HC Deb 15 July 1970 vol 803 cc1651-71

Question proposed, That the Clause stand part of the Bill.

10.15 p.m.

The Minister of State, Treasury (Mr. Terence Higgins)

Our Second Reading debate on Friday was extremely short, and that reflected, I think, not any lack of enthusiasm on the part of the House for the Measure, which was supported in all parts, but rather that the House was anxious to facilitate its Second Reading within the short time then available.

That debate was remarkable also for the fact that it contained two maiden speeches: it probably contained a higher percentage of maiden speeches than any other debate we have ever had. That, again, reflected the interest which new Members are taking in matters concerning our international finance.

I feel that on this occasion the House will wish me to give some more detailed explanation of the two main Clauses and, in particular, of this Clause.

Britain was extremely influential and played an important rôle in setting up the Fund, the World Bank and the Bretton Woods institutions, and it is right and proper to stress that the International Monetary Fund has promoted a free system of world trade and payments which has helped its members to achieve economic growth, high levels of employment and improved standards of living. In considering this Clause, it is worth reminding the House that the Fund's resources are at present 21 billion dollars, and, under the proposals described in Cmnd. 4353, which sets out the proposals for increasing the resources of the Fund, these resources will be increased to a total of 29 billion dollars.

These sums, which the Fund holds in gold and in currencies, provide a reserve on which members may draw, with the Fund's agreement, to meet foreign obligations during periods of deficit in their balance of payments, or, in the more formal words of the first of the Articles of Agreement, to give confidence to members … by providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity. In the Second Reading debate, hon. Members on both sides expressed support for this new Bill, which is in the line with the development of the Fund's affairs.

The resources of the Fund are derived from member countries' subscriptions, and the object of the Clause is to facilitate an increase in quotas by increasing subscription. Each member of the Fund has a quota which determines its voting rights, its access to Fund resources and, since last year, its allocations of Special Drawing Rights, so that the size of subscription and quota is a matter of very great importance to the members of the Fund. The subscription is equal to the quota, and is paid on this occasion, as on others, partly in gold and partly in the member's own currency.

The Articles of Agreement provide for reviews of the adequacy of members' quotas, which were initially designed on a basis which was said to reflect their economic strength. But there is also a provision for reviewing the situation regularly every five years, and it is the result of the fifth review that we are now being asked to approve. The purpose of each review is to look at the new situation which has arisen in the preceding five years, and to adjust the quotas according to the relative strengths of the individual member countries. But there are no rules to determine the precise size of the new quotas or the size of the Fund's resources. This has to be decided by the collective agreement of the member countries.

On this occasion there were some changes in the usual emphasis partly as a result of the introduction of Special Drawing Rights which the House discussed when debating the International Monetary Fund Bill in 1968. The S.D.R.s, as I said on Friday, are a creation of unconditional liquidity, but it was felt—

Mr. Robert Sheldon (Ashton-under-Lyne)

Can the Minister say what instructions our representatives had during the discussions fixing our quota? Was it the intention that the quota should be fixed at as high a level as possible, or was the figure proposed by our own representatives?

Mr. Higgins

I think it would be wrong for me to set out the precise instructions. I was seeking to set out the considerations which were borne in mind by the Fund and the various conflicting pressures which determine the allocation of the quotas and the subscriptions among various countries. But there are, quite clearly, conflicting pressures, and one needs to bear in mind not only the relative economic strengths of countries and how they change from one period to another, but also the claims of developing countries as against the developed countries. All these considerations have to be taken into account, and effectively in these discussions, as in other discussions, one needs to move forward and see how various pressures are building up.

Mr. Sheldon

I am grateful to the hon. Gentleman for giving way to me a second time. Can he say whether it was the Government's intention to press for as high a quota as possible?

