§ In our efforts to check the inflation, the Government have relied very largely on monetary policy. The extent to which we have done so is, of course, the subject of controversy. I will not burden the Committee with an account of the course of Bank Rate and other rates, or the movements in bank deposits and advances. The facts and figures are fully set out in paragraphs 34 to 38 of the Economic Survey. The question is, what conclusions are to be drawn from the experience of last year? How shall we apply those conclusions in 1956?
§ On the debit side, I put the increased cost of servicing the National Debt, including that part of it which is held abroad, and the time that it takes for monetary measures to achieve the desired results. On the credit side, I claim that monetary policy has, in fact, operated with increasing effect as the year proceeded, thanks to the persistent pressure exercised on the monetary system, both by the interest rate and by the control of credit through the banks and the Capital Issues Committee.
§ Of course, since this technique had not been used for many years—and even then 858 under vastly different circumstances—there are many new problems, especially as between the Exchequer and the monetary system. But two things at least are plain. First, no one has yet found an easy way to restrict credit without high interest rates. I am told that if I appoint a committee, I may find out how to do it, but I am not altogether sanguine about this. Secondly, monetary policy cannot "go it alone". It can only operate effectively in conjunction with fiscal and other measures to check demand, taken by the Government of the day and supported by an informed public opinion.