CURRENCY AND BANK NOTES BILL (Hansard, 4 February 1954)

§ THE PAYMASTER GENERAL (THE EARL OF SELKIRK)
My Lords, this Bill deals in three different ways with notes issued by the Bank of England. In the first place, it replaces powers formerly exercised under Defence (Finance) Regulations 7AA and 7AB. The powers regulating the amount of the fiduciary issue will in future be more closely controlled by Parliament. Secondly, it tidies up previous legislation in a manner which is little more than consolidation. Thirdly, it amends the law in what I think I may describe as minor matters. It will be recalled that up to 1914 the Bank of England could issue only notes of denominations of £5 and above. Under the Bank Notes Act of 1914, Treasury notes were issued for £1 and 10s. These two issues were amalgamated by the Act 688 of 1928, from which time only Bank of England notes had been issued. This Act gave the Bank the right to issue £1 and 10s. notes, as well as any denomination of note of £5 and above. Since 1945, notes above £5 have been demonetised.
In future, the denomination of notes issued by the Bank of England will require Treasury approval. Very broadly, the first clause brings the two classes of notes, that is, those of £5 and upwards, and below, on the same basis in future. Clause 2 refers to the amount of the fiduciary issue. Under the 1928 Act the fiduciary issue was set at £260 million, and was increased to £300 million under the Currency and Bank Notes Act, 1939. Since that date, extensions to the fiduciary issue have been made, under the Defence (Finance) Regulations already mentioned, without Parliamentary authority. Under the terms of the Bill the fiduciary issue is set at £1,575 million. That is the figure at which it is standing to— day. On the representation of the Bank of England the Treasury may direct at any time that the amount of this fiduciary issue may be altered, in either direction. Such alteration, however, will be valid only for a maximum period of six months, at the end of which time it can be renewed by a further Treasury direction for a further period of six months. Such direction will be given by a Treasury Minute which will be laid before Parliament. If, however, the amount of the fiduciary issue stands for two years above the figure mentioned in subsection (2) of Clause 2— that is, £1,575 million— in order to continue this arrangement the Treasury may order that this level of the fiduciary issue be continued for a further period of two years by Statutory Instrument which will be laid before Parliament and be subject to annulment.
To put it more shortly, alterations in the fiduciary issue as laid down in this Bill must be governed at least every six months by a direction from the Treasury. If the fiduciary issue is above the statutory limit, then at least every two years the matter must be laid before Parliament in the form of a Statutory Instrument which can be annulled. This arrangement, I think your Lordships will agree, gives closer Parliamentary control than exists at present when the fiduciary issue can be indefinitely varied without 689 reference to Parliament at all. I should, perhaps, add that the position of notes issued by Scottish banks remains exactly as it was before, and that Bank of England notes of denominations of £5 and upwards will continue not to be legal tender in that part of the United Kingdom.
I would refer to one provision in the Bill, subsection (5) of Clause 1, which the noble Lord, Lord Pethick— Lawrence (who has told me that he cannot be here to— day) has said at least cast a shadow of doubt into his mind— and, if it cast doubt into his mind, it might cast a shadow into the minds of other people. Therefore I should like to make the position clear. Under Clause 1 (5), the Bank of England have power, on giving notice, to call in any bank notes; and on expiry of the notice they will cease to be legal tender. This power may be necessary in the case of a new issue of notes or for similar reasons. But it is important to realise that even when a Bank of England note ceases to be legal tender, the promise to pay is still payable in legal tender of the time by the Bank of England. Indeed, I can say that any promise to pay, however old, in whatever form, will always be honoured by the Bank of England and paid in the legal tender current at the time of such request.
There is one other very small point 1 might mention which I think I can say is a typing error. In Clause 4, Short title, repeals and commencement, your Lordships will see at the side "7 & 8 Vict. c. 37." That should read: "8 & 9 Vict. c. 37," I hope your Lordships will agree that this is a measure which is appropriate at the present time because it gives additional Parliamentary control and because the fiduciary issue will be brought into line with modern requirements. I beg to move.

VISCOUNT ALEXANDER OF HILLS-BOROUGH
My Lords, in the absence of my noble friend Lord Pethick-Lawrence, who is very much more expert upon this question of currency than perhaps most of us here— we all remember with pleasure and profit the book that he published on it some twenty years ago— I need say only a few words. I welcome 690 the statement that the noble Earl, Lord Selkirk, has made with regard to subsection (5) of Clause 1. I need perhaps mention only one point. What I know my noble friend had in mind was that there might be some handicap in our banking stations, widely dispersed overseas in different parts of the Commonwealth, if there were any doubt at all about the point with which the noble Earl has now dealt. He has made it perfectly clear, and I think it would do all the good in the world for the statement he has made to be known in those directions. There is one other point to which I would draw attention. I have been reading the report of the debate in another place on this Government measure. The only point in the Bill which led to any length of debate there was in respect of what was described as a constitutional issue, in Clause 2, subsection (8). I noted the decision of the other place upon this particular issue and I do not intend, therefore, to speak on it at any length. But what interests me particularly is that the Explanatory Memorandum to the Bill says: The main purpose of this Bill is to put on to a permanent and statutory basis the provisions of the regulations, subject to certain conditions. Whilst I agree that there are wider constitutional issues to be brought in than the mere substance of this one Bill, nevertheless, I think it right to say, on behalf of my colleagues, that we have noted the debate in another place with great interest, and it must not be taken that at some future date in Parliamentary history we may not have to deal with it.

§ THE EARL OF SELKIRK
My Lords, I thank the noble Viscount for what he has said. He is taking exception to the submission of regulations to both Houses of Parliament. It has beery the standard practice up to now, and was the standard practice in the late Government, to make statutory orders subject to agreement or annulment by both Houses. There are many examples that can be given which have a certain financial flavour, such as pensions ms agreements, exchange control and a number of things of that sort. So, there is nothing new about this; and this is not particularly a Finance Bill. I would ask the noble Viscount, should we he really right, in what amounts to something approaching Party recrimination, to reduce the power 691 which Parliament has over the Executive? I think it is fair that the noble Viscount should consider that matter, and I say that even bearing in mind the very limited and moderate way in which he has referred to it. I suggest it is doubtful whether we should be right in allowing ourselves to be led into a position where just that much of the power of Parliament to question whatever the Executive may suggest is removed.

VISCOUNT ALEXANDER OF HILLS-BOROUGH
I am much obliged to the noble Earl. I do not want to debate the matter this afternoon; I only want to make it clear why I mentioned it. I entirely agree that there should be Parliamentary control over the Executive, but we do not know what future circumstances may be. When it comes to a question of dealing by statutory instrument with, let us say, the amount of the fiduciary issue, it might be very awkward for a Government if in some circumstances that could be annulled by that part of our Parliamentary constitution which is not responsible to the taxpayers by vote. This point is so mixed up with others coming within the ambit of this matter that I think it better to leave it to a later date.