I beg to move, "That the Bill be now read a Second time."

I hold in my hand a document entitled "Let us Face the Future; a Declaration of Labour Policy for the Consideration of the Nation. "The nation considered it, and having done so, elected this House of Commons, from which this Government draws its democratic mandate, to govern for five years at least. Then we will try again. The electors of Britain having given this Government a large and clear majority in this House, we have an unchallengeable popular mandate to carry out all that is contained in this document, on page five of which I find these words:

"What will the Labour Party do?"

Then follow a number of other undertakings and then this:

"the Bank of England with its financial powers must be brought under public ownership, and the operation of the other banks harmonised with industrial needs."

This Bill fulfils that mandate. In point of form, I venture to claim that it is a model. It will, in due course, make a streamlined Socialist Statute. It contains a minimum of legal rigmarole, and I believe that it can be understood nearly as readily by laymen as by lawyers, which is as it should be. It contains only five Clauses and three Schedules; but I believe it does the job which we intend to do. Clause 1 of the Bill provides for the transfer to the Treasury of "the whole of the existing capital stock of the Bank of England, "and for the issue of Government stock to stockholders in exchange for their holdings. I will say more in a moment about the details. All that Clause 1 provides for is an exchange of pieces of paper. Clause 2 provides that, on an appointed day, the Governor, Deputy-Governor and Directors shall vacate their offices, and that, on that same day, avoiding any gap or discontinuity, His Majesty shall appoint a Governor, Deputy-Governor and a new Court of Directors, reduced, for purposes of practical convenience, from 24 to 16 in number. Twenty-four seems rather large. I will again comment further, in a moment, on this Clause; but I think it may be convenient if I first run over the Clauses in outline. Clause 3 contains consequential provisions which are not of the first importance. Clause 4 provides:

"The Treasury may from time to time give such directions to the Bank as, after consultation with the Governor of the Bank, they think necessary in the public interest"

but that—

"Subject to any such directions, the affairs of the Bank shall be managed by the court of directors in accordance with such provisions (if any) in that behalf as may be contained in any Charter of the Bank for the time being in force and any bye-laws made thereunder."

We do not intend any day-to-day interference by the Government or the Treasury with the ordinary work of the Bank. On the contrary, we intend to leave that ordinary daily work, much of it of great importance, with confidence to the Directors and to their efficientand well-trained staff.

Clause 4, Sub-section (3) provides—and I gather there is some controversy about this—that

"The Bank may, if they think it necessary in the public interest, request information from and make recommendations to bankers, and may, if so authorised by the Treasury, issue directions to any banker for the purpose of securing that effect is given to any such request or recommendation."

I will say a word or two about this Clause in due course.

That, apart from details in the Schedules, is the whole thing. I think it is enough. Some people may think it is a bit too much. The Bank of England is an institution with a long and very interesting history, dating back to 1694, as we read. It has passed through many phases and vicissitudes, and has, over the years, over the generations, and over the centuries, steadily extended, from its first beginnings, both its functions and its responsibilities. It has been mixed up, from time to time, in a great number of controversies, some of which some of us are still young enough to remember; but, in spite of that—it does no one harm to be mixed up in controversies—the Bank of England has long held a high place, and a deservedly high place, both in the esteem of financial circles in this country and in the wide world outside this little island. I make that statement sincerely, believing it to be important that, at this moment, that should be said, lest there should be misunderstanding of the purposes behind this Bill.

Yet, with the passage of time, and with the changes that history has brought about in our economic and financial structure and in our ways of thought, the Bank of England has become, in some respects, a strange anachronism. There is a standard book—which, no doubt, has been read by many hon. Members of this House—by Sir Cecil Kisch, on Central Banks. It is in the library here, no doubt, and in other well-stocked libraries. Lord Norman—Mr. Montagu Norman as he then was—contributed a most appreciative foreword. The author, in the edition of 1932—and the date is interesting—points out that of all the Central Banks in the pre-war world only two out of the whole number were not, at that time, in greater or less degree, State institutions. The two exceptions were the Bank of England and the German Reichsbank. We know what happened to the Reichsbank. Is it not, indeed, a strange anomaly that, in this modern world, the Bank of England should still be, in law, a private institution, owned by a rather miscellaneous body of private stockholders who elect, from year to year—anybody who happens to have bought £500 or more of this stock gets that right—the Governor and the Deputy Governor of the Court of this most famous central banking institution? It is a great tribute to British common sense and to our capacity for the successful practical working of theoretically indefensible arrangements that the Bank of England has, in its present constitutional form, survived so long.

The right hon. Gentleman the Member for Woodford (Mr. Churchill) in the Debate on the Address said:

"The National ownership of the Bank of England does not, in my opinion, raise any matter of principle….There are important examples in the United States and in our Dominions of central banking institutions…"—[OFFICIAL REPORT, 16th August, 1945; Vol. 413, c. 93.]

owned and controlled by the State. That is quite true. We often hear of the need for a united Empire policy, and this Government will, in due course, give many examples of our devotion to that end. Let us begin this afternoon, and have a united Empire policy on the organisation of Central Banks. In Canada, Australia and New Zealand the Central Bank is wholly State-owned and State-controlled. In South Africa, the Government of the Union appoints the Governor and the Deputy Governor of the Central Bank, and also appoints three other Directors out of a total board of eleven—not quite a majority, but nearly. Under the South African Bank's constitution, although the capital of the Bank is still nominally and legally held by private stockholders, there are many controls imposed by law on the Bank's activities. The South African Central Bank is thus substantially State-controlled, and those in Canada, Australia and New Zealand are altogether State-controlled and State-owned. Therefore, we may claim that this little Bill, which I present this afternoon, brings the Old Country up into line with the young democratic Dominions beyond the sea, which is as it should be in this and other matters later to be unfolded.

There are two different lines of argument, reinforcing each other, but distinct, which may be used in support of this Bill. The first is that this Bill, in effect, brings the law into relation with the facts as they have gradually evolved over the years. It brings the antiquated and out-moded constitution of the past into a form which fits the practical realities of the present. That is one line of argument; we make the law fit the facts. The second line of argument is even more important. It is that by this Bill we ensure a smooth and efficient growth of our financial and banking system, in order to meet the new needs of the future. This Government have a mandate, an emphaticmandate for a five-year plan of economic development. [HON MEMBERS:"At least."] At least. The Tory Party will have to do better at the next elections. It is a mandate, for at least five years, to lay the foundations of an economic plan for this country, and a new social order. That is what this great Labour majority is here for, and this Bill is one of the foundations.

I have said that, in one aspect, this Bill only legalises an actual situation. The relations between the Bank of England and the Treasury have long been close, confidential, even intimate; and so they must continue. But this relationship has, until now, been factual rather than legal; and His Majesty's Government feel—and the British people feel—that the time has now come when these two parties, the Old Man of the Treasury and the Old Lady of Thread needle Street, should be legally married. We should not like to think that there was any danger of their living in sin.

I have already paid my tribute in this House to the present Governor of the Bank, Lord Catto, and I have told the House that, to my great satisfaction, he has expressed his willingness to continue to serve as Governor under the new dispensation which this Bill will inaugurate. Lord Catto commands the confidence both of His Majesty's Government and of all thoughtful and knowledgable persons in the City of London; and I count myself most fortunate in being able to rely on the loyal co-operation, on the ripe experience, and on the unfailing public spirit of this remarkable and distinguished man. He and the Bank have, in particular, rendered very conspicuous national service during the war; and I thank them for it.

I turn now to deal with some of these Clauses in more detail. Clause 1 concerns the terms of transfer of the stock. The terms of transfer of the Bank's stock—what are commonly called "terms of compensation"—are, in my view, on the one hand, fair to the shareholders, and, on the other hand, undoubtedly a good bargain for the State. I desire to emphasise that, though these terms of compensation, for reasons which I will give in a moment, are fair and appropriate in this particular case, they are not to be regarded as a precedent for any subsequent measure of nationalisation. The terms of compensation must vary from one instance to another, according to the merits of each case.

From the financial point of view, the Bank of England is by far the best of all the propositions which we intend to nationalise in this Parliament. Some of the others are a bit depreciated; they show marks of private unenterprise. Not so the Bank of England. "Safe as the Bank of England" is still an apt phrase, which means what is says. The Bank's affairs have been most prudently managed for many years. It has set a fine example, which others would have done well to follow a little more closely, by steadily strengthening its position and by putting to reserve each year a considerable part of its earnings. The Bank stock is a gilt-edged security, a trustee security. It has changed hands, over a long period now, at a price very close to that of comparable British Government securities, such as Local Loans Stock. The Bank of England stock has maintained an unchanged dividend of 12 per cent. over the past 23 years, since 1922. This Bill, therefore, provides that the stockholders shall receive a suitable quantity of a new 3 per cent. Government Stock, so as to assure to them the same income as they get now, at least until the year 1966, when the Treasury will have the right to redeem this new stock at par. To have offered terms less favourable than these would, in my view, have been unfair to the stockholders, of whom there are some 17,000. The Bank stock is fairly widely distributed; 10,000 out of the 17,000 stockholders hold less than £500 of Bank stock. The average holding of all the 17,000 is £850. On the other hand, to have offered better terms than these would, in my view, have been unfair to the community.

I have heard it argued that the stockholders should have received, in addition to the continuance of their present incomes, some share in what is called the "equity" or less-happily, "breakdown value "of the Bank. The Bank is not going to be broken down; it is going to be built up. This claim to a share in the "equity" cannot be sustained. The fact that the Bank has accumulated large reserves, and is the owner of a number of good buildings on valuable sites in different parts of the country, must be taken to have been reflected for a considerable period in the market value of the stock. Lord Norman, himself, in a broadcast as long ago as 1939, when Governor of the Bank, said:

"In theory, the dividend paid on Bank Stock can vary, just like that paid by any other company; but our proprietors have come to realise that service, and not a larger dividend, is the first consideration. In fact, the dividend has been unchanged for many years.''

A famous historian. Sir John Clapham, of Cambridge, says in his History of the Bank of England, a standard work of its kind, published last year:

"The Bank has ceased to think of raising the dividend on its stock, which the market values as a very secure debenture."

I do not believe that any impartial body of arbitrators, or any court, would sustain the claim of the stockholders to better terms than are provided in this Bill.

Under Clause 1 (4) the Bank will pay to the Treasury each year, in lieu of dividends hitherto paid on the Bank Stock, the sum of £1,746,360. That is equal to the amount of the dividends hitherto paid forthe last 23 years on an unchanging quantity of Bank Stock; and it will, in future, be paid over by the Bank to the Treasury in place of being paid out to the shareholders. This sum which I have mentioned may be varied up or down by agreement between the Treasury and the Bank of England, from time to time. So much for the terms of compensation.

I turn now to Clause 2, as to the mode of selection of the new governing body of the Bank. The present mode of election of the Governor, the Deputy-Governor and the Court is, to put it mildly, a little odd. They are elected, for a year at a time, by an Annual General Meeting of the stockholders, every stockholder who owns £500 or more nominal of the Bank stock being entitled to wield one vote. I have made inquiries, and I have ascertained that attendance at these meetings is not large. At the last half-yearly meeting, held some weeks ago—at a moment, one would have thought, of some interest to the stockholders, since it was immediately after the Government had announced their intention to nationalise the Bank, although the terms of the Bill had not yet been published—there was a record attendance of stockholders to hear an address by the Governor on the future of the Bank. The attendance was about 100 per cent. above the average. According to "The Times" about a dozen stockholders were present.

I do not conceal from you, Mr. Speaker, or from the House, that His Majesty's Government have been deeply concerned to prevent, by the provisions of this Bill, any unfortunate slip-up in the future, consequent upon the large-scale abstention from these meetings of those entitled to attend. It would be quite easy for a relatively small number of stock holders, having concerted their plans beforehand, to present themselves at one of these meetings and vote out of office the Governor, Deputy-Governor and all the other members of the present Court, and replace them by some prearranged ticket of entirely undesirable persons. That is quite possible under the present law. [An HON MEMBERS: "What about proxies?"] I am told there are no proxies.

Would they not have to give notice of their intention?

Certainly, notice would have to be given; but in the light of past experience, that would not ensure a good attendance to vote for the old guard. Therefore, I think it is better to put these appointments on a more intelligible and dignified basis. For the future I propose, on behalf of the Government, that the Governor, the Deputy-Governor and the Directors, the latter being reduced, for practical convenience, from 24 to 16, making 18 with the Governor and the Deputy-Governor, should be appointed by the Crown. This will unquestionably enhance the prestige of those so appointed as compared with the present, not very dignified, method of their selection. It is, moreover, provided in the Bill that of the 16 there shall be an annual renewal of four each year.

When the right hon. Gentleman says that they will be appointed by the Crown, does that mean they will be responsible to the House or to somebody outside the House?

:Appointment by the Crown means appointment by His Majesty on the advice of Ministers. It would be possible, and indeed it would no doubt become regular under the new constitution we are devising, for periodical debates to take place, as they cannot take place now while the Bank is nominally private, upon the general policy of the Bank and monetary and credit policy generally, in which debates Ministers would be responsible on all the larger issues. The Minister most naturally responsible would be the Chancellor of the Exchequer.

As I have said, out of the 16 Directors, four will retire annually. They will be eligible for reappointment. We propose that the Governor and the Deputy-Governor should have a five-year term, likewise being eligible for reappointment. By this plan we shall be able constantly to reinforce old experience with new blood. I wish to make it clear that it is not intended that there should be representation of any sectional interest whatever on the Court. No one will be entitled to say, "I speak on behalf of this, that or the other section of the community. "We shall advise His Majesty to place upon the Court persons of suitable and varied—I emphasise "varied"—ability and knowledge, and we shall seek in particular so to compose the Court as adequately to reflect industrial as well as financial experience. It has often been said that finance should be the servant of industry and the nation. It has not always been so in the past; we shall seek so to compose the Court of the Bank that it shall be more nearly so in future.

As to the age of the Directors, there is an unwritten rule, I am told, which operated in peace-time, that no Director of the Bank should be over 70 years of age. In war-time this limit has, quite naturally, in some cases been exceeded; but, in future, I consider that this rule should be generally followed, which means that, normally, no person over 66 will either be appointed or be re-appointed for a four-year term.

I come now to Clause 4. Sub-section (1) of this Clause makes plain that in the last resort, as between the Treasury and the Bank of England, the Treasury has got to have the last word, after due consultation with the Governor of the Bank, in any case of disagreement. This is only bringing the law into relation with the facts. I shall be very much surprised if it proves necessary, save in very exceptional and unusual cases, for the Treasury to use the power given to it under Clause 4, Sub-section (1), of issuing directions to the Bank; but the power is there, if need be. Clause 4, Sub-section (3) is a very simple and straightforward provision. It is designed to give effect to the mandate which the Government received from the country to ensure

"that the operations of the other banks are harmonised with industrial needs."

This provision is, deliberately, very broadly drawn, but it is also very carefully worded. It makes it plain, I hope, that it is on the initiative of the Bank of England itself and by the Bank of England, although with the authority of the Treasury behind it, if desired by the Bank, that directions, if ever necessary, will be served by the Bank of England upon the other Banks. The Bank of England is the initiating force, in the operation of this Sub-section. It is easy for theorists to pick holes in this or in any similar provision, or to conjure up fanciful dangers from the depths of their own imaginations; but we British people have a habit—this is part of our greatness—of working sensibly together within the framework of the law, which we interpret reasonably. I do not myself anticipate that in practice it will often be necessary for the Bank of England to use the power given under this Sub-section, to issue directions; but I am sure it is necessary for this power to be there. In the last resort, if ever we get there—we do not get there so often as theorists expect or as melodramatists of the extreme Left or extreme Right imagine—in the last resort, as a matter of principle, if there be a serious case of conflict or challenge, the Bank of England must be the master and the leader of the clearing banks. We British do not normally push things to these extremities of doctrine; but there is the statement of principle.

I was very glad to read in the Press, on the day following the publication of this Bill and following a meeting at which the Governor of the Bank of England, at my request and with my authority, saw the chairmen of the clearing banks and explained the provisions of the Bill to them, that Mr. Colin Campbell, the chairman of the National Provincial Bank—the highly respected "elder statesman"of the bank chairmen, if I may so describe him—said:

"Having read this Bill, I think the good relations which have always existed between the Treasury, the Bank of England and the Joint Stock Banks are likely to continue."

I pay more heed to this responsible statement than to some of the hysterical forebodings of partisans in or out of the House. Some people have asked what would happen if one day we had a Communist Chancellor of the Exchequer.

If the right hon. Gentleman will give me the opportunity, I will answer that.

:I hope the hon. Gentleman will have a chance of telling us; I am looking forward to hearing him. But if we are to concoct competitive conundrums of this sort, I might equally ask: "What would happen to our trade, our industry and our liberties if we had a number of Fascist bank chairmen? "The one question is as much or as little sensible as the other. I suggest that we might set aside these extravagant fancies and get down to sober business, as we are likely to conduct it in the years immediately ahead.

I understand there is some apprehension in some quarters lest the provisions of Clause 4, Sub-section (3), should be used in order to compel the clearing banks to reveal through the Bank of England to the Treasury the private affairs of their clients or depositors. I do not know whether any hon. Member feels apprehension about that—apparently not—but it has been hinted outside, and I am anxious to deal with it. I can say at once that this apprehension is completely unfounded. It need rob no one of his sleep. The Government have no intention of using this provision in that way. If it were a case of tax evasion or other illegal action, we have other powers, under other Statutes, sufficient, I hope, to deal with that. And if not, those other Statutes, through which the Inland Revenue operates, must be strengthened. But this is not the Bill for that purpose. This Bill is not aimed at forcing disclosure of any confidential or private information in order to deal with those—and there are some of them—who may be trying to "dodge the column" of honest citizens. If we want more powers to deal with that sort of person, we shall take them under other Statutes. To make this plain, I should be prepared, when the Bill is being considered in Committee, to propose an Amendment covering this particular point, in order to lay at rest any fears that may have been aroused on this subject. But having said this, having offered this concession in a spirit of conciliation, I hope the Opposition, now that this misapprehension has been removed, will support the Second Reading of the Bill. I hope they will; if not, we will take a vote and see who will win. But the general, and deliberately wide, powers conferred upon the Bank of England, with the authority of the Treasury behind it, contained in this Clause, are, in the view of the Government, essential in order to assure the successful working of our Five-Year Plan.

As I have already said, this Bill may be defended by two different and separate lines of argument, to which I have already referred, and which I will repeat in a sentence. The first is that we must make sure that to-day's law fits to-day's facts and prevents any back-sliding into bad old ways. The second, and even more important, is that we must make sure that in the years ahead, we have an integrated and coherent system of financial institutions. We plan—this House of Commons is determined to plan—for full employment, and full production, for an expansive economy, for increasing trade, both at home and abroad; for greater exports, especially in the early years of reconstruction, against restriction and in favour of abundance. If all this is to be done, we must have the Treasury, the Central Bank and the clearing banks all pulling together. We cannot afford to have them pulling—or even the possibility of their pulling—different ways. That will frustrate the whole plan. They must all pull together, and their operations must harmonise with the national interest and industrial needs. The banks have an essential part to play in the fulfilment of our national plan. There is a worthy place awaiting them, with large opportunities for service and full facilities for consultation—we shall be most desirous of that—and for cooperative effort. I believe that the more thoughtful, far-sighted and public spirited leaders in the world of the clearing banks appreciate this and are prepared to play on those terms. There may be a minority—I do not know—here and there, who will not. I notice that since the last Election a number of Tory ex-Ministers have joined the Boards of those banks—quite a number—no doubt as a reward for the last Election. [HON MEMBERS:"Speak up."] I said that I observed that a number of Tory ex-Ministers, since the last Election, have become directors of banks. I had always understood that that was a profession requiring long experience and great expert knowledge.

