§ Motion made, and Question proposed, That the Clause stand part of the Bill.
§ 3.32 p.m.
§ The Financial Secretary to the Treasury (Mr. Henry Brooke)
It is my duty to detain the Committee to point out that in one respect this Clause differs from similar Clauses in previous Consolidated Fund Bills which the Committee has been accustomed to pass. If hon. Members will look at subsection (3) they will find that on this occasion the provision which has hitherto restricted to 3 per cent. the rate of interest payable on Ways and Means advances is omitted. The Clause deals with the Floating Debt, and far and away the greater part of that is in Treasury bills. A small part is normally in day-to-day ways and means advances, as they are called, and hitherto there has been this restriction, on the smaller part but not on the larger part, to a maximum rate of interest of 3 per cent. That restriction is omitted from this Bill, and it is done for a good and substantial reason.
At present, the current market rate for day-to-day money is above 3 per cent. It would, therefore, be unreasonable to expect to borrow money at 3 per cent. or under. If, therefore, we are to continue to enact a maximum rate of 3 per cent. on ways and means advances the result will be that we shall not get the money, and instead we shall have to borrow on Treasury bills at a rate which is now over 5 per cent. Therefore, this restriction, which has been in former Acts, designed, no doubt, to save money, would cost money if we were to retain it now. For those reasons, the Government have decided on this occasion, to present the Bill without that restriction in it.
I felt it was obligatory on me to hold up the proceedings of the Committee to explain this because the Consolidated Fund Bill is unlike other Bills in that it 1252 cannot be presented until just before it is discussed on Second Reading and in Committee. That, I thought, put a special obligation on me to inform the Committee of this change. In addition, I took the step of informing right hon. Gentlemen opposite, before the publication of the Bill, that this was our intention, because it would have been unreasonable to have asked the Committee to agree to a change like this point blank. I trust I have made out the case that we are acting reasonably in omitting the restriction on this occasion.
§ Mr. Harold Wilson (Huyton)
Like the Financial Secretary to the Treasury, I do not seek to detain the Committee long on this point since there is a very important debate to follow, and the time for that is already somewhat limited—
§ Mr. Wilson
—but since, as the right hon. Gentleman has pointed out, this involves a breach of precedent, which goes back to 1941, I think, it is only right that the Committee should have an opportunity of considering it. As he said, the Consolidated Fund Bill cannot be printed until after Report of the Estimates. That means that the Committee might have had no opportunity to spot this change in practice but for the right hon. Gentleman's courtesy in informing some of us and in informing the Committee now.
This small but significant change shows what a tangled web Government weave when they try to control the whole economy by means of the monetary weapon, and the monetary weapon alone. The right hon. Gentleman has not told us how much borrowing on ways and means at a rate above 3 per cent. will cost the taxpayer. Clearly, since, as he said, ways and means advances are only a small part of the total borrowing in the period covered by the Bill, it will be only a small part of the total cost to the taxpayer of the Government's action in raising the Bank Rate. It may be difficult for him to say how much it is, but I hope that at some stage he will tell us a bit more about that.
He made it clear that he could have borrowed the whole amount on Treasury bills, the rate of interest on which is not controlled and has not been controlled by 1253 any provisions of the Consolidated Fund Acts. The right hon. Gentleman rather sounded as though he was taking a little credit to himself and the Government for having saved the taxpayers' money by this alteration in the form of the Bill. To use that sort of argument is to behave rather like a cutpurse who stops a passerby and robs him of all his possessions, but finally gives him his bus fare home and then expects to receive gratitude as a result. Here the Government are increasing the cost very considerably to the taxpayer by the rise in the Bank Rate and trying to save a very small amount of it by enabling the Government to borrow on ways and means advances perhaps at 4¾ per cent. or some such figure instead of borrowing on Treasury bills at 5¼ per cent.
What he has not explained—and I do not press for an answer now—is why he has not followed the precedent which, I think, was followed before 1941. Before 1941, there was an interest limitation in the Consolidated Fund Acts. I think it was at that time 5 per cent. Since 1941, it has been 3 per cent. We understand that the right hon. Gentleman cannot now continue with the 3 per cent. figure, but we do not understand why he has not put in some other figure, such as 5 per cent. or 6 per cent. That might have been more in line with the current Bank Rate.
Does this mean, perhaps, that the Government intend to raise the Bank Rate still higher during the currency of this period of borrowing? My own view would be that the Government do not at present intend so to act because they never know more than a day or two ahead what they are going to do, so I should not imagine that the Chancellor of the Exchequer has decided to take action of that kind, though it is probably true that the Chancellor has it in mind that he may have to.
It would have been better, I think, had the Government, in making this breach with practice, set some ceiling figure, because for all we know we are letting the taxpayer in for paying 6 per cent. or 8 per cent. or 10 per cent. or whatever figure it may be to which the Chancellor next chooses to raise the Bank Rate, after his interim Budget of 17th April breaks down and he has to take more emergency action.
1254 I shall not detain the Committee further, but, in appealing to my hon. Friends not to protract the debate, unless they feel especially moved by this matter, I feel I should say to the right hon. Gentleman that we shall reserve our right to debate the whole question of the cost of the higher interest rates when we consider what I may call the interim Budget of 17th April. I think that that is a better occasion for debating this whole question than this afternoon, because then we can look at the picture as a whole. Already there is an increase of about £100 million in the annual interest payment compared with 1951. It is a fantastic sum when one bears in mind the recent mean economies of the Government which are causing so much hardship.
If we are to let this matter go this afternoon without further comment, I should like to ask the Financial Secretary whether he will give an undertaking that between now and the Budget debate we shall have information, or will ask the Chancellor, when he opens his Budget on 17th April, that sufficient information will be available to the House on that occasion, to enable us to debate the consequences of these increases in interest rates to the fullest possible extent. In particular, we should like an estimate from the Government of what the cost of servicing the National Debt is likely to be in the financial year which we shall shortly be entering. If the right hon. Gentleman can give an undertaking that we can have a much fuller debate of this very important point on that occasion, I think that the Committee will be willing to let the point go until then.
§ Mr. H. Brooke
As far as I know, a wide debate on these matters will be in order in the usual days' debates following the Budget. I will certainly bring to the attention of the Chancellor of the Exchequer what the right hon. Gentleman has just said about his desire for further information and for a full opportunity to pursue these matters. I am obliged to him for not holding up the proceedings on the Bill now. All I would add is that anyone who drew any conclusion from Clause 3 (3) about the future course of the Bank Rate would be rather unwise.
§ Question put and agreed to.1255
§ Clause ordered to stand part of the Bill.
§ Clause 4 ordered to stand part of the Bill.
§ Bill reported, without Amendment.
§ Motion made, and Question proposed, That the Bill be now read the Third time.