DECIMAL CURRENCY BILL

HC Deb 22 March 1967 vol 743 cc1731-75

Order for Second Reading read.

Mr. Speaker

Before I call the right hon. Gentleman the Chancellor of the Exchequer to move the Second Reading of the Bill, may I announce that I have selected the Amendment standing in the name of the right hon. Gentleman the Member for Enfield, West (Mr. Iain Macleod) and some of his hon. and right hon. Friends, but that I have not selected the Amendment standing in the name of the hon. Member for Ilford, North (Mr. Iremonger) nor that in the name of the hon. Member for Swindon (Mr. Francis Noel-Baker) and his hon. Friends.

4.20 p.m.

The Chancellor of the Exchequer (Mr. James Callaghan)

I beg to move, That the Bill be now read a Second time.

This historic proposal that I now submit to the House has been under study and consideration in this country for nearly 150 years. During that period, a number of investigations have been made into the question of "going decimal", but the crucial work for our purpose was undertaken by Committee of Inquiry on Decimal Currency, which was appointed in December, 1961, under the chairmanship of the Earl of Halsbury.

The Committee's terms of reference were: … to advise on the most convenient and practical form which a decimal currency might take, including the major and minor units to be adopted; to advise on the timing and phasing of the change-over best calculated to minimise the cost; to estimate the probable amount and incidence of the cost to the economy … of its proposals.

The Committee's Report came out in September, 1963, and I take this opportunity of paying tribute, on behalf of the House, to the thoroughness with which the members of the Committee undertook their task. The Report is a model. Except on choice of system, on which the members of the Committee themselves were not unanimous, their conclusions command almost universal support. There is no question relevant to the subject of currency decimalisation in this country which is not dealt with and illuminated by them, and I thank them for it.

As far as I am aware, the previous Government came to no conclusions on the recommendations of the Halsbury Committee in the period of rather more than a year which elapsed between the presentation of the Report and the General Election—maybe there were other preoccupations. It therefore fell to the present Government to consider and decide on this matter, and on 1st March last year I had the distinction of announcing the Government's decision that the country should change over to a decimal currency in February, 1971, and that the system should be based on the present £ divided into 100 minor units. That is to say, the Government accepted the recommendations of the majority on the Halsbury Committee.

Nine months later, after a great deal of preliminary work and planning, the Government published a White Paper setting out their reasons in greater detail, and the work that had been undertaken. The White Paper dealt with the benefits of decimalisation, the choice of system, the new decimal coinage and the arrangements for the changeover, including the appointment of a Decimal Currency Board. Before I proceed with the Bill, let me say a word about the benefits.

We all count from our earliest days in tens in ordinary arithmetic. In pound, shillings and pence, we count in twelves and twenties. So one of the largest benefits of decimalisation is that it will harmonise money and non-money calculations. There will be fewer chances of making mistakes. It will be easier and quicker. The shopper and the shop assistant will both benefit. So will the schools, where the teaching by the teachers and the learning by the pupils will be easier. Some calculations have been made that show that a very considerable amount of learning time will be saved. In offices, commercial houses and banks, calculations on the decimal system will be greatly simplified. The benefits will be felt quickly by all the nation.

Where conversion has taken place already there is evidence coming in of the advantages that are being felt, and they will rapidly outweigh the actual cost of converting to the new system, which is itself substantial. The Government had to weigh those two elements against each other, and I think that there is little doubt—I believe that this is not in dispute anywhere—that the benefits are of such a substantial character, increasing year after year, that it is a proper decision to decimalise.

When I made my original announcement in March last year, I stated that there was a period of five years to prepare for the changes. Some hon. Members opposite thought that period ludicrously long, but it is clear as time goes on, and as the Halsbury Committee had foreseen, that the Government were right to decide on a preparatory period of this length because, within reason, the longer the preparatory period the shorter the transition period of dual currency needs to be, and the Government intend to make it as short as possible. Four years of the preparatory period now remain. It is not practical politics to continue to argue about the merits and demerits of various rival systems—they have been argued for a century and a half. The time now really has come to bring the matter to a conclusion. The Government and others need to enter into firm commitments, and must be secure in the knowledge that the new decimal currency and coinage have been given the force of law by Parliament. This particularly affects arrangements for minting the new decimal coinage, and this Bill will give the Government the requisite authority for that work.

The Bill deals with the basic policy issues, but it does not cover all the matters in respect of which legislation will be required before the changeover can take place. In due course, a second Bill will be required to deal particularly with arrangements for the transition period of dual currency, and with such questions as legal tender during the transition, conversion of amounts, contracts, and the amendment of existing Statutes which, of course, refer to the words "pounds shillings and pence". I cannot at this stage be more precise about the nature and scope of the second Bill, since these are matters on which the Decimal Currency Board will be consulting the various interests concerned, and will then make recommendations to the Government. It will be in the light of those consultations which the Decimal Currency Board will undertake that the provisions of the second Bill will be framed.

I now come to the provisions of the Bill itself. Clause 1(1) deals with the central issues of policy—the choice of system. I dare say from all I have read and heard—indeed, it is hardly possible to get one's voice heard above the din—that this topic will occupy a number of hon. Members, so for that reason I will first deal briefly with the remainder of the Bill and then return to the question of the system.

Clauses 2 and 3 deal with new coinage. There are to be three bronze coins—the new halfpenny, the new penny and the new two penny piece. These are precisely as recommended by the Halsbury Committee. There have been many complaints about the weight and size of the existing penny, and although I confess to an affection for it, I fear that I must agree that the complaints are justified. The new bronze coins will be smaller and less heavy than the present coins, and there will be a further advantage, namely, that the bronze coins will be in weight-value relationship with each other, so that the new two penny piece will weigh twice as much as the new penny, and the new penny will weigh twice as much as the new halfpenny.

This will bring the new bronze coinage into line with the present cupro-nickel coinage, which is already in weight-value relationship. It will obviously be an added convenience to all those firms and businesses which handle coins in bulk—bronze, as well as the present cupro-nickel coins—because it will be possible to assess the value of a mixed bag of bronze coins simply by weighing, as is now done with the cupro-nickel coinage. The denominations of cupro-nickel coins will be five new pence and ten new pence. These coins will be exact translations of the present shilling and florin both in value and in other respects—save, of course, the design. They will therefore be readily recognised during the changeover period.

In the Halsbury's Committee's view, two considerations govern the choice of coin denominations. They should be in a simple relationship with one another, so that payments may be made and change given easily for any amount, and they should also be chosen to enable transactions to be conducted with the smallest practicable total number of coins in circulation. This choice of coins fulfils those conditions. The Halsbury Committee, however, also recommended the provision of a coin of 20 new pence equivalent in value to four of our present shillings. The Government are not so far entirely convinced of the need for such a coin, although if demand for it should grow there is provision for it to be minted later. Partly in order to leave this possibility open, Clause 2 etxends the powers under Section 11 of the Coinage Act, 1870, to introduce new coins by proclamation.

There is one entirely new coin which the Government propose to introduce, the 50 new penny piece. The reasons for this are economic. The present 10s. note has a very short life—now only about five months—and the costs of issuing replacement notes and withdrawing old ones are considerable and are growing. A coin, of course, is much more expensive to produce than a note, but it has a life of at least 50 years and, taken over that period, the coin is much cheaper. Careful thought is being given to the detailed specification of such a coin and this is still in progress. This is why details of the coin are not included in the Bill but it will be brought in by proclamation in due course if the House agrees.

The only other point I make about the coinage provisions of the Bill relates to the Royal Mint. The manufacture of new decimal coinage is a tremendous operation. Nearly 9,000 million coins will be needed. It is hoped to complete the operation in bronze coins by changeover day. This will help the changeover to be smooth and the transition to be short. It is the Government's plan that with the new decimal coinage factory which is under consideration the Royal Mint will be able to undertake the whole operation but the Mint has other important tasks, including most valuable and remunerative export work which must be continued. Therefore, as an insurance we are allowing for the possibility that some of the new coinage might be manufactured elsewhere than at the Mint. Clause 3 has been introduced to permit this to be done, provided of course that it is done with the authority of the Mint. This is an insurance provision. The aim will be for the Mint to do this operation if possible.

Mr. Eric Lubbock (Orpington)

Can the right hon. Gentleman say whether the numbers of new 1- and 2-unit coins to be minted before change-over day correspond with the estimates in the Halsbury Committee's Report, or has he any reason to change those figures?

Mr. Callaghan

I think they are the same, but the Chief Secretary to the Treasury can deal with that point in winding up the debate.

Mr. David Ginsburg (Dewsbury)

Could my right hon. Friend say something about the life of the new halfpenny under the new system? How long does he envisage it going on? Secondly, although this may anticipate something that he is to say later, could he comment on whether his mind is absolutely closed to having a yet smaller unit than the new halfpenny?

Mr. Callaghan

My hon. Friend will find that I shall comment on both points later.

Clauses 4, 5 and 6 and Schedule 3 deal with the constitution and functions of the Decimal Currency Board. The Board is already in existence and has begun work. I was able to set it up in advance of legislation because at present its functions are purely advisory but it will shortly have to assume a more markedly executive and co-ordinating role, and for this legislation is necessary.