Does that mean that the right hon. Gentleman only intends to appoint to the Common Court of the Bank of England people who have spent all their lives in banking?

:No, Sir. It does not mean anything of the kind. But it is noticeable, I repeat—and since the right hon. and gallant Gentleman has risen to the fly, I will throw it once more—that a large number of new appointments to the directorates of joint stock banks made since the last Election consist of Conservative ex-Ministers, whose party has been defeated by that test of the public will. I only touch upon that in order to say that I hope that this does not mean that this political infusion which has taken place in the directorates of the joint stock banks is going to mean any lessening of cooperation with His Majesty's present Government, with the British, people behind them, including all those righting men who voted for the Labour Party. I hope that we shall find that we can count no less upon the co-operation of these banks, in spite of the political colour of a number of new arrivals on their boards.

The right hon. Gentleman refers to the British people being behind the present Government. Would it not be correct to say that less than half of the people of the country are behind him?

:No, Sir, it would be very incorrect. I, myself, share with the Conservative Party a profound dislike for such fandangles as proportional representation; but I am not prepared to go behind the facts revealed by the composition of this House of Commons any more than they were when they had a majority. These are the chosen representatives of the people and it is they who will vote, at the end of the day, upon this Measure.

I would prefer to assume—and I shall assume until the contrary is proved—that all those concerned in the working out of these arrangements will act reasonably, and that this new scheme of things will be worked in a sensible and co-operative spirit. If it is to be assumed that those concerned will act unreasonably, then, no doubt, these new arrangements will work badly, and we shall need then to consider whether they should not be more radically revised. But, on the same assumption of unreasonableness, the present arrangements will not work at all; they will break down completely, at an early stage. Therefore, I hope that the Opposition, having tried at the Election to frighten the electors into voting against this and other Socialist proposals that were placed before them, and having failed, will not now kick in this House against the pricks of the people's will, so emphatically declared in virtue of which I to-day submit this Bill for Second Reading.

Rarely in the history of Parliament can a Measure of first-class importance—and this is a Measure of first-class importance—have been commended to the House in a speech more devoid of argument directed to the substance and merit of the general proposition which was being put to the House. After listening to the right hon. Gentleman, I am confirmed in the opinion at which I had already arrived, that this is an unfortunate and quite unnecessary Bill. Let us realise clearly—and I am bound to say that the right hon. Gentleman helped us very much in that direction—what is happening. It is surely this. In response to some ideological urge a relationship, moulded by long tradition, is being replaced by formal enactment. We are surely entitled to ask why, in view of the very satisfactory working, to which the right hon. Gentleman bore witness, of the existing arrangements—and I entirely agree with what he said on that point—all this should be necessary.

If anyone were to propose to replace the unwritten Constitution of this country by a series of precise legislative formulae, everyone would cry out in horror. Yet that is exactly what the right hon. Gentleman and his friends are doing here over a small part of the field. Even assuming—as I am prepared todo—a desire to put practically the whole of the existing system behind a slightly different facade, that is, as I think the right hon. Gentleman would be bound to admit, not an easy task, and he must expect criticism, on that score, of particular provisions in the Bill, which, I think, show that the task has not been successfully accomplished. But general criticisms of this kind do not lay bare the full enormity—I would even use that word —of what is being done. There is, as my right hon. Friend the Member for Woodford (Mr. Churchill) said when the Government's policy in this matter was first announced, nothing out of the way in bringing a central bank under public ownership. The right hon. Gentleman made a great deal of play with that in the course of his speech, but surely it must be recognised that this is no ordinary central bank. We are dealing with an institution of a quite unique character, not merely a national institution. The Bank of England has an international status not shared by any other central bank. It is, for example, the chosen instrument—if that is not an unfortunate expression—for the management of the sterling currency. Sterling is not merely the affair of this country. It is an international currency, in a sense in which no other currency in the world could be so described. I should certainly have thought that Ministers were anxious to preserve the essential features of the sterling area, and even to bring about expansions of that area, and that they would have thought twice before undertaking this drastic operation upon the nerve centre of the whole monetary system.

Have the Government considered that aspect? Of course, other countries using sterling need only use it as long as it suits them. Their confidence, warranted by long experience of the existing institution, is not likely to be increased by the thought that a Government over which they have no control, a Government whose interests may differ from their own, may be going to start interfering.I do not believe that the Government really have any intention of doing that, but I think I have indicated some very good reasons to reinforce what the right hon. Gentleman himself has already said why they should not do so. I can see that if they do not interfere, no great harm may be done by this, in my judgment, wholly unnecessary Bill. In fact, everything is going to depend on the spirit in which this Bill will be worked. But I do beg the right hon. Gentleman to let no ideological motive, no ideological pride, if I may put it like that, stand in the way of giving the fullest reassurance to this House, to the country, and to all the other countries which have hitherto collaborated with us in monetary and financial matters.

Now I come to some of the details of the Bill. The right hon. Gentleman told us nothing about what he might have in mind about the staff and the organisation of the Bank. It may be—I hope it is so—that he contemplates leaving these matters, as they have been, in the hands of the directors, but I am sure that he will be alive to the possible embarrassments that might result from the existence of a large organisation, throughout which standards different from those to which we are accustomed in the Public Departments obtain. It is quite conceivable that, in the course of time, such a difference, which I think myself is inevitable, may be a source of inconvenience, or even embarrassment. I have no criticism whatever to offer of the basis of compensation for stockholders proposed in this Bill, and I agree with what the right hon. Gentleman said about its not being proper to regard this as a precedent for other cases. Such a matter has, in my judgment, to be determined in relation to the facts of a particular case. I welcome the provision for the appointment of the Governor, Deputy-Governor and directors for a fixed term in each case. I think that will make for stability, continuity and confidence.

I come now to Clause 4, which, in my opinion, is unquestionably the part of the Bill most likely to create controversy, and the wording of Clause 4, in my view, illustrates very well what I said a moment ago about the difficulty of drafting a Measure of this character, which is designed, as the right hon. Gentleman said, to bring the law into line with the facts, because the facts are really somewhat complicated and this Bill, as the right hon. Gentleman said, as far as its wording is concerned, is a very simple Bill. The right hon. Gentleman was good enough, when he was dealing with the provisions of Clause 4 (3), to give us some reassurance on the question of disclosure of facts with regard to individual accounts, and he offered to consider in Committee some suitable Amendment, if it is desired to have the matter put beyond all possibility of doubt. I am not at all sure at the moment whether it will be possible to devise an Amendment on this point which is not open to objection from some point of view or another, but we must see. However, that is not by any means the only point on which I—and I am speaking personally here—would desire reassurance in regard to Clause 4.

I am sure the right hon. Gentleman will realise that it is not simply a question of what the present Government might wish to do if and when this Bill becomes law. What we want to be sure about is what powers are lurking behind the very wide wording of Clause 4. Does the Clause, for example, enable the Government to interfere, through the Bank, in the matter of the fluidity ratio which governs banking policy—the ratio betweeen liquid resources and total deposits? Would it be possible, in the view of the right hon. Gentleman, for the Government to intervene effectively, through their power under Clause 4 (1), to give directions to the Court, and, under Clause 4 (3), to confirm by directions a recommendation from the Court? If, in the view of the right hon. Gentleman's advisers, the Bill is wide enough to cover such interference, I would certainly desire to see safeguarding words inserted.

Then there is another question of great importance. The directors of joint stock banks occupy a position of trusteeship for their shareholders and also for their depositors. How can powers which the Government propose to take under Clause 4 (3) be reconciled with the maintenance of that necessary position of trusteeship? On that point, may I say, in reply to some rather flippant observations which the right hon. Gentleman made at the end of his speech, that I have never heard of directors of a bank using their position in order to influence the policy of the bank in accordance with any particular party view? It is an unwarranted suggestion, and such a course, in my view, would certainly involve a breach of trust.

I put these points in all seriousness to the right hon. Gentleman. I hope the Government speaker who winds up this Debate will be able to supplement the assurances that the right hon. Gentleman gave, by dealing with the further points which I have just brought to his notice, and, for my part, my attitude, when we come to the end of the day, will depend upon the assurances so given.

Rising for the first time to address this House, I ask for that measure of indulgence so generously handed out to other hon. Members who have made their maiden speeches. I have listened to the speech of the right hon. Gentleman opposite, and, speaking for this side of the House, I wish to say that we do not consider it unnecessary that this Bill should be introduced at the present time. We do not accept the view that, if the relations between the Treasury and the Bank of England up to the present time have been satisfactory, there is, therefore, no need for a change. Neither do we accept the view that, because the Bank of England in recent years has acted in the public interest, it has always acted in the public interest in the past, or that, while remaining under its present ownership, we can be sure that it will always act in the public interest in future. I say that, because those of us who represent industrial areas, such as the Enfield area of my constituency, blame the Bank of England's policy for a large measure of the suffering through which such areas passed during different periods of depression. Our constituents, when discussing these matters, cast their minds back to 1925, and they believe, rightly or wrongly, that the policy which was followed in the return to the Gold Standard in 1925, which was followed by a period of industrial unrest, including the General Strike of 1926, was largely due to the financial advice given by the Bank of England to the Government at that time. It is also believed that, during the period of the 'thirties, when the financial condition of this country was extremely bad, the advice of the Bank of England was not always helpful to this country, and that the period of wage reductions which followed the downfall of the Labour Government in 1931 was again, partly, at least, due to the financial policy followed at that time, on the advice of the Bank of England.

The right hon. Gentleman who has just sat down suggested that the prestige of the Bank of England was so high abroad, that its international prestige was such, that we should not interfere with it at the present time. It is not correct to say that the prestige of the Bank of England has always been so high abroad. We, on this side of the House, remember the financial appeasement policy of the Bank during the rise of Hitler; we also remember the disgraceful episode of the handing over of the Czech gold in London to the German Reichsbank. For these reasons we are strongly in favour of this Bill, and those are the reasons why we have the country behind us in the mandate to carry it through.

Either the relations of the Bank of England with the Treasury are satisfactory or they are not. If not, this Bill is necessary to put them on a correct basis. If, on the other hand, the relations between the Government and the Bank are satisfactory, and the Bank does act on the advice of the Government of the day, then surely, this House should have the right to question what those policies are, and the right to debate them on the Floor of the House. As long as the Bank remains under its present management, or as long as the present constitution remains, hon. Members of this House are denied the right to raise questions on the operations of the Bank, or to debate its policies on the Floor of the House. I think hon. Members will agree that they have a right to be informed what those policies are, and, when the time comes, no doubt they will themselves put questions to and get answers from the Chancellor on these matters and also raise them in Debate. I would like to suggest that one occasion on which there should be a Debate on the Bank of England will be when the report of the Bank is presented to this House. I think it would be interesting if a report on the operations of the Bank could be made annually and the Report and Accounts presented for debate.

One of the great assets in this Bill, in my view, in relation to the financial policy of the Government, is that it redefines the relationship between public corporations and the Government. In the past, with public ownership, as illustrated by such bodies as London Transport and the Central Electricity Board, the relationship between these boards and the Government has not been on a satisfactory basis. One failing has been that, in the case of existing corporations, the control of Parliament has been too remote. The definition of Parliamentary control has not been clear. I think that, in swinging away from the old-fashioned ideas of nationalisation, that is, the operation of a publicly-owned concern by a Government Department, to the public corporation which was devised to give a greater independence of operation than was possible with the publicly-owned body, we have swung too far in the direction of complete inde- pendence, and the control of this House has not been adequate. Ministers come to the floor of this House and decline to answer questions which are put down regarding the B.B.C. or London Transport or the Central Electricity Board. They decline to give time for Debates on those bodies, except on very large and general issues. They use such phrases, when they do answer questions, as "I understand that" or "I am informed by London Transport that so and so is the case" or, very generously on occasion, they say that they will convey hon. Members' views to London Transport, and that is the end of that.

In the case of London Transport, the Board is not appointed, by a Minister of this House, it is not appointed by the Government. In the case of the B.B.C. the Board of Governors is appointed by His Majesty and it has no responsibility to this House. In the case of the Central Electricity Board, it is true, the Minister, through the Electricity Commissioners, appoints the Board. In the case of the Bank of England Bill now before this House, His Majesty appoints the Board and it is quite clear that the Board will be responsible to the Chancellor of this House and he will answer in this House for the actions of the Board of the Bank of England. In that way I consider that we are bringing closely to this House the relationship of the public corporation to the Government, and in that way the Bank of England Bill is a step forward. In the case of other corporations, power rests in the Boards without responsibility, and you cannot have power without responsibility or responsibility without power. In the case of the Bank of England Bill, I consider that there has been devised a method whereby there is power with responsibility, and that power and responsibility rests on the shoulders of the Chancellor of the Exchequer.

There are two further points on which I would like to touch. The first is regarding the qualifications of the directors. The Chancellor pointed out that there will be no sectional representation. I do not think anybody will disagree with that, but in the case of public corporations up to the present the Boards have been appointed on the grounds of ability and competence. They have been drawn from a wide field representing different sections of the community, without actually representing them as such, and the experi- ence which has been brought to bear on the public corporations has been satisfactory and, in the main, the bodies have been completely free from any political interference whatsoever. I suggest to the Chancellor, that in appointing the Board of the Bank of England he casts his net widely and goes far outside the field of the banking community, far outside the field of financiers and industrialists, and brings in as wide a representation of the people of the country as he possibly can. In that connection, perhaps he will bear in mind that while we do not favour sectional representation, and while we do not ask for workers' control or workers' representation, we do ask that that field be not ignored and that the Bank workers—that is, those fully qualified staff within the Bank of England and within the banking community—are not overlooked when the selection of able and competent men is made to the Board of the Bank of England.

The second point is that of compensation. The Chancellor and the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) both argued in favour of the present basis of compensation and I think there will be few on this side of the House who will disagree with them that in the case of the Bank of England the basis on which compensation has been fixed is a fair and proper basis. We believe it is a good bargain for the State, and that the shareholders have been reasonably treated. Personally, I am not concerned with how the shareholders are treated; as long as the State gets a good bargain, we are satisfied, but the compensation which has been given in the case of other public corporations has often been excessive, and was particularly excessive in the case of London Transport whose operations it hampered. In the case of the Bank of England, however, whatever amount of compensation is given at the present time—and the amount has already been fixed—it cannot affect the successful operation of the bank.

The reason why it has affected the operations of London Transport and other public corporations is because the interest burden was too great in those cases for the organisation to operate successfully; it had to concern itself largely with earning interest and, at the same time, the demands of the workers on the one hand for improved conditions and the demands of the public for good travelling facilities, had to be denied because the financial interests of London Transport had to be put first. In the case of the Bank of England, however, such a proposition cannot arise, as the interest which has to be paid over to the Treasury for payment on the compensating stock is easily earned and, as the Chancellor pointed out, no difficulties should arise in that case.

In conclusion I would like to say that this is not only the first major measure of nationalisation for which this Government has received a mandate. It is certainly regarded as that by the people who sent us here, but it is also regarded as the king-pin of labour policy, because we believe that without it labour policy could not be carried out. Therefore it means more to us than the mere transfer of ownership from the stockholders to the Treasury; it symbolises something more than that—the passing of control of the finances of this country from one small section of the community into the hands of the community itself. The worker, as I say, rightly or wrongly has blamed the Bank of England in the past for the periods of depression through which he has passed and he regards this change, which the House is being asked to approve on the Second Reading of this Bill to-day, as one which will influence his happiness and his welfare in the future.

I ask three favours. First, that this House should continue to extend the old tradition of sympathy and forbearance to an anxious and inexperienced speaker. Secondly, I ask for an ancient ally of this House in the cause of freedom, a specially friendly spirit. The Bank was founded in 1694, only six years after the great revolution of 1688, and it played, as an ally of this House, a most important part in maintaining those freedoms. I am sure the Chancellor will agree with me when I ask that we should not only for historical reasons give them that spirit of sympathy and forbearance, but also for party reasons, particularly when I say that the Bank of England was formed to keep the Tories out of power. Seriously, the Bank of England is a very precious institution, not only in this country but in the world and, as I say, I think the Chancellor will agree that we ought to bring a spirit of moderation and a true spirit of objectivity to our deliberations this afternoon. Credit is popularly supposed to be wholly monetary. Believe me, it is at least as much, in fact probably more, emotional. I hope, therefore, that we shall be at great pains to keep emotion down and bring objectivity and sincerity to bear.

The third favour I would ask is the indulgence of this House in that I am still a stockholder, and was, until 2nd August, a director of the Bank of England. I could have sold my qualifying stockholding but I had confidence in the general fairness of the British people and of this House in particular. I decided to show that confidence by holding it, and I hope that it will not be counted against me that I had that confidence and that I have to avow this interest, and to ask hon. Members to continue their usual courtesy of listening.

I would like to take the opportunity first of saying that, as a stockholder, I regard the compensation as eminently fair. I say that not only as a stockholder, but as a taxpayer and a citizen. However, I speak as a mere mortal. It is different for an undying corporation like King William's Compatriots, the University Professors of Utrecht University or his new subjects, the Worshipful Company of Clockmakers, who were among the original Venturers, and are still, as far as I know, continuing that holding today. They, I think, have not had such, a fair deal. From their point of view the equity of the Bank, which, is apparently not valued in the short term, is an important factor in the long term. I hope, therefore, that I am adding to the compliment I am seeking to pay to the Government in this repect, in saying that, while the compensation may be fair in the short run, it does not appear to me to be fair in the long run. However, let us recognise that there cannot be fairness both to stockholders and to taxpayers unless there is at least some element of doubt on both sides.

May I raise two points—one of the precedent for compensations in the future? Will the Member of the Government who winds up assure this House that at any rate compensation will be fair in the future? I agree that this is a very special problem which will not precisely recur again, but may we take it that principles of compensation will be fair in the sense in which a jury of ordinary British men would consider that it was fair, and not—and we have had disturbances in the political thought in the past—by the supposition that the definition of "fair" can be what is meant by fair by the wilder and more extreme elements of Socialism.

Secondly, may we take it that in this case, and in all questions of nationalisation, the Government will watch carefully and will compare facts and figures. I am glad that the hon. Member for Enfield (Mr. E. Davies) has said that we should debate the results of each year's working. I have seen the annual report and accounts of the Bank, and I am inclined to think that this House would be much more interested in an annual report which showed clearly what improvements nationalisation had brought in a higher standard of living, or in any other sense, to the common man of this country as between conditions as they were or as they would have been, and as they are found to have been in that year. I hope, too, that the Government will bring into effect a policy of sampling. Sampling and carefully watching enable you to avoid mistakes, and not only that but to learn from experience and develop new techniques. It is a great mistake to break all your eggs before you know, first of all, whether the customer wants them boiled or scrambled, and secondly, before you know whether you have the necessary cooking fats, and not only water, so that when you have broken them you can, at any rate, make scrambled eggs. Do the Government realise that no manufacturer would turn his factory over to a new process without first installing a pilot plant and thereby submitting the a priori reasoning to practical tests? It is strongly to be hoped that the Government will approach this problem of nationalisation by way of careful watching, testing, sampling and learning by experience; and that they will hazard the assets of this country only when they have fully established that those assets ought to be launched irrevocably, because with certainty of improvement.