Mr. Higgins

One has to take into account not only whether we want the highest quota possible but other considerations such as the share which will go to the less developed countries. This is a matter for negotiation but, clearly, the absolute amount is something which has to have limits placed upon it because there is a danger of the creation of inflationary pressures. One has to take into account not only our own position but also the position, for example, of Commonwealth less developed countries and so on. It was felt that we had to strike a balance. Effectively, the major industrialised countries agreed to make a cut in the 8 per cent. of the quota to which in theory they would have been entitled. If one had gone purely on the grounds normally taken one would have gone for a somewhat bigger quota, but it was the view taken at the time in the meetings that the industrialised countries should take a somewhat smaller increase in total amount and that their percentage share should be lower than otherwise would be the case.

In some cases this 8 per cent. cut was made on very large increases but the U.K., since the last review, did not qualify for a special increase. This 8 per cent. cut meant that our increased quota eventually came out at about 15 per cent. I take the point the hon. Member has made; namely, the question of to what extent we pressed for the maximum quota. The answer is "No, we could have continued to negotiate for a larger share of the total but taking all considerations into account we felt that the right increase was of the order of about 15 per cent.".

This raised an important question because very important rights stem from the size of the quota in regard to S.D.R.s, for example, and so on. This being so, it is right to stress that our quota is still by far the largest quota after the United States. The difference between the United States and ours is, of course, considerable. We are, quite clearly, the second largest and, therefore, in terms of voting rights and so on we have a position second to the United States but considerably ahead of the others. If the hon. Member presses me on this point I will seek later in reply to the debate to give more precise figures.

Our maximum drawing rights have increased from 3,050 million dollars to 3,500 million dollars, of which 2,400 million dollars have been used. The House will wish to be assured about the nature of the payment we have to make for our increased quota. The sum of £37 million will be payable in gold, but it will increase the amount we can draw automatically from the Fund; the remaining 75 per cent. is to be paid to the Fund in sterling, but immediately lent back to us without interest. The Fund holds large amounts of sterling from earlier quotas and the equivalent of foreign currency borrowings. So there will be no question of an early call on us with respect to this new payment in sterling.

I hope that that outlines the broad points which arise on the Clause. No doubt a number of hon. Members will wish to raise particular matters, and if they wish me to do so, I will elaborate on the various points I have made.

Sir Brandon Rhys Williams (Kensington, South)

I am disturbed that a Bill of this importance was not adequately discussed on Second Reading, because it was inevitable, if the Bill was to be accorded its Second Reading on a Friday afternoon, that very limited contributions should be made from the Front Benches. Our discussions were illuminated by two excellent maiden speeches, but the Second Reading was certainly not a full one.

I have for a long time felt some concern about the negotiations which were proceeding for the issue of Special Drawing Rights, because one of the greatest problems facing the world trading community at present is that of mounting inflationary pressures. The agreement to permit the Fund to increase the quotas of its members in this way and to allow Special Drawing Rights is in effect a licence to the Fund to print money.

In the disputes over the causes of the depression in the 1930s progressive thinkers at that time were unanimous that we had to ascape from the tyranny of gold, that we had to find some other medium of exchange, and that it was necessary to expand liquidity to find ways of sustaining world trade. It now seems rather mean spirited to cavil when at last we seem to have arrived at a measure of international agreement to increase the available capital resources to sustain an even balance of world trade.

I ask myself whether sufficient attention has been given to another alternative which has been widely canvassed; namely, whether countries which find it difficult to maintain a fixed exchange rate for one reason or another should be allowed to vary their exchange rate—at any rate within narrow limits—rather than be forced to continue to subsidise their current account out of capital account.

Those who feel that above everything we must preserve a system of absolutely rigidly fixed exchange rates have said that the only way to preserve the structure of world trade is enormously to increase the available supplies on capital account which can be poured into the maintenance of current account balances when countries get into difficulties.

I Welcome any international agreement arrived at after years of negotiation the effect of which is to liberate world trade. Yet I cannot help wondering whether just at this juncture the inflationary pressures which are bound to be generated by the increase, virtually at the stroke of the pen, of the capital resources of countries en- gaging in international trade is wise; and whether it would not have been better that the pressure should have been sustained, so that we would have gone some further way down the road to managed exchange rates, crawling pegs—call it what you will.

