HC Deb 20 December 1961 vol 651 cc1442-52

7.29 p.m.

Mr. G. R. Mitchison (Kettering)

I beg to move, That this House declines to approve the ratification of the Agreement between Her Majesty's Government and the Swiss Federal Council for a loan by Switzerland to the Government of the United Kindom. The Motion relates to what is only one of the minor peccadilloes of the Government and I trust that it will draw satisfactory comment from the Government and, in due course, be withdrawn. Meanwhile, it is our only method of raising a matter which is of importance from two points of view.

First, the Agreement between the British and the Swiss Governments was made as long ago as 20th October, and in connection with it there have been two breaches of what is commonly called the Ponsonby rule. This is a rule which is followed, save in exceptional cases—and this is no exceptional case—a rule which prescribes that a treaty, however unimportant or however apparently important, shall be laid for twenty-one days in order to give the Opposition—this was the reason given by Mr. Ponsonby himself on 1st April, 1924—or any party the opportunity of getting a discussion on the treaty in question.

Mr. Ponsonby in stating this, which has been the practice ever since, stated it as an alternative to legislation and made it perfectly clear that the Government would not presume to decide which treaties were important and which were unimportant, and would provide debating facilities accordingly. We have been unable to get any opportunity other than by putting down this Motion, and we have, therefore, by the delay in laying this treaty before the House—laying it actually after the last business statement relating to this Session had been made—been deprived of what we were intended to have under the Ponsonby rule, namely, time to consider and, if we so chose, time to debate.

That is a point of real constitutional importance. I was present in the Chamber the other day when the Lord Privy Seal was here, and I hope I am not doing him any injustice when I say that he appeared to me to recognise its real importance.

The Lord Privy Seal (Mr. Edward Heath)

indicated assent.

Mr. Mitchison

I am glad to notice the right hon. Gentleman's assent.

On the merits of the matter, we asked one essential question which the Lord Privy Seal was naturally unable to answer in the very short time available then. I hope that we shall now shortly dispose of the matter because I am well aware that my right hon. and hon. Friends, and I believe hon. Members opposite, too, wish to get on to the much more important—if I may say so without any derogation to the Swiss loan—matter of Berlin.

What appears to have happened is this. We all know that on 25th July the Government, for reasons which were explained by the Chancellor at the time, requested the International Monetary Fund for a loan, and facilities were granted in August and September for drawing 1,500 million dollars in various foreign currencies—hard currencies, if I may put it that way.

There was, in addition to that, a standby arrangement. On 31st October, after these drawings had been made to the extent of some £450 million, £100 million was actually repaid. It was at about that time—on 20th October actually—that the Swiss loan about which we are now speaking was negotiated. It was not put into effect because it had not been ratified. The Swiss loan for a much smaller amount seems, therefore, at first sight to have been wholly unnecessary, and one wonders why it was required at all. That question was put by my right hon. Friend the Member for Easington (Mr. Shinwell) and by myself when the Lord Privy Seal made his statement the other day, and it is substantially the question that we want answered tonight.

The Economist of 23rd September, 1961, in connection with the meeting at Vienna of the various governors of the International Monetary Fund, had this comment, and I put this to whoever is to answer for the Government: One rumour to be heard in Vienna is that there may even be special arrangements to draw off surplus money from the Swiss; A sort of financial blood-letting was apparently contemplated. the World Bank has found that Switzerland's non-membership is no barrier to its raising money there, and the same should be true for the Fund. It was said the other day that the reason for this loan being separate was that Switzerland was not a member of the Fund. But nor is Switzerland a member of the Bank; and yet very substantial advances in borrowings in Swiss currency have been made by the Bank.

The comment made by the Economist in the form of quoting a rumour from Vienna was that if the Bank could provide Swiss currency, then surely arrangements could be made for the Fund to do so, too. In order to make matters as clear as mud, I ought to explain that I think it was the late Lord Keynes who said of the Fund and the Bank, that the Fund was the Bank and the Bank was the Fund, which makes their respective functions even clearer than they were before.

I think it is quite clear that the Fund's loan was in connection with our currency difficulties and in connection with the sterling exchange position and that, of the two bodies, the Fund rather than the Bank would be the body to meet any difficulty of that sort. Therefore, one says to oneself: Why were there no arrangements of this sort? Why was what is possible in the one case found to be impossible in the other? Was this merely a blood-letting operation?