I come now to the main criticism of the Bill. So far as I can see it achieves nothing. We on this side of the House have no difficulty whatever in agreeing that no national institution should be allowed to be in conflict with the will of the people. Where we differ, is in considering that nationalisation or coercion of the recalcitrant should take place only if and when a conflict has appeared, and not before. We can imagine that the Bank of England, a trade union or even the Trades Union Congress might embark on policies which were antagonistic to the interests or will of the people—but they have not. To nationalise the Bank is to take away that most precious of all English and British values, the free association of people working freely together. The Chancellorhas told us how he expects that British habit of working freely together to be effective in the future as between the Bank and the joint stock banks. He has, in fact, told us how it has worked in the past as between the Treasury and the Bank of England. We might now pass a law to nationalise the Trades Union Congress for fear that it might conflict with national interest, but if we did so we should be making the same mistake, and with as little cause.

Members opposite may say that there has been conflict, but that it has been behind the scenes. I think there is no justification whatever for that contention. Might I ask the House to bear with me over a few facts? First, there is the case of the deflation policy of 1920. That policy was adopted as the result of a Report by the Cunliffe Committee, and the Chancellor of the day—I think it was Sir Austen Chamberlain—took full responsibility for that.

The return to the Gold Standard in 1925 followed a Report by a Committee appointed by Mr. Philip Snowden on which the Bank of England was not even represented, and that policy was debated and decided in this House. The foreign loans in connection with the Dawes and Young Plans were not domestic issues; they were international issues. The very names of the men associated with them showed that it was America who took the lead. All the Allied nations were committed to them and, in fact, the Foreign Secretary, as much as the Chancellor, was the man responsible for those loans to Germany. The Prime Minister, at the time of the Dawes Plan in 1924, was Mr. Ramsay MacDonald and the Chancellor was Mr. Philip Snowden; at the time of the Young Plan the Prime Minister was, again, Mr. Ramsay MacDonald, with Mr. Arthur Henderson as Foreign Secretary and Mr. Philip Snowden as Chancellor. To say that the Bank was in any way responsible for that is completely to misread the situation.

Finally, the fall of the Labour Government in 1931 was coincident with the loss by them of the confidence of the country. They not only lost nearly 2,000,000 votes at the coming Election, but they lost the confidence of their own Prime Minister, Mr. Ramsay MacDonald, and of their own Chancellor and of many others. Indeed, they lost the confidence of the investing public overseas. Do let us realise that the Bank of England, as manager of the Government debt, acts as a conduit pipe through which willing investors from this country, the Dominions and foreign countries lend their money to our Government over here. The Bank of England cannot control that willingness, and to confuse effect with cause is wholly wrong. It is putting the cart before the horse. Is it not also an affront to our intelligence to suggest that a Central Bank, which, in effect, never advertises, could put across this country, across the world, a false story in the face of those magnificent machines of public relations—the Labour Party and the trade union movement? So far as I can sec, it seems perfectly clear that the people of this country have had the financial policies of succeeding Chancellors of the Exchequer and succeeding Governments, which they have voted to power through the support which this House has given to them. To say there has been conflict and to seek to lay the blame elsewhere is, I think, wholly wrong.

Has any Member ever heard any Chancellor of the Exchequer disclaim responsibility and blame the Bank for what has happened in his period of office? It is true that we have heard the present Chancellor blame the Bank for what it advised the previous Chancellors, but I would ask again: Has anyone ever known a Chancellor get up and say, "I am not to blame; it is the Bank which is to blame?" The truth of the matter is that Governments of the past have had the best of two worlds. They have been able to have skilled advice, and to sit back and blame a silent organisation which has never answered back—

:The hon. Gentleman said, a few moments ago, the exact opposite. He cannot have it both ways.

:I would remind the hon. Gentleman that it is not usual to interrupt maiden speeches.

:I do not mind in the least; I have no desire to shirk a question. The point I was making is that the Government havehad the best of two worlds, and that the present Government rather propose to kill the willing co-operation of the past by substituting for it a directed sub-Department of their own. While the Bank was free, the Government were able to blame it, or rather, the public behind the Government were able to blame it. But the Bank sat like a dignified old lady, never apologising, explaining or answering. Those days will now be over forever, and the Chancellor, while he still enjoys the confidence and advice of the Bank, will have to take all the canings himself, not only for his own mistakes but for the adversities of a not very satisfactory world. Quite frankly, I am sorry for him.

We on this side of the House ought to welcome this Bill because it does pin down, clearly and inescapably, the responsibility, which will lie with the Chancellor. Secondly, it exonerates this side of the House from any suspicion of an alliance with the Governor and directors of the Bank of England. So, as I say, from our point of view we ought in that way to welcome the Bill. Apart from Clause 4, however, which I understand is to be amended in Committee, it is wholly a waste of time in that it seems to achieve nothing, except save face in the dilemma in which the Government find themselves. Having built up, by propaganda, the idea that the Bank of England is big bogy No. 1, or, should I say vicious vampire No. 1, because of its well-known blood-sucking proclivities, they are now in the dilemma that they either have to pass a quite useless Bill or lose face. That is, quite frankly, why I oppose this Bill. It is useless. In all conscience there are enough ways in which the Government of the day can restore and even improve the lot of the common man. Let them do it by something which achieves that rather than by something which, in the Chancellor's own words, is a piece of paper.

May I also take this opportunity of correcting the right hon. Gentleman on the question of the election of the Governor and directors? The house list is prepared in advance, and when voting takes place it takes place on something which, at that stage, cannot in any way be altered. I do not know how many people in this country would turn up for a subsequent election after the General Election, to vote for the Cabinet, if the Cabinet had been drawn up, and they could do nothing but accept it as it was. I think that point ought to be made clear.

The Chancellor of the Exchequer has brought Lord Norman into it. The Bank of England is more silent than the Silent Service. The degree to which it works this secrecy is quite extraordinary. Few people realise that the apparent mystery behind Lord Norman is nothing except his own determination to keep his mouth shut. He considered that it was the duty of the Bank to its customers, and particularly to its chief customer, the Government, to keep his mouth shut. At no time has he reacted with anything but patient silence. I would like the Chancellor of the Exchequer to search the archives of the Treasury to find out any instance in which the Governor, Lord Norman, exceeded the boundary between advice and responsibility. Previous Chancellors of the Exchequer whom he served have had a skilled adviser, and an executive who carried out their policy regardless of whether the instructions agreed with the advice he tendered and his judgment. He has carried out those instructions, as I say, silently, taking all the arrows to himself, because he did not answer back. As I see it, the Chancellor of the Exchequer has a great deal to learn from Lord Norman. Lord Norman was, and, I am glad to say, still is a strong and colourful personality. He built up at the Bank a magnificent machine. He gathered round himself a staff of great quality. The machinery of the Bank is an efficient organisation with first class methods. He led this organisation with distinction and has won the respect, admiration and affection of the whole staff.

The Chancellor of the Exchequer is the head of the Civil Service—an even vaster and more important machine. If he can build up and maintain as fine an organisation, with equally efficient methods, and can inspire in the staff of the Civil Service, respect, admiration and affection as great as that which Lord Norman has inspired, then on all those counts, he will be owed a very great debt of gratitude by this House

It again falls to my lot to congratulate two new Members of this House on their maiden speeches. May I first congratulate the hon. Member for Enfield (Mr. E. Davies), and say that he has lived up to the best traditions of this House. I am sure we shall look to other contributions from him. With regard to the hon. Member for Bath (Mr. Pitman), I sincerely congratulate him on his informative speech. May I add this? What has been the Bank's loss is this House's gain, and if this Bill passes into law, as it undoubtedly will do, the hon. Member will have an opportunity of giving advice here in this House to the persons responsible, as he used to give it to the Governor of the Bank.

On behalf of my colleagues I support the Second Reading of this Bill. It has been put in the programme of the Liberal Party, and hon. Members above the Gangway should make up their minds as to where they stand. There is nothing revolutionary in this proposal; there is nothing even novel in it, as the Chancellor of the Exchequer himself pointed out. All the self-governing Dominions have their central Bank, under the control and direct domination of their own Government. There is in this Bill, as the Leader of the Opposition has very rightly pointed out, no question of principle involved. I wonder where the right hon. Gentleman is to-day, because the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) began his speech by saying this was the first Bill of major importance introduced by the Government, and I should have expected that on such an occasion the right hon. Gentleman the Member for Woodford (Mr. Churchill) would have been here to declare the views of the Opposition. I make no apology to the House for quoting again the words which the right hon. Gentleman used on 16th August in the Debate on the Address. He was not dealing, as was apparently suggested by the right hon. Gentleman the Member for the Scottish Universities, with an abstract case of some institution outside this country, or with banking in general—he was dealing with this very matter, the Bank of England. These were his words:

"The national ownership of the Bank of England does not, in my opinion, raise any matter of principle."

The recorder of our Debates at that point inserts "Hon. Members: 'Oh.' "My recollection is that that interruption came largely from behind my right hon. Friend.

"I give my opinion"—

he said, turning round—

"anybody else may give his own."

Then he added these words:

"There are important examples in the United States and in our Dominions of central banking institutions, but what matters is the use to be made of this public ownership."—[OFFICIAL REPORT, 16th August, 1945; Vol. 413, c. 93 and 94.]

Having said that it raises no question of principle, the speaker for the Conservative Opposition to-day began the Debate by saying that the Chancellor of the Exchequer was perpetrating an enormity. If the right hon. Gentleman were perpetrating an enormity, I should have expected right hon. and hon. Gentlemen above the Gangway to be here in strength to stop that enormity from being perpetrated. At the end of the speech the right hon. Gentleman said in effect, "We really cannot make up our minds what we are going to do until we hear the final speech. "I am sorry the right hon. Gentleman was not here to hear the speech by the hon. Member for Bath (Mr. Pitman), because he said that this Bill accomplishes nothing. I wish hon. Members would make up their minds as to where they stand. I wonder whether their attitude to-day, which is so different from that of their Leader in August, is not partially dictated by the fact that there will be an election in the City of London on Wednesday next, by which time we shall have known precisely what we propose to do. There appears to-day in "The Times," not in the leading article but under "City Notes," a paragraph which begins by stating:

"Let it be said at once that this prospect afflicts nobody with panic." It then goes on to explain the reasons. The very point which the hon. Member for Bath thought was against the Bill, is the point which commends the Bill to me. He very rightly pointed out that this monopoly, which was established six years after the great Revolution, has been in existence now throughout all these years, but that the Government of the day were getting the best of both worlds. That is the very objection I have to the continuance of the present system. They have had the best of both worlds. They have had excellent advice tendered to them by the Governor of the Bank, but Members of the Government could stand at that Box and say that they were not responsible for anything which the Bank did. From now on, they will be responsible, and, what is more, on all questions concerning major finance the Chancellor of the day will be answerable to the Members of this House. In theory we are changing the law. It has been said that we are not changing it much in fact, but we are: with the change of law, will come a change in the responsibility of the Government of the day in regard to what is happening concerning the control of finance. They have been hiding behind an institution; they themselves will now be called upon to explain the reasons for their policy.

In spite of the words used by the Chancellor of the Exchequer with regard to the terms of compensation, that they were fair to the shareholders and a good bargain to the State, I venture to suggest that they are generous to the shareholders. What individual shareholder in this country would not be more than gratified if he could be quite sure that his average income for the past 20 years was going to be guaranteed to him in perpetuity? That is what it comes to. Although it is repayable in 1966, he is now being guaranteed that what his past income has been for the last 20 years will be continued, come what may, for another 21 years. I do suggest that is certainly on the generous side, and I am glad the Chancellor of the Exchequer put in a warning, a caveat, with regard to this being a precedent, because if this was to be regarded as a precedent, he might find "socialism in his time" even nearer than he expects.

Shareholders might be queuing up for the terms he is prepared to give. That might not be limited to the shareholders of the Bank of England; it might apply to insurance companies and goodness knows who, trying to take advantage while the going was good.

Clause 4 only tries to put into words what has been the practice for a considerable time. At first I felt it was right that some limitation should be put upon the three words "information," "recommendations" and "directions" that appear in the Bill; they are too vague and too wide. But it is to be observed that there is no sanction behind the words now in the Bill, and perhaps if a closer definition of "directions" were to be made, it might be found necessary to follow that by sanctions. I think that would be dangerous and lead to unforeseen difficulties. I do not want that compulsion now. The whole purpose of the Bill is that there should be close co-operation and a general working together of those best able to give advice. What it means is that the practice of the Bank shall be continued without their bringing any more force into it other than their position, the experience they have had and the authority they have amongst their fellow men in the City of London. So that, while at first I rather took the view that it would be right to limit the interpretation of the words "recommendations" and "directions," I think that on the whole it is best to leave them as wide as possible, and not to insert behind them some legal sanction, because the whole thing turns upon co-operation and goodwill for the general benefit of the country. For those reasons my hon. Friends and I will support the Second Reading

If the hon. and learned Member says that the main way in which this Bill will work is by co-operation, why nationalise the Bank of England at all?

:I wish the hon. and gallant Member had listened to the earlier part of my speech, which answered that question.

May I on this, the occasion of my first speech in this House, crave the indulgence of the House? I do so with some diffidence, because I feel that all the indulgences granted to-day are supposed to be to shareholders of the Bank. In my youthful innocent days I used to think that the function of money was to provide for the easy transfer of goods and services from producers to consumers. But the sort of cycle that went on was that as people did not consume as much as they produced, they could save it for the purpose of further production, and that out of that saving, they got something for having saved. That I think was called the practice of usury. I believe that in mediaeval days this practice of usury was regarded as a necessary evil, and that those who produced things were looked upon as very desirable people. I am sorry that with the march of time, that has changed in some respects. Money has reached the stage at which it has become the master, and the craftsman is more or less the necessary evil. I can only hope that one effect of this Bill will be to get these things into their true proportions. The thing that matters, so far as we are concerned, is not the manipulation of money, but the production of goods and services. If the Bill makes that clear it will have achieved one of the objects for which we on this side of the House were elected. We promised the electors that we would see that money was used as the servant, not as the master of the State; that we would see it was used in such a way that those goods and services necessary for the wellbeing of the whole people would be produced.

An hon. Gentleman opposite referred to the origin of the Bank of England. I believe it is an ancient and honourable institution, established originally for the purpose of providing a loan of £1,200,000 to the Government at 8 per cent. That was regarded as the right figure at that date. It went on and added to its capital, and I believe that, ultimately, by subscriptions it arrived at a capital of some £11,500,000. It is interesting to note that in 1816, the practice of presentingbonus shares was not unknown. By a special Act the Bank was allowed to create a further, capital sum, increasing the total to £14,500,000, so that of £14,500,000 at which the nominal capital now stands, the original subscribed figure was £11,500,000. That is an important factor in considering the amount of compensation to be paid. It may be argued that there will be the reserves of the Bank to be taken over. I believe that the reserve at the present time is something less than £3,500,000. If they have other reserves they have not declared them, and as they do not publish accounts, we have diffi- culty in arriving at the true position of the shareholders.

A better way than that of giving nearly £58,000,000 for £14,500,000—even accepting the latter figure—would have been to distribute those reserves as profit, not as capital appreciation. Then, by that excellent remedy of Excess Profits Tax, consumer tax, and so forth, the Chancellor could very well have collected a large portion of it. That would have been a much better way for the Party on this side of the House to take. It would not have been giving the shareholders something in perpetuity. At a time when industry was struggling, this Bank, in conjunction with the other banks, was able to give a steady 12 per cent. to its shareholders. Payment on the basis of what it did then is to go on in the future, so that these people are to have in perpetuity what they had in the past. I do not like the financial compensation which is being provided. I regard 12 per cent. on a gilt-edged security as not a proper return but an excessive return. I say that those who will receive it will, for the service they have rendered, have taken a greater sum than they should have taken from the people to whom they have Tendered that service. The Chancellor should take that into consideration in the compensation.

In relation to the joint stock banks it is suggested that it is creating some hardship if they are to be subject to the direction of the Bank of England, and through the Bank, of the Treasury, with regard to their future operations. When it is considered that for every additional £1,000 deposited in their coffers they can create credit to the extent of £10,000, I think it is high time that this form of creating credit, which affects each and every person in the country, should be subject to the direction and control of the State, through this House. The creation of credit is of the utmost importance to trade and industry. Therefore, in its working, obviously the State is the important instrument which functions for and on behalf of the whole people. It is surely right and proper if these banks are to be allowed to create credit to that extent that the State should be able to say why and when that credit shall be created.

We look on this Bill as the first major measure of socialisation, and the forerunner of the other Measures to which we are committed. As a result of this Measure, notwithstanding the more than adequate terms of compensation which are being provided, we shall at least have an instrument of control, which is vitally necessary for the future. I hope that when such industries as may come along for nationalisation present their accounts, and say "We have been able to earn 12 per cent. as well, "some regard will be had to their practical assets, and not to the amount of dividends they have paid over the period of years. Assets, as far as we are concerned, represent the ability to produce. I appreciate the fact that the same terms cannot be applied precisely to a bank. I am glad to know that what is being paid here is not to be taken as a precedent; I agree with what has already been said, that it would be a most expensive way of taking over the assets of the country. We are looking to the future, knowing that this Measure will receive the approval of the people, and that as a result of it, the Chancellor will be responsible to this House for the financial policy of this country. That is as it should be. It is not a matter for fear so far as we on this side of the House are concerned. I wish the Chancellor good luck with this Bill. I hope it will be accepted speedily and that as a result we shall go forward to a better and more stable planned economy than we have had in the past.

I rise to address this House for the first time, and I ask the indulgence of hon. Members. The hon. and learned Gentleman the Leader of the Liberal Party seemed to be in some doubt about what we on this side of the House thought about this Bill. As far as I am concerned, I am not in doubt. I believe that it is not only unnecessary but wrong. It is no part of the duty of the Bank of England to lay down policy, and as my hon. Friend the Member for Bath (Mr. Pitman) pointed out, it has not done so in the past. The function of the Bank of England is to act as the instrument for the execution of the Government's policy. I take it that what is wanted in such an instrument is that it should command general confidence, that it should be efficient in getting things done quickly, that it should not be liable to deflection by private interests and that it should be adaptable to circumstances as they change.

The Macmillan Committee, in 1931—and this went also for those Members who were in favour of nationalisation—reported that the Bank was disinterested, was adaptable and was efficient. I will give their actual words on two of these points. They said that the Bank was

"aloof and untinged by motives of private gain,"

and further that it was

"not distrustful of evolutionary change."

I do not know how accurate it would be to describe the history of the last 14 years as a process of evolutionary change, but there have been some changes, and the Bank have had to cope with a good many problems not contemplated by that Committee. They have had to evolve the whole technique of managed money and managed foreign exchanges; they have had to deal with all those heavy problems caused by the wholesale default on Continental bills of exchange. Lastly they have forged and perfected the weapon of cheap money so well that, though over the last seven years our dead-weight debt has gone up by upwards of £15,000,000,000, there has been an actual fall in long-term interest rates over the same period. If that Committee were reporting again to-day, I do not think they would have any cause to change their opinion that the Bank was, in fact, efficient, disinterested and adaptable.