Clause 5 gives a very clear idea of the functions of the Board and indicates the vital part which it will play in this operation. We have been fortunate in securing the services of very able and public-spirited people to serve on the Board. They were asked to serve in their individual capacities but between them their experience covers the main interests affected by decimilisation.

I come to the choice of system. The course recommended by the majority of the members of the Halsbury Committee and now adopted by the Government is extremely simple. Our present £ should be retained and divided into 100 minor units and a coin equal in value to half the minor unit should be provided for as long as necessary. That is the system and that is what all the argument is about. Before they came to this conclusion, which they did not reach lightly, the members of the Halsbury Committee considered an enormous mass of evidence. They heard all the arguments for and against a number of possible systems—25 at least. They held 57 meetings, studied 400 memoranda, examined and questioned 150 machine companies and saw 120 witnesses. They commissioned research on practical problems concerned with coin handling and giving change in respect both of the £ system and the so-called 10s. noble system. In this research they had the practical help of Post Office workers, housewives, naval ratings—I do not know why the senior Service was selected, but that always was a good thing to do.

Mr. W. A. Wilkins (Bristol, South)

Hear, hear.

Mr. Callaghan

My hon. Friend shares my view. The Committee extended its research to bus conductors. In the light of all this evidence the Committee produced a detailed Report after 18 months' consideration recommending by a majority the system which the Government have adopted and which they announced a year ago.

Since we announced our decision, and particularly since the White Paper was published, controversy, perhaps not unnaturally, has mounted, but fundamentally not one of the arguments put forward now is new in this long drawn out controvery—not one. Every one of the arguments that is advanced now was advanced to the Halsbury Committee and considered by the Committee at length. In the Government's view, after we had taken our time to consider it, as in the view of the Halsbury Committee—

Mr. Lubbock

The majority.

Mr. Callaghan

I keep saying the majority. I am at least as entitled to rely on the majority as the hon. Member is entitled to rely on the minority, although he is in a permanent minority.

Mr. Lubbock

Will the right hon. Gentleman allow me—

Mr. Callaghan

Not for a moment. I am sure that the hon. Member will try to catch Mr. Speaker's eye. Then he can flay me to his heart's content. In the Government's view, as in the view of the majority of the Halsbury Committee, these old arguments put forward, chewed over, regurtitated, digested, regurtitated again, do not constitute a strong enough case for abandoning the £ as the major unit and substituting a system in which the values of both the major and minor units would be unfamiliar.

Naturally the argument put forward by those who advocate other systems dwell on what their advocates consider to be their own particular interests, although I am not sure that they are alone in doing that. Paragraph 96 of the Report of the Committee said: Organisations looked at decimalisation, as indeed we wanted them to do, purely from the point of view of the problems posed for themselves. We could not, and did not, expect that to give a balanced assessment of all the factors needing to be taken into account before selecting the best system in the general interest. That was our task. This is also the task of the Government. Our duty as a Government is to analyse the validity of the arguments and then to assess the weight to be given to them I stress this point. There is an important difference between agreeing that an argument is valid and in deciding how much weight to give to it in reaching a final decision.

I should like to give my conclusions before I proceed to the detailed arguments. My conclusion about this controversy—on which I started, I must say, with a very open mind—is that some of the arguments of those who advocate the 10s. noble are valid. Most of their arguments, even where they are valid, are grossly exaggerated in importance. In addition, most of their arguments where valid are true only for a short period of time. Finally, whatever advantage they might claim to possess, they do not outweigh the long-term advantage of keeping the £ which is known and familiar here and throughout the world.

The Halsbury Committee soon decided that the final choice must lie between the £-cent-½ and the 10s.-cent. or noble systems. I think that this view was correct and for this reason I discuss these systems only. I recognise that others have other choices. The Confederation of British Industry, for example, has put forward, after discussion with me, another system based on the £-mil. My hon. Friend the Member for Swindon (Mr. Francis Noel-Baker) and some of my other hon. Friends have put forward a system based on the £5-mil. There is no limit to the number of systems which can be put forward. I repeat that the Halsbury Committee examined at least 25. There is something to be said for every one of them. We must make up our minds about one, and make them up now and get on with the job.

I therefore hope that my hon. Friend the Member for Swindon will forgive me if I do not pursue his case, which was not regarded as fighting out the final round in the same way that the 10s.-noble unit was regarded as fighting out the final round with the £. The C.B.I. has assured me in its last letter, as I think will be true of everybody else, that, whatever system is chosen, it will cooperate to make a success of it, because of the importance of decimalisation. I believe that we all approach the matter in this spirit.

Mr. Patrick Jenkin (Wanstead and Woodford)

Does the Chancellor of the Exchequer intend to say nothing about the £-mil system, because support comes for it from very powerful bodies indeed?

Mr. Callaghan

I do not intend to say any more than I have said so far. We could go on talking about this for hours. [Interruption.] I do not think that the House will bear with me for hours. I am now talking about the two major systems which have afflicted hon. Members, the two which really stand the test. After all, Halsbury did not rate the £-mil system nearly as high as the 10s.-cent. The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) has illustrated my point that we could go on discussing all sorts of systems. This is why the Government have made a recommendation to the House. Somebody has to choose between all these conflicting elements and systems. It would be a gross dereliction if the Government said, "We do not care. Adopt what system you like. Choose anything you like". All that would happen would be that there would be a majority against any particular proposal at any one time. The Government had to come forward with their own proposal.

The House will recognise from what I have said that I do not claim that the system recommended by the Halsbury Committee is entirely perfect or that there is nothing to be said in favour of any other system. Indeed, there is no perfect system. In this we differ from our main critics, whose case is suspect because of the intemperate and selective way in which it is argued.

As I understand it, two main arguments are put forward in favour of the 10s. noble—first, that it is easy to associate the new coins with the old pounds, shillings and pence values; and, secondly, that there is an absence of a fraction. These are the two points I should like to meet. It is claimed that, because the familiar shillings are repeated in the new system, this is useful because a high percentage of day-to-day transactions are based on shillings and pence. It is claimed, next, that the 10s. noble has no fractional coin, whereas the £ system has a fraction which, it is said, will wake calculations more difficult. It is also claimed that, if ignored in practice or dropped in a short time, the new halfpenny will lead to excessive price increases.

Let us agree that there are advantages. That is more than any opponent of the £ system has ever conceded to the £ system, but let us agree that there are some advantages of the 10s. system. How much weight do we give to them? That is the next question. Then we must ask: has the system any countervailing disadvantages? Let me draw attention to the selective Mature of the noble lobby. I am not here referring to another place. Those who choose to stress the inconvenience of the new halfpenny in the £ system reinforce their complaint by saying that it will be with us for a very long time and it is impure, as though there were such a thing as arithmetical immorality. However, when they want to stress the dangers of inflation, they say that the new halfpenny is so inconvenient that it will be ignored in practice, thus leading to excessive price increases.

Even the hon. Member for Orpington (Mr. Lubbock) cannot have it both ways to quite that extent in defending the system he proposes. [Interruption.] I am only explaining matters. It is the hon. Member for Orpington who is such an ardent advocate of it. The main argument put forward by the advocates of the noble is that it smooths the change-over period. This is really what they say, that it is easy. This is known—I apologise for using this dreadful word—as the "associability" argument. That is the word which has been foisted on us all. If I say "smooth changeover", perhaps the House will understand what I am talking about. What underlies this is that with the system using the noble we should retain more familiar coins and that prices would be more easily recognised. This is the root of the case for the adoption of the "noble".

In case anyone thinks that I am being unfair, let me quote from the literature put out about this by the very powerful committee which is co-ordinating the campaign in favour of the 10s-noble. The Committee has been courteous enough to send me a copy of its propaganda. It says that one of the difficulties that it will find is that the familiarity of the public with the £ will go against the 10s.-noble. This is an argument in my favour. For the Committee this is a disadvantage. It goes on to say this: The Committee decided that the most telling argument and the one which can be put across most easily in visual terms was the 'ease of associability'"— recognition. This is not to deny that other arguments have equal force and should, of course, be deployed, but the main emphasis should be on associability. I take that up now. The Committee relies in its propaganda on the ease and smoothness of the changeover. So the first thing to be made clear from the nature of the Committee's own argument is that it is a temporary argument. The Halsbury Committee considered it. It devoted a whole chapter to what it called the smoothness of the changeover. In paragraph 179, which is entitled, "Associability: a transitional problem" the Committee says The transitional differences between systems … should probably be measured"— in years? No. In months? No— in weeks rather than months. Let us look at the way the Committee examined this. That is exactly what it said. [Interruption.] If I am challenged, let us look again at paragraph 179: Associability problems are inescapable … the transitional differences between systems on this account"— the Committee was talking of the 10s. system and the £ system— should probably be measured in weeks rather than months. Let us look at the way the Committee examined this and reached its conclusion. It was not a conclusion which was based on just asking a few people. The Committee conducted tests over a period with the co-operation of two groups of housewives, one using the new £ system and the other the new noble system. The Committee endeavoured to set up realistic shopping conditions, with students acting as shopkeepers and housewives acting as housewives. The Committee entered a number of reservations. Those who conduct scientific tests very properly always do this. The Committee said, "This was not like real life. Allowance must be made for the fact that a great deal of coaching was given".