I have to point out to the Minister that though one can see very good and clear reasons for it, in fact borrowings from the Fund carry no interest charges.

Mr. Heath

indicated dissent.

Mr. Mitchison

The right hon. Gentleman shakes his head. I wonder if he is right in this connection. On 7th November, 1961, the Chancellor of the Exchequer gave an answer about United Kingdom debts to public bodies. I have mentioned a drawing of £450 million and a repayment of £100 million. They come out of this sum in the form of sterling interest-free notes. I understand that the money lent is re-lent and that really what one is borrowing is one's own subscription in one form or another. At any rate, if there is a rate of interest, let us hear what it is. There is no doubt that the Swiss loan carries a rate of interest of 3 per cent.

I am not saying that this loan is unnecessary. I am not saying that it was not made for the common good of Europe by the proper and very fine collaboration of the Swiss Government. I do not wish to detract from what I am sure was a well-intentioned effort for the common good. But I do want to know why the money was required, in the light of the almost contemporary repayment of a large sum of money out of the Fund borrowing, and I want to know why, if Swiss francs had to be borrowed, they could not have been borrowed through the Fund. I think I have made my point clear enough.

I notice that a similar loan, not of 215 million Swiss francs—that is between £17 million and £18 million—but of 200 million Swiss francs, was made at roughly the same sort of time by the Swiss to the United States Government. It therefore appears to be a case of some operation for the benefit of both sides at any rate.

I have made my inquiries. I trust that they will be answered in the spirit in which they are asked, and I hope that we shall not take too long to get on to the next business.

7.40 p.m.

Mr. Emrys Hughes (South Ayrshire)

I rise to ask a brief but, I think, pertinent question. Is the interest rate in this case 3 per cent.? How does it happen that the Government can get money at 3 per cent. from the Swiss Government whereas local authorities in Scotland have to pay a rate of 6¼ per cent. for the money which they borrow from the British Government? Are the finances of Switzerland so good? Also, if it is possible for the Government to borrow money elsewhere at 3 per cent., can they not relend it to the local authorities in Scotland at 3½ per cent.?

7.41 p.m.

The Lord Privy Seal (Mr. Edward Heath)

I am very grateful to the hon. and learned Member for Kettering (Mr. Mitchison) for the way in which he has raised this matter and for the indication that he has given that he might be prepared to withdraw the Motion at the end of this short debate.

I explained the situation in my statement to the House on Monday. The hon and learned Gentleman has mentioned that I said that the Government adhere to what is known as the Ponsonby rule. I told the House on Monday that this agreement was signed on 20th October and was laid in the House on 15th December. This did not, therefore, give the usual twenty-one days' notice—perhaps I might point out to the hon. Member for Woolwich, East (Mr. Mayhew) that they are parliamentary working days and not calendar days, as he supposes—before the date of ratification, which was intended to be 31st December, but which, by a later exchange of letters, is now to be 29th December.

I came to the House and said, frankly, that this was due to a mistake in the Foreign Office. It was due, in fact, to a human error. The document arrived in the Foreign Office on 1st November, and, to conform with the Ponsonby rule, it should have been laid by 23rd November. This left rather less than about three weeks for the formalities to be gone through, and the normal formalities for dealing with treaty documents take considerably longer than that. I regret that the need to give urgent priority to this treaty was overlooked, and it became necessary to ask for the indulgence of the House.

The delay was particularly unfortunate in the case of this treaty because, as the hon. and learned Gentleman will have noticed, Article VI stipulates that it shall enter into force on the date of exchange of the instruments of ratification, and that was to be as soon as possible. But it becomes urgent when one reads with that Article II, which says that the proceeds of the loan shall be made available to the United Kingdom by 31st December. As I have already mentioned, it is now to be 29th December.

This error took place because the urgency was not noticed, in part because of a change of staff in the department concerned. I have given the House a very frank explanation of what happened. We have made the necessary inquiries in order to ensure that such an event shall not happen again.

When this matter came to my notice, I decided that there were three possible actions which one could take. I wish to mention these because the hon. and learned Gentleman has referred to the "breach" of the Ponsonby rule. I mentioned that there had been, as far as we knew, nine cases in which the Ponsonby rule had been waived in particular circumstances. In fact, the hon. and learned Gentleman is not quite correct in saying that it has been continuously in operation since Mr. Ponsonby made his speech to the House on 1st April, 1924. It was not in operation between 1924 and 1929, after the change of Government, but it was then reaffirmed by subsequent Governments, including the present one.