I hope that the statement by my hon. Friend the Minister of State is correct that there is no question of an early call under the Clause on the money which we are asked to vote, because I think we should go extremely cautiously down the new path towards the issue of paper gold.

There have been rather forward-looking suggestions put about from continental centres that we should draw away from gold virtually altogether and that the Special Drawing Rights should become the pivot of international trade. It may be that that is the way that the future lies. Yet as we look about we see virtually all the major Western international powers afflicted by inflation. Is this the moment to print a great deal of capital? Is it the moment to try to pretend that inflation is affecting all the world's economies simultaneously by exactly the same amount, so that, although the value of money is falling everywhere, we can at least maintain some element of stability by keeping absolutely fixed exchange rates?

10.30 p.m.

It seems patently not true that inflation is proceeding in all the major trading countries of the West at the same rate. Less than a fortnight ago I attended a conference of bankers and economists in Frankfurt, where we were told with authority that wage rates in Germany, taking into account the social security payments which have to be added on top, were currently increasing at the rate of 25 per cent. per annum. I do not know whether that is true, but it suggests that in Germany also this problem of inflation is on the point of getting out of hand.

How long shall we be able to maintain the illusion of absolutely fixed exchange rates, immutable for all time? I fear that we shall soon find that we are obliged to turn to these Special Drawing Rights and draw on them up to the hilt in order to sustain this illusion; and when the Drawing Rights have all been taken up, we shall find ourselves with the old problem of how to find enough capital to subsidise the current account.

I have voiced my doubts. I do not want to seem curmudgeonly in my attitude to what I know is being greeted everywhere as a tremendous advance in international co-operation; but I wanted to voice those doubts, and I am grateful for the opportunity to do so.

Mr. Sheldon

I agree with one observation of the hon. Member for Kensington, South (Sir B. Rhys Williams), that it is a licence to print money. But I have no objection to that, because I see the position of gold as obviously in decline. In the very nature of things, we must accept that it will decline, and we need to be prepared for that.

What has concerned me for some time has been the excessive concentration on Special Drawing Rights to the exclusion of other matters to which the I.M.F., could well have devoted some of the large energies which it has put into the creation of Special Drawing Rights. In particular, it has always struck me over the past few years—I have said it again and again—that the real problem of the International Monetary Fund has not been the question of liquidity. Liquidity can be increased in many ways. The growing use of international credits is one such way in which effective liquidity has been increased many times. The swap arrangements can rapidly increase liquidity to whatever may be required, as can the way that trade is financed nowadays, being done so much by letter of credit and long-term credits between manufacturers and importers.

We have had a great effective increase in credit, and I do not think that we could ever see a situation in which international trade would go into decline as a result of limited liquidity. I just do not envisage that. Nevertheless, because of its importance in connection with the declining use of gold, I have always welcomed the Special Drawing Rights arrangement. The great pity, as I have seen it, about the whole of these discussions is that the crucial international problems of the time were not faced because the I.M.F. and all those negotiating with and on behalf of Governments were concentrating on this to the exclu- sion of the exchange rate variation, which is the great international financial problem now.

We have run into the problem of exchange rate variation, a problem not only of the present but one which will grow in importance because of the varying incidence of inflation as between one country and another. This is something which Governments cannot control. They can influence it in some sort of way, but they cannot control it. There are those countries which will find themselves faced with large levels of inflation, countries like Japan and South America, and there are others which will obtain rather greater control over their inflation, countries like Switzerland and Germany. Faced with this situation there will be a need for constant revaluation between one currency and another without the kind of upheavals we have seen in recent years. This was the great problem confronting the I.M.F., and the great tragedy was that it did not deal with it as the problem was evolving.

I am in favour of greater liquidity. One of the enormous advantages we have had in the post-war years has been the acceptance of the United States' deficit. This has been of great value, perhaps not so much now as it was in the 1950s, when there was still a fear of recessions, which has now been very largely banished. The fact that countries have held very large levels of dollars has been one of the most encouraging features or our time. I do not care whether the money is ever repaid. That is a very small matter by comparison with the absolute importance of the rôle of the dollar and the way it has been able to finance the enormous expansion of trade in the 1950s. The situation today is rather different. We should pay tribute to the way in which American economic policy did so much for the whole world.