Its broad conclusion was this. The first group of housewives using the 10s. system was able to reach a standard of competence in five days equal to their standard in using the present £ s. d. Another group of housewives using the new £-cent.-½ system was able to reach the same standard of competence in eight days. This is what we are talking about. The advantage in the practice sessions turned out to be three days of half an hour's instruction in favour of the 10s. unit with an average group of housewives.

Mr. Ginsburg

rose—

Mr. Callaghan

I am in the middle of a very powerful argument and I shall not be turned from it. I have had to put up with a' lot of nonsense over the past few weeks.

No hon. Member can be surprised that in the face of that evidence the majority of the Committee concluded that the smoothness of change-over argument was a matter of no more than a few weeks. But that is the major argument on which those who favour the 10s. noble continue to rely. Experience shows—all of us in the House have had it—that people soon become accustomed to thinking in terms of a new currency. Not every one of our citizens goes abroad, but an increasing number do, and they deal in an unfamiliar language with a currency in which all the units are strange. They rapidly learn to think in terms of the foreign currency for smaller purchases.

It is a fundamental misconception to imagine that, during the period of dual currency working, people will forever be doing complicated mental arithmetic. That is just not true; it will not be necessary. Change giving is usually a matter of counting, not arithmetic. The situation in this country will be much easier than that for a tourist abroad because the major unit will remain the same if the Government secure the vote tonight. All existing coins of 6d. and above will have exact equivalents in decimal values, and the present shilling and florin will have exactly the same size, shape and value as before, becoming the new five and 10 penny pieces respectively.

Furthermore, it is part of the responsibilities of the Decimal Currency Board to organise, as has been done elsewhere, a big campaign to familiarise the public with the new coinage long before D-day. It plans to use the full facilities of television, radio, films and newspapers. Some time ago the teaching profession offered its assistance, and I recently received from an enterprising schoolmaster an original copy of a text book he hopes to get published, teaching the new system. I was amazed at how quickly I could pick it up, and I think that it will be very easy.

Shop assistants, bus conductors and everyone else who deals with the public in money transactions will be specially trained to help. Many aids can be given to the housewife, such as a small postcard-sized table which she can carry in her handbag or shopping basket, showing the dual prices. Labels in the shops will carry dual prices. Every price will have to be shown in the new and the old currency. Tables will be posted up in the shop so that the housewife can compare the old and new prices immediately. The Decimal Currency Board has already learned a lot from the experience of Australia. I do not think that that is a matter of difference between us. The same process would be needed for the 10s.-noble as for the £.

I do not wish to make too much of the point, but in my view there is a considerable prospect of confusion in the noble system. Some of the values are so close that in terms of price changes the unwary housewife could be more easily deceived under the 10s. system, though that could happen either way, and a great process of education is needed. But there is no particular advantage in showing that the 10s. system would be so close to the present system that it would be easily recognised, because that could easily go against the housewife on many occasions.

Mr. Wilkins

I should like to go back to my right hon. Friend's reference to people travelling abroad, when he suggested that they easily became accustomed to the different money. I happened to be in France quite a lot when the new franc was introduced, and I remember that almost every time one made a purchase one received one's change in both old and new francs. It was simple to fool the majority of people. [HON. MEMBERS: "Oh."] Yes, it was, because there was a vast difference in the two values of the franc. I hope that my right hon. Friend does not underestimate the amount of confusion that will be caused.

Mr. Callaghan

The House should understand, and I hope that my hon. Friend will understand, that that problem arises whichever system is adopted. It can be the result of going decimal, and that is why it is necessary to have a big educational campaign in advance, which the Decimal Currency Board must see is carried out properly. It is not an argument in favour of the 10s.-noble and against the £ but in favour of a substantial process of education in the meantime.

Mr. Francis Noel-Baker (Swindon)

rose—

Mr. Callaghan

I must get on. I assume that the Bill will have a Committee stage.

Mr. Noel-Baker

My right hon. Friend referred to me. I am grateful to him for giving way. I understand that he does not want to discuss the "fiver", which I hope to raise later, and on which I hope that my hon. Friend will be able to reply. I think that my right hon. Friend would concede that that system would deal with the difficulties which he has just mentioned. The shilling would remain and all prices could continue to be quoted in shillings and other coins which would remain as they are.

Mr. Callaghan

That system would have certain advantages but, it has disadvantages. The whole of my case is that every system has certain disadvantages and that the Government must make a choice between the various systems. One can say that a particular system gets over a particular difficulty, but one does not get over all the difficulties by adopting one system. I am afraid that that is the conclusion that anybody who studies the matter must come to.

That leaves us with the question of fractions. It is true that calculations with fractions are inconvenient. But only one fraction is involved under the proposed new system—the half, and even that will not enter into all calculations. We are all used to calculations involving halfpennies, and we used to cope with farthings as well. How many of us felt that the farthings and half pennies were a crucial flaw in the pounds, shillings and pence system?

The argument that the new halfpenny might be ignored in practice disregards the force of price competition. I emphasise, because I am anxious that this should not be misunderstood, that in choosing the 10s.-noble there would be no advantage, because in both systems the minor unit will be worth 1.2 pence. The advocates of the 10s. system agree that with it there will be the same difficulty about prices, or lack of difficulty, as with the £ system.

The Government and the Decimal Currency Board must pay serious attention to the question of price changes under the new system. We shall need to consider what steps are necessary to prevent the changeover being used as an excuse for rounding up prices in the old currency to the nearest decimal equivalent. It will also be for the Board to look into the question of rounding down prices and make recommendations to us in due course.

Let me turn to the longer-term question and the effect on prices of the value of the lowest coin. The Halsbury Committee considered with great care the need for the present halfpenny and the effect of decimalisation on prices. After investigation, it concluded that the use of the halfpenny was declining at a rate which, if continued, would result in its complete disappearance from use in the early 1970s. So, irrespective of decimalisation, the present halfpenny would be going out of use in a few years anyway, though the effect of decimalisation may be to speed up its disappearance. The Committee then considered the effect on prices after decimalisation of not providing for a halfpenny, and of introducing a system in which the lowest value coin was worth 1.2 of our present pence—the same under the system the Government propose or under the 10s. system.

It concluded that if the halfpenny were withdrawn before decimalisation, and if all prices were rounded up to the nearest value in the new currency, price rises equivalent to about 1½ points in the Retail Price Index would take place over a period. That would be the maximum increase; all the assumptions made were unfavourable. But in practice many factors would work the other way. The Committee's judgment, which I see no reason to question, was that the likely result in terms of price rises on decimalisation, as distinct from the maximum result, would be about 2d. in the £—two of our present pence. It would be the duty of the Board and the Government to minimise those adverse changes.

My conclusion is that with the 10s system some weight must be attached to the smoothness of change-over argument and some weight to the fraction argument, but very little to the effect on prices—and, to be fair, the 10s. advocates do not claim much for themselves in that respect.

I therefore do not see how any reasonable man can give those considerations so much weight as to dictate the final choice of systems. Furthermore, the 10s. system has its disadvantages, notably all those that would flow from changing the value of the major unit. Those are not to be airily dismissed.

Now let me deal with the advantages of the system the Government have chosen. Different people give them different weight. For many, retaining a familiar major unit is paramount; for others the main advantage lies in retaining a much more durable system. There is also great advantage in retaining the £ as a major unit of trade and so avoiding any break in our sense of values in money transactions larger than the transactions in day-to-day shopping for food, bus journeys, and so on. It is important internally. But there is also an international argument for retaining the £. I do not believe, and have never claimed—indeed, I am claiming the contrary—that international arguments are conclusive, but they cannot be dismissed out of hand. I concede that foreign bankers can count. I concede that they can multiply by two. But that is not the point. What cannot be dismissed is that a great volume of world trade today is done in sterling, although that trade and the transactions concerned never touch this country. Frequently, it is done in not very sophisticated circles.

This trade is of value to our balance of payments and we should not therefore risk changing the basic unit which traders in those parts of the world have come to know and to rely upon, and to risk losing some part of this trade, unless there are powerful other reasons for doing so—and I have shown so far that there are no powerful other reasons for doing so. In all the years of controversy these reasons have never emerged.

Secondly, the importance of a currency unit changes as the standard of living rises, and this is nothing to do with inflation; it is a separate argument. There need to be powerful reasons to justify a switch to a major unit of only half the value of the present system. That is why the majority Report of the Halsbury Committee said that to halve the value of the major unit by adopting a 10s. system seems to go against the economic logic of history". A high value unit has a real advantage which should not be ignored. In a highly developed and industrial trading economy like ours, where many of the money transactions are large ones, wholly or mainly in major units, the lower the value of the major unit the greater the proliferation of large numbers in national and company accounts; and the higher the value of the units in a currency system—subject to adequate provision for small purchases—the more efficient the system is.

Finally, there are many currency and machine advantages in retaining the £. During the changeover and afterwards, the cost of converting accounts in industry and commence will be substantially lower, and so will the cost of converting most cash registers and adding and accounting machines. On the other hand, under a 10s.-cent system, it would be cheaper to convert coin-operated machines, but I do not accept—as some of the more extreme advocates have claimed—that the total overall cost of converting all machines will be cheaper under the 10s. system. It will be more expensive than under the £ system.