With regard to the three courses, Lord Attlee said at Preston in 1950, over the Anglo-United States Mutual Defence Assistance Agreement, that in that case what he did was to consult the leaders of the Opposition. He brought the agreement into force without laying it before Parliament at all. He had to do that because he had decided at the time to have a General Election without realising that it would not give him sufficient days to carry out the Ponsonby rule in the case of that agreement. So he adopted that method of consulting the leaders of the Opposition.

The second course was to give the House the opportunity of discussing the agreement in a general debate. I mentioned this in my statement. I said that I hoped that the House would find that the economic debate last Monday or the foreign affairs debate today would provide a suitable opportunity for any hon. Members who wished to express their views. This, again, was covered by precedents. There are several cases where this has been the method for dealing with early ratification, including the Austrian Loan Protocol of 13th July, 1932, and the Protocol of 17th October, 1951, for the accession of Greece and Turkey to N.A.T.O. So we were amply covered by precedent in suggesting that the House might like to take the opportunity of these two debates to express views.

There was a third course. It was to inform the House of the Government's intentions by means of an Answer to a Question, or by a statement to the House. There are precedents also for doing this. It was done on 25th October, 1939, for the Tripartite Mutual Assistance Treaty between the United Kingdom, France and Turkey, and there was a Private Notice Question on 24th June, 1942, relating to a treaty of alliance with the Soviet Union. There was ample precedent for doing both these things.

The hon. Member for Leeds, West (Mr. C. Pannell)—he is not in his place at the moment, but he was earlier—has said on two previous occasions that we had treated the House with contempt. I regret to say that, obviously through not having studied the matter closely, he is ill-informed and his judgment is completely wrong. We adopted a course for which there was ample precedent on previous occasions when the Ponsonby rule had been waived.

I decided that, because of the closeness of the Recess, the best course would be to make a full statement to the House and explain the situation. It became apparent in the exchanges across the Floor that the House wished to have an opportunity to debate the agreement, and, therefore, this opportunity has been provided.

I would, however, also point out to the hon. and learned Gentleman that the mere fact that it is now being debated is, in fact, an operation of the Ponsonby rule machinery. It was what Mr. Ponsonby intended. Therefore, it is no longer necessary for the treaty to lie for the twenty-one days, and, in fact, the Government are not in any way now in breach of the Ponsonby rule because the House has taken the opportunity of debating this issue. I hope that that has explained the situation about the operation of the rule and the precedents which exist for it.

Mr. Mitchison

The right hon. Gentleman is defending himself a little too much. According to the Ponsonby rule, the Government ought to have provided a time. But the Opposition have had to provide it by putting down a Motion in the nature of a Prayer, as it were, refusing ratification.

Mr. Heath

But today is a Government day, and time is being taken out of Government time. The putting down of a Motion is the only procedure available, unless the hon. and learned Gentleman prefers to use the other means that I suggested, that of taking part in a general debate.

Mr. Mitchison

What was contemplated by the Ponsonby rule was that if the Opposition asked for a debate, the Government would put down a Motion confirming the proposed ratification.

Mr. Heath

We are providing Government time. I understand that the procedure which has to be followed in these cases is that the Motion should reject ratification.

The hon. and learned Gentleman has raised the question of the practice. Perhaps I may confirm again that the Government adhere to the rule and that we have every intention of adhering to it. I hope that the hon. and learned Gentleman will be satisfied with that. The position was last stated by the late Mr. Ernest Bevin in the House on 7th November, 1945—no doubt this will be remembered by the hon. Member for Woolwich. East, who was Under-Secretary of State for Foreign Affairs at the time—and reaffirmed by the Conservative Government in 1954 and by ourselves tonight.

Concluding this part of my remarks, I should like again to offer our apology to the House for the error which has occurred, which made it impracticable to follow the usual convention.