I understand the great difficulty of the Minister of State in giving the details of the negotiations fixing the quota for Britain, but was it the Government's intention to go for the highest quota? I fully accept that we have the second highest quota in the I.M.F. Nevertheless, our percentage increase of that quota was much less than the increase in the quota of other major industrial countries. Was this accepted readily, or was it fought over?

Dr. John Gilbert (Dudley)

The hon. Member for Kensington, South (Sir B. Rhys Williams) discussed the possibility of increasing international liquidity by a method which I gather technicians normally described as the "wider band" approach—in other words, having a 2 per cent. or 3 per cent. spread between parties rather than the 1 per cent.

Sir B. Rhys Williams

I am grateful to the hon. Gentleman for permitting me to intervene so early in his speech to clarify what I said. There has been a misunderstanding. The system which I favour is what I think is known as "managed rates", whereby an orderly market is maintained by the intervention of monetary authorities, exchange equalisation accounts or what you will, but the actual events taking place in the trading countries ultimately decide what the rate of exchange is to be. I do not want a system of crawling pegs, because it seems to me to be an artificial system. I do not want fixed bands, because very soon the rate would be at one extreme or the other and we should be back with fixed rates.

The ideal would be something like the old gilt-edged market, where the authorities held the market at an extremely predictable and stable level but pressures of interest rates and other things made themselves felt over the passage of time.

Dr. Gilbert

I apologise for misunderstanding the hon. Gentleman. I am glad that he is not one of the wider band theorists, because I have never believed that that would produce any satisfactory solution when there is a fundamental disequilibrium. While I am a crawling peg enthusiast myself, I do not hope to carry the hon. Gentleman with me at this stage. I see that his proposals have considerable advantages over the present system of fixed rates that can be changed very infrequently and then only in times of crisis and with great difficulty.

Was the size of the increase in our quota contained in the Bill determined in isolation? That is, were our representatives negotiating for an increase in the quota without consideration of the possibility of other types of increase in global liquidity at the same time.

Are the Government bearing in mind other methods of increasing global liquidity or of reducing the need for keeping the same volume of reserves as a ratio of total world trade, which may be other possibilities? If the Government have in mind either possibility, which would they prefer?

On Second Reading I mentioned the imaginative proposals recently made by the U.S. Executive Director of the Fund. He was not taking a final position on any of the proposals, but he put forward three for consideration at the next meeting of the Fund. I should appreciate it if the Minister of State could give some indication of the Government's attitude to each of the three.

I am sure that I need not remind the hon. Gentleman of what they were, but one was the wider band proposal, one was the possibility of having freely floating rates for fixed and limited periods, and the third was some variant of the crawling peg. If the Minister cannot give an indication yet which type of proposal the Government would be prepared to support, can he assure us at least that the Government would support full discussion of the proposals themselves? They are extremely important and imaginative and I for one am grateful that the United States, as the world's leading economic Power, is taking the trouble and the initiative to come forward at this time.

I should be particularly concerned if there were any truth in the Press reports that our position may be inhibited by the negotiations now under way in connection with our possible entry into the Common Market. There have been suggestions that we might not take as imaginative a position as we should like for fear of offending the French. This may be untrue—

The Chairman

The hon. Member is straying from the Clause; there is nothing in the Clause about the Common Market.

Mr. William Rodgers (Stockton-on-Tees)

With respect, Sir Robert, I think that my hon. Friend is talking about something which is central to our discussion. The whole question of wider bands and floating rates and crawling pegs, which was raised by the hon. Member for Kensington, South (Sir B. Rhys Williams), has grave implications for the Bill. I do not think that my hon. Friend is exceeding the bounds of order by talking about the implications of our entry into the Common Market. With the greatest respect, if you feel that my hon. Friend is out of order, it would be helpful if you would spell out why you take that view.