Sir John Rodgers (Sevenoaks)

On the question of conversion, I would have thought from the knowledge that I have gained that there is little in it. I am not devoted passionately either to the £ system or the 10s. system, but I would have thought that the 10s. system had an advantage in that it allowed many more calculations to be made on existing machines, and was therefore much more flexible.

Mr. Callaghan

That is a technical argument. I, having studied both sides, do not accept that conclusion, any more than did the Halsbury Committee, and more recent developments have shown that it is not borne out in practice. One of the reasons for the long change-over is that with it the obsolescence of existing machines naturally will be greater and therefore there will be more chance of changing them in the natural course of events. I have no doubt that this issue will be raised again.

I have spoken for a long time, but on the other hand, the opponents of the £ system have had a jolly good run for their money for months. I hope that I have made it clear by the detailed and close argument that I have produced that the Government are not just being obstinate. There are excellent reasons for not changing our major unit. Once decimalisation has been decided upon a choice has to be made, and the time has come to make the choice. We cannot postpone it without endangering the programme of decimalisation. At present we have adequate time, but we do not have too much time to complete the preparations that have begun.

No system will please everybody. Different systems affect different sections of the community in different ways. Whatever system is chosen there will be some whose interests would have been better served by choosing the other system, and if we had settled for the minority report we should not have escaped violent controversy in precisely the opposite way. There would just have been different protagonists.

Mr. Lubbock

No.

Mr. Callaghan

The hon. Member for Orpington says "No", but he has been taking a lot of advice from the Consumer Council. He has been in the forefront of this argument the whole time, and he reached his own independent, wrongheaded decision a long time ago. The Consumer Council Opinion Survey was very interesting on this point. It showed that both the £ system and the 10s.-noble system commanded general popular support, although the margin among the public in favour of the 10s. system was 61 per cent. as against 51 per cent. for the £ system, but that either system would command general support.

It is for the Government to judge the arguments, to put them forward to the House, and then to ask the House to reach a conclusion, but in the Government's view—I say this without heat, although, goodness knows, there has been a lot of heat in this argument—it is my profound conviction, having examined all the arguments and received all the deputations, that the transient advantages that are claimed for the 10s.-noble are so temporary that no decision should be taken on that basis, and therefore that the balance of argument is clearly in favour of the £ new halfpenny system.

I therefore now ask the House to give the Bill a Second Reading.

5.8 p.m.

Mr. lain Macleod (Enfield, West)

I beg to move, to leave out from "That" to the end of the Question and to add instead thereof: this House, while accepting that a decimal currency should be introduced in 1971, declines to give a Second Reading to a Bill which provides that the basis of the new currency should be the pound—new penny—new halfpenny system. The Amendment stands in my name and that of my right hon. and learned Friend the member for Wirral (Mr. Selwyn Lloyd) who appointed the Halsbury Committee. I join straight away in the tributes which the Chancellor of the Exchequer paid to that Committee. I shall have much to say that is critical of the majority Report, but it is in no sense personal. It is an exercise of judgment. The Amendment accepts the principle of decimalisation and the date, but disagrees about the unit. I am an unrepentent ten-bobber, and always have been, and I will speak mainly on that basis. But that is not the universal opinion held on these benches.

I have only one political point to make and, with the indulgence of the House, I propose to make it straight away and then to come to my main argument. We know, of course, that there is to be a drilled Whip on one side of the House tonight and a free vote on the other, which always means a large majority for those who put the Whips on.

I think that it is unfortunate—and I use as quiet a word as I can—that this matter should have become involved with whatever temporary difficulties the Labour Party may be having. There is no question but that this has been made a shibboleth by the Prime Minister, and I quote from his famous speech as reported in The Times of 3rd March: In another unsparingly ruthless burst Mr. Wilson said there would he no abandonment by the Government of their position on a decimalised pound. there would be no preliminary debate, there would be no free vote. I think that everyone would at least agree that if we are legislating for a thousand years, it is a thousand pities that this issue should have become involved with a matter which concerns the other side of the House. And there I leave it.

In order to try to make my speech of tolerable length in a short debate—we have had a long statement and I understand that there is to be a Royal Commission and the debate ends at 9.30—I shall spend little time following the Chancellor of the Exchequer on what I might call the small change of the argument. I mention briefly the question of coinage. The advantage clearly must be with the 10s. unit which retains the well-known half-crown and, above all, the 6d. whereas the coins of the system which the Government propose are the new halfpenny, which is more or less relevant to the present 1d., but not the present ½d., the new penny, which is about 2½d., and the curious coin to be called the new twopenny piece, which appears to be 4.8 pence. There can be little doubt that the balance of advantage swings there, and heavily, to the 10s. system.

There may well be very little in the argument where machines are concerned, but at least the 10s. system would have the longer-term advantage that it would be standard with other countries. We are told that under the Government's system the banks will ignore the fraction as an accounting unit. That is all very well for the banks, but it is not so good for the rest of us, because it is only in a pure system, like the 10s. system, that the banking system and commercial accounts will be able to agree, and this seems to be extremely important.

There are many other matters—the question of coin handling and the difficulty of the name, and some tell for one system, and some tell for another. I am content to sum up what I call the small change of the argument with words from paragraph 372 of the Halsbury Report: After surveying all the main areas … we concluded that, for most but no means all organisations, the 10s.-cent system would be cheaper than the £-cent-½ system for both measurable and non measurable costs but that the difference was unlikely to be large enough to assume more than marginal significance in making our choice of system. I accept that. I think that the minor advantages are with the 10s.-cent system, but I wish to come to a much more important argument which I should like to put in more detail.

I believe that the real problem is much more profound and that an analysis of it is absolutely destructive of the Government's case. Let us for a moment look around us, and the best illustration is not in the Halsbury Report, but in the Australian 1960 Report which, of course, I have studied. If we leave out of consideration countries like Italy, which have very small units, we find that the world groups itself into three ranges of currency.

There is, first, that where the major unit is between 1s. and 2s., Scandinavia, the German mark, the French franc, Switzerland and the Netherlands, what I might call, with others, basically the European group. These systems are all pure two-decimal systems, that is to say, there is a major unit which is divided by 100 into minor units. For convenience I am calling this the European group.

The second group is that range where the major unit is worth between 7s. and 10s., a group which of course is dominated by the United States dollar, but which also includes the Canadian dollar and which will include the new converts from the £ about which the Chancellor of the Exchequer said surprisingly little today—the Australian dollar, the New Zealand dollar, the South African rand and others. Those who advocate a heavy unit should note that if we had a 10s. unit, it would still be the heaviest unit of all the major countries. I call this second group, the American or Canadian, or Australia group, the middle group.

In the third group the highest currency unit is the English £ and there are a few similar units. Egypt, Cyprus, Iraq, Libya and so on have decimal systems in which the major unit is somewhere near equivalent to the £ sterling. But in each case it is a three-decimal system. So we have the two lower systems with pure two-decimal systems and a higher group, in which we find ourselves, in which, for purely practical reasons, people have turned to a three-decimal system.

However, the House should note that the Government proposal is none of these. It is neither two-decimal nor three-decimal. It is a £ / penny fraction system. The truth, I am afraid, is quite simple, but once one has taken it in, the conclusion is inescapable: the £ is too heavy to decimalise.

If we wish to keep the symbol of the £—and I understand this—then it is impossible to have a true decimal system. Everyone appreciates this. The Government, of course, appreciate it and have recognised that 100th of a £, 2.4 pence, is too large, and so they have had to lose all the advantages of a decimal system and introduce a fraction. The C.B.I. has seen this and although most of its members would have preferred the 10s. unit, it has tried to avoid this difficulty by reverting to the £-mil system rather than the system of Cyprus and so on which I have described. For many reasons, the three-decimal system is vastly inconvenient and it has as its lowest unit the mil, a concept and not a coin. It also has a very difficult problem of association. The Halsbury Report said that 3s. 9d. was 187 mils—I take its word for it, but I cannot feel that there is any connection between the two.

The hon. Member for Swindon (Mr. Francis Noel-Baker) also recognises the truth of this matter and tries to solve the problem in another way which is by having a still larger unit. But I think that he must agree that the problems which he solves at the bottom of his scale he multiplies at the top, because his major unit of £5 would be no less than 50 times the unit of all our neighbours on the Continent. One comes to the conclusion that if one wants to keep the £ system, it is not possible to have a pure decimal system with it.

I should like to turn to the international case. There is an international argument, but it is very different from that which appears in the Halsbury Report. The international argument is that if we are to modernise our currency, we should modernise it within the main stream of opinion in the world rather than outside it, as the Government propose.

Of course it would be nice if everybody would adopt the £. It would be nice if everybody would drive on the left-hand side of the road. It would be nice if everybody played cricket. It would be nice if Sassenachs and other heathens would eat haggis and so on. [Interruption.] I am sorry about that last observation. The sore of Twickenham is still burning in my mind and it led me into saying that.

