HC Deb 04 March 1969 vol 779 cc193-5
9. Mr. Alison

asked the Chancellor of the Exchequer what estimate he has made of the alternative funds available to the private sector in the light of his recent recommendation that bank advances should be brought within the prescribed March ceiling.

The Chancellor of the Exchequer (Mr. Roy Jenkins)

I do not believe that a quantitative estimate is possible. Bur as the ceiling applies to the major finance houses, as well as to the banks, and as other financial institutions are asked to observe a comparable degree of restraint, the extent to which borrowers who are denied bank finance can obtain funds from alternative sources can be exaggerated.

Mr. Alison

Does the right hon. Gentleman appreciate that in compelling small private borrowers to pay back bank overdrafts, as the policy implies, many of them will sell gilt-edged stock or Government non-marketable securities at a considerable loss, no doubt further depressing the price, and that the net effect will be to give them a substantial loss to set against future capital gains?

Mr. Jenkins

A lot of hypothetical questions are involved in that supplementary question. While I would not say that it is not possible that what the hon. Gentleman has in mind would not occur in certain circumstances, I would certainly not think that it was likely to be the generality of the position.

Mr. Barnett

Is it not a fact that in most cases the rate of bank interest does not deter a company or individual from borrowing? Are there not serious implications in the fact that the banks are still refusing to meet my right hon. Friend's instructions, or is he not now insisting on the implementation of his instructions? If not, and if the banks do not comply, I ask my right hon. Friend not to be deterred from using other methods to make sure that they do.

Mr. Jenkins

I am extremely determined—and the banks are in no doubt about this—that the credit squeeze should be made effective. I believe that my request to the banks—and it is a request rather than instruction—will, and should, be carried out.

Mr. Higgins

Could the right hon. Gentleman say what effect these measures are likely to have on investment, particularly by small firms?

Mr. Jenkins

It is impossible to isolate one factor. There is at least one other later Question on this point. I believe that the investment prospects are, on the whole, good at the present time.

Mr. Clegg

Does not the right hon. Gentleman remember that during the debates on the import deposit scheme the Financial Secretary said that alternative sources were available to those who could not get the import deposit from the bank? How does that square with his Answer today?

Mr. Jenkins

There is no contradiction, nor is there evidence of great difficulty being experienced in raising the import deposit.

Sir A. V. Harvey

Is the right hon. Gentleman aware that his directions to the banks are not clear to some banks concerning agriculturalists, who are having a difficult time? Would he make it abundantly clear to the banks that farmers and others involved should have special consideration to meet their problems?

Mr. Jenkins

The position in relation to the priority categories has been made clear, and is clear, to the banks.

Mr. Dickens

Although I disagree with the Government's policy in this respect, a very important point of principle is involved. Would my right hon. Friend make it clear whether he intends to use the reserve powers of the Bank of England to enforce the Government directive on the joint stock banks if they continue to be reticent about cutting down bank overdrafts and lending to private borrowers?

Mr. Jenkins

I have made clear to the banks and to the House that I intend that the credit squeeze should be made effective.