London Clearing Banks (Advances) (Hansard, 26 June 1958)

§ 31. Mr. Cronin
asked the Chancellor of the Exchequer to what extent the average level of aggregate bank advances, during the eight months since the banks received the relevant directive from his predecessor last September, has been less than that of the preceding eight months; and by what approximate proportion.

§ Mr. Simon
The total of advances of the London clearing banks was 1 per cent. lower on the average for the eight months from October, 1957, than for the corresponding period a year earlier; excluding advances to the nationalised industries, it was about ½ per cent. lower.

§ Mr. Cronin
is not the lower level of bank advances due to the business recession and the falling off of capital investment rather than to the Chancellor's September directive? Would not now be an appropriate time to withdraw that?

§ Mr. Simon
As for the first part of the hon. Gentleman's supplementary question, I do not think there is any doubt that it was the reaction of the bankers in response to the request by my right hon. Friend the Member for Monmouth (Mr. P. Thorneycroft) which had the effect of 596 restricting bank advances. As for the second part of the supplementary question, as my right hon. Friend indicated the other day, his policies are flexible, and he is watching the economic situation to see at what moment it would be appropriate to change any course on which we may be set at the moment.

Mr. H. Wilson
Yes, but is not the hon. and learned Gentleman living in a dream world about this? Does not he realise that if the credit squeeze were taken off altogether now there would be no significant increase in borrowing—[HON. MEMBERS: "Oh."]—for essential industrial purposes—because the Government have dealt such a blow to the psychology of industry and the economic community on this question of expansion against stagnation?

§ Mr. Simon
No. I do not think that that is the right way to put it. It accords very curiously with the request made by the right hon. Gentleman, a short time ago, that the Capital Issues Committee should be kept intact.

Mr. Wilson
On the contrary, does not the hon. and learned Gentleman realise after all that has been said—we shall have a lot more to say to him shortly on this issue—that what is needed in this country is some means of distinguishing between essential and inessential borrowing as soon as expansion is resumed? The trouble now, under this Government, is that with stagnation very few people want to borrow at all.