At least we can claim that we have contributed far more than any other country to the culture and customs and structure of the world's governments. English is all but the international language of the world. This House has been called the Mother of Parliaments and the legal systems all over the world are largely ours. But we cannot have everything and I wish that the Government would recognise the one simple and fundamental fact that our currency does not fit, that we cannot make it fit and that we should either leave it as it is and not decimalise—with which I would not agree—or have a genuine decimal system.

For myself, I doubt whether the Government system is even the second-best. For example, in the latest issue of The Banker, quoting an address of his to the Royal Society of Arts, Lord Halsbury said: Let me say from the outset that there is not very much in it. No 'Currency Commission' has ever achieved unanimity on this point. Neither the New Zealand nor South African reports was unanimous. Mine was no exception. That is true as far as it goes, but a closer examination shows a more interesting feature. The Australian Report, and I have recently returned from Australia and would like to speak in a moment about what I saw in this context there, was unanimous, and the 10s. system was selected from many others. As I read the 1960 Report it did not give any particular placings, although the inclination seemed to be for second place towards a system which has barely been mentioned today, the 8s. 4d. system of 100 pennies divided into, naturally, 100 pennies.

So much for the Australian system which was unanimous. The New Zealand system was not unanimous, as Lord Halsbury says, but the minority Report, which consisted of only one member, recommended the 8s. 4d. system. Even in New Zealand, a country with the closest links with us, probably closer than any other country in the world, the system that the Government are proposing did not even get placed. In South Africa there was a commission of 15. Of that number, 12 favoured the 10s. system, which emerged as a rand-cent.-½ cent. It is interesting that the ½ cent has been dropped fairly recently, so that this is the equivalent of the 10s. case, which basically, I am arguing.

The minority favoured what they called a £-cent-decime system, that is a £ divided into 10 florins, divided into 10 cents, divided into 10 decimes, which is another variant of the £1mil system, but not the system put forward by the Government. We are therefore in the position that what is proposed is wildly out of line with what has been done by every country in the world, including some of our closest friends, who examined with every care and sympathy the case for the £. The conclusion must be, I say it with regret, but I am convinced of it, that the £ does not fit into the needs of a modern decimal currency system. I wish that it did but it does not.

Mr. Francis Noel-Baker

The right hon. Gentleman was good enough to discuss my proposal, but he did it an injustice when he said that it would be different from others. It would retain the shilling as one-hundredth of the new heavy unit. This would be exactly what a large part of the world already has.

Mr. Macleod

I quite agree, but the idea of having a major unit 50 times the size of the franc or the mark cannot be in line with the famous phrase of the economic logic of history. The Chancellor relies a good deal on the majority verdict of Halsbury. I thought that that argument was weak at the time and I am bound to say that I think that it has been riddled since. What is the difference between Australia, South Africa, New Zealand and ourselves?

It is the international case; it is that we have to look carefully at international problems of sterling. This case is out of fashion at the moment. The Chancellor said on T.V., just before Christmas, that he was not very impressed with it, and nor am I. But the Halsbury Committee was. Paragraph 373 makes this blindingly clear. The House will recall that a few moments ago I said that paragraph 372 summed up the minor advantages and came down on the side of the 10s-cent, but said that the advantages were not important enough in making a choice of system to assume more than marginal significance. Then it goes on to outline in paragraph 373 what a difficult decision it is. It puts this in heavy type: The 'international' case for the £ versus the 'associability' case for the 10s. system. It goes on to say: … one requirement points to the £-cent-½system, the other to the 10s.-cent system. In our view the differences between the two systems ar fairly small; the real decision to be made is between, on the one hand the associability ' advantages of the 10s.-cent system coupled with, and partly deriving from, the absence of fractions of the cent and, on the other hand, the avoidance of risk to the standing of sterling implicit in the £-cent-½ system. I could give a hundred other references from Halsbury—there is no possible, probable, shadow of doubt whatever that the Halsbury Committee saw this as a decision, on this point, between these two systems and between the associability and the international case. If one explodes the international case, and the Chancellor by playing it down has done this, then one also explodes the majority opinion of the Halsbury Report. Indeed the whole Report—or to be more accurate, five to one on the Commission—would then come down for the case for the 10s. cent. system.

We know very well that the Bank of England's case was put to the Halsbury Committee and had great influence on it. It is in Appendix 1 and I do not propose to go into it. I usually admire the Bank of England; often I like what it does, and nearly always I like the way that it does it. I am bound to say that its evidence was sadly incoherent; it was technically unsound in suggesting that one could retain the half-crown and the sixpence with the £-cent-½ system. Manifestly this cannot be done. Where I criticise the Committee, majority and minority Report alike, is that it was far too deferential in the face of this salvo. It did not inquire at all into the reasons given by those whom it said were entitled to speak, and with experience, on this matter. True they are entitled to speak, but a Committee of this importance is entitled to cross-examine and to take evidence from other sources. By far the most interesting comment on this comes from the minority Report paragraph 39 page 164 which said: The Bank of England advised that there was nothing to be gained by taking direct evidence from foreign bankers on the 'international' case for the £, pointing out that, while some foreign bankers would favour the retention of the £, others would minimise its importance and, in the end, an Act of judgment would still be required. It is doubly deplorable, deplorable that the Bank of England should put forward that view, suggesting that the Halsbury Committee should not even consider taking evidence from foreign bankers and others concerned, and it was deplorable that the Committee so tamely accepted that verdict. If only it had not done this, I believe that the international case for the £ and the majority Report would have been exploded long ago.

The logic is clear enough. If the international case goes, associability remains. That points clearly to the 10s.-cent system. The only thing to do, and the Chancellor did it this afternoon with considerable skill as always, is to go into reverse and pretend that associability does not matter. This is the line that is now being put forward. In the same issue of The Banker from which I have already quoted there is a note from Australia which says: The Commonwealth Treasurer. Mr. William McMahon, has announced that the currency decimalisation operation has gone so well that the date for the completion of the change-over has been brought forward by six months to August 1 this year-originally it had been set at two years after the start of the change—over". He goes on to say that the cost of the switch would be 50 million Australian dollars, against the original estimate of 75 million Australian dollars. He adds that: The change … had had no discernible impact on the consumer prices index. … This is a very awkward argument for the Treasury, and with typical Treasury skill, because I admire that Department very much indeed, instead of arguing it, it has adopted it. Much the same now appears in all the letters which Ministers of the Treasury have been sending to Members of Parliament.

I find this in a letter from the Chancellor of the Exchequer to my right hon. Friend the Member for Altrincham and Sale (Mr. Barber): In Australia it was found that where staff were trained to help customers with their problems there was little or no difficulty; where they were not there was friction ". Here comes the jump in logic: Thus it is not the system in itself which makes for a smooth transition". The answer is—[HON. MEMBERS: "Go on."] It seems that hon. Members would like the next piece read: I have every confidence"— That must be a different letter. I also have the letter which the Financial Secretary wrote to my hon. Friend the Member for the City of Chester (Mr. Temple). [Interruption.] The letters say the same thing; they are identical.

The real answer, once more, is the simple answer. Australia got it right not just because its preparations were good but because it picked the right system. This is the answer to the success of the system in Australia and South Africa; and I do not doubt that the same will apply to New Zealand.

I have recently returned from Australia. I spent a good deal of time speaking to people—from bankers to taxi drivers—about decimalisation of the currency. It has gone marvellously well. I remember an article in one of the Sydney newspapers which said that when one saw a story about L.s.d. it referred to the drug and not to currency. This was only a very short time after the introduction of the decimal system.

We have a variant of the new argument about associability which the Government are doing their best to play down. A pamphlet which has been distributed by Lord Halsbury contains, as it puts it, the substance of the talks which he gave to Parliamentary Committees of the two principal political parties. I do not wish to raise the temperature, and therefore I avoid comment on that. Our meetings are supposed to be secret. I thought that this one was. As far as I know, no authority was given by the Opposition for this.

I do not wish to comment on that. But I do wish to comment on the new argument which emerges triumphantly at the end of this short pamphlet. Under the heading "Evidence from India", it states: This is of critical importance. It is persistently disregarded because it is ten years old and has lots its news value. It goes on to explain how India decimalised in 1957 from an incredibly complicated system to its present system, and it says that "the transition went quite smoothly". I have no doubt that it did, partly because in 1957 the vast majority of small transactions would be in kind and not currency, but also because the rupee value of 1s. 6d. is one of the accepted groups and was decimalised into 100 Naya Paise, which is in an exact and pure two-decimal system. This is the reason for the success of the Indian system, and it is odd for Lord Halsbury to say that it is persistently disregarded because one of the bodies which persistently disregarded the advice was the Halsbury Committee itself which had this evidence presented to it, and it appears neither in the majority Report nor in the minority Report. It is slightly absurd that we should be asked urgently to consider it at this stage.

I come to the point about whether associability matters. I have tried to show that the Chancellor of the Exchequer has been driven into arguing that it is unimportant, but I do not think that many people share this view. Every report from every country—and I have studied as many of them as I can—gives the palm to the 10s.-cent. In its simplest form, the argument is that under the 10s.-cent system 13s. is 1.3, which is uncluttered and obvious, whereas under the £-cent system 13s. is 65 new pennies or 650 mils. But I do not think that the evidence shows that the gap will close, although unquestionably it will narrow. The Chancellor of the Exchequer dismissed this matter much too casually.