Mr. Bruce Millan (Glasgow, Craigton)

Before the right hon. Gentleman leaves the question of procedure, will he answer this question? Article II says that the proceeds of the loan should be available on 31st December. But the right hon. Gentleman has already said that the date has been changed to 29th December. A change of two days in this case may not be terribly important, but are there not some other instruments which might have been entered into where a change of date is involved? What is the procedure for laying such instruments? After all, if this date had been changed very substantially, the agreement would have been a different agreement. Also, surely it is rather odd that we should now be discussing this agreement when it is not even yet a final agreement?

Mr. Heath

The change from 31st December was made because that day is a Sunday, and from the point of view of banking convenience, it was better to do it on 29th December. This was done by exchange of letters. If the hon. Gentleman wishes, I will arrange that the exchange of letters shall be laid in the House so that hon. Members may be informed about it.

To turn to the other questions—

Mr. Emrys Hughes

What about the rates of interest?

Mr. Heath

I shall be coming to those matters, because they have been raised. This loan wil replace part of the temporary credit which the United Kingdom has had from the Swiss National Bank since the spring of this year. It is not, therefore, a new loan. It is replacing an existing loan from the Swiss National Bank. The borrowing from the fund, to which the hon. and learned Gentleman referred, that was deliberately spread over a very wide number of countries and in their currencies, and for the reasons which I explained on Monday—because Switzerland is not a member of the Fund—it was arranged that Switzerland should provide the credit in this other way. This, therefore, replaces that loan which we had from the spring of this year.

Why it was not done through the Fund is very largely a matter for the Fund, but, as Switzerland is not a member, it was found more convenient to do it in this way, and that has been confirmed for this period by this agreement, the details of which the hon. and learned Gentleman will have seen in the treaty itself.

The reason why I did not reply to the hon. and learned Member on Monday when he asked about the rate of interest was because I thought he said "three" when referring to the International Monetary Fund when, in fact, he said "free". I am told that the statement he read out about sterling notes referred to our own money with the Fund, but did not refer to the borrowing I have already mentioned—the drawing on the Fund. The rate there amounts to a sliding scale, because it is nil per cent. for the first three months, it moves up to 2 per cent. for the next nine months—the rest of the year—and afterwards moves up to a figure of 3½ per cent. at the end of the third year, and, of course, it goes higher if the loan goes on for a longer period.

If it is compared with the 3 per cent. of the Swiss loan, we have to average the I.M.F. rate over the whole period for which we are borrowing. We cannot take a simple comparison, as the hon. and learned Gentleman would obviously wish me to do, if that were possible. If we average it up to three years and add on another 50 million dollars, which is the same as 215 million Swiss francs, or £17.7 million sterling, it would work out at slightly under 3 per cent., but that is a very small difference indeed. The interest on the Swiss loan is roughly comparable to the average Fund rate which we now get. I hope that that answers the point about interest rates.

Mr. Mitchison

I am obliged to the right hon. Gentleman, but it does not answer it. This is extremely complicated, and I do not propose to take up the time of the House about it. The answer given by the Chancellor of the Exchequer referred to sterling interest-free notes. It referred to drawings on the Fund of £450 million in August and September, 1961, and to a repayment of £100 million on 31st October, 1961. I think, therefore, that this must be the debt by the United Kingdom to the international institution which we have been talking about. I know what the right hon. Gentleman has in mind about fluctuating rates of interest, and there is no point of substance in trying to get the very complicated details of this matter thrashed out now.

Mr. Heath

I think that the hon. and learned Gentleman was referring to interest-free notes, and not to the rate at which we draw from the Fund. That is a little different. Perhaps we could clarify that by correspondence, if there is any further point.

Mr. John Rankin (Glasgow, Govan)

Will the correspondence be published in HANSARD?

Mr. Heath

I will write to the hon. Gentleman as well, if he likes.

Mr. Rankin

I thank the right hon. Gentleman.

Mr. Heath

Now that we have examined the points about the Ponsonby rule in this particular instance and in these documents, I hope that the House will agree that our debate shows no lack of appreciation to the Swiss Government, the Swiss National Bank, or the Swiss people for the arrangements they are making for us. I know that the House would not like there to be any misunderstanding in that respect.

Mr. Mitchison

May I associate myself with the last words of the right hon. Gentleman which put more clearly and more fully what I had intended to say on my own behalf. In view of what has been said—I repeat that this was only a minor peccadillo on the part of the Government—I beg to ask leave to withdraw the Motion.

Motion, by leave, withdrawn.