CURRENCY (DEFENCE) BILL. (Hansard, 1 September 1939)

§ LORD TEMPLEMORE
My Lords, I beg to move that this Bill be read a second time. This Bill deals with three separate financial measures which will become necessary immediately on the outbreak of war. The Bill does not come into force automatically, but will be put into operation by Order in Council, and it is intended to bring it into force immediately any war breaks out.

LORD STRABOLGI
I do not want to delay matters, but my noble friend behind me asked me to watch these Bills, and I should have thought that some short explanation was called for here, in particular with regard to the provisions for loans by the Bank of England. This is partly legislation by reference, and it is not very easy to follow. But this raises a question of great importance from the point of view of my Party—namely, the future financing of the arrangements we may have to make in the months ahead of us, and we do not want to see the same policy adopted—we think with not altogether satisfactory results—as was adopted in the last national crisis. I make that caveat, so to speak, in advance, and I also bear in mind what the noble Earl, the Leader of the House, had to say about amending these Bills later. This Bill is perhaps the most important of the whole batch, if I may say so with great respect to the noble and learned Lord, the Lord Chancellor, who has a number of important Bills in his name.

§ LORD TEMPLEMORE
The noble Lord has raised a very important point, and I shall be glad by the leave of the House to explain Clause 3, to which he 928 referred. Arrangements have been made for advances by the Bank of England but out of Government funds, firstly, to approved banks, in order to enable them to meet demands from their customers for currency; and secondly, to approved acceptors whose bills are normally discounted in the London market. These advances and the interest thereon will be a floating charge in favour of the bank ranking prior to all other floating charges on the assets of the borrower. It is not expected that any large amount of advances under the first head will be necessary, and such as are made will be repaid quite quickly. As regards advances under the second head acceptors will be required to repay whatever they collect on the bills, but the balance will not be repayable earlier than six months after the end of the emergency. The necessary funds for these advances will be provided by the Government out of any Vote of Credit. This arrangement is the same as that eventually made in the last war after an initial period during which the money was actually advanced by the Bank of England under a guarantee from the Treasury against loss. The latter method, by swelling the Bank of England's balance sheet, proved to have a decidedly inflationary effect and has been avoided on this occasion.
Subsection (1) legalises these floating charges in the case of loans certified by the Treasury to have been granted by the bank by arrangements with His Majesty's Government, and provides that Section 79 of the Companies Act, 1929, under which a charge created by a company registered in England must be registered with the Registrar of Companies to be valid against the liquidator and any creditor and Section 43 of the Bankruptcy Act, 1914, under which assignments are void against the trustee unless registered, and any other enactment in force relating to the registration of charges, shall not apply to these loans. With regard to subsection (2), under the previous subsection the loans are to be certified by the Treasury, and this subsection provides that a document purporting to be a certificate and to be signed by two Lords of the Treasury shall be taken to be such unless the contrary is proved.