The comment in paragraph 218 of the majority Report on the report by Dr. Sheila Jones was this: Dr. Jones's results … suggest that the 10s.-cent system would be easier from the point of view of paying sums than the £-cent-½ system, that the gap between the two would be very much narrowed, though never entirely closed … This is a very different picture from the one which the Chancellor of the Exchequer painted today. I feel that we had had far too little scientific examination of the questions of coin handling, ease of assimilation, the education of school children and many other matters. It is amazing that we should be embarking on the world's largest currency conversion on such slender and ill-backed evidence.

One of the most significant sentences in the Halsbury Report is the first sentence of paragraph 95: Our inquiries suggest that in the last three years there has been a swing of opinion towards the 10s.-cent system, which is now the system most favoured by organisations ". That is true. The Halsbury Report came out in September, 1963. The Report is talking about a swing of opinion between 1960 and 1963. Nobody can doubt that that swing of opinion has snowballed since. Nobody can doubt now that it is the majority opinion among those in this country—and one must be careful about this qualification—who have studied this matter at all; because millions of people quite clearly have not.

I speak for no particular organisation. But I think that one is entitled to look at the editorials in the major newspapers of this country. Among the newspapers which have had editorials supporting the 10s.-cent system are the Daily Express, Daily Mail, Daily Mirror, Daily Sketch, Evening News, Evening Standard, Financial Times—and "Lombard" has been particularly telling in his column in the Financial Times—The Guardian, Sunday Citizen and The Times.It is perfectly possible that they are all wrong. But we should consider the possibility that they may not be wrong. It is perfectly possible that every country in the world—and I have shown that we shall be out of step with the lot—is wrong. But it is at least possible that the Government are wrong.

If we attach weight to the majority Report of the Halsbury Committee, which, as I have pointed out, was founded on a wrong judgment of the issue, and if we attach weight, which I do since I knew her when I was Minister of Labour and I have considerable respect for her, to the view of Dame Anne Godwin, should not we attach more, much more, weight to the view of the T.U.C. General Council, which told the Chancellor of the Exchequer that the bulk of industry, trade and commerce supported the 10s. system, and it asked him to reconsider his decision.

Some people have had very few letters on this matter. I have had a great number. One becomes experienced in analysing one's letters. One knows the organised letters, the letters from cranks, and so on. The letters which I have received are overwhelmingly in favour of the 10s.—cent system, and have been ever since this issue became a matter of public knowledge.

I quote very briefly two very different points of view. One says: I write as the Headmaster of a primary school as well as one of your constituents to urge you most strenuously to exercise your influence to ensure that if and when a decimal currency is introduced in this country it shall be based on the ten shilling unit so as to eliminate the need for a half-cent and the consequent complications in calculation which would follow upon the introduction of half-cents. I am certain that decimalisation of the coinage can only be of maximum value to society if the opportunity is taken to simplify our monetary system to the greatest possible extent ". The other is a very different letter from the Enfield Highway Co-operative Society, which has 64,000 members. It argues the 10s. case, but the only sentence which I read is this: Since the White Paper was published much evidence has been brought forward of what has happened in other countries who have gone over to decimal currency and the strength and weight of the arguments against the system recommended by the Halsbury Committee have been such that the Government would be fully justified in having second thoughts on the matter. I agree very much that that is true. The Halsbury Committee reported in September, 1963, and the evidence particularly from countries like South Africa, Australia and New Zealand now certainly reflects upon the judgment of the majority finding.

This is one of the most important debates that we will have in the whole of this Parliament. Let me put as I see it what we are going to do. We are setting out on a course which has been rejected by every other country, including those countries which have a great attachment to this country and, indeed, to the £ sterling. Secondly, we are opting for a system which will make each and every minor, particularly shopping, transaction more complicated than it need be. Thirdly, we are opting for a system that will not give the maximum benefit of teaching for our children and it follows from this that we are going against, and not with, the economic logic of history.

It is often said of the Chancellor of the Exchequer—and it may be true—that he wishes to be remembered as a Chancellor. Unfortunately, Chancellors are remembered more than anything else for their follies, and I fear that this is one of his. It has been said, and I believe that this is partly why we are in this difficulty, particularly about the vote tonight, that this country loves strong Government. I am not at all sure that that proposition is true—much of our history would contest it—but I am darned sure that it does not like stubborn Government.

I believe that the Chancellor of the Exchequer would gain greatly in stature by changing his mind, because I cannot believe that he does not know in his heart that what he is proposing is wrong. It would be wildly unlikely if the rest of the world were wrong and the Chancellor of the Exchequer alone were right. He is the prisoner of his own cry that the Government must give a lead. Therefore, I ask him, does that apply even on a subject which has nothing to do with party politics, and does it apply even when that lead is known to be, and can he shown to be, wrong?

5.43 p.m.

Mr. R. B. Cant (Stoke-on-Trent, Central)

I would like to begin, as the right hon. Member for Enfield, West (Mr. lain Macleod) began, by congratulating my right hon. Friend the Chancellor of the Exchequer on actually introducing a decimal currency system. This is indeed a very historic occasion. Despite everything that might be said tonight from the benches opposite, I do not think that the Conservatives would have taken this step had they been returned to power. They are making a good deal of political capital.

Having said that, however, I want to say, as the right hon. Member for Enfield, West said, that I am an unrepentant ten-bobber. My average length of speech in this Session of Parliament has been 11½. minutes and I do not much want to exceed that tonight. I do not, therefore, want to say anything about what might be euphemistically called the democratic aspects of the decimal currency affair.

My right hon. Friend the Chancellor of the Exchequer has been extremely smart in exploiting the democratic machine and bringing this matter to a conclusion. He has caught everybody on one foot, inside Parliament and outside it. My only consolation, perhaps a sop to my self-respect, is that I was shouting about the importance of this matter way back last June. [An HON. MEMBER: "Not loudly enough."] Yes, not loudly enough.

I do not even want to say anything about the international aspects of this argument or the international case, because I appreciate that this has faded into the background. We have had private meetings with the Chancellor of the Exchequer and other people, and this argument has never been mentioned. My right hon. Friend played it down today. I am, however, absolutely certain that this is the decisive argument and is what has persuaded my right hon. Friend to take this course. [AN HON. MEMBER: "A good argument."] Is it a good one? I do not want to be provoked too much, otherwise I might speak longer than I intended.

The elementary textbooks which I read when I was at school suggested to me that the strength of the £ sterling, secular and cyclical, had much more to do with real factors underlying the economic situation and that even when we had our financial problems associated with the fact that we were a reserve currency, and, even more important, a world trading currency, these stemmed very largely from a deterioration in our basic economic situation.

Perhaps the Chancellor would have been persuaded by the fact that within 1,000 years we shall have an international unit in currency, even a European unit of currency as we are going into the Common Market. I do not, however, want to say anything more about that. I do not even want to discuss associability at any length. Here again, however, just as the international argument has changed, so the associability argument has become distorted.

I look at this matter from two points of view. First, the right hon. Member for Enfield, West quoted from paragraph 373 of the Halsbury Report, a decisive paragraph which states, in effect, that the decision is one to be taken between, on the one hand, the international argument for the £ and the associability argument for the 10s. unit, on the other hand. And yet Lord Halsbury ends up on page 11 of his pamphlet by dismissing this entirely and saying that in terms of associability the implication is quite clear that one has no advantage over the other. Why in the Report did associability loom so large in favour of the 10s. unit and in Lord Halsbury's privately circulated document disappear entirely from the scene?

I have just one other word on associability before I get on to what I really want to say. Not only has the argument changed, but it has become distorted in this sense. If we look at the Financial Times this morning, we see a letter from the lady who did the research for the Halsbury Committee. She is most upset about this because, she says, it is absolutely wrong to talk as the Chancellor does about three days' shopping practice being the difference.

What, in effect, that lady says is that we must accept that some elderly or less intelligent people might take months to learn the £-cent.-½ system while some may never master it at all.

Mr. Joel Barnett (Heywood and Royton)

Would not my hon. Friend agree that some elderly people have not mastered£s. d. either?

Mr. Cant

I would not agree, and I am an elderly person. The lady who did the research for the Halsbury Committee then talks about the average housewife and says that these results were achieved only because perfect conditions operated. I would like to discuss this matter at length, but this associability argument is getting into rather deep water.

In my remaining few minutes I turn to paragraph 40 of the Halsbury Report. I used to be a local preacher and perhaps I may be permitted to take this paragraph as my text. This is an intensely practical problem and one which was not discussed in detail even in the Halsbury Report. The right hon. Member for Enfield, West said that the Halsbury Committee was perhaps not scientific enough in its approach to this problem. I hope to prove that that is a correct statement.

