§ 41. Mr. Osborneasked the Chancellor of the Exchequer if he will reduce considerably the Bank Rate in view of the fact that it no longer acts in a major deflationary way because of the existing rate of taxation but is adding to the financial burdens of local authorities and impeding business expansion that ought, in the national interest, to take place.
§ Mr. H. MacmillanMonetary policy remains flexible and the Bank Rate will be varied as circumstances require. But my hon. Friend underrates the deflationary effect of the present level of interest rates.
§ Mr. OsborneWhat is the use of controlling the cost of money through a high Bank Rate and at the same time leaving volume uncontrolled? What steps will my right hon. Friend take to control volume so that price control can be effective? Is he not aware that the present policy in some respects is undoubtedly having an influence on the cost of living?
§ Mr. MacmillanThese deep subjects are difficult to deal with by question and answer. There are some who say that it is possible to make money scarce without making it dear. There are some who say that to make it dear does not help to make it scarce. All I can say is that the trend is that the various weapons, of which monetary policy is one, will be successful in overcoming our difficulties.
Mr. H. WilsonSince this deep subject was referred to in a number of speeches from this side of the House during the debate on the Finance Bill and the Chancellor did not even deign to enter the debate to reply, will he answer these questions today? First, is he aware that the high Bank Rate is both increasing Government expenditure very heavily and increasing our remittances overseas; second, while we on this side do not accept his over-reliance on monetary weapons, is he not aware that the Bank Rate is not having the effect which he wants it to have on bank advances, and will not do so as long as the Bank of England continues to keep the Joint Stock Banks replenished so far as their cash basis is concerned?
§ Mr. MacmillanThat series of questions is no nearer to the possibility of 874 dealing with this matter by question and answer than those raised before. All I say is that both sides of the House accept the view that the Bank Rate is one of the methods of control which it is wise to use—monetary policy is partly effected by the Bank Rate and partly by a general policy. I am not saying that we yet have absolute proof about whether the reintroduction of these methods will succeed or not, but I am very confident, as a result of the last few months, that we are beginning to overcome our difficulties, so long as we do not throw unnecessary spanners into the works.
Mr. H. WilsonSurely the Chancellor is aware that this anxiety is shared in all parts of the House and that there is great anxiety in the City of London among people of different views about whether this Bank Rate policy is working. Since the right hon. Gentleman says that he cannot answer it in question and answer, will he, having regard to the very grave position of sterling today, take an early opportunity of making a statement at the Dispatch Box in relation to sterling, and particularly the problem of the Bank Rate?
§ Mr. MacmillanThe last question which the right hon. Gentleman has asked has not been in the general public interest and has tended to accentuate our difficulties rather than to help them. I repeat that the results of the gains which we have made in the reserves and the results of the gain in the balance of payments in the last five months give us great confidence in the future.
§ Mr. GaitskellIf things are going as well as the Chancellor suggests, why does he keep on making speeches about coming disaster?
§ Mr. MacmillanI do not say that they are going so well. I say that if we use these weapons sensibly and carry on a wise policy, we shall overcome our difficultles.