§ 11.5 a.m.
§ Lord BALOGHMy Lords I beg leave to ask the Question which stands in my name on the Order Paper.
§ [The Question was as follows:
§ To ask Her Majesty's Government when they last obtained a waiver for Article VI (especially Section 1 (a) of the Final Act of the Bretton Woods Conference governing the International Monetary Fund; when this waiver will have to be renewed; and whether they will ask for its renewal.]
§ Lord BESWICKMy Lords, the policies carried out by the International Monetary Fund under its Articles are governed not only by the Articles but by occasional formal Decisions of the Board of Executive Directors interpreting the Articles. On July 28, 1961, the Executive Board decided that the use of the Fund's resources for capital transfers was not precluded. No question of waiver therefore arises.
§ Lord BALOGHMy Lords, while thanking my noble friend for his Answer, may I ask whether he realises that the Fund's by-laws provide that a member may not make use of the Fund's resources to meet a large or sustained outflow of capital; secondly, that the gross outflow of capital amounted last year to £621 million when our old deficit was only £408 million, and that capital exports since 1965 in investment amounted to some £2, 000 million? Thirdly, is my noble friend aware that the returns in 1967, the last year for which data are available, show that on direct investments we earned only 7-5 per cent.—
§ Several Noble Lords: Speech!
1178§ Lord BALOGHI am asking a question, whether my noble friend is aware that on portfolio investments we earned barely 3 per cent. and we paid far higher interest rates for the hot money that we borrowed in order to be able to do this?
§ Lord BESWICKMy Lords, my noble friend's supplementary question is really divided into two parts: one is whether we are doing wrong in allowing this outflow of capital investments; and secondly, whether it is a good thing or not that this capital investment should be allowed. The second point, does not really arise on the question which my noble friend has put; it is a matter for discussion. We have had a debate in this House and I have no doubt that we shall have a further debate about this subject. On the first point, however, as to whether we are doing right under the Articles of the I.M.F., the fact is that the Directors themselves must decide whether or not we are doing right, and they have not raised any difficulty at all.
§ The Earl of DUNDEEMy Lords, arising out of that question, may I ask the noble Lord whether the Government still adhere to the view expressed in the National Plan, that this country is investing abroad to an extent which we cannot maintain; and is he aware that over the last ten years our receipts from foreign investments have exceeded our outlay by something like £4, 000 million? And is it not the case that since the noble Lord, Lord Balogh, ceased to advise the Government in these matters the views of the Government have been considerably modified?
§ Lord BESWICKMy Lords, I would not be so certain about the second part of the noble Lord's question. There is a difficult balance here. Of course it is a good thing to invest overseas and of course we are benefiting from the investments that we have made in the past. The question which my noble friend is raising is whether it is a good thing to allow capital investment of money which really is not ours in the first place. That is the real point at issue, and somewhere you have to strike a balance. Taking everything into consideration, we think—and it is a most delicate matter—that the present policy is about right.
§ The Earl of CROMERMy Lords, while the noble Lord who is replying to this question has done so clearly and plainly, I should like to ask him whether there is indeed any waiver procedure? I myself am not personally aware of it, and if there is no waiver procedure it strikes me as curious that the noble Lord, Lord Balogh, who has studied these aspects with such attention for so long, should phrase his question in this particular way. The other point I would ask the noble Lord about is whether to some extent the question is not answered by the ensuing clause of the Articles of the Fund, which says:
Nothing in this section shall be deemed to prevent the use of the resources of the Fund … in the ordinary course of trade, banking or other business.We are of course a banking nation.
§ Lord BESWICKMy Lords, this is true; we are a banking nation. But it is also true that in the case of Australia, for example, portfolio investment amounted in 1968 to some £150 million. Whether it is counted as banking or other business is a matter for definition and discussion. As between the two experts, perhaps I might sit down and allow them to argue it out.
§ The Earl of CROMERMy Lords, may I have a reply to the first question, as to whether there is a waiver procedure?
§ Lord BESWICKMy Lords, Article 6 certainly does not include the provision of a waiver; but I think that what was in my noble friend's mind was that if we were breaking this Article, which I do not accept, then there must be some waiver.
§ The Earl of DUNDEEMy Lords, is there not a waiver in Article 5, and would that not include Article 6?
§ Lord BALOGHMy Lords, is my noble friend aware that under Lord Cromer's governorship of the Bank of England we lent what we did not have and thereby got into great difficulties?
§ Lord BESWICKMy Lords, in reply to the noble Earl's point, I must have a look at that. I have not got the wording of Article 5. If it is so in Article 5, I will confirm it in writing.
Viscount ST. DAVIDSMy Lords, would my noble friend not agree that 1180 the money we lend to less developed countries overseas is of enormous value to their economies and good for the world?
§ Lord BALOGHMy Lords, is my noble friend aware that the figures I quoted do not include those amounts which were lent by the Government to less developed countries?
§ Lord BESWICKMy Lords, if I may say so, I am doubtful whether this issue can best be settled by question and answer. It is a very complex matter, and there are a lot of arguments on both sides.