The Chairman

We are discussing Clause 1, which is the important part of the Bill, but to the terms of which we should adhere as far as possible. If one is not careful, with this sort of Clause it is easy to stray beyond the terms of the Clause. I have not been immensely strict about it, but we must have some regard to that. I wished to safeguard the Committee from a long discussion which might enter into matters concerned with the Common Market and outside the Clause.

Mr. Rodgers

With respect to you, Sir Robert, and without wishing to intrude on the valuable contribution of my hon. Friend the Member for Dudley (Dr. Gilbert), may I observe that you bore with the hon. Member for Kensington, South while he made his interesting remarks on the subject of the crawling peg. Although the debate may have been prolonged beyond what was expected, the subject of our entry into the Common Market raises central questions of the floating rate in particular. I hope that you will allow my hon. Friend reasonable discretion on this central economic question.

The Chairman

Provided that the hon. Member does not go into the terms of the Common Market and questions of that kind and keeps to the subject of Clause 1, he will be in order.

Dr. Gilbert

I am grateful to my hon. Friend the Member for Stockton-on-Tees (Mr. William Rodgers) for his assistance and to you, Sir Robert, for your guidance. I assure you that I was not discussing the Common Market as such, but the Common Market that is relevant to this subject.

As hon. Members know, there is a move in the Common Market, which is not unanimous, to fix parities irrevocably for the future. There is some suggestion that the fixing of internal parities would reduce our own opportunity to move towards a more flexible system of exchange rates. That is not a view I share, because basically I do not think that there is anything inconsistent between setting up a fixed parity system within a trading bloc and having the external rate of that bloc able to move much more freely than at present as against other currencies. That is the only point I make.

10.45 p.m.

I welcome the remarks of my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) particularly with reference to the United States deficit and the fact that we seem to be moving further away from the tyranny of gold. I do not know whether it is in order to suggest that our negotiators might, when they talk about these imaginative American proposals for the Fund, suggest that the Americans might be even more imaginative still, because they are the only people to do it in the last resort. There is nothing I would like to see more than a further step towards demonetisation of gold. This is something that might be suggested to the American authorities. This is a good Bill as far as it goes. It makes a good contribution to international liquidity.

I hope that future steps will be in the direction not of these rather mechanistic, arbitrary increases but towards a system that will make further applications of this sort less necessary. In other words I hope that we can move towards a system where exchange rates adjust themselves much more smoothly, when we do not have to wait for periods of fundamental disequilibrium to arise and then have to deal with crises, and where we can have a situation where the ratios of reserves to world trade are no longer limiting factors to national economic growth.

Mr. John Biffen (Oswestry)

We are entitled to ask why in this Bill we are authorising the payment of a further increase of 360 million dollars in United Kingdom subscriptions because there must have been some p hilosophy behind that action. It must inevitably be related to the discussion which has gone on for some time now as to how we might better order the settlement of international debt. That cannot conceivably be isolated from the consideration of various alternatives which have been widely discussed, such as crawling pegs, gliding parities or floating rates, for which I feel some attraction and for which I understand the Home Secretary felt some attraction. I hope that my hon. Friend in replying to the debate will help the Committee a little.

It may be late but this is an issue of tremendous importance for the future economic management of this country and for its relations with those European countries with which we are now conducting negotiations, and by implication, how we would like all such European countries to proceed in relation to the "third world". All that flows directly from Clause 1 because it is inconceivable that in taking the decision that the Government have on Clause 1 they did not take a view on any of these issues.

We know that it is monstrously unfair to ask a Government to give some thinking aloud on matters of parity changes. The whole of recent history demonstrates that it is quite unreasonable to make that demand and no one can but have immense sympathy for any Government which find themselves obliged to change these, often under immensely disadvantageous circumstances. That does not preclude hon. Members making their views known, hoping that by doing so they will help create a climate of opinion in which government can operate. We owe it to ourselves as a responsible House seeking to participate in these decisions to make such sentiments known.

