HC Deb 23 June 1960 vol 625 cc656-7
11. Mr. C. Osborne

asked the Chancellor of the Exchequer, since the purchasing power of money has fallen to one-third of its pre-war value, and the price of the £2,000 million 3½ per cent. War Loan has fallen from over par to its lowest ever of 60½ per cent., thus depriving holders of nearly 40 per cent. of their capital, and about 80 per cent. of the real value of their investment, what new steps he proposes to take to improve the value of all trustee securities; and if he will make a statement.

Mr. Amory

Ultimately, the maintenance of the value of all fixed-interest securities depends upon the avoidance of inflation. In this the Government are determined, as recent events have shown, to play their part. In the short term, fluctuations in market values of fixed-interest securities depend upon the movement of the level of interest rates.

Mr. Osborne

Since the higher Bank Rate produces so many social evils, cannot inflation be checked by making money scarcer rather than dearer? [HON. MEMBERS: "Reading".] I am reading something that is important. Is there no other way of making money scarcer than by increasing the bank special deposits, which cause banks to have to sell gilt-edged and therefore depress the market still further? Finally, is it not true that there is no hope for the holders of trustee stocks until the Government really cut expenditure, so that we are a net saver of money and start to reduce the National Debt? When is that happy day going to come?

Mr. Amory

My hon. Friend will hardly expect me to answer all the questions he has asked in the short time available in Question and Answer. I assure him that the object of the increase in the Bank Rate is to effect stability in the economy and therefore, in the long run, to help exactly the people that he has in mini more than any other section of the country. That is the whole object of the exercise, and nothing else. Therefore, I cannot agree with him that an increase in the Bank Rate has the net effect of imposing social hardship on our people. When it is used effectively its net effect is precisely the opposite.

Mr. Jay

But is not the whole trouble due to the fact that the Government have left themselves practically no weapon of control except a higher interest rate and, therefore, that whenever we have a balance of payments crisis the Government's only remedy is to slow down investment, both public and private?

Mr. Amory

I do not agree with the right hon. Gentleman.

Mr. Jay

Then why is the Chancellor raising the Bank Rate?

Mr. Amory

In my opinion, the effect of this increase in the Bank Rate will not be seriously to affect the present level of investment expenditure in industry. Investment expenditure at present has very great momentum, and I think that that will continue. As for the more important projects of industrial investment, I think that they will continue to go forward.