§ Sir G. Schuster
asked the Chancellor of the Exchequer the origin of sterling balances owned by overseas holders and their relation to the National Debt.
§ Sir J. Anderson
I am glad to have an opportunity of explaining to the House the origin and nature of the accumulated sterling liabilities to overseas countries to which reference is made in this Question, and I hope that in doing so I may remove some misapprehensions. These balances, which it is estimated will amount to some £3,000,000,000 by the end of this year, represent the net amounts of sterling which have been acquired by their holders in a variety of ways, the greater part of which, though not all, is directly connected with the war. There are three main headings contributing to the total.
- (1) The accumulation of normal reserves and working balances which overseas Governments, banks and enterprises were always accustomed to carry in London.
- (2) A further accumulation on commercial account due to large purchases of a commercial nature, whether made by the Government or by private importers, in the Empire or elsewhere, while our commercial exports have shrunk owing to war conditions.
- (3) The sterling counterpart of direct war expenditure incurred in local currencies in many areas abroad.
The total sterling balances so accumulated have been drawn upon in the usual way to meet the sterling requirements of the countries concerned.
Relations between these balances and the National Debt arise in two ways. 1472W (a) Government expenditure under heads 2 and 3 above (which will have been duly authorised by Parliamentary Supply Grants) represents a charge on the Budget and since our total Budget expenditure is met partly out of revenue and partly out of borrowings, the expenditure in question contributes to the current increase in the National Debt. (b) A large part of the total sterling balances arising under heads 1–3 above is, in fact, held in the form of Treasury Bills or other British Government securities (mainly short-dated) forming part of the National Debt. It is only in respect of the cash payable in sterling on the maturity of such securities that any question arises of a direct cash liability on the Exchequer. In many cases, of course, investment under (b) is the counterpart of borrowing under (a).