Any unprejudiced man would have expected the Bank to act like that, but there are two further points in their conduct to which I would like to draw the attention of the House. The first is that, although the actions of the Bank over this period have necessarily cut across numerous private interests, there has in fact been a total absence of friction and recrimination. The Bank has only had to express a wish in the City for that wish to be carried out, and what you have had is Clause 4, or what the Chancellor says he means by Clause 4, without tears. Secondly, anyone taking to the Bank a problem which is for the Bank to decide, has had an answer in reasonably quick time, and the answer has been one on which it is possible to put some definite meaning and on which one can act. I do not know a record of any Ministry over this period where you have had the same degree of efficiency, harmony, speed and lucidity. I believe that 20 years hence, this House, reviewing the annual report of the Bank, will find that the Bank, while losing many of its past virtues, has in addition contracted many of the vices of Ministries, and I think history will record that, among many reasons, one at any rate was that in this country at present it is still easier to lead the people than to drive them.

I would like to say a word or two about the court of directors. I feel that there has been some danger of confusion in the public mind owing to the way hon. Gentlemen opposite, and most particularly the Chancellor, have thrust forward the highly honouredfigure of Lord Catto, and I have lately been rather surprised—I take it this is not controversial—by the great enthusiasm of hon. Gentlemen opposite for the nobility. It is a very interesting fact that in these negotiations which are now proceeding in America—I suppose the most important ever entered into by this country in time of peace—we are led by three gentlemen two of whom are peers and the third is a cadet of a noble house. It puts one very much in mind of the technique of rioting in certain Eastern cities. I am told that if it is known that the police are going to fire, you lead off with the women and children. I take it that hon. Members opposite feel that the party of order on this side, would be unwilling to fire for fear of shedding innocent blue blood. Be that as it may, in the past the court has been very largely drawn from gentlemen with very great experience of what is going on all over the world in matters of shipping, insurance and international banking generally—in fact everything that goes to make up the total of our invisible exports. In 1929, which I suppose it is possible to say was the last year of normal foreign trading, we drew £195,000,000 from banking, insurance and other commissions and from shipping, and £270,000,000 from our foreign investments.

The public mind has been debauched by the swollen figures of war finance, but these amounts were of crucial importance in our balance of payments, and it is vital to get back every penny wecan of that business. We cannot say too often that unless we can get our Balance of payments right, all these schemes of social reform to which we are all committed are nothing but a series of frauds, and I feel it is open to doubt whether the new gentlemen we shall get—we do not hear much about them; all we hear is of Lord Catto—will bring the same knowledge and sympathy to the task of getting back our invisible exports as the old court would have done. Further, the advice of these very distinguished gentlemen has been obtained remarkably cheaply. I understand that the salary of an ordinary director of the Bank is £500 a year; but overtime is taxed, as we know. Many gentlemen on the court of directors, as I imagine Lord Catto does, pay tax at the maximum rate. If you pay tax at the maximum rate you are actually drawing £12 10s. net per annum. It would be most interesting to know whether the Treasury contemplate getting services equally as distinguished as those we had in thepast for a net wage of less than 5s. a week.

The Bank has served us very well—nobody denies that—and before we destroy anything which has done the State some service we want to be sure we are doing the right thing; we want some solid reasons, and I cannot say I have heard any to-night. The main reason adduced was a paragraph in the paper with a handsome V on it. There is no doubt that though many hon. Gentlemen opposite are far too intelligent and well informed to believe the full party mythology about the events of 1931, they are offended by the apparent inconsistency of the private form of the Bank of England. We have had a good deal of this talk about consistency. Consistency is the very last thing in which the people in this country are interested. All they want to know is if something works. If an example of inconsistency is needed, take the classic one which is under our noses. At the other end of Whitehall there is a statue of Charles I; and outside here there is a statue of Cromwell who cut off that king's head. If we can put up with that, we can put up with the private form of the Bank of England as we have done for these 250 years.

The only valid reason for this Bill would be a genuine danger that the Bank, for its own private ends, and against the will of the people, could hold this country to ransom. Do hon. Gentlemen opposite really believe that is possible? if they do—they do not appear to indicate that they do—they must hold a very low view of the courage and competence of Minisers, because to suppose that to-day any private institution can defy Ministers, with all their vast and increasing power, is ridiculous. In any case, it is difficult for anyone who knows anything about the facts to believe in a fratricidal contest between the Bank and the Treasury. I am told that officials of the Treasury in their off moments often refer to the Bank as "our East End branch." That, I believe, symbolises the actual relations as they are now and as they were in 1931.

It is my pleasant duty to offer congratulations on behalf of the House to the two previous speakers. My hon. Friend the Member for Spelthorne (Mr. Pargiter) spoke with ease and fluency on certain historical matters, and was bold enough to show a very independent front on the matter of compensation. I have no doubt that will endear him to hon. Members on the other side of the House as well as to hon. Members on this side. The hon. and gallant Member for Flint (Lieut.-Colonel Birch), if I may say so, made a most admirable, witty and clear speech, and he did something else which will endear him to my hon. Friends on this side; he enlivened the Debate and he showed that the party opposite appeared to have some opinions on this important occasion. I am sure, Mr. Deputy Speaker, you will agree that in the circumstances a slight breach of the rule of non-controversial utterances in maiden speeches will not be out of Order. The Chancellor had rather a different reception to-day from that which he had last week. On that occasion hon. Members, not only on this side but on the other side of the House, were profuse in their congratulations. They "said it with flowers" and presented bouquets on every occasion. In fact, speaking as a back bencher, some of us on this side became almost overpowered by the scent of the flowers which were being thrown about. I am sure that my right hon. Friend will be rather glad that to-day the Opposition are putting up more of a fight than they did on that occasion.

Very little has been said in this Debate about the functions and powers of the Bank of England. I do not think there is much doubt about what those powers are. Text books are fairly clear on the matter and, of course, there is a certain number of hon. Members who have direct experience of them. In the first place, the Bank is an issuing bank for the country, and on that matter there is no dispute. It is simply acting for the Government, and the note issue is regulated by this House, the profits of the issue department accruing to the Treasury. It is also the Government's bank, and on that there is no particular comment to make. For my part, I should certainly not regard that as a reason for nationalising the Bank of England. But there are certain other functions of a more important character, less under the control of the Government. It will not be denied that the Bank of England, through its open market policy, can directly decide the size of the joint stock banks' reserves, and thereby the whole structure of credit in this country; and, although one must admit that the amount of cash in its till plays an important part in deciding how far the Bank can go in that direction, nevertheless a fair measure of elasticity remains with the Bank.

In the second place, the Bank still has an important influence on interest rates. It is true that the relationship of rates of interest to the Bank rate is largely conventional, but it has nevertheless been a fairly powerful one. There are two other functions which we should not overlook. In recent years during the war, the foreign side of the Bank of England's activities has necessarily been virtually nonexistent, but it played in the inter-war years an important part in foreign affairs. I will have something more to say about that in a moment. Finally, as the hon. Member for Bath (Mr. Pitman) pointed out, the Bank of England exercises a very powerful informal influence in the City of London.

Two arguments have been used against the Bill by hon. Members opposite. On the one hand we are told, "Do not play with fire; you might get into trouble. You cannot really control these dangerous financial forces. "This argument was also used in the text book from which the Chancellor quoted. It is said that Governments must not mess about with financial institutions because they do not really know how to run them and we shall all be involved in inflation if they do; this argument has now rather receded into the background.

Certainly there is no logic about it, because if this House controls the note issue, which it does, and which from the point of view of a larg-scale inflation would be much more unfortunate, it might just as well control the volume of credit also. In my opinion that kind of attitude, which in effect says that the representatives of the people are not fit to take charge of the financial affairs of this country, is completely out-moded. Can it be denied that, during this war, when the Government have been in control, we have made a much better job of the business of war finance, and that we have stopped inflation far more effectively, than on the last occasion?

But, it will be said, this is of no importance now. The other argument is the one on which hon. Members opposite rest their case, the argument that there is no need to bother, that all this control of the Bank by the Treasury exists already and that it is a pure waste of time to trouble to nationalise. The Bank of England will always do what the Government want. Why worry? My first observation on that is that if this is the view of hon. Members opposite, it constitutes no ground whatever for voting against the Second Reading of the Bill. What we should expect would be a perfunctory speech from a right hon. Gentleman on the front Bench opposite, and after that the Bill would be read a Second Time. But I cannot myself wholly accept that argument. It is perfecty true that during the war the Bank of England has necessarily carried out the instructions of the Government; so have a great many other people. It is also true that in the eight years or so preceding the war the power of the Treasury over the Bank increased very substantially. Here I am going to pay a tribute to the late Mr. Neville Chamberlain, who undoubtedly played a prominent part in securing that domination when he was Chancellor of the Exchequer, but even at that time there were occasions when one might reasonably doubt whether the power of the Government through the Chancellor of the Exchequer over the Bank was adequate, and I am going to take, if I may, three examples.

Reference was made by my hon. Friend the Member for Enfield (Mr. E. Davies) to the Czech gold episode. There must be a number of hon. Members pre- sent who were in the House at that time, so perhaps I might recall the circumstances. The Czech Government, before the invasion of Czechoslovakia, had lodged with the Bank for International Settlements a sum in gold of some £5,000,000 or £6,000,000. The Bank for International Settlements deposited that gold with the Bank of England. Gradually the story came out in the Press, through questions in the House, that this gold was to be handed back to the Germans. The point was pressed by Lord Pethick-Lawrence, and he was assisted by certain other hon. Members of the Party opposite, including Mr. Duncan Sandys, for example. I do not propose to cite the whole episode, but I want to take one of the points. Lord Pethick-Lawrence asked the then Chancellor of the Exchequer, Lord Simon, this question:

"Do I understand from the Chancellor of the Exchequer that when the Governor of the Bank of England, in his position as a director of the Bank for International Settlements has to come to a decision, he makes no report whatever to the Treasury, and that therefore the Treasury and the Chancellor of the Exchequer are ignorant of most important international events that are happening in the Bank for International Settlement?"

Lord Simon's reply was this:

"Replying directly to the question put to me, it is certainly not the fact that the Governor of the Bank of England reports to the British Government on a matter of this sort. It is a mistake to suppose that the Governor of the Bank of England serves on the Board of the Bank for International Settlements as a nominee of the British Government. That isn ot so at all."—[OFFICIAL REPORT, 23rd May, 1939; Vol. 347, cols. 2079 and 2080.]

That was just before the outbreak of war. I ask hon. Members opposite, Do they regard that as a satisfactory position? Are they prepared to say that Lord Catto, who now represents the Bank of England on the Bank for International Settlements, should go there without consultation with my right hon. Friend? During the war, things may have changed, certainly, but hon. Members opposite are rather anxious to remove controlsimposed during the war—or is this one that they would like to keep? The case is made by hon. Members opposite that during the war the Treasury to a very large extent dominated the Bank of England but, immediately before the war in this important matter of the Czech gold, it is clear that they did not.

The second example concerns interest rates. I do not think that any hon. Member would maintain that before 1932 it was the regular custom for the Bank of England to consult the Treasury, even on the matter of Bank Rate. It has certainly always been my impression that when the Bank Rate went up in 1929 to six per cent. the Government were not consulted at all; but there is a very recent case. At the outbreak of war in 1939 the Bank Rate was put up to four per cent. There may be, again, hon. Members present who recall the circumstances of the time. There was some indignation. After a bit of agitation, in about two months, I think, the Bank Rate, which went up in August, was brought down in October to three per cent., and a little later on to two per cent. I do not know whether the Bank of England at that time consulted the Chancellor of the Exchequer. Either they did, in which case the Chancellor of the Exchequer at the time was singularly ill-advised to agree, or, as I suspect, they did not.

My third illustration of the point I am making which is that, whatever hon. Members opposite may say, the Bank of England has not been wholly under the control of the Treasury, must be a somewhat personal one. Lord Norman, or Mr. Montagu Norman as he is generally referred to even now, was Governor of the Bank of England for nearly 20 years. Now 20 years is a long time for any man to hold a position of that responsibility. I am very glad that the Chancellor of the Exchequer is proposing in the Bill a much shorter period for the Governor to keep that appointment. Can hon. Members on any side of the House really put their hands on their hearts and say that Mr. Norman was the ideal Governor of the Bank of England? An engaging character, a startling personality, no doubt, a dominating figure in the City; but was he the ideal public servant? One is, of course, in this sphere, in the field of rumour and gossip. [HON MEMBERS:"Hear, hear."] Certainly, but those rumours and gossip have some basis.

I did not quite understand the alleged facts mentioned by the hon. Member before he came to this gossip. He referred to the terms of the Bill; is there any reason why the Governor of the Bank of England under the new régime should not be reappointed? Was Lord Norman ever appointed for a very long period? What is the difference?

:The difference is very simple. It is that Lord Norman was not appointed by the Government, and was not responsible to the Government at all.

That knocks the hon. Member off his argument.

:I must be allowed to put my own argument as I please, and that was my argument. I submit that this mysterious figure who travelled about the world incognito—I think he called himself "Mr. Skinner, "but there was always a Press photographer to take photographs of him either striding up the gangway of an ocean liner or lurking in the corridor of some wagon lit—was not the kind of public servant we should require for this important office. Can we imagine the right hon. Member for the Scottish Universities (Sir J. Anderson), himself a distinguished civil servant, behaving in the same way as Lord Norman? I submit in all seriousness, and this is my point, that great responsibilities rest upon a public servant of this character, and I cannot see that Lord Norman was quite the man to discharge them in the way that we should wish to-day.

I turn to the more controversial Clause 4, particularly Sub-section (3), which deals with the powers over the joint stock banks, the clearing banks. It might be argued by hon. Members opposite, and to some extent it has been argued, that those powers are really unnecessary. If hon. Members support the nationalisation of the Bank of England they can at least claim, having nationalised the Bank, that the powers which the Bank possesses through the control of the liquid reserves of the clearing banks are sufficient, but we are not even sure that hon. Members are going to support the Bill. If they are opposing it, they are asking us in effect to take a double chance, the chance that the Bank of England will do what the Government wish and the chance that the clearing banks will do what the Bank of England wishes. Of course, the Bank of England has important powers over the clearing banks. Nobody would deny that from our side, but I submit that the powers are incomplete. In the first place, even the ratio.

of reserves to deposits is a purely conventional one, and not always precisely 10 per cent. In the second place, a question might arise as to whether the distribution of clearing bank assets was in the correct proportion. There is no special means of controlling them in this matter. The third and important point to my mind is the question of interest rates. My right hon. Friend the Chancellor was able to announce a reduction in the short-term interest rates only a few days ago. I have been wondering why that had not taken place before. We have had no answer to that point from the right hon. Member for the Scottish Universities. All he said in his reply on the Budget Debate, if I recall aright, was, "Well, interest rates had to go up at the beginning of the war because there was more risk." Risk for whom? I submit these rates should have come down much earlier. But the point I am making now is, How are we to be sure that the banks will in future agree to interest rates which suit the Government unless we have these powers? This is an important matter fur the taxpayers.

I want to get one point clear. Is it not a fact that the interest rates were adjusted without nationalisation having been found necessary in order to bring that adjustment about? How is it possible to bring about an adjustment by nationalisation, which has already been made without nationalisation?

:The proposals to nationalise the Bank of England had already been announced and it was confirmed by the people of this country before those interest rates went down. It has been said that the clearing banks are willing to play the game with the Government, and in future will always do what is necessary. The same kind of argument has been used about the Bank of England. From this point of view we cannot help examining what sort of people control the clearing banks. If we look at the list of the directors of these clearing banks we shall find that they are more or less composed of the following classes of persons: Some of the are ex-employees of the banks. This is perfectly natural. They obviously must have learned something about banks in the course of their time.

May I point out that the control is in the hands not of the directors but of the shareholders?

I think that the example of lack of shareholders' control which my right hon. Friend the Chancellor gave this afternoon was of such a crushing kind that I am surprised that point should have been raised. Some of these directors are ex-employees. A number of them are Peers. There are not many Labour Peers among them at the moment, in fact, I do not think any. Some, as the Chancellor has pointed out, are ex-Ministers and Members of Parliament belonging to the Conservative Party. I am disappointed that the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden) is not present. He has recently been given the important position of a director of one of the "big five" banks, and one would have supposed that on an occasion like a Debate on the nationalisation of the Bank of England, he would have been here to give us the benefit of the experience which he has obtained in these last few weeks. When I read of his appointment I was a trifle surprised. There may, of course, be some family connection there, which is not uncommon so far as joint stock bank directors go. I have come to the conclusion that there is only one possible explanation for the right hon. Gentleman's appointment. It is that in face of the proposal to nationalise the Bank of England, and in view of the delicate negotiations which will, no doubt, have to take place from time to time between the clearing banks and the Bank of England, the Westminster Bank looked round for somebody skilled in diplomacy, and certainly we would not hesitate to agree that the right hon. Gentleman has that skill. When he comes to write his memoirs he will be able to compare his experiences of the discussions between Lord Catto and the Chairman of the Westminster Bank and those between Mr. Stalin and the right hon. Member for Woodford (Mr. Churchill).

The real issue in this Debate, and the issue which we have to decide, is whether this country is to take control of the head and fount of financial power in this country. Hon. Members may say, "The Bank of England will be a good boy and the joint stock banks will be good boys; please leave them alone." But we are not taken in by that kind of talk. We have had bitter experience in the past of their not playing the game, and we have no reason to suppose that there would not be times in the future when they would again not play the game. We are taking steps in this Bill to make sure that that situation shall not recur.

The Chancellor opened his speech by waving a leaflet with a red cover which, he told us, was entitled, "Let us Face the Future" and contained Labour's policy at the Election. One item in it, he said, was the nationalisation of the Bank of England. I venture to think that a great many of the people who voted for the Labour Party after having read in that leaflet that the Government intended to nationalise the Bank of England, will be disappointed with what the Chancellor has said. I know one woman who will be. She is a woman cleaner at a London factory. When she went for her pay packet three weeks ago, she looked at the outside and said, "What! Deducting insurance?" The cashier said, "Certainly, why not?" She said, "Surely we are not paying any more insurance now that we own the Bank of England." I am sure that she and many other men and women who do not understand what the Bank of England is, imagine that it is a concern which owns all the money in the country and that the class of people who own it are the few whom they call capitalists. They imagine, too, that now the Labour Party were going to take over the Bank, with all the money of the country, the Government will be able to pay for the social services and anything else they want to do without anybody having to pay taxes.

