HC Deb 17 April 1951 vol 486 cc152-3W
Mr. Champion

asked the Chancellor of the Exchequer what fresh instructions he has issued to the Capital Issues Committee.

Mr. Gaitskell

I have today addressed a memorandum to the Capital Issues Committee. As on previous occasions, the banks are being asked to observe the principles of this memorandum in granting credit to customers. I am confident that, as I said in my Budget Statement, I can continue to rely on them to maintain restraint in their credit policy, and, in particular, to ensure that advances are not made for the increased finance of hire purchase, particularly of consumer goods, for any speculative purposes, or for capital expenditure or investment which would conflict with the intentions of the revised principles of guidance to the Capital Issues Committee.

The terms of the memorandum are as follow: 1. It is necessary to restate the principles on which the Capital Issues Committee will consider applications in view of the changed circumstances resulting from rearmament and other developments. 2. In general, the applications will be considered against the background of the Memorandum of Guidance of 31st May, 1945 (Cmd. 6645), subject to the special considerations set out below and to a strict and critical examination of all proposals. 3. The Committee will continue to recommend approval of issues or borrowings where it is satisfied that these will continue to be needed for the effective maintenance of existing facilities for necessary goods and services. 4. In respect of applications which call for new investment for the purpose of expansion, the Committee will take into account that the main emphasis of Government policy is now on—

  1. (a) Projects which are essential to enable approved defence programmes to be achieved.
  2. (b) Projects which will alleviate basic deficiencies, particularly of raw materials.
  3. (c) Marked and direct contributions to import saving and particularly dollar saving.
  4. (d) Increased exports of a continuing nature to desirable markets.
  5. (e) Marked technical advances and new products of importance, and developments making possible substantial reductions in costs.
5. The Committee is aware of the importance attached by the Government to keeping down expenditure at home and to discouraging any measure likely to lead to anything more than a modest increase in dividends distributed. It will understand likewise that any distribution of capital appreciation which might lead to spending out of capital would, in the view of the Government, be contrary to the national interest. In addition to these considerations the Committee, in making recommendations regarding bonus issues and issues containing a bonus element, should bear in mind that all of the following requirements are also to be fulfilled: that the application relates as a single operation to the capitalisation of true reserves and is one which will benefit the stability, credit or efficiency of the undertaking; that it does not take a form which will enable tax liabilities to be reduced; and finally that it is in the public interest having regard to the general directions to the Committee. 6. The Capital Issues Committee will, as hitherto, rely upon the various Government Departments for advice and comment on particular applications, and Departments have been instructed that such advice should be specific in character. 7. This Memorandum supersedes the Memorandum of 14th April, 1949, and Sir Stafford Cripps' letter of 13th December, 1949.