HC Deb 21 February 1956 vol 549 cc175-7
19. Mr. Moss

asked the Chancellor of the Exchequer whether he is aware that many British companies have become self-financing; and what consideration he has given to this fact in estimating the effectiveness of the Bank Rate and credit squeeze upon large concerns.

Mr. H. Macmillan

I would refer the hon. Member to my statement of 17th February, in which I dealt with this aspect.

Mr. Moss

Has the right hon. Gentleman considered the statement made by the Chairman of Lloyds Bank that one of the causes of the limitation of the efficacy of monetary measures is the way in which companies are financing themselves out of their profits? Has he anything more to add to his statement of 17th February, when he said: I would also appeal to businessmen who are able to finance investment out of their own resources to apply the same tests as to the timing and rate of their investment as if they had to borrow."—[OFFICIAL REPORT, 17th February, 1956; Vol. 548, c. 2677.]

Mr. Macmillan

Yes, Sir. I feel sure that they will respond to that appeal. I would point out that the increased liquidity of a great number of our companies is due to their having followed the principle of limitation of dividends for so many years.

29. Dame Irene Ward

asked the Chancellor of the Exchequer, in view of the fact that hardship is caused to small customers who are asked to reduce bank overdrafts which were legitimately granted before the credit squeeze, if he will take steps to ensure that his policy is so framed and interpreted so as to protect these people who cannot safeguard themselves.

Mr. H. Macmillan

No instructions have been given to the banks as to how they should reduce their outstanding advances. This has been left to their discretion. But I can assure my hon. Friend that, as I said yesterday, the banks are not concentrating on what is called "the small man."

Dame Irene Ward

While fully supporting my right hon. Friend's new policy, may I ask him if he will try to ensure by every possible means that the small man is not asked to make greater sacrifices than the big man, who is more able to make a contribution?

Mr. Macmillan

Yes, Sir. I think that that is fair.

Viscount Hinchingbrooke

Now that the Bank Rate has risen to a satisfactory level, could not my right hon. Friend review this special and selective bank squeeze in order that bankers may not in due time turn into Treasury servants?

Mr. Macmillan

I do not think they show any signs of doing that.

Mr. J. T. Price

When the right hon. Gentleman is trying to assess whether or not the credit squeeze is successful from the Treasury point of view, will he bear in mind that some merchant banks are now advertising for public subscription of money at 7 per cent. and lending it in the City of London at a black market rate of 11 per cent.? Has he taken that into account?

Mr. Macmillan

If that is true—and I must accept the hon. Gentleman's statement—I shall be very glad if he will give me some information of it; but all it would seem to show is that at prices of 11 per cent. some of these marginal or inessential projects will probably not proceed.