Therefore, when my right hon. Friend tells us more of the Govenment's thinking on Clause 1, I hope that he will give us some inkling that the Government bring to this subject, as to so many others, two characteristics. The first is that they will not be browbeaten by what they understand to be international understandings and commitments. There come times when I believe we have to decide what is in British national interests, and the whole question of international monetary arrangements seems to me now to be dominated by the American decision that they will not alter the exchange rate of the dollar. If this is true, an alteration in the exchange rate of other countries will probably have to take into account the fact that the dollar seems to be in fundamental disequilibrium and overvalued.

In recent weeks, the Canadians, when confronted with a decision to alter the exchange rate, decided to float. This is significant and it is directly related to Clause 1. If the Clause really embodies a decision to make do or mend with the existing system of fixed exchange rates, there will be widespread regret, but if it is buying time during which we can move towards a more orderly system of international monetary settlement, we shall be pleased.

Second, I hope that the Government will bring to this problem a preparedness to consider economic affairs and economic management in the spirit of economic liberalisation. I make no apology for that slightly ideological approach. After all, that is one reason why we have divisions in the House. I hope that the consideration of producing a freer economic climate in this country will include a consideration of the central issue of fixed exchange rates. That must inevitably lie behind the purpose and the intention of Clause 1.

Therefore, I hope that, within the disciplines of prudence and order, my hon. Friend will hold out some comfort and guidance to those of us who hope that the rôle of sterling, with the fixed exchange rate rôle of sterling, may have less detrimental consequences upon the economic management of this country in future than it certainly has had in the recent past.

Mr. Higgins

I agree with my hon. Friend the Member for Oswestry (Mr. Biffen) that the House should be able to express its views on matters like this, and I am glad that we have been able to do so this evening. As he says, there are some problems over the rules of order but the debate has been fairly wide, and I will try to reply to all the points.

My hon. Friend asked whether this was a question of make do and mend, or whether more financial changes are to be made. We should see the Bill as a further step in a steady progression towards better ordering of our international monetary affairs. The increase in quotas which we are considering tonight should be seen in that light. One cannot entirely disentangle the two major strands of international affairs—the adjustment problem, concerned with the relative parities of different countries' currencies, and the liquidity problem, concerned with the general level of international liquidity.

There is a relationship between these two, but for the purposes of this debate we should be right to concentrate on the second point, because that is fundamentally what the Bill is designed to do. It is a Measure to increase international liquidity. Therefore, it is not a question of making do and mending; it is a question of taking a measure that is prudent and, in our view, necessary, given the existing state of the world in respect of broader questions that might be raised. Clearly, if there is in future a change in these we should need to consider the overall position again, but the situation must be looked at dynamically, and I am happy to say that we are looking at it against a steady increase in the rate of world trade—and a recent very substantial increase.

That brings me to my hon. Friend's final point, concerned with taking a liberal attitude in these matters. He and I, over the years, have discussed these matters on many occasions. The important consideration to be borne in mind is the one that was also referred to by the hon. Member for Ashton-under-Lyne (Mr. Sheldon), namely, what should the increase in international liquidity be on any given occasion, given the fact that world trade is increasing?

There is no clear objective measure by which one can judge such a matter, but I should like to quote for a moment what the Managing Director of the I.M.F. said when the allocation of S.D.R.s was considered; namely, that he thought that more weight should be laid on the evidence for current inadequacy of reserves and reserve growth provided by the prevalence and growth of restrictions on international transactions and by the increasing resort to arrangements for balance of payments financing than on the evidence for adequate or excessive reserves provided by the current demand situation". If I understand that correctly, he was saying that in deciding whether international liquidity is adequate we have to take into account not only the growth in world trade and the needs of financing it but what one might think of as a symptom of inadequacy; namely, that nation States find it necessary to impose restrictions of one kind and another on international trade.

This is something that hon. Members on both sides would deplore, and nothing perhaps, is more likely to affect the United Kingdom adversely than if we find ourselves in a position where world liquidity is inadequate and countries are imposing restrictions on international trade—and there is always a tendency towards restrictionism and protectionism if such a situation exists.

