a higher level. We are concerned only with the individual variations, which, the right hon. Gentleman the Member for Batter- sea, North (Mr. Jay) will well recall, have to be made at different times of the year to meet the increased demand for bank notes at the time of public holidays. I suggest that that purely administrative act, one which has to be performed fairly frequently, is not one for which Statutory Instrument procedure would be very convenient.

I shall illustrate that by remanding the Committee what has happened in the last few weeks. Christmas is one of the occasions on which it is necessary to increase the fiduciary issue in order to provide sufficient notes for purchases during the Christmas shopping. It is equally the practice—it has been so for many years—to reduce the fiduciary issue again when the Christmas rush is over. On 2nd December, we made a Minute increasing the fiduciary issue to £1,625 million, and on 14th December to £1,675 million. We decreased it on 4th January to £1,625 million and decreased it again to £1,600 million on 12th January. I am in a position to take this opportunity to inform the House that, by a Treasury Minute made today, which will be subject to the normal procedure, the figure is being reduced to £1,575 million, which happens to be the figure in Clause 2 of the Bill.

That is an indication of how inappropriate the Statutory Instruments procedure would be to this particular form of administration. There have been five changes since 2nd December, and the normal period of 40 days in which a Prayer can be moved against it has not yet expired in the case of the first. That is an indication of the fact that this is not delegated legislation in any real sense at all. It is a necessary adjustment by the Treasury of the size of the fiduciary issue to meet the varying need for bank notes at different times of the year.

The confusion which would result from the Statutory Instrument procedure can be contemplated if one thinks of the Select Committee concerned having to deal, not merely with an Order such as would have been, made under this procedure today, but also with the four previous ones, all of which would still under the time limit be subject to Prayers. I think that indicates the nature of these proceedings and, therefore, the inappropriateness of the Statutory Instrument procedure.

The practical point is that the House should be informed. The House is informed both by the making of a Minute and, in practice, as hon. Members who follow the matter will recall, almost always by a reply to a Question by my right hon. Friend. Therefore, the knowledge of what the size of the fiduciary issue is at any time is very freely available to hon. Members. That I think is right, but I think that is all that is necessary, and, therefore, although I have from time to time expressed a certain bias about this Statutory Instrument procedure, I really cannot, even with that bias, convince myself that it is applicable in this particular case.

Mr. E. Fletcher

In view of the very courteous and cogent answer which the Financial Secretary has made to part of my speech, I do not propose that the Prime Minister should be inconvenienced by pressing this matter further on the Committee, and I therefore beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.

Clauses 3 and 4 ordered to stand part of the Bill.

Bill reported, without Amendment; to be read the Third time Tomorrow.