§ 42. Mr. Osborne
asked the Chancellor of the Exchequer what replies were made to him by the representatives of the banking organisations in response to his appeal for no relaxation of the credit squeeze; whether he is now satisfied that the nationalised industries and the big borrowers are being treated with the same severity as the small borrower; and if he will make a statement.
§ Mr. H. Macmillan
I would answer these Questions by referring hon. Members to the statement published on 24th July after my meeting with the representatives of the banking organisations. I am circulating a copy of the statement in the OFFICIAL REPORT.
§ Mr. Osborne
Is my right hon. Friend aware that some of the small traders, while they are prepared to carry their share of the burden of the squeeze, and will willingly do so if it is a cure for inflation, have a feeling that the bigger borrowers and the nationalised industries are not bearing an equal proportion of the burden? Will my right hon. Friend assure them on that one point?
§ Mr. Macmillan
As my hon. Friend knows, new arrangements for nationalised industries are being made and will come in as the Finance Bill becomes law. They will receive capital from the Exchequer, and they will, therefore, be subject to that degree of control. In general, while, of course, any form of restriction of credit is a burden to those who wish to receive it, I am absolutely convinced that it is in the broad national interest that we should not relax in our efforts to reduce the total amount of credit available.
Mr. H. Wilson
As the communiqué to which the Chancellor referred tells us almost nothing, would the right hon. Gentleman say whether it is a fact or is not, as suggested in the Financial Times 1143 this morning, that he gave a pretty broad hint to the distinguished gathering he called together on that occasion that there would be no further increase in the Bank Rate?
§ Mr. Macmillan
The communiqué set out what it was thought right to set out as the result of the discussions. I am rather surprised that it should be regarded as something not allowed to a Chancellor of the Exchequer that he should have discussions with bankers. Neither bankers nor Chancellors of the Exchequer are such mysterious people that they cannot have a private talk.
Is the right hon. Gentleman aware that we all welcome the fact that he called together that meeting? Is he not aware that he should not feel himself bound by old conventions, such as that his only approach to the City must be through the Bank of England? But if the right hon. Gentleman holds another meeting, will he draw the attention of the Bank of England to the fact that it could help him a great deal more in what he is trying to do if it would operate on the cash basis of the joint stock banks instead of relying purely on the liquidity ratio?
§ Mr. Macmillan
I receive every possible assistance from the Governor and the other authorities of the Bank, who work in close harmony with the Treasury. I am glad to know that in general my reputation is rising in these matters.
§ Mr. Macmillan
I have put forward certain additional measures, the first of which was the £76 million reduction in expenditure, but they are not always well received by those who urge me to reduce the amount of the floating debt.
Following is the statement:The Chancellor of the Exchequer, with the Economic Secretary to the Treasury, today met the Governor and Deputy Governor of the Bank of England, the President of the British Bankers' Association, the Chairmen of the eleven London Clearing Bankers, the Chairmen of the Accepting Houses Committee, the Chairman of the Committee of Scottish Bank General Managers, the Chairman of the Northern Ireland Bankers' Association, the Chairman of the British Overseas Banks 1144 Association, and representatives of the Foreign Banks and Affiliated Association and of the American banks in London.The meeting discussed the economic situation. The Chancellor emphasised that the control of inflation was an essential condition of success in dealing with all other economic problems. It was recognised that effective action could only be taken if the Government and the banking organisations worked in close co-operation. The Chancellor reviewed the measures taken by the Government before, in and since this year's Budget, including measures influencing the supply of money. He indicated that the Government would press on with these measures, the effectiveness of which would increase as the year went on. The Government recognised the valuable part already played by the banking system in maintaining credit restrictions in the face of considerable difficulties. But the Chancellor asked that the contraction of credit should be resolutely pursued and that there should be no relaxation in the present critical attitude towards applications for bank finance. The representatives of the banking organisations took note of the Chancellor's statement and undertook to meet the Chancellor's wishes and the national needs.