I now turn to the points made by other hon. Members, in particular, my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams). He raised the question of parities. I was invited by the Member for Dudley (Dr. Gilbert) to express views on the whole range of various ways in which changes in international parities might be facilitated. If I were to do that we might be here for a long time. I do not profess to be the only hon. Member with views on that subject, but if pushed I could perhaps speak for three hours without trouble. I am not sure that I am prepared to do that.

But it is right to stress that in this field the I.M.F. board is considering improvements which might be made in the present exchange rate system, and views have been reported in the Press recently spelling out three of the possible alternatives. In this connection it is right that negotiations must continue, but they must be on the basis of mutual consultation. I do not think the time for final decisions in this area has yet arrived.

It is true that in these matters one would like to go faster and faster. It was certainly true on the question of Special Drawing Rights. But we are continuing to negotiate; we have been making fairly reasonable progress in international finance lately, and I would hope we shall continue to do so in the future. But I do not think that on this Bill I should go into great detail in discussing all the individual possibilities.

On this point I would like to assure the Committee, since I was asked, that we will ensure that these matters are adequately discussed. That is certainly our view, and we accept that it is necessary.

11.0 p.m.

Mr. William Rodgers

I fully understand the reluctance of the hon. Gentleman to spend a great deal of time discussing this issue, but I think some of us would be ready to be patient if he were prepared to do so. My hon. Friend the Member for Dudley (Dr. Gilbert) asked him three precise questions; namely, his attitude to the wider bands, to floating rates, and to the crawling peg. While one would not expect the hon. Gentleman this evening to pronounce finally the view of the Government on all these matters, it is perfectly reasonable for him to discuss for some while the options open to the Government in future in these areas.

Mr. Higgins

There are, clearly, options and they are being discussed in the various forums which are available to us, but it would be premature for me to express an opinion here, coming down in favour of this or that proposal. We are certainly in favour of improvements if they can be negotiated on an international basis, but I do not think it would be right of me on this Bill to pronounce positively in favour of one measure rather than another.

Mr. Rodgers

I entirely see that, but would the hon. Gentleman indicate in which direction he feels it would be desirable for us to move? Obviously, the outcome we cannot at the moment judge and I am not taking any dogmatic view, but surely, in view of the very thoughtful contributions by his hon. Friends the Members for Oswestry (Mr. Biffen) and Kensington, South (Sir B. Rhys Williams), he owes it to the House—I think he does—to indicate the direction in which his own mind is working and to have a little thinking aloud for a change?

Mr. Higgins

No. I would not feel that proper. To start with, as I say, I am not clear—

Mr. Rodgers


Mr. Higgins

For the simple reason I was asked, are we going on—

Mr. Rodgers


The Chairman


Mr. Rodgers rose

The Chairman

Order. The hon. Member knows perfectly well that he must not interject from a seated position. If he wishes to interject he must first see that the hon. Member who has the Floor gives way to him. Otherwise he will please keep silent.

Mr. Rodgers

On a point of order, with the greatest respect I was not seeking in any way to be discourteous to the hon. Gentleman, but as you will very fully appreciate, Sir Robert, if he—unwittingly—misrepresents what I said it is perfectly reasonable that I should seek to correct him and enable him to answer the question I put?

The Chairman

That may be so, but there are parliamentary ways of doing it and unparliamentary ways of doing it.

Mr. Higgins

I am sure the hon. Gentleman will appreciate that I would never wish to misrepresent him in any way whatever. We have debated at far later hours than this, and for very long, for me to wish to do any such thing.

The point I was about to make was that he asked me where we were going, in which direction were we going. There are in the whole field of international finance a great many possible courses open to us. The important thing is, that they should be fully debated in all the places where these matters are considered, and not least in the House, and we should then decide whether it is possible to make progress on the basis of negotiations.

But I think the time premature for me, on this Bill, to express a clear view, when the matter is under consideration by the I.M.F. board, and when various points, which are well known, are being considered. The academic arguments on this matter have been proceeding now for many years. I have always greatly enjoyed discussing them, but this is not the moment when we can give clear indications on this, and I think that on this Bill it would be wrong to concentrate on this point—I know hon. Gentlemen's passionate interest in the international adjustment process—when the Bill itself is concerned with the liquidity problem.

