§ 3.37 p.m.
§ Lord Lyell
My Lords, on behalf of my noble friend Lord Trefgarne, I beg to move that this Bill be now read a second time.
The Bill now before your Lordships' House is concerned, among other things, with the mechanics of administering the currency. In essence, it seeks to achieve a necessary tidying up of the methods we already use. There are separate provisions for coins and notes, but in every case they simply recast or extend existing legislation. I apologise to the House for detaining your Lordships on what is apparently so slight a matter, but I assure the House that the Bill, although modest in purpose, makes a contribution to the efficiency with which the currency can be managed sufficient to justify its presence here this afternoon.
In turning to Clause 1 we find that this concerns the coinage. I should like to deal with the bare essentials. Inflation under successive Governments has created a number of difficulties for the coinage, not least its weight in everyday use. We have benefited in dealing with inflation from powers to specify coins by proclamation which are provided in the Coinage Act 1971. These powers have been used, to give one example, to specify the lighter 20p coin. But the same flexibility is 1219 not at present available for the smaller denomination coins—and these are the coins that range up to 10p. The specifications of these coins are laid down in the Coinage Act 1971 with the practical effect that any necessary changes to the coinage at the lower end of the range can only be made by primary legislation in each case. The main purpose of Clause 1 is to place the low denomination coins for everyday use on the same footing as coins above 10p so far as their specification is concerned.
If we turn to Clause 2 of the Bill we see that that provides a new mechanism for Treasury and parliamentary control over the Bank of England's note issue. The existing system was introduced by the Currency and Bank Notes Act 1954 but has now outlived its usefulness. Under that system the note issue was an amount which could vary from a figure specified in the Currency and Bank Notes Act only when authorised by the Treasury to do so.
The note issue fluctuates constantly in response to public demand. The result is a relentless daily flow of formal minutes simply responding to events and effectively controlling nothing at all. In place of that system the Bill establishes a ceiling below which the daily and seasonal fluctuations, which have no general economic significance, can occur without restriction. The Treasury may adjust the ceiling to a new permanent level by administrative means, provided that it is no more than 25 per cent. higher than the level two years previously. Parliament is also given renewed power of control. The 25 per cent. limit may only be set aside for any period by the authority of a Treasury order which can be made only after Parliament has been given a prior opportunity to reject it.
Finally, Clause 3 of the Bill simply brings up to date the technical provisions for writing off Bank of England notes. The public is entirely unaffected, because the Bank of England will always honour a note even after it has been written off. I do not think that your Lordships would wish me to go through any more of the Bill—Clause 4 or the Schedule—so with that, I beg to move that this Bill be now read a second time.
§ Moved, That the Bill be now read a second time.—(Lord Lyell.)
Lord Bruce of Donington
My Lords, we on this side of the House will facilitate be every means possible the passing of this comparatively non-controversial Bill which has been described in full explanatory terms by the noble Lord.
It is unfortunate, as the noble Lord says, that the inflationary movements in this country from time to time make such measures necessary. I am given to understand, if the proceedings in another place are any guide, that the measure will also facilitate the issue shortly of a coin of the denomination of £1. I believe that that is envisaged. I am bound to draw attention, as indeed the Prime Minister did two days ago, to the fact that the retail price index since May 1979 has increased by 61 per cent., which means that today, and presumably when the coin is issued, a pound will be worth 38p approximately in May 1979 terms. It looks very much as though the more the coin depreciates the heavier it becomes. That is a bizarre situation, as I am sure the noble Lord will agree.
1220 The existing pound note has its advantages; it is very light. In view of the weight of the extra coinage and the wear and tear on the pockets, particularly of the male population, I was wondering whether the noble Lord would make representations to his right honourable friend the Chancellor of the Exchequer to have trouser pockets made free of VAT. In that event, could he ensure that the announcement is made not later than 13th March, two days before the Budget, in the announcement of the Budget provisions that will undoubtedly appear in The Observer and Sunday Times newspapers? It would be for the great advantage of the House.
We have no objection to this Bill and we will be happy to secure its passing through your Lordships' House.
§ Baroness Phillips
My Lords, before the Minister replies, may I intervene on one matter? I understood him to say that currency was getting lighter in weight. Surely we all regret yet another heavy coin. Which decision encouraged the Government to take away the pound note? It was much worse when the 50p piece was introduced instead of what had been the ten shilling note. I do not know about gentlemen's pockets, but ladies' handbags are extraordinarily weighty nowadays. I make a plea: please let us have no more heavy coins. Let us not get rid of all the notes. They make our currency much easier and lighter to handle.