Paragraph 40 says: Within limits the higher the value of the major unit"— It is the advantages of the major unit that we are discussing— the more convenient and manageable it is for the recording of large amounts—wages and salaries, company and national statistics, prices of suits, of clothes, cars, houses … In a highly complex trading and industrial economy like ours, such a heavy major unit is perhaps more particularly useful. The second point given is: It has the further advantage in that it tends towards a more economical use of business machines. If the choice lies between a number of straight two-place decimal systems"— note that— the one with the heaviest major unit will make the most efficient use of machines capacity. Let us look at this question of "convenient and manageable". This really has not been gone into in a scientific way, in the sense that we would apply time and motion study to the use of notes and coins. Let us assume that we are buying a house for cash, and let us assume that the house costs £2,550 15s. 6d., which, of course, it could cost with legal charges, estate agents' fees, and so on. We would assume that the heavy £ unit would have an advantage, because it would need fewer coins. But this is incorrect. Certainly, with a large purchase like a house, it needs more units to express this in decimal terms. If we buy a suit, we might expect that if we paid cash for it, the bigger unit, the £, would have the advantage. But not at all. I will go into detail if hon. Members want me to. I am a fanatic about this point.

If we look at this argument in economic sense, if we ask ourselves what is the likely relative effect of a £ unit and a 10s. unit, we might think that the heavy unit would have the advantage. But all Australian experience suggests that from the point of view of, say, a deflationary effect on the economy, the 10s. unit increases the marginal propensity to save and, therefore, reduces the tendency to inflation. A moment's reflection would prove that point.

To go back to my original point about convenience and manageability, we are really concerned, not with buying cars, houses and suits, but with the average transaction. This is something about which we do not really know very much. The Halsbury Committee got a figure From some people who gave evidence, but we do not know much about the nature of the average transaction in this country. What is the average transaction? Is it £1? Is it 5s? It is assumed to be something around 5s. or 6s.

If we are thinking of the convenience and manageability of the unit, we have to think of it in these terms. What has never been done in this country—until I looked at this problem, I may say, with a certain amount of conceit—and certainly was not done by the Halsbury Committee, is to take, say, transactions from 1d. to £1. Let us assume that we are making a great number of purchases, say 200. Let us estimate how many coins and notes this country would handle in one week in this context. We are told that there are 20 million families, that they make 100 purchases a week, and that this involves 2,000 units of currency. If we go right from 1d. to £1, if we calculate how many coins and how many notes will be required under the £-cent-isystem and the 10s.-cent system to transact these purchases, giving an appropriate amount of change—if we undertake this time and motion study, which I think is absolutely vital, and if we make one assumption, that we do not follow the Memorandum of Dissent and use the 25 cent, but follow New Zealand and use the 50 cent, which is the optimum, then the actual economy for persons making 200 purchases a week would be 160 coins, and, for the country as a whole, this would be a saving of 1.6 billion coins in use every week.

This is the sort of practical problem with which the Halsbury Committee should have been faced. If I may go back to the point which the Chancellor made, in making this calculation one sees that he is making a mistake in not using the 20 cent coin, because time and time again we are faced, in paying money or giving change, with ten-plus-ten-plusten-plus-ten, or ten-plus-ten, and the use of the 10 cent would greatly facilitate operation. But think of the burden of 1.6 billion extra coins and notes having to be used every week in this country to make average transactions. There is the question of trouser pockets. There is a sense of anticlimax about that. I am thinking of the Chancellor of the Exchequer bothering to save £750,000 though not producing this 10s. note; yet he is going to produce all the extra coins required because he has adopted this particular system.

I should like to say a lot more, but I have spoken for too long already. I should like the Chancellor to get somebody to make this calculation. I am prepared to give him my papers if he wants them. He would then see how much more economical is the use of the ten shilling system in practical terms, and he would see the real significance of the words "convenient and manageable".

May I say one word on inflation. I have already made some reference to this. If the average purchase is around 5s. or 6s. now, there is no doubt that as the ten-shilling system gathers momentum in terms of its advantage, as one goes up from that point, as inflation grows, which it will with any Government, the advantage of the ten-shilling system will be increasingly demonstrated.

My second point concerns the heavy unit and the thousand years. The Halsbury Committee gives it as an argument for the £-cent-½ system that the ½ will disappear in 20 years. This involves a 380 per cent. increase if we are going from a minimum unit of ½d to a minimum unit of 2.5. If the ½d. is dropped out of our calculations, with an average wage of £20 a week, we must assume an average wage of £80 a week before we can equally drop out the 2.4d. If we are thinking of a thousand years, we do not need to worry about the unit. The formula is merely to shift the decimal point. In my lifetime the franc has been 20 to the £, 1,300 to the £, and 13 to the £. It is as simple as that, if we have a pure decimal system.

The other aspect of this paragraph was the more efficient use of business machines. This is really the most remarkable part of the Report, because the assumption is that if the choice lies between a number of straight two-place decimal systems, then the heavy unit will have the advantage. The Halsbury Report then goes on to recommend a three-place decimal system in which all the advantages are completely undermined.

I do not want to go on to discuss this matter in any detail, although, being a fanatic, I would be happy to do so. I cannot help but feel that this is a rather sad day for this country, if I can speak without emotion, because it held out hopes of a move forward into a rational system which other countries are adopting. I think that the Chancellor has allowed tradition to triumph over reason, and that he has done this in the context of what must be a rare spirit of unity amongst people about what they want, both inside this House and outside.

Some people say that it does not really matter. The Prime Minister at this private meeting, the account of which I read in The Times, said rather flippantly, Who is going to the barricades for decimal currency? Nobody is, but I think we have to accept that this piece of legislation is very different in its impact on our society from many others which may appear to be equally important, because here we are doing something which will affect the daily lives of people for a long time to come. Unlike a Finance Act, or a Companies Act, or some other things, this is going to be with us for a long time to come, and I regret it.

I am almost tempted to quote the rude comment on the Chancellor of the journalist who said: My mind is made up, but do not confuse me with facts. Having said that, I assure my right hon. Friend—not that he cares two hoots about this—that, being a loyal backbencher, I propose to limp into the "Aye" Lobby tonight and register my half-hearted support for this half-baked, ½-cent system.

6.3 p.m.

Mr. John Smith (Cities of London and Westminster)

Although I felt it my duty to try to do so, I am rather sorry that I managed to catch your eye, Mr. Deputy Speaker. I have no wish to upset the Prime Minister's dumb friends by supporting the Government, still less upset many of my colleagues and many of my constituents who, for excellent reasons, are 10-bobbers. It is very tempting to let the Government sweat it out, but this is a very important matter, and so long as there is the slightest risk, however small, that the Government might listen to what are loosely termed their supporters, I must declare that, after studying this question for several years, I agree with Lord Halsbury's choice of the major unit.

That decision is strengthend by having served on a Royal Commission with Lord Halsbury for seven years. I feel that it would be taking a great deal on oneself to disagree on matters of reasoning with such a clear-headed man as that. It is a finely balance choice. Neither system is perfect, both systems will work, and either system is a great deal better than what we have at the present; but I think that the £ has it.

I shall not rehearse all the arguments, with which we are all familiar. I would simply like to make one or two additional points, including one to do with the nature of the currency itself, which has not been dealt with at all.

First, we are all agreed that the system must be lasting. We do not want to do it again, and in spite of what the hon. Member for Stoke-on-Trent, Central (Mr. Cant) said—and I have heard both his speeches and respected very much what he said—the cost of rejuvenating a decimal currency system is not at all a small matter in our complex economy. It is not simply a question of moving the decimal point. It is a very expensive business, involving reconstructing the programmes of business machines all over the country, and it is a cost which will greatly increase in future. We do not want to do this again.

Clearly the £-cent system will last longer, but it has this ½-cent which is a draw-back. I think a good deal turns on when we think the ½-cent will go. Lord Halsbury and the Government have referred to improvements in the standard of living; Lord Halsbury also certainly referred, rather coyly, to inflation. The conclusion was that the ½-cent might go in a generation. I think that it will go far sooner. For example, in 1963, when Lord Halsbury was dealing with quite another point, he referred to three things which cost 3d.—newspapers, letter post, and bus fares. That now reads like ancient history.

We do not, of course, approve of inflation any more than we approve of fog, but it is very silly, and indeed hypocritical to ignore it. Inflation and our method of Government are absolutely inseparable. We shall always vote ourselves more than we can afford. Inflation is attractive to voters, and it is attractive to Governments. Inflation is for Governments what death is for doctors. Inflation offers the Government not only the chance of burying their financial mistakes, but of turning today's extravagance into tomorrow's bargain. Inflation is, of course, damnable. It is a method of living off one's children, but it is attractive and so we shall have it. We should therefore go for the larger unit, ephemeral ½-cent or no.

On the question of inflation, the £-cent system, if there is any difference between the two systems, is slightly less inflationary. The difference between the two systems at the outset can come only from firms ignoring the ½-cent in the £ system by rounding up or rounding down to the whole cent worth 2.4d. Lord Halsbury did a similar calculation when he was considering whether to abandon the existing halfpenny. He concluded that this would have the effect—the Chancellor quoted the full effect, but what is important is the marginal effect, because both systems have an effect of an increase of three quarters of a point on the cost of living. Far fewer firms would abandon the ½-cent than in Lord Halsbury's calculation would have abandoned the halfpenny, and therefore the effect is unlikely to be any greater.

