WAR LOAN BILL. (Hansard, 28 August 1914)

THE MARQUESS OF CREWE
My Lords, I must briefly explain what this Bill is, because it differs from Bills which have been passed in former times in cases of urgency. This Bill provides that any money for raising the Supply granted to His Majesty for the service of the year ending March 31, 1915, may be raised in such a manner as the Treasury think fit, and it gives a general power to the Treasury of creating and issuing any kind of securities for the purpose. These powers sound, and are, exceedingly 555 wide. On former occasions when smaller amounts have been raised the actual method of raising them has generally been included in the legislation. When we engaged in the South African War the first demand which was made was not a large one—it was for £8,000,000 of Treasury Bills. Later on a sum of, I think, £60,000,000—first £30,000,000 and afterwards £60,000,000—was raised by the creation of Consols; and, of course, there is also the method, adopted afterwards in the South African War, of raising a special War Loan. In all those cases it was easy to state the particular method by which it was desirable to raise the money.
Now, as your Lordships are aware, a Vote of Credit has been obtained for a sum of not less than £100,000,000, but it is quite impossible to say in the present condition of the Money Market, which, of course, is entirely different from anything experienced in any previous war in which we have been engaged, what may be the most economical and the best method of raising a large sum of money when it is required, or, indeed, to state the time at which such creation, either of Bills or of Exchequer Bonds or of Consols or of a special War Loan, would be desirable. Those are, in fact, the only four methods which, so far as I know, could be employed for the purpose of raising this money, and therefore there is no possibility of hasty or arbitrary action on the part of the Treasury which could in any way damage or compromise the national credit. I was glad to notice, when this subject was discussed in another place, that so acute and well-informed, and, I may say, almost invariable critic of His Majesty's Government as Sir Frederick Banbury expressed hearty approval of the terms of the measure and of the latitude given to the Exchequer to raise money in any way which appears most suitable and most economical to them. I may also remind your Lordships that it has been stated that it is not likely that any long interval will elapse without the sitting of Parliament, and in those circumstances I hope this House will agree that in the present peculiar and very special circumstances the terms of the Bill are not unwarranted.

§ LORD DESBOROUGH
My Lords, it is not my intention to occupy much of your Lordships' time on this occasion, 556 but I should like to ask His Majesty's Government whether they have considered a recommendation made by a Commission which was set up in the year 1888 on the question of currency, and which unanimously reported in favour of the adoption of a certain method for increasing the gold reserves of this country. The Royal Commission reported, I think I may say unanimously, in favour of issuing small notes based on silver. We have in this country enormous sums of money in ten-shilling pieces, which are a most wasteful coin. The Commission reported in favour of issuing small notes based on silver as substitutes for half-sovereigns. I submit that that would be an easy, cheap, and harmless method of increasing our gold reserves. I am informed that there are something like 70,000,000 ten-shilling pieces in the country; that, of course, may be an exaggeration, but the number is very large. Speaking on this subject at Leeds, during a financial crisis in 1891, the late Lord Goschen, whose authority in this matter will not be disputed, said that he had fully considered this suggestion and saw no economic objections to its being carried out. The adoption of the recommendation of the Royal Commission would not inflate the currency. Therefore I venture humbly to throw out this suggestion, backed as it is by a Royal Commission which sat for two years and by the late Lord Goschen, who was admittedly a high authority on finance. When Germany went to war she issued legal tender up to £80,000,000 against the deposit d securities; I think Canada in the last ten days has taken the same step; and I believe that the United States of America, after their panic in 1907, sanctioned the issue of no less than £100,000,000 sterling against securities. There is no doubt in my mind that there has been a conspiracy on the part of Germany against the whole of our English securities. In order that the business of the country may be carried on there ought to be some means of employing in the ordinary purposes of commerce and trade this enormous mass of wealth which has been conspired against and which is now locked up owing to the war. I therefore ask the noble Marquess the Leader of the House whether the recommendation of the Royal Commission to which I have referred has been before the Government and whether they have also considered the possibility of issuing legal tender against the deposit of securities of acknowledged worth.

THE MARQUESS OF CREWE
My Lords, I am sure the House will not expect me to engage in anything like a full discussion on the question of currency at this moment, even with so accomplished a master of the subject as my noble friend opposite. But as regards the issue of 10s. notes as against silver, with the consequence of the demonetisation of the half-sovereign as a current coin, I would remind him of this, that the value of such an augmentation of the gold reserve as would be caused by the addition of the stock of half sovereigns in the country, whatever it may be, and their conversion into sovereigns or into bar gold, must depend on the possibility of calling in the whole of those coins, which would be an elaborate process, and one not very easily carried out at this particular moment. The question, I think, cannot be regarded as urgent. I do not express any opinion at this moment on the abstract proposition as to whether it might be a useful thing in ordinary times to issue these small notes against silver, but it is not urgent in the sense that there is any shortage of currency in the country. We have been able to meet this crisis by the issue of the notes of which I have already spoken without the very serious national step of a suspension of cash payments. That has, as a matter of fact, been carried out, and I think that if my noble friend will consult his friends in the City they will all tell him that any step of the kind he mentions is not in itself urgently called for at this moment by anything that had happened in connection with the war. Therefore although I have no doubt that the possibility has been considered, as all possibilities have been considered, by those most competent to form and to give opinions on the subject, yet I should be surprised to find that those with whom we have been acting, representing the great financial interests of the country, would desire to take the particular step with regard to 10s. pieces which my noble friend has mentioned.
As regards the other question—that is to say, issue as against securities—by securities I take it that the noble Lord means securities held by private individuals and not by banks, because, of course, in the case of banks this has already been done—the advance of these small notes to banks has been made against securities. The noble Lord means, I suppose, that in the case of private individuals owning securities cash advances should be made. That 558 is a very large proposition, and I confess that at first sight I do not see how it could be carried into effect without such elaborate safeguards as would make its practical usefulness very doubtful. I will not attempt to discuss the question further with my noble friend at this moment. He, I am sure, has means of bringing the proposition before the notice of those who form prominent and most valuable members of the Committee on which I have been myself acting, dealing with these matters. Therefore if he cares to pursue it. I have no doubt he will take that step.