The first point I want to deal with is the Bank's reserves and to ask the Financial Secretary to tell us the amount of the reserves shown on the balance-sheet of the Bank. The Chancellor referred to it twice in his speech but he did not give the amount. The amount of the reserves is of great importance in ascertaining the real value of the shares of the Bank. The right hon. Gentleman said that all through the years money has been saved by the Bank and put aside. Let us know what it amounts to. The capital of the Bank is just over £14,000,000. If the reserves are £100,000,000, the value of the shares of the Bank is £114,000,000. As the Government propose to pay only £58,000,000 for the shares they are getting away with a lot for which they ought to pay. This is important having regard to the fact that this is the first nationalisation Bill where the question of compensation has arisen. It has always been said by all Labour leaders that fair compensation would be paid. The balance-sheet of the Bank of England must be more liquid than that of any other business in the country and, therefore, it will be more easy to realise its assets, having regard to the fact that they probably consist mainly of gilt-edged securities which can easily be sold, or of loans which have been made to other banks, particularly the joint stock banks. For that reason, the fair value of the Bank's shares to-day must be the value which could be obtained for the assets less any amount that is owed by the Bank. That can be found out by the Financial Secretary telling us what the reserves of the Bank were shown as in the last balance-sheet.

I next want to say a word about sub-section (3) of Clause 4 which has already been referred to by the Chancellor. It says:

"The Bank may, if they think it necessary in the public interest, request information from and make recommendations to bankers, and may, if so authorised by the Treasury, issue directions to any banker for the purpose of securing that effect is given to any such request or recommendation."

It was indicated by the Chancellor that these were wide powers and that he would propose some modifications. It is necessary that modifications should be made, because the powers enable the Bank to call for any in formation, even to the extent of calling for particulars of the banking accounts of any individual customer in any joint stock bank and to give directions to the joint stock bank with regard to that man's account. It is possible under the Bill, as it stands, for the Government to get rid of a Member of Parliament. I will give an illustration of what could happen. A Member of Parliament is, say, a timber merchant. He is not liked by the Government of the day; it might not be this Government, but any Government later on. The Government find that he banks with a certain joint stock bank and that he has a large overdraft for the time being. Timber merchants usually have overdrafts, as they buy stocks in big quantities from Russia, Sweden or Canada, and the bank finances them while they are disposing of the stock. The Government can say through the Bank of England to the joint stock bank, "You must call in that man's overdraft." [HON MEMBERS:"Oh!"] It is so, under the Bill.

Is not that what is happening now? Are not overdrafts called in by the joint stock banks because the manager does not like the political complexion of the customer?

:I am afraid I do not know anything of the circumstances referred to by the hon. Lady. If they are as she says, it is most undesirable. A bank should not have the right for a political reason to be able to call in an overdraft. Such a power, however, is to be taken by the Government under this Clause, and I am giving an illustration of how that can be done. The timber merchant to whom I refer is ruined as a result of his overdraft being called in. He goes bankrupt, and thereby automatically loses his seat in this House. [An HON MEMBERS: "A Hans Andersen fairy tale."] That is a true illustration of what can be done by the Bank of England without any reason, given and no right of appeal. If it is argued, as the Chancellor indicated, that there is no intention of exercising such powers and that the object of the Clause is to give a general control over currency and credit such as the Bank of England has been able to exercise by request in the past, it should be made explicit and definite by an Amendment during the Committee stage.

I would like to refer the Chancellor to the Bill which was passed by the Australian Parliament by which the Commonwealth Bank was created. That Bank exercises control over what are called in Australia commercial banks. Under that Act the information which the Common-wealth Bank can demand from the other banks is exclusively statistical. As regards loans made by banks to their customers, the Commonwealth Bank can ask for details of the amounts advanced, the rate of interest and the nature of the business carried on by the borrower. The object is to see that too much money does not go into one industry. Then, as regards the sums deposited by customers in the banks, the Commonwealth Bank can similarly ask for details of the amounts deposited, the rate of interest paid by the bank, and the industry of the depositor, for the purpose of finding out the extent to which an industry is doing well and is not using all the capital that it is accumulating. The Commonwealth Bank is given power to determine policy in relation to advances to be followed by banks, but it is specified—and here I quote:

"Nothing in this section shall authorise the Commonwealth Bank to make any determination or give any direction with respect to any advance made or proposed to be made to any particular person."

So it is a very limited control, and the Chancellor in this Bill to-day is taking far more power to the Bank of England, and therefore to himself as Chancellor of the Exchequer, than is claimed by the Labour Party in Australia on this particular matter.

The Bill before the House to-day is framed so as to put in the hands of the Government, and of any future Government which may be quite different from the Government of to-day, the right to interfere with private enterprise of all kinds by controlling the rights of the joint stock banks to give credit. Similarly, the joint stock banks can be directed to support a particular industry to such an extent as completely to mop up all their resources, to the obvious detriment of all other industries. Let us take the coal industry. Suppose the Bill which the Minister of Fuel and Power tells us he is going to introduce in regard to coal is duly passed and becomes law, and then things become difficult in the coal industry, and in order to keep it going money has to be poured in. It would be possible for the Chancellor of the Exchequer, acting with the Prime Minister and the Minister of Fuel, to say, "Our whole reputation is at stake as a Party, we must save the coal industry, we must stop the banks lending to other industries the money they want to because all, as much as is available, must go into coal. "Therefore, for these reasons I oppose the Second Reading of the Bill.

May I ask for the usual kind indulgence of the House when it is addressed by a new Member for the first time? I am told that I must be non-controversial; and that is very difficult sometimes, perhaps particularly so when the subject under discussion appears to be that remarkable thing, an enormity which really makes no difference. This present change has been attacked upon both those grounds, and even so attacked by the same speaker. It does indeed throw a lurid light upon the present condition of affairs if it is so enormous that without any change it must remain an enormity. But surely the real position is this, that this Measure is a translation into statutory form of a great deal that is already common practice. One of the objections made to the Bill by the right hon. Member for the Scottish Universities (Sir J. Anderson) was just that it is bad practice, and contrary to the best traditions, to translate the unwritten into the written. I was reminded as he spoke of a very obvious and comparatively recent instance in which that was done in the very matter of Imperial policy to which my right hon. Friend the Chancellor of the Exchequer referred in his opening speech to-day. Surely the Statute of Westminster was just exactly that. It met, I think, at the time with the support of hon. Members opposite, and I have never heard that that translation of actual, traditional facts into a statutory form has led to any of the disastrous results which are apparently anticipated from the translation which is proposed to-day.

Next we were told that this enormity was based on some misapprehension and that at any rate there must be safeguards against it in some directions. One of the misapprehensions, as I understood, upon which the present Bill was based was that the directors of joint stock banks ever take any part in that capacity in political decisions and political affairs. I seem to remember that at the time when the first so-called National Government was formed after the May report there was a very considerable interference by the directors of joint stock banks as such, in their collective capacity, in the dealings of the Government of those days. I took occasion to look at a letter which appeared in "The Times" of 14th August, 1931, from that very well known banker, Mr. W. K. Whigham, as he then was. That letter began by saying that the bankers had been called in to advise the Government, and he wrote:

"This is no idle compliment, but a consequence of the fact that in the conduct of their banking business they necessarily learn more than any other persons as to the position of the manufacturing and commercial industries of the country, and accordingly are in a strong position to give authoritative advice as to the way out of the economic morass in which the country is struggling."

The letter went on to refer to a document called "The Bankers' Manifesto" that had been issued about a year previously in favour of Imperial Preference and high tariffs, a document which had been concocted on 4th July, 1930, at a meeting of bankers at Hambro's Bank and which had many signatures. It bore the signatures of 22 bankers, including the chairmen of the Big Five. The purport of that document at the time was the putting forward of a political remedy in the shape of Imperial Preference and tariffs. The advice given by Mr. Whigham, one of the signatories, himself a director of the Bank of England, in his letter was to revert in the circumstances of one year later to what had then been put forward as a "Bankers' Manifesto. "Surely what has happened once may well happen again. Though at the moment the Measure which is being brought forward may be no more than a recognition of what is already in practice, it may well be that in some future crisis once again bankers may claim to put forward manifestos, and may claim to be a position to give not merely advice but authoritative advice.

Another safeguard asked for as regards the use of the powers under Clause 4 of the Bill was, surely, a somewhat remarkable one. It was suggested that they should not be used to affect the question of fluidity, that is to say, the ratio of the available balances kept by the joint stock banks. That, of course, is a matter upon which the Midland Bank has, before now, differed from other banks and differed from the general practice, but that is precisely the matter upon which more than ten years ago the MacMillan Committee complained of a lack of sufficient contact between the joint stock banks and the Bank of England, and expressly recommended that the joint stock banks should be bidden to accept on this matter the advice of the Bank of England as to the average figure at which they would keep their balances. That recommendation occurs in paragraph 370 of the MacMillan Report, and in the following paragraph complaint is made of a degree of aloofness and remoteness in this connection.

Clause 4, in the sense in which it was put forward and with the Amendment which my right hon. Friend the Chancellor offered not merely to accept but to move at a later stage, is no more than turning into statutory form one of the recommendations of that Committee. If it has been carried out it is already in practical existence, and therefore once again we have a case of its making no difference; and if it has not been carried out already, it ought to be. Whether it has been carried out or not, it is surely against the best interests of this country that the Central Bank, charged with the duty of regulating the volume of credit, should be prevented from dealing at that very critical point and on that precise question with the joint stock banks, and should not be allowed to have any voice whatever in the vital question of how, when the volume of credit has been regulated at the source, it is issued, in quantity and in direction, through the fountains of credit. Therefore, humbly as befits a new Member, I suggest that the objections which have been taken to this Bill are not only somewhat inconsistent, but rather strange in view of the expert recommendations which have been made.

It falls to me to congratulate the hon. Member for Kettering (Mr. Mitchison) on a careful and eminently understandable speech. He hardly knows what benefits he confers on us on this side by giving us some of the reasons that are in the minds of his own Front Bench, which at times we find it very difficult to discover, and I hope he will speak again and give us a sight of the cat which is inside the bag. During the Debate on the Address, I ventured to quote to the House the opinion of Lord Pethick-Lawrence which he gave in this Chamber earlier this year, that the relations between the Bank of England and the Treasury were entirely satisfactory to the Treasury. I now welcome this opportunity to tell the House, very briefly, why I consider it unwise to make this drastic change in these satisfactory relations.

Can there be any question of moral principle involved in nationalisation? I think not. The decision whether to hand over a piece of our economic machinery to public ownership or maintain it in private hands cannot be on all fours with a decision like that between telling the truth or telling lies. Nationalisation, to my mind, is to be judged on grounds of efficiency and the public interest, having regard to the merits of the case, and particularly to the position of the industry concerned in our economy as a whole. For example, we would all agree that the coal industry is in a bad mess. Something drastic has got to be done. Whether the proposals of the Minister of Fuel and Power will be sensible and satisfactory, we cannot tell until we see them, but we shall have to look at them knowing full well that something drastic has got to be done. Is the Bank of England in a mess? Is it declared to be working unsatisfactorily, either by its depositors or by the other banks, or by the Treasury? In short, are there any complaints of substance heard against the British banking system at home or abroad? Are the commercial banks not playing the game?

I submit that no shred of contemporary evidence has been brought forward to show that the British banking system is behaving, or is likely to behave, contrary to the public interest. The hon. Gentleman the Member for South Leeds (Mr. Gaitskell) is, so far, the only hon. Member I have heard who referred to what I would call "contemporary mistakes."He pointed out one or two actions of the Bank of England and the joint stock banks which he felt were mistakes, but he never told us whether the Treasury objected to these actions.

:As the hon. Gentleman has referred to my speech, may I ask him whether he thinks the attitude of the Bank of England in the matter of Czech gold was simply a mistake?

:I think that the Bank of England may very well have had to act in the matter of Czech gold, in fulfilment of existing contracts, about which I know nothing, and what I would like my hon. Friend to tell me is whether he is prepared to say that the Chancellor of the Exchequer tried to force a different decision and failed.

:The point is a very simple one. The Government of the day declared it was not their business what line was taken by the Governor of the Bank of England on the Board of the Bank for International Settlements in this, or in any other matter.

:That is a matter of the opinion of the Government of the day, and the responsibility must rest with the Chancellor for taking a negative decision, just as it must for taking a positive decision. The fact is that the Chancellor knows, just as well as Lord Pethick-Lawrence knew, that ever since we went off the gold standard, that is for the last 15 years, the Bank and the Government have worked together in harmony, and have worked together with a success that has been admired all over the world. Why, then, does the Chancellor want to nationalise the Bank of England? I listened carefully to his speech, but, if I may say so, his speech gave only superficial reasons, but we are fortunate in having had speeches from hon. Members sitting behind him who have given some substantial reasons for this Bill. It is like this: the Labour Party believe that, in the first 10 years after the last war, Lord Norman gave some very bad advice, and they believe that the City worked against the Labour Government in 1929 and might work against the Labour Government in the 1940's.

May I interrupt the hon. Member? Surely, it is a well known fact that Lord Norman and Lord Snowden were blood brothers?

I was merely trying to state what hon. Members opposite believe, and they seemed to agree.

On a point of Order. Is the hon. Gentleman stating the case for the Government, or for the Opposition? I am wondering whether it has anything to do with us.

That is not a point for me to decide.

Holding this belief, hon. Gentlemen opposite are like the Russians in the matter of foreign policy, they are slaves to their own suspicions. They are afraid that the remarkable co-operation between the banking system and the Government, which has existed for 15 years, might not stand the strain of Socialism. So the Chancellor of the Exchequer gets his blow in first, and he asks the House to give him powers to compel the banks to underwrite his political programme, whatever that may be. I ask myself whether this method of threats in advance is likely to be successful. In my judgment, what cannot be done in this country by good will, cannot be done by compulsion. The Government know that is true of labour. They do not intend to use direction of labour as part of their permanent policy. If compulsion will not work with the wage-earners, on what grounds do they think it will work with the depositors of money, and the managers of those deposits? Is capital any less shy of compulsion than labour? Has it any fewer opportunities of going slow, or of striking, than the workers? Does any man honestly believe that the ordinary Englishman would deposit his money in a bank which was operated in a way in which he had no confidence, or would invest in a security, managed publicly or privately by men in whom he had no faith? All these acts of deposit and saving are acts of confidence, and confidence never has been, or will be, created by compulsion.

Would the hon. Member tell me whether the prestige and goodwill which are attributed to the Bank of England to-day, and rightly so, are not entirely due to its having been under the canopy of the Government for a number of years?

I am sure the phrase "Safe as the Bank of England" was current coinage, long before the time when the Treasury began to exercise its present authority over the Bank. I might understand the purpose of this Bill, although I should still doubt its efficacy, if the banking system had shown signs of unmistakable hostility to the Labour Government. But nothing of the sort is true. No Government ever entered office with such a widespread desire in the country to remain united and to achieve by common action some of the blessings which we failed to achieve after the last war. This spirit of unity has been engendered by the great events through which we have just passed. It is a very powerful force, but one very easily lost. What do the Government propose to do about that part of the fund of goodwill which has been manifested in the wonderful co-operation between the banking system and the Treasury throughout the war and carried over undiminished, after the result of the General Election, in the present savings drive and in carrying out the cut in short interest rates? What are they proposing to do? They are saying to the banks something like this: "We put you on notice that we do not believe in your patriotism. We do not believe that you will go on behaving well, and, therefore, we take powers to coerce you before you have shown the slightest sign of failing to do, from a sense of public responsibility, what we shall compel you to do under pain of penalty."

What an inglorious admission of weakness on the morrow of victory! What poverty of imagination! How humiliating it is to see the Chancellor of the Exchequer more pre-occupied with past sins and old suspicions than with present good will and future opportunities. This Bill is an unnecessary demonstration of distrust in the British banking system which has served the nation so ably and so well, and would continue to do so of its own free will, and with pride. I regard is as a Bill which springs, as Samuel Johnson might have said, "not from the love of virtue, but from the fear of vice." I shall vote against the Second Reading of this Bill, and I hope my hon. Friends will do the same.

I trust that I shall have all that toleration and encouragement which are so freely showered by the House on those who make their maiden effort. As I have been sitting here, for the major part of this afternoon, the thought has occurred to me that I know not as yet the exhaustion that may follow the maiden effort, but I already endure the exhaustion that has preceded it. I enter on this discussion, not as a financial expert, but as the representative, in this House, of a constituency which has suffered most grievously in years gone by from the financial experts. The Tradeston Division of Glasgow, like so many of the great industrial constituencies of Glasgow, can attribute, I think, its housing problems, its slums, its unemployment, its infant mortality rate, and its tubercular death rate to the financial policy which has been pursued by Governments in this country in years gone by.

It was in the last Parliament, I believe, that a speaker in this House, referring to the infant mortality rate in Scotland, stated that the average rate for Scotland was 68 per 1,000. The Tradeston Division has an infant mortality rate of 137 per 1,000, more than double the average rate for Scotland as a whole. That position in Scotland was described in this House as appalling. The present position in the Tradeston Division would lead those who would seek to describe it in words to say that it baffles description. Because of that, I venture to-day, having seen the ravages of that financial policy, to enter on this discussion. I want to bring to the mind of the House one of the decisions which aggravated and intensified the position in the constituency which I represent. I refer to a Treasury Minute of November, 1919—which I take it was issued in consultation with, and having the approval of, the Bank of England—curtailing the quantity of money in circulation in Great Britain. I submit that that decision of the Treasury, in collaboration with the Bank of England, led to all the industrial and social unrest that followed in the years between the two wars. I suggest that the Opposition now find themselves on that side of the House because the people of this country decided that what took place after the last war shall not be repeated after this war. If the Tory Party decide that while in the wilderness they will still pursue the worship of the golden calf, they have no right to call on the Government to follow them in their idolatry.

I suggest that the policy, the results of which I have described, was the direct outcome of certain monetary beliefs which are inherent in capitalist economy. Let us consider briefly—I do not propose to investigate them, but simply to mention them—the beliefs dictating the former policy which led to those industrial and social results. What are they? First, that the quantity of money available is limited; secondly, that the money is private property; and thirdly, that those individuals and nations who desire to produce commodities must borrow that money and must pay rent for its hire. I suggest that if the Bill before us is going to mean anything in overcoming the social and industrial disabilities which I have described, it must present a challenge to those three fundamental precepts in capitalist economy. First, the Bill says, in effect, that money is no longer private property, and having said that it must take the second step; it must encourage the tendency towards a lower rate of interest, towards a zero rate of interest in the end; and thirdly, it must utilize the capital assets that will be created in housing, for example, to expand, and not to contract our economy as the Tory party did in days gone by. It is because I believe that the Bill in essence offers those fundamental challenges that I welcome it. Tory policy has led in the past to a contracting economy, to poverty, and in the end to war. I believe this Bill will lead to an expanding economy, and to the health, wealth and happiness of this country as a whole.

I am very glad to have the opportunity of congratulating the hon. Member for Tradeston (Mr. Rankin) on his excellent maiden speech, a speech in which I am sure he impressed the whole House with his sincerity and his wide knowledge, and gaveus high hopes of the keenness which his contributions will add to our Debates on less controversial occasions than that of a maiden speech.

I listened to my right hon. Friend the Chancellor of the Exchequer to-day, as always, with great admiration that, for the second time in a week, he should be able to make a long speech seem short, but when I heard the remarks of my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) pointing out that the Chancellor's speech was singularly devoid of arguments, I wondered whether the ease of listening to him was due not only to his unquestionably brilliant exposition, but perhaps to the fact that he did not strain our powers by giving us any reasons for the Bill he was putting forward. He did make constant references to the great Labour victory at the polls, and he appeared still to show a rather great degree of surprise that eleven odd million people voted for hon. Members on the Government side and only nine odd million people voted for hon. Members on this side of the House. I think that on this side we accept quite clearly the right of the Government to bring in this Bill, for which they have a full mandate, and which they explained so fully to the electorate who supported them at the polls, but I was a little surprised by the Chancellor's closing remarks, in which he appeared to think it quite unsuitable that, after that great declaration of the will of the people, we on this side should oppose the Bill. That seemed to me to be applying the Fascist or Communist idea of one party. After all, there may not be as many on these benches as we would like to see, but there is a certain number, who were voted for as constitutionally and substantially as hon. Members opposite, and surely we have a duty towards those who voted for us to carry out what we promised at election time and oppose those Measures which do not seem to us to be for the benefit of the country.

