§ 3.41 p.m.
§ LORD BESWICKMy Lords, the following is the Statement made by my right honourable friend the Chancellor of the Exchequer in the House of Commons:
"On May 14 I told the House that there had been discussions with the I.M.F. Staff about further stand-by facilities for the United Kingdom and that a full Statement would be made when the arrangements were complete. These arrangements are now complete. On Friday last, the Fund Board approved a stand-by facility for the United Kingdom of 1,000 million dollars over the next year. Five hundred million dollars is available for drawing immediately; the rest will become available in three quarterly tranches, after consultation with the Fund in each case.
"The amount and phasing of this facility is related to the schedule of repayments in respect of our drawing in May, 1965. This was 1,400 million dollars, of which 600 million dollars has so far been repaid and a further 800 million dollars remains to be repaid in instalments between now and May, 1970. The new arrangement is a way of refinancing part of our debts. Our total indebtedness to the Fund, so far from being increased, will be approximately 400 million dollars less in May, 1970, than it was a year ago, on the assumption that we draw the full amounts.
"In accordance with normal practice, I addressed a Letter of Intent to the Managing Director on May 22, Copies have been made available to hon. Members in the Vote Office this afternoon. The letter follows the main lines of the financial policy announced in the Budget. But for the present purpose I have expressed two features of that policy in quantitative terms. First, I am announcing an objective of a £300 million balance-of-payments surplus for 24 the current financial year. This is an interim objective, a measure of our intended progress towards the continuing surplus which we need.
"Second, I emphasised in the Budget the need for restraint in the expansion of credit to the domestic economy. Domestic credit expansion—that is, broadly speaking, the net addition to the borrowing of the public and private sectors taken together—is intended to he limited to not more than £400 million in 1969–70. In addition to the annual figure I have made estimates, of which I have informed the I.M.F., of an appropriate quarterly path for domestic credit expansion and for the central Government borrowing requirement within it. I do not propose to publish these quarterly figures. Were I to do so. I should be encouraging speculation in a way that would make more difficult the management of the gilt-edged market.
"I regard the conclusion of these discussions with the Fund as satisfactory. The House will have the opportunity to discuss the matter on Wednesday when I hope to enlarge on this Statement."
My Lords, that is the end of the Statement.
§ LORD CARRINGTONMy Lords, I thank the noble Lord for repeating that Statement. It is a sorry state of affairs that the Government have to come to this House and say yet again that they have had to borrow money from the I.M.F. Shorn of all the verbiage, what this means is that we cannot pay our debts and we have had to borrow money from our creditors, or default. We shall read the Letter of Intent with interest, and it may be, since we shall not have an opportunity of debate in this House, we shall want to ask some more questions. I cannot help saying that I hope the £300 million surplus forecast is right. After all, we cannot help remembering that on five occasions before the Government have been wrong—but that was perhaps due to an accounting error. Would the noble Lord, Lord Beswick, tell the House what is the total Government indebtedness incurred by this Administration since October, 1964?
§ LORD GLADWYNMy Lords, like the noble Lord, Lord Carrington, I want on behalf of my noble friends on these 25 Benches, while welcoming the present additional facility granted by the I.M.F. as such, to express the hope—with an element of doubt, in view of so many tragic failures—that we shall achieve the £300 million surplus on our balance of payments in the present year. Secondly, I should like to ask the noble Lord, Lord Beswick, whether he believes that the limitations on domestic credit expansion proposed—namely, £400 million a year—will, if successfully imposed, be sufficient to prevent inflationary tendencies. In any case, if the surplus on the balance of payments is achieved and the limit is successfully imposed, when does he think, in those circumstances, that we shall be able to repay our total present liabilities?
§ LORD BESWICKMy Lords, I fear the noble Lord who speaks for the Liberal Party is asking me to cast my calculations too far forward. I cannot answer the last part of his question to me. To the noble Lord, Lord Carrington, who was concerned to say what a sorry state the Government were in. I put this point: it is an unfortunate and an unsatisfactory state, but it is not a question of this country going further into debt. He said that this was a matter of borrowing again. The position is that we are repaying our outstanding loan indebtedness. but we are doing it at a slower rate than was originally intended. As to the amount of indebtedness, it will depend upon how much of this loan we do in fact take up. The real figure, which he ought to be pleased about, is that by 1970 we shall be 400 million dollars less in debt than we were a year ago.
