HC Deb 12 July 1955 vol 543 cc1735-7
41. Mr. S. N. Evans

asked the Chancellor of the Exchequer what directives have been given to the Bank of England with regard to bank overdrafts.

Mr. R. A. Butler

When the Bank Rate was raised on 24th February, I told the House of the need to moderate excessive internal demand. In the course of that statement I said that I was asking the Capital Issues Committee and the banks to adopt a more restrictive attitude towards finance for hire purchase. Otherwise I have not made any specific requests to the Bank of England on the subject of advances policy: but the terms of their letter published on 30th June show that the bankers are well aware of the significance of my statement and of the increase in the Bank Rate.

Mr. Evans

Would it not be helpful for the Chancellor to give a more positive direction, having regard to the balance of payments problem? Is it not important that firms concentrating on exports should have preference over those which are solely concerned with the home market?

Mr. Butler

I understand the reason for the hon. Member's statement, but I am perfectly well satisfied that the banks are aware of the Government's policy in this respect, of the importance of exports and of preserving the maximum possible degree of investment, and particularly of the importance of having strict monetary control. I do not think that in this country we can operate, as in some other countries, so much by direction as by agreement.

Mr. Gaitskell

How can the banks be aware of the Government's policy in this matter if the right hon. Gentleman refuses to say anything about that policy, and would it not be better—unless he has made some secret communication to them —for him to say in definite terms, and in public, what kind of borrowing he wishes to discourage and what kind he wishes to leave unchanged?

Mr. Butler

The banks have observed my statement in this House and have perhaps read it even more carefully than has the right hon. Gentleman. We are in contact with the Bank of England and the other banks, and I am perfectly satisfied that they are well aware of what is in the mind of the Government and of the Government's policy.

Mr. H. Fraser

Will my right hon. Friend call the attention of the boards of the nationalised industries to his remarks? Is he not aware that they are devouring credit which might be available to other borrowers, and by upsetting the balance they are having an adverse effect on the export industries?

Mr. Butler

It is important to realise that the public sector, as it is called, has an important responsibility in investment, and it is also important to realise that its claims must be taken pari passu with the rest of the economy.