The Chancellor said that we must make to-day's laws fit to-day's facts. If the right hon. Gentleman, with the great ingenuity which we know he possesses, should suddenly discover a means of making uninhabitable lands habitable and should as a pioneer lead an expedition to the North Pole and should grant the people there the benefit, if "benefit" is the right word, of his financial guidance, then I think he would be very right to set up the central bank under the ownership of the State. But surely we must take into account not entirely fresh circumstances, but things as they are. This Bank, to whose efficiency the right hon. Gentleman paid very striking tributes, has done pretty well, and there is something to be said for leaving well alone.

I find it very hard to see what benefits can possibly accrue from nationalisation—certainly we have heard of none to-day—but I can see what damage might result, as my right hon. Friend the Member for the Scottish Universities explained in his speech. It really does seem rather as though hon. Members opposite were treating this as a new toy, like a boy with his first motor bicycle who likes to pull it to pieces to see whether he can put it together again. That may be an amusing thing to do, but it does not give a better machine. I should have thought that right hon. Gentlemen opposite would have been more than fully occupied at the present time with the colossal task, which only they can do, of conversion from war to peace, of converting industry from the production of munitions to the production of goods, and of providing conditions suitable for the resuscitation of our foreign trade. I should have thought that would have been a full-time occupation, and I cannot see what contribution this Bill can make towards that end. But if the Chancellor did not burden us with reasons, the hon. Member for South Leeds (Mr. Gaitskell) did, and I would like to examine his reasons. His first reason was that a system which could elect for 20 odd years a man so unsuitable as Mr. Montagu Norman was proved to be inefficient.

What I said was that a system which permitted a man like Mr. Montagu Norman to govern the Bank of England for 20 years, when at the same time he was supposed to be responsible to the Government, was wrong.

I could not have made myself plain. What I was saying was that, as I understand him—and he has confirmed it now—a system which could elect such an unsuitable man to be the Governor was a poor system. He also told us that the same man who was Governor for 20 years was a dominating man. If that is so, how does he fit in that statement with the Chancellor's tribute to the extraordinarily fine condition the Bank is now in? If Mr. Montagu Norman was such a dominating figure for all those years and the Bank is in such a superfine condition as the Chancellor told us, I think some credit must go to Mr. Montagu Norman.

:Its record was rather better in the last 10 years before the war than in the previous 10 years.

Perhaps the hon. Member means that Mr. Montagu Norman did not always give very good advice, but I think the Government can hardly hope for anybody who will give them infallible advice. Infallibility is not in the power of the human race. The hon. Member made his second point with great ingenuity. By that I do not want in anyway to disparage the hon. Member's speech, because I think the speech he made to-day and his previous speech in the House have both shown what valuable contributions he is going to make to our Debates, as those of us, who have, known him for a long time are quite certain would be the case. But the hon. Member proceeded to give reasons why the Bill was necessary, why the ownership of the Bank of England by the State was necessary, in order to ensure that the Bank would interfere with the clearing banks and other institutions so as to secure low rates of interest.

If that is so, it is a very good point. We all want to see low rates of interest. Therefore, I would like to examine for a moment the reasons given by my right hon. Friend. I would remind him that the technique of monetary control has drastically altered in the last few years. The late Sir Kingsley Wood, in his last Budget speech, described it as revolutionary, and it would be agreed that Sir Kingsley Wood was not a man particularly attached to revolutionary measures, nor was he apt to be extravagant in claims. It is clear that there has been, under the system of the Bank of England as it used to be, a very drastic alteration in the technique of control of interest rates.

The old plan up till a few years ago was for the Government to offer a fixed amount of stock. The banks took what suited them and the institutions and the public had to take the rest. That was done by a mixture of pressure on the institutions—I think quite unnecessary pressure—and cajolement, that is, raising rates to make them sufficiently attractive. The result of that is the maximum interference with the ordinary man and the minimum result with the maximum cost to the Exchequer. The last borrowing in the previous war was at just double the rate of interest at which the first borrowing was made. The last issue made by the State in the 1914–18 war was six per cent., whereas at the beginning of the war it had been about three per cent.

Now we turn to the new plan, quite independent of the nationalisation of the Bank of England. Under that system, there is not a fixed amount offered by the Treasury, but stock is offered on tap. The banks are put into a position where it suits them to take the whole balance that is not taken by public subscription. That is done by increasing what is called the bank money. The banks' practice is to invest ten times their cash and a larger proportion of that investment, of course, goes in Treasury Bills and short-dated Government stocks; obviously the more the bank cash is increased the more support it raises for the gilt-edged market. The result has been that the last issue of the right hon. Gentleman is at a cheaper rate than the first made in this war, although during the war there has been borrowed in the neighbourhood of £12,000,000,000. That shows that by the new system—and I suggest that even now it is not sufficiently understood—to a great degree a minimum of control is exercised and the maximum result in the way of cheapness to the Exchequer has been obtained.

I would like to make one observation on the delicate subject of control. It is the fashion of hon. Members opposite to attack our views on controls very much indeed and, intentionally, or perhaps not, they rather misrepresent what most of us think on this side. We look upon controls as a great evil but as a necessary evil and one which should be carefully selected, so that only those controls which are really necessary and which interfere with the ordinary man to the minimum are chosen. If I wanted to be rude I would say that hon. Members opposite look on controls as rather interesting gadgets with which they can amuse themselves at the ordinary man's expense. I would like to draw an analogy between the right hon. Gentleman the Chancellor and an antique motor car. I realise that that is a very unhappy analogy, because the right hon. Gentleman is far from antique. He is a most vigorous Chancellor.

Has not the hon. Gentleman observed that antique motor cars are going up and up?

In that case the analogy is correct. I realise that the right hon. Gentleman's stock has been going up, and the whole country applauded his brilliant exposition last week. I apologise for using the word "antique" because the right hon. Gentleman told us himself that he was five years younger than his predecessor. He is probably the youngest Chancellor in age and many other ways we have had for a very long time. In those old cars, 30 years ago, the dashboard was covered with switches and levers and all sorts and kinds of controls. This was very different from the streamlined motor car with perhaps one or two levers only. And yet the driver of a modern car has a far greater control than the driver of 30 years ago. There has been a great advance in economic thought and technique during the last few years; this has made possible over-all measures to enable the State to plan the economy of the country with the minimum of vexatious direct interference with the ordinary man. I do not think that during the present Parliament right hon. Gentlemen opposite have shown full consciousness of the fact that it is possible nowadays for them to direct the economy of the country with this minimum of interference with the individual.

I hope that this House, with the kind indulgence it always shows to a new Member speaking for the first time, will forgive me if I say a few words on first principles. Although for a large number of hon. Members what I say will be elementary and well known, there may also be those in the same situation in which I was in when an inquisitive mind led me to inquire into the processes of banking. I used to regard banks as very useful institutions for safeguarding a man's money and for saving him the trouble of handling large quantities of cash himself. I knew also that they were agencies for large-scale borrowing and lending transactions. I had a subconscious feeling that money was a commodity limited in extent, like potatoes. You either had it or did not have it, and if you did not have it, you certainly could not create it out of thin air. For us private individuals that is only too true, and painfully true sometimes. But I found that in the case of banks the situation was entirely different. Money was a medium of exchange and could easily be created out of nothing. When a bank made a loan, it was not a loan in the ordinary accepted sense of the word, the transferring of purchasing power from one party to another. For the greater part, the money was created in the act of making a loan, and, similarly, when a bank purchased securities, the purchase money was created in the very act of purchase.

I realised also that this process of creating money, and, at other times, the converse process of destroying it, is far and away the most important function of our banking system. It is true that there are people who deny that the banking system creates money, and they point to the fact that, if you look at the balance-sheet of any bank, you find deposits on the one side pretty equal to the advances, securities and other assets on the other side. That is true enough, and they say, further, that that shows that the bank is only using the money deposited with it by its depositors to lend to other people or for other uses. None the less, usually it is the other way round, and the balancing of the balance-sheet is very simply explained, because, when the money is created, obviously, the man into whose hands it comes will deposit it in his banking account. Therefore, a new entry on that side corresponds to the entry on the other side.

If we have any doubt whatever in this matter, we have only to consider the vast volume of money which is represented by the total deposits in our banks—vast in proportion to the actual cash in existence—and ask ourselves, if all that money has not been created by the banks, where in the world has it come from? Once we fully realise that the banking system has this great power of creating money, we surely must be impressed with the position which it gives that system—a position, virtually, of dictatorship in the financial and industrial sphere, because it means, in the first place, that the banking system decides at any given time what the volume of purchasing power in the country shall be, and it decides in accordance, naturally, with its own interests, which may or may not always be the interests of the community.

It has been pointed out that, during that long period of terrible depression which we went through in the 20's, the banks alone were practically the only type of business which prospered, which surely goes to show that their interests are not always the same as the interests of the community. Further, the banks also obviously have power to decide, in large measure, which undertakings and which branches of industry can go ahead and which must contract their operations. I know, of course, that industry gets its funds to a considerable extent from private investors, but, to a greater extent, it gets its financial resources from the banks, and, in that degree, they are the dictators. I do not want it to be thought for an instant that I am casting any aspersions on bankers or financiers. They are honourable citizens, doing their duty according to their lights, neither better nor worse than the rest of us, but I think it would be miraculous if they always put the interests of the community before their own interests. It would indicate a degree of saintliness in their case which I do not think they would actually claim or which any of us would grant them if they did claim it.

It is not their fault if their interests run counter to the interests of the community. It is our fault for letting the system continue which puts them in that position—a system which places millions of ordinary citizens in the hands of a few people responsible, virtually, to no one but themselves, although I know that an hon. Member opposite did claim that it was the shareholders who told them what to do. I doubt myself whether that hon. Member was innocent enough to think that that really represented the position. This is a system which places these citizens at the mercy of these few private men carrying out operations which these citizens hardly understand at all and over which they have no control whatsoever, and, further, operations which, at one time, may plunge numbers of these citizens into the misery of short time and low wages, and, at other times, into the greater misery of rotting in enforced idleness. We have got to change that system. The Chancellor has told us that the method of choosing Governors of the Bank of England needed to be replaced by one that is more intelligent and more dignified. I would go further and say that it needs to be replaced by a system which is democratic and which enables the ordinary man, through his representatives, to control who is going to be Governor, and who are to be part of the management, of the Bank of England.

No industry has suffered more under the vicissitudes which I have been describing than agriculture, the one with which my constituency in West Suffolk is principally concerned, and I may say that people in that industry are beginning to realise it. The farm workers are giving very sensible and practical expression to their realisation, and did so, in the recent General Election, by supporting Labour's policy. The farmers, as a body, have not yet got quite so far, but they did do a rather remarkable thing in my constituency, where a large number of them sponsored for a time an Independent candidate, who was not himself an agriculturist at all. He was a technician and a great student of economics, and his study of economics had led him to believe whole heartedly in this very step we are considering to-day—the nationalisation of the Bank of England and putting finance fully under the control of the nation—although, apart from that, he was still a capitalist. I hope that, in time, the farmers will progress still further and realise that the Labour Party is agriculture's best friend.

Coming back to the Bill, I have spoken of the banking system so far as if it was one unit. So, in a sense, it is, but we know also that it is a two-storeyed edifice. On the upper storey comes the bankers'bank—the Bank of England, which controls, under the limits of the note issue, the total quantity of credit which will be available at any time. In the lower storey come the joint stock banks, with which we ordinary mortals have dealings, and which, subject to the demands imposed by the central bank, can create and destroy money and also decide who is to get the money. I must confess, for my part, that I was disappointed when I saw that pleasant pamphlet which the Chancellor showed us just now, and found that it was only proposed to nationalise the top storey.

I would have preferred to nationalise the whole system straight away, and that for two reasons. First, I think all experience shows that you can control a thing far better if it belongs to you than if it belongs to someone else. Secondly, we know that the banks, by charging interest on all the money that they create, levy a heavy toll on the community, and I cannot really see why that toll should go into private hands. Still, there are those provisions in the Bill which give the central bank the power to request information from the joint stock banks, to make recommendations to them and to give directions to them, and I am very glad that they are there.

The Chancellor has also told us that if they are not sufficient he can take other radical measures later on. I wondered whether the right hon. Gentleman who represents the Scottish Universities (Sir J. Anderson) was, in a way, my ally in wishing to nationalise the joint stock banks, because he spoke of the difficulties the directors of those banks might have in discharging their responsibilities as trustees. Perhaps he feels it would be far better if they were relieved altogether of those responsibilities by having the banks taken over entirely by the nation.

In conclusion, I welcome this Bill. We welcome it on this side. I would not agree with the hon. and learned Member for Montgomery (Mr. C. Davies) in saying that no question of principle is involved; I think a very important question of principle is involved. I think this is our first step towards the Socialist Commonwealth, the first step towards an ordered economy, organising our resources for the benefit of the community in place of the present chaotic, wasteful and unjust muddle. I think it is the first step towards giving us the same liberty and democracy in the economic sphere which we already enjoy in the political sphere, and it takes place at the strategic key point of the whole economic system because, after all, money is the life-blood of that system. If the supply of the life-blood is not adequate, the system will be anaemic and depressed; if it does not circulate properly to every part, then those parts that are neglected will become gangrenous and diseased. This Bill, when it becomes law, will enable the representatives of the nation to ensure that the supply of money is always adequate to the national needs. I look forward to a series of Measures in the months and years to come which will ensure in every part of our economic system that money will be used in the best and fullest way.

I have listened to many able, and indeed brilliant, maiden speeches in this Parliament, but I can honestly say that I do not think I have listened to any one which has given me greater pleasure than the one which the House has just had the delight of hearing. Not only was it beautifully delivered, but the fact that with quite a large part of the argument I found myself in some measure of agreement, adds warmth to the congratulations which I would now-tender to the hon. and gallant Gentleman the Member for Sudbury (Lieut.-Colonel Hamilton). I think, the House listened to him with the greatest pleasure and with never a moment of boredom, which is perhaps the most important thing of all; and for that reason alone we shall welcome his intervention in our Debates on future occasions.

I do not intend to delay the House unduly this evening. I rise merely to explain the somewhat difficult situation in which I find myself; because for many years past, I have advocated in speech and writing the Measure we are now considering. I hope it is not considered bad form to quote from one's own writings; but in a small but classic work published two years ago—"The New Economy"—I found, on re-reading it the other day, the following sentence:

"In order to carry out the policy which has been outlined, the Bank of England will have to be converted into a public corporation, owned by the State."

There does not seem to me to be any ambiguity about that statement. I feel that, if I did not carry out my conviction in speech and in vote this evening, I might conceivably lay myself open to a charge of lack of conviction or of consistency, or perhaps even of mental stability. On this occasion I have to separate myself reluctantly from my Party; but I must say that if any speech could have induced me to vote against this Measure to-day it was the speech with which the Chancellor of the Exchequer introduced it this afternoon. I will not say this is a sacred, but certainly it is a momentous and great occasion in my life. I have really spoken and written and argued a lot about this business for many long years; and I feel it is very important because I have strong convictions in the matter. But when the Chancellor came down with that ridiculous piece of paper with a sort of V-sign in red at the top, and said, "I've got a mandate, "and went on repeating it like a small boy in a nursery saying "I've got an engine, "I felt there was really little reason for debating any further Measures in this House. I beg the Chancellor to remember the high dignity of his office. If what the hon. and. gallant Member for Sudbury said is true—and I am inclined to think it is—that this is a momentous occasion in the history of this House and of the country, then I think the Chancellor's speech should have been more sober and dignified. Not even the soothing re-assurances of my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) has quite convinced me that the spirit in which the Chancellor has introduced this Measure augurs very well for the future; because of one thing I am absolutely certain, and that is what one hon. Member has pointed out already in this Debate, that in the end, whatever machinery you may set up in this country, nothing works without co-operation on the part of all concerned.

Of course this Bill will work, we all know it will work, if the Chancellor gets the genuine co-operation not only of the Bank of England but of the banking system as a whole. I think he will get it if he is careful; but not if he makes many more speeches of the kind he made this afternoon.

On 24th January, 1924, the late Mr. McKenna said, with truth:

"They who control the credit of the nation direct the policy of Governments, and hold in their hands the destiny of the people."

I believe that is true; and for the next seven years "they"—the Governor and Company of the Bank of England—did control the credit of the nation, and few to-day would claim that they made an awfully good job of it. Many people have forgotten those years leading up to the crisis of 1931 but they were really rather melancholy years. We were put back, under strong pressure from the Bank of England and from the City, upon the gold standard at the wrong parity of exchange; and held there, with the full approval of Lord Snowden and of the Labour Government, until we were bankrupt. As the hon. and gallant Member for Sudbury has pointed out, our agriculture was ruined; it was indeed in the doldrums year after year. The real burden of our national debt was doubled, the number of our unemployed was trebled, our output was restricted, our shipyards were closed, our skilled artisans were forced to migrate to the United States. What was perhaps worse, credit was denied to modernise our industrial plant, to build houses for our workers at home, to develop our Colonial Empire. On the other hand, into Central Europe and, above all, into Germany, millions of pounds of good British money were poured, much of which we never saw again.

We do well to remind ourselves at this moment of these things, because I think the situation has greatly changed and I can agree with many hon. Members on both sides of the House who say that they do not want that situation ever to recur. What happened then is exactly what one or two hon. Members, and particularly the hon. Member for Bath (Mr. Pitman) in his very able speech, pointed out, that the Government were in a position—and that applies both to the Conservative Government and to the Labour Government of 1929–1931—to fob off the responsibility and put all the blame on to the Bank of England. We had a dual control; and, when things went wrong, the Government could say it was the Bank's fault, and the Bank could say it was the Government's fault; and we in this House had great difficulty in pinning the responsibility on to anyone. I want to pin the responsibility in future for our monetary and financial policy upon the shoulders of the Chancellor of the Exchequer and upon the shoulders of the Government.

Mention has been made of Lord Norman. I think that, in some respects, he is the real architect of this Bill. Nobody denies that he was one of the most selfless public servants who ever worked day and night in the interests of this country—or in what he conceived to be the interests of this country. He had only one fault; he was nearly always wrong. He held the Governorship for so many years that he came to be regarded, not only in the City but far beyond its confines, as the embodiment of power without responsibility. I remember an eminent Governor of the Bank of England telling me many years ago that it was essential, if that institution was to remain out with the control of the Government, that the Governorship should be constantly changed. Prior to Lord Norman's tenure that did happen. You always had a number of ex-Governors, men with great authority and experience, to keep an eye on the Governor; and that system worked rather well, especially during the last century. I remember this Governor telling me that if ever the Governorship came to be held for any great length of time by one man, it would be only a question of time before the Bank was nationalised. He has proved to be right.