§ Lord Leatherland
My Lords, on the question of heavy coins—I do not feel any weighing down my pocket, incidentally—I wonder whether the Government would consider the system adopted in France. I do not know whether it still exists but it did when I was in the Army there in 1915. A hole was drilled through the centre of the coin so that it became a wide circular piece of metal instead of a solid piece of metal. That would make the coin much lighter and would not detract from its present imposing appearance.
§ Lord Lyell
My Lords, I am sure that the House will be grateful to your Lordships for the tremendously enthusiastic welcome that this brief Bill has had.
I first thank the noble Lord, Lord Bruce of Donington, for his welcome for the Bill. When I first looked at the Bill I thought that it had to do with mighty institutions at Basle and world currency movements, but I had a fascinating briefing, discussing the relative values to numismatists, gold coins, fineness and the rest. I am not surprised at the interest that your Lordships' House has evinced in the Bill.
The £1 coin was mentioned by the noble Lord, Lord Bruce. It was compared with the £1 note. I am able to confirm to your Lordships that, among the Government's future plans for the currency, the most immediate event is the introduction of the £1 coin, which we understand is planned for 21st April this year. We hope that it will be as welcome to the public as the 20p coin was, to judge from the quantity issued.
There are one or two other points that the noble Lord, Lord Bruce, raised which I shall come back to, but the noble Baroness, Lady Phillips, raised the question of a lighter coin. I scanned swiftly through my speech, and I think I mentioned the lighter 20p coin. 1221 At least that is what I had intended to do. I am afraid that I do not have one: I have only the cupro-nickel coins and the larger 50p piece, such is the vagary of Government business. But the 20p coin is lighter; it is also distinctive, as I think your Lordships will agree. I shall certainly convey the views of the noble Baroness on the weight of coins and the currency to my right honourable friend.
I return to the interesting and valuable comments of the noble Lord, Lord Bruce. He mentioned inflation. Inflation in this particular field under successive Governments has, as I think that the noble Lord would agree, to be absolutely blunt and fair, eroded by almost three-quarters the value of the decimal coinage which was introduced in 1971. The noble Lord was absolutely precise, as he always is, about the retail price index since 1979.
I am sure that the noble Lord, and indeed the noble Baroness and the noble Lord, Lord Leatherland, would accept that three particular problems have arisen with the coinage as a result of inflation since 1971. First, for a given range of purchases, the public and indeed handlers of large sums of cash, for example, milkmen, must now carry more of the larger and heavier coins of higher denomination than the original designers of decimal coinage probably envisaged in the far-off days of 1969 and 1970. Secondly, the cost of producing the currency relative to its face value has risen. Finally, there has been a need to introduce larger denomination coins to cut down the number needed for various transactions, and also, by giving them a specification outside the previous pattern of weight relationships, to bring about a certain needed reduction in the weight of our coinage.
The noble Lord, Lord Bruce, mentioned his trouser pockets and the date of 13th March. I had not got my diary out, but I just wondered whether that was the day when his trousers were coming back from the cleaners or his pockets were being repaired. I remind him that North of the Border we tend to carry our money—whatever the coinage is; the Aberdonian's tip was mentioned, I think, by the noble Lord, Lord Leatherland, a while ago in asking a question of my noble friend Lord Cockfield—if we are not wearing trousers, in sporrans. Therefore, I am sure that the request of the noble Lord, Lord Bruce, to free trouser pockets, the linings thereof, or trousers themselves from value added tax, should also apply to sporrans. I shall make sure that my right honourable friend the Chancellor of the Exchequer is acquainted with the problems of the noble Lord, Lord Bruce; and I hope that that does not involve the noble Lord, Lord Bruce, losing his trousers.
The noble Lord, Lord Leatherland, raised the point of coinage in France during the First World War. I do not know whether the noble Lord fought or was involved anywhere near Armentieres, but bearing in mind the stories that I have heard from my military friends and when I was a young soldier about what one could and, indeed, did do with coins with holes in the middle, though I will certainly convey the noble Lord's point to my right honourable friend, I think that possibly your Lordships will agree that the noble Lord, Lord Leatherland, and myself should carry on our conversation about what we can do with coins with 1222 holes in them elsewhere, at another time, possibly over teacups, since I believe that I and the noble Lord, Lord Leatherland, would be considered out of order in discussing all the uses to which, I am sure, he put coins with holes in them right back in 1915.
We have had some very interesting questions, and I believe that goes to show the interest that your Lordships have taken in what I hope is a relatively uncontroversial Bill. Nevertheless, we are immensely grateful for the encouraging comments and the interest that has been shown in the Bill. I believe I have taken up enough of the time of the House, I am sure your Lordships will agree, and I trust that your Lordships will accept that this Bill should be now read a second time.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.