Moreover, the continuing inflationary effect of a £-cent system is likely to be less than that of a 10s.-cent system. What speeds inflation is frequent interconnected rises of price. To take an extreme example, weekly alteration of wage rates tied to a cost of living index is a great deal more inflationary than wage rates which are changed at less frequent intervals. I feel that large "steps" at the bottom of a currency are a positive advantage, because they will mean that rises in price will be delayed until costs pass the middle point. Therefore, in terms of delaying rises—which is part of any policy, pay pause or freeze, for controlling inflation—the £-cent system has a positive advantage.

There are further advantages in having a "coarse-grained" system—that is to say, one with a large minor unit.

Mr. Bernard Weatherill (Croydon, North-East)

I do not know whether my hon. Friend is speaking as a banker, but I have heard it said that banks will ignore the half-cent. Can he confirm that—because ordinary traders will not ignore it?

Mr. Smith

I understand that banks will. They already ignore the halfpenny. On the subject of a "coarse-grained" currency, I feel that, rather in the manner of Parkinson's first law, people will use a unit of currency, however small it is, whether or not they need to do so. The bank for which I work gave up using the halfpenny without ill effects in 1761, when it was worth at least eight or ten times what it is worth now, and indeed before the bronze penny had been introduced. It would be quite simple for traders to use fractions and for people concerned with price shading on paper to use further decimal points, but for banks to deal only in a larger unit.

The principal advantage for ordinary people in having a large higher unit of currency is that small prices are represented by smaller numbers, and small numbers are very much easier to reckon in than are large ones. The £-cent system has been criticised for being too "coarse-grained", but it is possible for calculations to use as many decimal places as are required. But if, on the other hand, we have a small unit we are condemned to use it for calculations however large, and for which—and they are probably the more important calculations—the £ itself is already too small a unit.

The £-mil system is attractive on many counts, but it has two crippling disadvantages. First, its bottom coin is too small to use and, secondly, people cannot reckon in their head with the three-figure numbers involved. Therefore, regretfully I rule out that system.

Mr. Patrick Jenkin

Does not my hon. Friend recognise that both these difficulties can be easily surmounted? The smallest coin could be two mils, which would be almost the equivalent of a halfpenny, and by introducing the florin as one-tenth of the £ the difficulty referred to by my hon. Friend of calculating to three places would also be overcome.

Mr. Smith

I do not want to have a sustained rally with my betters on this point. I merely suggest that we could not do that, because it would not be possible always to give change. If we had a system involving only even coins at the bottom and odd ones higher up there would be great difficulty in giving change.

I now turn to something less controversial but more interesting, namely, the coinage itself. The Bill proposes that we shall have two new cupro-nickel coins and that these should be of the same size and weight as the shilling and the florin. Could they please be lighter? It is proposed that they shall be the same weight as they were in 1816, when their purchasing power was many times as great as it is today. When the bronze coinage has been lightened, as proposed, the cupro-nickel coins will seem to be even more clumsy and cumbersome than they do at present.

Almost all coin-accepting machines work on diameter. Therefore, the simplest way to lighten the coins would be either to make them of another material, which I do not suggest, or to make them thinner. Thin coins are very handsome. If the Chancellor would examine the last shilling to be minted before 1816, or the present Austrian ten-schilling piece, he will see what I mean.

There are two other advantages in my proposal. The first relates to the major task of getting the old coins out of circulation and the new ones in. They will circulate side by side for a period, and then the old ones will have to he taken out of circulation and reminted. The business of sorting will be made easier if the new coins are of the same diameter as the old, but of a different thickness. They will not be compatible for weight during that period but afterwards they will be, and there will be no more inconvenience in getting an old florin in a shovelfull of new coins—if the new coins are lighter—than there now in getting a foreign coin in a shovel-full.

Further, the Chancellor wishes to introduce a 10s. coin, which I regard as very sensible. But this will have to be either a cartwheel if it is compatible for weight, or made of a different metal, thus producing a three-tier coinage, in which the top tier is not compatible for weight with the middle tier. If, on the other hand, he will do his level best to make the new cupro-nickel coins lighter he may be able to make his top coins compatible for weight with the middle coins, and thus avoid having three tiers. I should be grateful if the right hon. Gentleman would ask someone to get him ten English shillingsworth of Austrian nickel coins so that he can see whether he does not like them better than the coins that he is at present proposing to give us.

I want to deal briefly with the question of associability. Much has been made of this. For shoppers, the associability of the 10s. system is very much better but I think that we greatly under-estimate the talents of shoppers. Anybody who has ever bought a bar of chocolate in a foreign airport, where people not only associate two currencies at a time but, often, several at a time, and give change in them, will know that we have overdone this argument. Nevertheless, associability is very important for records and for budgeting, and for thinking.

The £-cent system is indeed already used in certain records. It is used by the Navy—or at least it was in my day. I do not know whether the Chancellor experienced this, but in my time pay in the Navy was dealt with in £ notes and florins only. Moreover, associability for shoppers is a temporary need, but for records and statistics it is a permanent need.

Surely the permanent part of associability—that is to say, continuity—is much more important than temporary ease. In general, we are much too liable to say that a system is easy and to choose it simply because it is, without looking further ahead.

I want to say a little about the international case. As the Chancellor says, most gnomes can multiply by two. I have seen them do it. But not all foreigners are gnomes. Most of them are traders. The Chancellor did not give the fraction, but half of all sterling transactions take place between foreigners. For many years I have been a director of the Ottoman Bank, which deals with countries where a high proportion of these transactions take place. I know what a lot of our customers are like. Many of them are good traders who know everything there is to be known about Mombasa Robusta, or whatever it is they trade in, but are not very up to date on current affairs in Britain. All people, especially such people, are creatures of habit, just as we are creatures of habit, and a useful analogy can be drawn between what might happen with them with a 10s. system and what happens with us in our own dealings with our own bank. From time to time one is persuaded into making a banker's order for some dim cause or other. Later, the charity or whatever it is asks if one would make another order, as it has changed its bank. One does not always make another; sometimes one reviews the matter and realises that the money could be used better. If you ask someone to do something in a different way he may stop doing it at all: you do not transplant the flowers in your garden just because you don't think it will do them any harm; you only do it if you've absolutely got to. The great thing with sterling is not to talk about it. Sterling always strengthens a little when this House is in recess. Therefore, I think the international case for the £ reinforces the domestic case; I hope that we will not be financial "Little Englanders" over this; and I hope that the Chancellor will stick to his guns.

6.22 p.m.

Mr. Richard Buchanan (Glasgow, Springburn)

I am sorry to have been called immediately after the hon. Member for the Cities of London and Westminster (Mr. John Smith), because he is a "pound man" and so am I and the debate would have been much better if I had followed a "ten-bobber".

The debate has shown that this affects everyone in the country and every purchase. This would be a fairly easy exercise, in that the obvious minimum purchase is bound to be the minimum fare on any public transport vehicle. The proposed coins are very much along those lines. This matter affects us all in our everyday lives, so it is not a matter for superficial judgment, in the sense that 6d. is handy for one-armed bandits and half a crown for cigarette machines. We should judge not for the short term but for the far future. We are all affected in different ways, and those with different interests react differently.

As the Chancellor said, if the 10s. system had been chosen, there would have been an even louder outcry. The Government made the right choice. No one, not even the Halsbury Committee, would claim that it is perfect, but I hope that the advocates of the 10s. system would not claim the same thing for theirs. Both have advantages and disadvantages.

There was little enthusiasm for the 10s.-cent system until the present decision was announced. The bulk of the Government's case must be that they are planning for the future and must therefore plan a coinage which will endure. Inflation is not caused by a change in currency but by government decisions throughout the world. My Government was doing very well after 1945, until another Government decided to go to war in Korea. The importance of currency units inevitably lessens with time. This is not a recent phenomenon. I am not making a political point.

One of the advantages of the £-cent system is that when the new halfpenny becomes redundant we can get rid of it with no risk. It is worth noting that much of the argument against the system is that it is not a pure decimal system and that the new penny is too high a unit. The hon. Member for the Cities of London and Westminster pointed out that until 1939 banks did not officially recognise the halfpenny for accountancy purposes. We managed very well with a unit much larger than the proposed new penny.

The halfpenny until recently was used in small transactions, but our currency has declined to about one-third or a quarter of its 1939 value, when a penny bought three or four times what it buys today. Therefore, if the smallest unit for accountancy purposes in 1939 was a penny, it would today be about 3d. or 4d. The Government proposal for 2.4d. is in fact worth less than the 1939 penny. We will be better placed for flexibility for smaller transactions than we were in 1939.

I have a booklet entitled "Shaws' News" issued by Shaws' Biscuits Ltd., the kind of document which one normally only glances at, which gives an example of the retail price in 1939 of a 7½ oz. tin of Shaws' Yorkshire Parkins, which are delicious biscuits. It was 10½d. Today, it retails at 2s. 1d., or 25 of the present pennies. It would cost 10.4 of the new pennies or, numerically, practically the same as its pre-war price.

When decimalisation was discussed in the 1930s, there was good reason for insisting on a minimum unit much smaller than one-hundredth of the £, but, with the £'s present purchasing power, surely no reasonable objection could be taken to the proposed new penny—