Comment on his policy I leave to one of Lord Norman's directors who resigned from the Court—Mr. Vincent Vickers—who said:

"We have to remember that the value, that is to say, the purchasing power of money, and consequently the price of goods, can be, and has been, varied intentionally and deliberately, not by the will or action of the State, but by those individuals who themselves manage and control the money, though they constantly aver that they act for and on behalf of the community. We returned to the Gold Standard in 1925 for the benefit of the City of London and so ruined our basic industries. It does not follow that what is best for the City of London is best for the country…A monetary system which begets such flagrant injustice cannot be regarded as an equitable system. Yet no one in authority here dares alter the system because the financiers don't want it altered."

I would say to my hon. Friends on this side of the House that, although we are entitled to have what views we like upon any subject, it is no use pretending that the Bank of England is an industry. I entirely agree that we on this side should, in principle, oppose—and rightly—thenationalisation of industry unless a very clear case can be made out in favour of it; but it is no use muddling up a central bank with industry and pretending that the two things are the same. They are entirely different. The Bank of England is now almost the only central bank in the world that is not owned and directed by the Government of the country.

It came into existence as a result of the financial difficulties of William III and his consort, Mary. They were in a "jam" because they had a number of wars on their hands, and just could not raise the money to wage them. They then came across a very remarkable man; or, rather, a remarkable man came across them. Needless to say, he came from Scotland and, I need hardly add, from Aberdeenshire. His name was William Paterson. He was very shrewd, and produced a scheme to advance to these hard-pressed monarchs £1,200,000 at a rate of 8 per cent. plus£4,000 expenses. In return, the subscribers were to constitute a corporation, to be known as the Governor and company of the Bank of England, which was to be allowed to deal in bills of exchange or bullion and to have the right to issue notes up to the value of its total capital. There were no flies on Mr. William Paterson. He has an eminent descendant, who is a constituent of mine, and who shares the views I am expressing to the House. Mr. William Paterson said:

"The Bank hath benefit of interest on all moneys which it creates out of nothing."

There is a bit of dynamite in that sentence. The proposal to divest the State of the sovereign right to create and issue money, and to hand it over to a private corporation aroused considerable opposition and alarm. The Bill had no easy passage. In fact, it had a majority of only 12 in another place, where it was vigorously opposed by Lord Halifax, Lord Rochester, Lord Monmouth and Lord Nottingham. Further, the Queen herself had to plead for hours on end with the Privy Council before she could get it through. The Opposition was very largely Tory opposition. When the proposal subsequently came forward for a renewed charter, the right being given to the Bank to double the capital, the fight was a Whig-Tory fight. The Whigs were fighting for the mercantile society; and the Tories were fighting for the landed, agricultural, and newly rising industrial interests of the country. Of course, the situation now is rather complicated in the party to which I have the honour to belong, because the Whigs infiltrated into our party; and a division of opinion arose, as between the mercantile and landed interests. What was the result? Credit, instead of being created under the authority of Parliament, against the productive capacity of the nation as a whole, was created in the form of repayable debt. Effective economic power was transferred from the Government and Parliament to an oligarchy of private bankers of whom the Governor of the Bank of England was the recognised head. That is all I have to say except this—

My hon. Friend's powerful advocacy of the Bill transfixes us all but is he swallowing it hook, line and sinker, or has he any reservations at all, even about Clause 4?

Yes, I have if my Noble Friend will wait a moment. My position is not altogether easy; but I never swallow anything hook, line and sinker, if I can help it. Holding the convictions I do, I do not see how I can get out of voting for the Second Reading of this Bill, which I propose to do. I was about to say that we have learnt a thing or two since those days. We have learnt that Mr. William Paterson was quite right when he said that money could be created out of nothing; that money is, in fact, no more than a convenient medium for the exchange of real wealth, and for measuring its value. We have also learnt that the system of distribution, if it is going to work in the modern world, must be related to human needs; and that, so long as these remain unsatisfied, the solution of the economic problem must be sought always by an expansion of demand—by clothing these human needs with sufficient purchasing power to absorb the abundance of the modern world. The time has come when the Government should shoulder, and must shoulder, responsibility for the management of money and for the control of credit. They are too important to have a divided responsibility. I think it is right that the thing should be cleared up and formalised. This Government or any other Government might one day want to go back to a Gold Standard; but if any Government ever committed such an act of insensate folly I should want to attack the Chancellor across the Floor of the House. Further, I should not want him to say that it was really the business of the Bank of England rather than his affair.

I want now to say a word or two about Clause 4. It is obviously necessary that the Bank of England should have some say about the ratio between the cash reserves and the deposit liabilities of the joint stock banks. For that is how the Bank of England determines the amount of bank money that may be available at any given time. Normally, the joint stock banks maintain a minimum ratio of 10 per cent. between their cash reserves and deposit liabilities. If the Bank of England buys securities, the cash reserves of the joint stock banks rise, and the credit base is expanded; and vice versa. It is through its control over the size of their cash reserves that the central Bank is in a position to influence the readiness of the banks to buy or sell securities, make advances or call in loans; and thus to influence the various operative rates of interest.

It is of course obvious, whether we nationalise the Bank of England or whether we do not, that the ratio between the cash reserves of the joint stock banks and their deposit liabilities, and the amount of cash they keep with the central bank, must be maintained. Apart from this point, I do not understand the motive or object of the manner in which Clause 4 has been drafted. We were somewhat reassured by the statement of the Chancellor of the Exchequer that this Bill must not be used, in any sense, to enable the Government of the day to pry into the private affairs of individuals; because that is in no sense the object or purpose of this particular Bill. As the Chancellor of the Exchequer quite rightly said, there are other methods of doing that; and, if they are not adequate, the Government can come to the House and ask for more powers. The Government has no right, mandate or no mandate, to ask us to put into this Bill powers which enable them to do more than direct the monetary and financial policy of the country. In opposing the existing provisions of Clause 4, and also in getting into the Bill a suitable amendment, I shall join forces, with great satisfaction, with hon. Members on this side of the House.

I would like to quote, in conclusion, a short statement by a very great man. In one of the last letters which he ever wrote, President Abraham Lincoln put down these words:

"Money is the creature of law, and the creation of the original issue of money should be maintained as an exclusive monopoly of the National Government. The monetary needs of increasing numbers of people advancing toward higher standards of living can and should be met by the circulation of a medium of exchange issued and backed by the Government….The privilege of creating and issuing money is not only the supreme prerogative of the Government, it is the Government's greatest opportunity. Money will cease to be master and become the servant of humanity. Democracy will rise superior to money power."

Fortified by this august authority, and basing myself upon it as well as upon long held convictions, with sorrow but without anger in my heart, I shall vote with the Government, I hope for the last time, in the Lobby this evening.

I should not have the temerity to address the House at all, especially after the brilliant exposition to which we have just listened—if I may say so without presumption—if I were not fortified by the knowledge of the traditional kindness and toleration of this House towards new aspirants. One quality which I have will, I think, meet with the commendation of the House to_Tnight—that is, that I hope to be brief. Never have I more earnestly wanted to be brief, than now.

I wish to make one point and to ask for information on one issue. The point I would like to make first is a subjective one that I am very glad to see that this Measure has been introduced so early into Parliament. One of the causes that has irritated and angered me a little since I came into this august Assembly was the fact that certain hon. Gentlemen opposite—and please do not think I am intending to be controversial here; I am much too new and much too humble to do that— from time to time, since discussions on the Gracious Speech and right through our Debates, have suggested that we, on this side of the House, succeeded in winning the Election, very largely, by making all sorts of promises and wild statements which we had neither the desire nor the intention to follow up.

I may be a political innocent—no doubt I am—but, casting aside all questions of personal integrity, morality and honour in Parliament—which some people assume do not exist there, and which should exist there more than anywhere—it seems to be a matter of tactical suicide, to propose putting a programme to the country at large, and then to come here, and have neither the desire nor the intention to follow it up. I am certain that my constituents in West Lewisham, whether they agree with me or not, will at least have confidence in the fact that this Government is adhering to the definite concrete policy which it advocated during the election. I am, therefore, very glad to see this Measure so quickly translated from the political programme into legislative action.

The question on which I would like to elicit some information, and I think it is quite relevant to the discussion, is in connection with a body which has very close associations with the Bank of England, including monetary ties. I refer to the Corporation of Foreign Bondholders. Members of this House will doubtless be aware that it was founded in 1868, incorporated in 1873, under licence from the Board of Trade, and reconstituted in 1899 by a Special Act of Parliament. The object of the Corporation, and I am quoting from its 71st Annual Report, is:

"The principal object of the corporation is the protection of the interests of the holders of Foreign Government, State, or Municipal obligations isssued in the United Kingdom….The council endeavour to obtain the earliest information regarding any default or threatened default and take the initiative to ascertain the true facts and to safeguard as far as possible the interests of the Bondholders."

It goes on to state:

"The council have frequently intervened on behalf of individuals whose rights have been prejudiced by the action of foreign Governments."

This object has been recognised by at least one Chancellor of the Exchequer in this House, almost officially. The late Mr. Neville Chamberlain, in 1936, said that he would regard this institution as an appropriate body for dealing with negotiations between British bondholders and foreign Governments. Certainly, the Bank of England has been most closely connected, not only indirectly but directly, in the form of various subsidies, which have been made from time to time, through the Corporation. During the last few years, one finds that in 1940 the Bank of England subsidised the Corporation to the extent of £11,000; in 1941, £13,000; 1942, £12,000; 1943, £12,000 and 1944, £12,000. I should like to know from the Chancellor of the Exchequer whether it is intended to continue these payments to this body, and upon what terms the continuance is deemed necessary, and how the payments will be made. It may well be that the Chancellor of the Exchequer will consider whether this extremely important function of safeguarding the dwindling British foreign assets ought now to be looked after by a department directly responsible to this House, particularly when one realises that of the Council of 21 members, six are nominated by the British Bankers' Association; I think most of the Members of the House Will agree that there is at least a tendency in banking interests sometimes to favour the elimination of foreign indebtedness by writing off large slices of the old debt so that new loans may be created on which banking commission can be earned.

There has been very serious criticism from many quarters as to the competence and efficiency with which this body has discharged its self-appointed task. Recently a compromised settlement, was negotiated largely by this body, for the first mortgage bondholders of the Barcelona Traction Light and Power Company. This company is a legally instituted company in Canada with prosperous operating interest in Spain mostly financed by British investors. Under the settlement this country will be deprived of between £2,000,000 and £3,000,000 foreign exchange held against Spain. These credits would be extremely important for the settlement of various imports which this country might make in Spain over a long period. Actually the company has not paid any interest since 1936. One wonders, particularly having regard to the dwindling volume of British overseas assets, whether it is safe to leave this extremely important function in the hands of a body such as this. These criticisms, of which there are many from all sources, may or may not be right. What I would like to know from the Chancellor of the Exchequer to-night is whether he proposes to continue the subsidy to the Corporation or whether he is prepared to inaugurate in the new constitution of the bank, a department which will discharge these functions, and therefore be directly responsible to the House.

I would like to take advantage of the custom of this House to congratulate the hon. Member for West Lewisham (Mr. Skeffington). I am able to only because by virtue of the fact that I happen to be a member of a party with a representation in this House of two instead of 390, I was able to make my maiden speech some eight weeks ago. That gives me the privilege of congratulating the hon. Member, which I am delighted to do.

Earlier in the day the Chancellor of the Exchequer threw out a challenge when he asked what a Communist Chancellor would do in regard to this Bank of England Bill. I would like to answer by saying that a Communist Chancellor would, in general, do what the Chancellor is doing. In essence what he is doing, as we have heard previously from other hon. Members on these benches, is that, while a Socialist, he is not introducing a fully Socialist Measure. As the hon. and gallant Member below the Gangway said earlier, we would have liked to have seen the taking over of the joint stock banks in addition to the central bank. Therefore the Measure is not a complete Socialist Measure. In my opinion though it is on the way, and because it is on the way I support it, and it is very nearly what a Communist Chancellor would have done in the circumstances.

Is the hon. Member supporting this Measure because it is a Socialist Measure, or because he thinks it is a Communist Measure?

:I am supporting it because I think it is in the interests of the people. Likewise I think that Socialism is in the interests of the people. I think this Measure is on the road to Socialism, hence it is in the interests of the people, and of Socialism. I trust the hon. Member opposite will understand that logic.

I appreciate the fact that the Chancellor had to make some alleviations with regard to the opposite benches in introducing this Bill. Personally I do not favour conciliation, for what have we seen this afternoon? Speaker after speaker, including the hon. Member for East Aberdeen (Mr. Boothby), has got up and said that there is not much difference between what is being proposed and what exists, except the question of the kind of control. I would say, as did the hon. and learned Member for North Hammersmith (Mr. Pritt) last week, in a Debate on another matter, that the Opposition are making a mountain out of a molehill—give them an inch and they take a whole mile. The Chancellor has made some alleviations to-day and we know why he has done so. There are some things which all back benchers are prepared to support, but Members on the Opposition benches are taking advantage of that and think it a sign of weakness. It is not a sign of weakness but of strength. We know where we are going, and we are taking that path deliberately.

The right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) said that bank directors would not influence policy for political moves. A number of references have been made to cases in which such influence has been used. I want to repeat one or two of these, perhaps new ones. It is a well-known fact that the greatest contribution to the downfall of the Labour Government in 1931 was the influence of the Bank of England and the bad advice of the Bank of England. There have been arguments this afternoon as to whether Mr. Montagu Norman was a "bad" adviser, a "stupid" adviser, a "dominant" adviser or a "silly Tory" adviser. My own view is that he was a bad adviser. Some Ministers in the past have acted on bad advice, sometimes from stupidity. This is not the occasion to discuss whether the late Mr. Ramsay Macdonald acted through stupidity or some other motive. The fact is that Ministers of that day were getting bad advice.

The policy of the Bank of England was not only influential in this country. Hon. Members will recollect that a few years ago, just before the war, during which we valued so highly our gallant Allies of the Dominions, we tried to strangle the New Zealand Government through the machinations of the City of London, and the Bank of England. Do hon. Members forget that the 1936 Popular Front Government in France was brought down by bank influence in this country and New York? Let them not forget these things, which contributed to the war which has just ended. The Bank was responsible for the restrictive policy which was outstanding in the cotton industry. If any Conservative Members for Lancashire—if such exist—dare oppose this Bill because they favour the Bank, let them remember what the Bank did to the cotton industry during the last 20 years—and to the shipyards and steel works. To this day the Bank has been pursuing a policy with regard to a certain steel works in the South Wales area that has meant the restriction of steel in our country during the war years. If hon. Members opposite wish to use some catch phrases, let them find out from those who have suffered and made sacrifices in this war, what were some of the factors which contributed to those sacrifices, in many cases so unnecessarily.

This Bill is amply justified by that past history of the Bank of England. The hon. Member for South Leeds (Mr. Gaitskell), in an excellent speech earlier to-day, referred to the fact that the Treasury now has influence over the Bank of England. Let us face the facts. If this Treasury influence began to develop in the period when the late Mr. Neville Chamberlain and Lord Baldwin were the Prime Ministers of this country, and if it has extended in this country during the war, when the Bank of England dare not conform otherwise than to the requests of the Treasury let us understand that we are now in the post-war period and Members of the Opposition

:Will the hon. Mem—

The hon. Member must not keep on interrupting.

:I shall sit down shortly. Other Members wish to speak and I want to be as brief as I can be. This Bill will remove such malevolent influence as has existed in the past. I want to deal with some factors which in my view the Chancellor should take into consideration, and which I hope will be remedied in the Committee stage.

Firstly I want to deal with the question of compensation and payments. Here I notice that hon. Members on the Opposition benches seem to be rather pleased with the deal. They are going to get an excellent deal—£58,000,000 as against £14,000,000 and 3 per cent. for a minimum of 20 years, having regard to the fact that less than a week ago we heard the Chancellor of the Exchequer say that he hopes even within a few months to reduce the rate of interest. The present standard rate of interest has been round about 3 per cent. He is proposing to reduce it, but here is a section of the community who, for a period of 20 years, are going to have the present standard rate of 3 per cent. I hope this will be changed. Hon. Members opposite have asked the Chancellor to state the amount of the hidden reserves. It is strange that for years hon. Gentlemen opposite have tried to hide the fact that there is anything to hide, but now, when it is a question of doing a deal, occupying the office armchair, taking a cigar and a glass of port wine, they want to know about the hidden reserves. Why do they want to know about the hidden reserves? In order that this House shall be able to effect a good transaction with the Bank of England? No—in order that the Bank of England may be able to transact better at the expense of the public. But let me enlighten them. Three years ago Mr. Reginald McKenna wrote a pamphlet called "What is Banking?" I trust hon. Gentlemen opposite will accept what Mr. McKenna said in 1942. He said:

"The true capital of the banks belonging to the shareholders is not the published figure of paid up capital but the whole of the capital and reserves, dislosed and undisclosed, taken together. The dividend paid on the shareholders' true capital would probably work out at about 4 per cent., whereas together with the hidden capital it works out at 14 per cent., 16 per cent. or 18 per cent."

In my opinion, the compensation which we are offering is much too high and based on inflated values. We should think in terms of terminable annuities at reduced rates rather than the Measure which is proposed.

I wish to draw attention to the manner of appointment of Governors and directors. Reference has been made to an absence of sectional interests in this court of directors. We should be under no illusions. I have a list of the present directorate of the Bank of England and, as a working man, I would not put one pennyworth of confidence in any of them. If I had £200,000 to invest, Lord Catto, Sir Charles Hambro, Mr. Cooper, of Hudson Bay, and Mr. Martin, who is connected with South African mining, would advise me very well indeed. I have not £200,000; I have not got £200 to invest, and neither have the vast majority of the people in this country. In my opinion, Lord Catto himself has sectional interests. There are no non-sectional interests in those elements. Therefore, if the Chancellor proposes that there should be a court of directors and a governor who shall represent all interests, I am prepared to reach an understanding on that point, but let no one in this House be under the misapprehension that there will be anyone on the court of directors with no sectional interests. It may very well be that trade union and co-operative interests should be represented, but it cannot be said that they are non-sectional. Of course, they are sectional.

Let us, therefore, have a court of directors of all interests. The Chancellor of the Exchequer should review this proposition or he will be making a mistake. At the same time we are suggesting that no Member of Parliament may be a director of the Bank of England. Does this imply that the Chancellor himself may not attend? That is the implication. Who, then, is going to control the court of directors? The House heard my interruption earlier, because I am deeply concerned that in no circumstances shall we have another London Passenger Transport Board. I, personally—and I am sure I have support on these benches—am against that. What we want is an organisation directly controlled by this House, with a Minister who is responsible to us.

Lastly, I come to the contentious Clause. It will be observed that hon. Members on the opposite benches are as happy as sand boys about the £58,000,000 and the 3 per cent., with 20 years as a minimum. What they are concerned about is the little bit of control. An hon. Gentleman on the opposite benches told a story earlier in the day. I think he should have been a screen script writer. He drew a picture of the Chancellor using his power under this Bill to sweep the Opposition out by making them bankrupts and thus disqualifying them. The will of the people will effect that desirable exodus in due course without connivance by the Chancellor. Hon. Members opposite are anxious about the control and direction by the Bank of England of the joint stock banks, lest it interfere with their private interests. I wonder how many of those hon. Members opposite have ever concerned themselves with the means test inflicted upon working class folk, who are not asked what money they have in the bank or in the Post Office, but "Have you got a sideboard? Then sell it before you get some more money. Have you a table? Sell it before you get any more money. Down goes your allowance." I have seen it. Hon. Members opposite disregard that in the same way as they prefer to disregard the slums where these working folk live.