§ LORD CARRINGTONMy Lords, that really will not do. I asked the noble Lord a perfectly easy question to answer. I asked him what was the total indebtedness incurred by this Government since October, 1964. Surely that is a question that always ought to be in the minds of noble Lords opposite. It cannot be very difficult to answer that.
§ LORD BESWICKMy Lords, the noble Lord, who knows far more about these financial affairs than I do. knows that it is not so straightforward or so simple as that. I answered a question put by the noble Lord, Lord Barnby, on June 12, and in my Answer I broke down our liabilities to some extent. But I do not know, for example, whether the noble 26 Lord is referring to the central swap arrangements and whether he has accounted that debt. In that case I cannot answer him, because those figures are not disclosed. If he is simply talking about the I.M.F. outstanding payments, it is 1,400 million dollars, less the 600 million dollars which we have already repaid, plus the amount which we have got as a stand-by credit. The amount which we shall actually draw has not yet been decided.
§ LORD CARRINGTONMy Lords, would the noble Lord be prepared to say whether or not the total figure outstanding is over £3,000 million?
§ LORD BESWICKMy Lords, to give the noble Lord a more precise answer, I should be obliged if he would put a Question down. I would then find the figure and let him have it.
§ LORD LEATHERLANDMy Lords, so that I may be able to clear my mind on a very confused situation, could my noble friend answer these questions. First, is it not a fact that the State expenditure of Great Britain, as shown in the annual Budget, is not in any difficulty, and has balanced with the sum on the right side? Secondly, is it not a fact that our balance of payments is on the wrong side, not because of State activity but because of the activity of British businessmen, manufacturers, merchants and other members of what are called the capitalist classes?
§ LORD BESWICKMy Lords, so far as the inuernal situation is concerned, my noble friend is quite right: for the first time for many years we are in a position where we do not have to borrow at all. We are in a better position now than we have been for many years. That is internally. The external situation is quite another matter. For a country of this kind which is dependent so much on overseas trade, we do need to have some reserves. Unfortunately, they are not adequate. We had the loan of 1,400 million dollars, some of which has been repaid. It has not been possible to repay the whole of it, and therefore it has been necessary to rephase the loan with this additional stand-by credit.
§ LORD GRIMSTON OF WESTBURYMy Lords, could the noble Lord say what contribution could be made by the Government themselves to the realisation 27 of this £300 million surplus if they revised their policy and removed the ban on certain exports to South Africa which are required for defence of the Cape route? Have they made any calculation as to what they themselves can contribute by revising their own policy?
§ LORD BESWICKMy Lords, there have been calculations and some figures have been given, but if the noble Lord wants to go into a discussion about that matter, I suppose it would be true to say that, had the Government which the noble Lord opposite supported not committed us to such an extravagant expenditure on military bases in the Far East—that is certainly so—we should not have had the difficulty with our overseas payments that we have had.
§ LORD GRIMSTON OF WESTBURYMy Lords, is the noble Lord aware that that is no answer to my question, but merely poses another one?
§ LORD ALPORTMy Lords, may I ask the noble Lord whether, in reaching the calculation that we should be running at a surplus at the rate of £300 million by the end of this year, the new element in the accounting of our surplus of payments (running, I think, at a rate of £10 million a month) was taken into consideration? And therefore do we start on this new leg of our recovery with the advantage of £10 million a month—£l20 million a year—surplus in our favour as a result of a new entry in the books?
§ LORD BESWICKMy Lords, the objective of £300 million surplus was arrived at before the calculations about the recording of exports were reached. It is therefore the fact that, to the extent of £10 million or so a month, we are on the way to the objective.
§ LORD CONESFORDMy Lords, may I ask the noble Lord, in order to enlighten the noble Lord behind him, whether it is not the fact that, were it not for our invisible exports, our position would be perfectly hopeless, and that the gains from these invisible exports are won by private enterprise?
§ LORD BESWICKMy Lords, I am not quite sure how far that point takes us. Of course the invisible exports have 28 made a terrific contribution to our position. Acknowledgment of that was made in a recent debate.