I want to turn, if I may, because the hon. Member for Ashton-under-Lyne sought to raise this with me, to the question of the actual size of the quotas and their distribution. I return to the point I made when he originally raised the matter with me. The executive director's report explains that, in addition to considering the adjustment of the size of the Fund relative to the growth of the world economy, a quota review also offers the opportunity of adjusting the relative size of the quotas of individual members. The level of the increase and the pattern of distribution are partly a matter for international agreement and partly a matter for negotiation.

I hesitate to use the expression in an international monetary context, but there is inevitably in these matters a certain amount of horse-trading and on this occasion the process was complicated by various cross-currents of interests and opinion, not least the one which was raised by my hon. Friend the Member for Kensington, South, that there might be a problem arising here where inflationary pressures would be encouraged. I do not take the view for one moment that this Bill is likely to create such a situation. Given the level of increase in world trade, and given the restrictions upon it which are clearly apparent, I think this is not so.

One of the points made by my hon. Friend the Member for Kensington, South might have been relevant in the S.D.R. debate in 1968. I think he spoke on that occasion. That Measure was concerned with unconditional liquidity. This Measure is concerned with an increase in conditional liquidity. Conditional liquidity means that if a member draws on its quota beyond a certain point it is subject to conditions imposed by the International Monetary Fund and the various provisions, with which the House will be familiar, for an I.M.F. inquiry into the state of the domestic economy.

If because of inflationary pressures a particular country finds its balance of payments deteriorating and needs to draw on its quotas, it is likely that the Fund will have an interest in this, and the Fund will have a particular interest in countries not allowing inflationary pressures to run rampant. Therefore, given that it is conditional rather than unconditional liquidity which is being increased, I do not think that my hon. Friend the Member for Kensington, South need be concerned about that point.

I have already dealt with the point which the hon. Member for Ashton-under-Lyne had in mind on the share of the quotas. It is a question of looking at a general increase and then special increases for those members which have qualified under changes in economic circumstances, in particular the growth in their national economies. The United Kingdom in recent years has not shown a very rapid rate of economic growth, and therefore its claim upon the increase in the quotas was correspondingly reduced. On the other hand, there was a scaling down of the results in the interest of keeping the total down, given the claims of the countries which had grown at a rapid rate and the less developed countries. The figures that have been arrived at by negotiation are reasonable, both in absolute terms and in the relative allocation of the quotas between the countries.

Dr. Gilbert

I thank the hon. Gentleman for so courteously giving way so often. There was a fourth question which I put to him, in addition to the three repeated by my hon. Friend the Member for Stockton-on-Tees (Mr. William Rodgers). Was the global increase determined in isolation on our submissions of what should be the size, as though that was enough in itself, or was it negotiated bearing in mind the possibility that we will get further increases in international liquidity? In addition to what my hon. Friend for Stockton-onTees has said, may I remind that hon. Gentleman that, although he may not yet have made up his mind which of the three American proposals, or any other proposals, he wishes to support, he has only about three months in which to decide before the meeting of the Fund, and it is surprising that he does not have a view on this subject.

Mr. Higgins

I have already expressed my views on the hon. Gentleman's second point. We must look at it dynamically in the course of international negotiations. Taking the whole run of events, we have made considerable progress. But it takes time, and inevitably hon. Members on both sides are likely to become impatient.

On the hon. Gentleman's other point, of course this matter was considered in the broad context of increases in international liquidity. The hon. Gentleman will recall that I said at the outset that this was, in some way, complementary to the increase in S.D.Rs which came into operation at the turn of the year.

This is a matter which we must look at both in the long-term and in the full context of the international liquidity position. That being so, it is a matter which should have wholehearted support, and I hope that the House will give it. But it is a subject which we too rarely have an opportunity to debate.

In reply to the debate on this Clause, I hope that I have covered the points which have been raised and that the House will now give its approval.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.

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