If the hon. Gentleman had been in the House in 1935 he would have heard me, as a Conservative, oppose the means test. He should talk of facts, not fiction.

It is quite evident from the speech made by the hon. Member for East Aberdeen (Mr. Boothby) that the Conservative Party is not united, but we must have regard to their basic policy, and the basic policy of the Conservative Party is what I am discussing. This measure of control is necessary if we are to carry out the legislation which the new Government are going to introduce. I, therefore, support in substance the provisions of this Bill. I have made one or two suggestions, which I hope the Chancellor will take into consideration, so that we can reach agreement on the Committee stage.

The hon. Member for East Aberdeen (Mr. Boothby) has informed the House that the Bank of England was founded by a Scotsman. He did not inform the House that the Bank of Scotland was founded by an Englishman. So, in those two early predatory capitalist enterprises, honours were about even. I am indeed grateful for having caught your eye, Mr. Deputy-Speaker, for I, as a Scotsman, represent a constituency in the centre of Glasgow which houses some of the head offices of Scottish banks and a large number of important subsidiary branches of other banks. I hope that whoever replies for the Government at the end of this Debate will tell those Scottish banking institutions just exactly how they stand under the Bill, That is to say, do they stand on all fours with the rest of the banking system in this country, or is some special formula held in reserve for them?

Hon. Members opposite have twitted us on these Benches with not knowing what we feel, but I am in no doubt about what I feel. I call this a bad Bill. Having spent the last six years of my life in the Army where brevity, in writing or in speech, is held to be a commendable virtue, I will come straight to the point and say why I think this is a bad Bill. Hon. Members on these Benches are opposed in general to nationalisation. They will require a very strong case to be made out to show that nationalisation will bring some improvement in the welfare of the community, before they will agree to nationalisation being put into practice. Wherever we look in parts of the world where nationalisation has been used in any country, we see that it has been shown to be extravagant, where economy is vital, inefficient where efficiency will be the life-blood of this country, and unsympathetic in dealings between employers and employed, one of the most important problems that we shall have to face in the future.

This Bank of England Nationalisation Bill is the forerunner and precursor, I suppose, of others. There is probably much more to come. Starting off from the position that a Nationalisation Bill is bad, we recognise that there has been a General Election and that there has been a mandate; but that is surely no reason why we should sit silently on these benches and accept the assurances of the right hon. Gentleman the Chancellor of the Exchequer that all will be well in the future. My duty, as I believe it is the duty of all hon. Members in this House, is to watch on behalf of the people who sent us here and to point out to them through this House and the Press of this nation what a Bill involves and what dangers it may arouse. I do not propose to accept the doses of anodyne which the Chancellor of the Exchequer has poured out almost as liberally to-day as he was pouring out financial benefits in his Budget speech. I propose to examine the Bill and what it implies, and to say what I think about it.

There seems to have been a general measure of approval for the basis of compensation being four shares for one, as being reasonable. On the face of it it is reasonable, but the matter is not quite so simple as that. Itis well-known, and the hon. Member for Mile End (Mr. Piratin) waxed eloquent upon it during his speech, that there are hidden reserves held by the Bank of England. Certain shrewd members of the public have voiced the opinion that those hidden reserves, or the break up value of Bank of England shares, is something considerably in excess of the four-to-one basis which is here and now proposed.

I want to point out the danger that if the break-up value of the Bank of England has not been taken into consideration in the compensation figure, all the industrial concerns of this country, who are all more or less threatened with nationalisation sooner or later if hon. and right hon. Members opposite retain their position, will say to themselves something like this: "Hallo, in nationalising the Bank of England the Chancellor of the Exchequer has fixed his eye only upon one thing, the past yield of the shares. Therefore, let us build up our dividend record as high as possible and let payment to reserves go to the four winds." That is the most dangerous frame of mind which you could possibly induce in the commercial community at this time.

I would like to clear up the point of difficulty raised by the hon. and gallant Member in the argument he is using. Would he not agree that the hidden reserves of the Bank of England are very largely the product of special privileges accorded to the Bank by Parliament? Therefore, is there not complete justification for returning to the nation what the nation has thus accorded?

I would like to clear that point up, although it is not the point with which I am dealing, which is that however those reserves have been built up, it is important that the Chancellor of the Exchequer or the Government should show to the nation that in arriving at their basis of compensation they have taken all those factors into account. What do we see in the papers, in the Press and in speeches here? The only aspect of this compensation that is brought into the limelight at all is the past yield. There is a very big inherent danger if the Chancellor lets the business community of this country believe that, in future nationalisation compensation, it will only be the yield that will count. The business community will then run counter to the very advocacy which the Chancellor so ably and so orthodoxly put forward in his Budget speech, that E.P.T., when handed back to industrial concerns, should be ploughed back into those concerns and be used for reserves and not for distribution. The right hon. Gentleman pats the industrialist on the shoulder with the right hand of the Budget speech and gives him a shrewd blow under the jaw with the left hand of the Bank of England Nationalisation Bill.

I ask right hon. Gentlemen opposite to give some assurance. The business community should be informed; if some proof can be adduced for what Members say on the benches opposite so much the better. The business community should be told that in calculating the compensation under the Bank of England Bill and under future Bills it would not be entirely on a basis of dividend yield.

I pass to the now notorious Clause 4. I was glad to hear the Chancellor of the Exchequer pay tribute to the desirability of secrecy between customer and banker, but he did mention that the Bank of England in this country was one of the few examples of non-State-controlled banks. He instanced Australia and New Zealand. Under the New Zealand Banking Act, and further, under the Commonwealth Bank Act of Australia, 1945, it is precluded that power should be given to the Central Bank to direct the joint stock banks or subsidiary banks to make advances or to refuse advances to any particular set of customers. Therefore, we are going further. We are taking wider powers under the Bill than the Dominions have already taken. What may happen? I am not to be dissuaded or turned aside by the words of the Chancellor of the Exchequer that there are no dangers to be feared in the future. The danger to be feared in the future is the sort of situation brought into evidence by the speech of the hon. Member for Mile End (Mr. Piratin). We are entitled to see where these powers may lead us, powers far in excess, be it said, of those required to carry out the immediate purpose of the Bill, the nationalisation of the Bank of England.

This could happen, among other things: The joint stock banks could be instructed under Clause 4 that they were to grant advances and credit facilities to customers whom they would normally and prudently have considered un creditworthy. What happens next? They grant advances and credit, but knowing full well that when credit is granted to un creditworthy customers losses are inevitable, and in order to recover those losses they will raise the rate to the creditworthy customers. So we have the parodox of the sound creditworthy concerns having the rate raised against them in order to carry the burden of the un-creditworthy customers. That can happen under this Bill. The creditworthy and the sound concerns in this country will have enough to bear on their shoulders in future in order to recapture trade without being called upon to bear part of the extra burdens of granting credit to un-creditworthy customers.

I am also concerned with the situation in which shareholders in the joint stock banks are concerned. We have heard a number of speakers from the benches opposite who said that the Chancellor ought to have gone further and should have nationalised the whole banking industry. I contend that he has done that, or, at any rate, that he has put the shareholders of joint stock banks, who are generally small individuals and not the bloated capitalists who only exist in imaginations of many Members opposite, in a parlous position under this Bill. What have they done? They have trusted in the good record of the bank in which they have invested their money, and trusted in the directors who are, whatever hon. Members opposite may say, ultimately the trustees and can be called to account by the shareholders. They now find that a Bill has been introduced which gives power to the Treasury, through the Bank, to direct the directors of joint stock banks what they are to do. Therefore, the shareholders in joint stock banks have, in fact, no representation and no sort of safeguard for the investments they have made. All of us will remember the slogan which cost this country dear, "No taxation without representation." This is very nearly its little brother, and if we want to invent another slogan which would suit to-day's circumstances and the circumstances produced under this Bill, I would say, "There must be no national- isation without fair compensation." Here the Chancellor is getting the best of both worlds. He is, in fact, taking powers equivalent to the nationalisation of the joint stock banks through the Bank of England, but he is not paying out the shareholders. They are consequently in a worse state than the shareholders of the Bank of England, who are being paid on something approaching a fair basis. I am not a share holder in any bank, and I can, I hope, look upon this matter objectively. I am bound to say that until these powers are cleared up and some assurance is given, I would not at any price become the shareholder in a banking concern.

Why are these powers required? Why do the Government continue to ask for some weapon much greater than the weapon which is required to carry out their avowed intentions? In the Gracious Speech from the Throne the Government indicated that they would nationalise the Bank of England, but here they go much further. We saw the same thing in the Supplies and Services (Transitional Powers) Bill. This is just the sort of action which causes disquiet in the minds of the population. When we are asked to accept assurances that it will be all right in the future and that the Government have no such intentions, the sinister implications of constantly asking for more powers than are required make one stop and look closely at any such promises. Intoxication with power is a dangerous thing. Is it that the Government are still suffering from the mesmerism of their majority? Are they still intoxicated with their success? I am afraid that they are. One can hardly remember a reference to a mandate or to the General Election at which their eyes did not dilate with joy. Other Administrations have had mandates and great majorities, and have finally got over it. The sooner this intoxication of success is translated into the sober hang-over of realism and responsibility, the sooner shall we get intelligent legislation from this House. "Safe as the Bank of England" is, as a motto, apparently to go. What are we to substitute for it? "Safe as the Treasury?" "Safe as the Government?" "Safe as 10, Downing Street?" More than one right hon. Gentleman in this House will be able to testify to the shifting character of that address.

The hon. and gallant Gentleman who has just sat down began by saying that he was a soldier and a man of few words. I am a civilian of many words, but I would undertake to bet with anybody that my speech will be briefer than the one to which we have just listened. He quoted "As safe as the Bank of England." The Bank of England was born out of the bankruptcy of a King, and, as a matter of cold sober history, has gone bankrupt six times in the course of its existence. "As safe as the Bank of England!" If the hon. and gallant Member's investments are as badly disposed as that, he had better seek the advice, not of a financier, but of a capable civil servant. The hon. and gallant Gentleman came out with that cry, "No taxation without representation." That reminds me of the story of Franklin's appearance before the French Parliament when he was begging for a loan to America following the War of Independence. One of the Frenchmen to whom he was talking said, "Haven't you just fought a war with the British on the slogan, 'No taxation without representation'?" He said, "Yes, but what we really meant was, 'No taxation'." I fear that that is true of hon. Members on some sides of this House.

I rise to say that I intend to vote for the Second Reading of this Bill. I shall do so although I feel as strongly as anybody a dislike of giving unnecessary powers to Governments. If I, who dislike giving unnecessary powers to Governments, feel it necessary to vote for this Bill, that ought to reassure some of the hon. Members on the Opposition benches. I want to devote a few sentences to the arguments that have been advanced against this Bill and then a few sentences to the case for the Bill as I see it—for the Bill, the whole Bill, and nothing but the Bill. Whenever a great reform is urged in this Chamber it is always met by one or other of three arguments, or a contradictory combination of the three. The first argument is that the reform proposed is wrong. The second is that it is unnecessary. The third is that it does not matter. To-day we have had those three lines of argument directed against this Bill. The argument of the late Chancellor—and the more I listen to him the more glad I am that he is "the late"—was that we were going to do the wrong thing.

Indeed, his words were a bit stronger than mine, because I am an artist in understatement. The actual phrase he used was, "the enormity that we are about to commit. "That is line number one, that the reform is wrong. Line number two is the line advocated by my hon. Friend the Member for Bath (Mr. Pitman) when he argued that it was unnecessary. The third argument is the argument that this is a world of contradictions and compromises and, in the same way that the statue of Charles I stands at one end of Whitehall and that of Cromwell at the other without quarreling, so we can endure a private Bank of England in the State without a quarrel. They forget every argument except one. The reason why Charles and Cromwell do not quarrel in Whitehall is that they have both been dead for 300 years, and they are permanently separated, physically, by the distance between one end of Whitehall and the other.

I want to look at these three arguments, "wrong," "unnecessary" and "does not matter. "I start with the late Chancellor of the Exchequer. Why did he say we were doing wrong? I made very full notes of his speech and I tried to find out what was at the back of his mind. I did that because I know him, I have known him for 25 years, I have loved him for 25 years, and I have grieved over him for 25 years. He is a Scotsman, and every Scotsman at bottom is a metaphysician. Most Scotsmen, in addition to being metaphysicians, are also mystics—the late Chancellor is not only a mystic, he is misty. I tried, by the most careful attention to his speech, to find out where we are going wrong. I got one or two gleams of light. First, we were doing this out of "an ideological urge." Well, why not? Is that necessarily any worse than a materialistic urge? Or a biological urge? Or a maternal urge? It is no argument against a thing to say that it is ideological; everything should have some relation to an idea, whatever it is that we do. His next comment was that what we are doing is giving "formal enactment" to what has hitherto been an informal arrangement. Bless my soul, that is often true of marriage, but I have yet to learn that marriage is any worse on that account.

Surely the hon. Member forgets the distinction between concubinage and marriage?

At any rate, the Government to-day is at least trying to make an honest woman of the Old Lady of Thread needle Street. He went on to refer to the "unique" character of the Bank of England. Indeed, it is unique. Of all the rackets that there ever were in England, this is the most "unique." I know of no other concern in Britain, founded on the bankruptcy of an impecunious king, which has ever established so complete amonopoly with as much State backing as the Bank of England. Indeed, the last Chancellor was right in describing the position of the Bank of England as unique. But we had still got no solid arguments against the Bill, and the first time the hint of an argument emerged was when he said that the Bank of England was concerned with sterling, and that the confidence of other countries in sterling might be shaken if the Bank of England were controlled by a Government over which the other States in the sterling area had no control at all. That, believe me, was the first hint of serious argument. I have two answers to that. The first is, Are we to suppose that other Governments in the sterling area will have less confidence in a Bank of England controlled by the British Government than they have in a Bank of England that is answerable to nobody on earth? Because that is the existing position of the Bank of England.

In the strict and literal sense of the words, the Bank of England is responsible to nobody. If anybody doubts that, I would refer him to the experience I had in this House in 1929–31. I put down, or handed in to the Clerk at the Table, three Questions about the Bank of England. Question one was, Who were the directors of the Bank of England; Question two, What was the amount of their holdings in the Bank respectively; and Question three, How many of them also had holdings in the financial houses of other countries? I handed in those Questions seeking, as I always do, for information. Nobody has ever been so good as I at seeking information since Rosa Dartle died. I tried to get these Questions accepted by the Clerk at the Table. But I got one of those little notes addressed to the Member for Wolver- hampton, as I then was, asking me to see the Clerk. I went to him and he said, "I have asked you to see me about the Questions." I said, "Oh yes?" and he went on, "You cannot put these Questions in this House." I asked why and he said, "Because the Bank of England is a private institution." I replied characteristically, "It may be a private institution, but from my point of view it is a public nuisance, and I want to know the answer to these Questions." But could I get these Questions on the Paper? No—the Government were not compelled to give me information because it was a private institution. And from that time they have felt that they were not obliged to give information to the Government, because they were a private institution. It is no use pretending that they are, in fact or in form, anything but a private institution until this Bill goes through.

The second answer to the late Chancellor is perhaps the answer given by the right hon. Member for Woodford (Mr. Churchill), whose native honesty compels him to indiscretions which are the despair of the Tory Party. Speaking in the Debate on the Address he not only said that he was not alarmed at the threat of the Bank of England being nationalised, but went on to deal specifically with the point about the possible effect on other nations within the sterling area. He said:

"Meanwhile it may be helpful for me to express the opinion, as Leader of the Opposition, that foreign countries need not be alarmed by the language of the Gracious Speech on this subject, and that British credit will be resolutely upheld."—[OFFICIAL REPORT, 16th August, 1945; Vol. 413, c. 94.]

I think the late Chancellor and the late Prime Minister had better go into a huddle about this matter and determine which is the line of the Conservative Party, and if I can offer my own humble services as conciliator, with a view to smoothing out any differences there may be, I should be very happy. Indeed, we have had no case whatever from the late Chancellor of the Exchequer on the grounds that this is a wrong thing to do.

Now I come to the second argument, that it is "unnecessary. "The picture that is drawn for us here is that the Bank of England is so pure, its motives so animated by public well-being, it is already so much a servant of the public, that to nationalise it is really superfluous. We should not let them get away with this self-denying ordinance. If they are so much public servants as they say they are, shall we withhold from them the dignity of the title as such? Shall we deny them admission to the established ranks of the public service and the benefits of permanency, of pension, which go with established rank? If they are so completely public servants as we have been told by some on these benches tonight, then there can be no objection to our recognising the fact by the formality of this Act of Parliament. The third argument is that it really "does not matter, "and that argument hits me worse than the other two arguments, coming from—I forget which hon. Member it was; it was not the man of few words—

This is altogether delightful, but the hon. Member has got up under false pretences. He promised to be shorter than I was, but by the clock, he has already taken longer.

The hon. Member had better let me be the judge of that.

I regret having been so long, but the House will agree that time has passed like magic. Now, if I may, I will be exceedingly quick and earnest. To say that it does not matter that there should be a power in England, outside the law, and not subject to the law, which has it in its hands to put 3,000,000 men out of work, or 3,000,000 men into work, by altering the credit policy of the banking system—if that does not matter, what does matter? We have seen in our lifetime that it does matter. In addition to being a trade union official, a journalist, and other things, I am, although only in a humble way, a capitalist.

May I ask my hon. Friend why he thinks the banks have that power?

We have seen it demonstrated again and again in our lifetime, and if this striking phenomenon has escaped the notice of the hon. Member for Scarborough—[HON MEMBERS:"And Whit by"]. If I were in his position I should think it dreadful that I had to answer to even one town for the expression of such views, much less two towns.

The Government of the day chose to take the advice. One cannot criticise a body for having its advice taken.

All I know is that the combination of a bank which gave bad advice, and a Government which acted on it, was utterly disastrous to this country.

May we get this right? The rate of interest at which the Government borrows its money through the Bank of England is a matter for the Government and this House, and to say that the Bank of England exercises the control of capitalists when it is merely acting as a channel through which the Chancellor of the Exchequer—

I have not begun to discuss that; I am talking about the control of credit, the releasing of credit, the drawing in of credit, and the effect that can produce on the employment, or unemployment, of millions of people. As things are, if there is a possible slump appearing on the horizon, then the bankers make the possible slump into a certain one by calling in money all over the country, and precipitating the very thing they fear. It is intolerable that there should exist this "state within the State," this irresponsible government within the State, answerable to nobody except a nominal meeting of shareholders which, as the Chancellor of the Exchequer showed, has no real control.

It seems to me, whether one looks at the thing from the capitalist or Socialist point of view, that one thing sticks out a mile. Neither the needs of the ordinary human being nor, for that matter, the productive needs of the industrialists themselves, ought to be at the mercy of the money power. There ought to be unanimity in this House to-night on the broad proposition that the vast weapon of control of credit in Britain ought not to be without the control of the State or this House. I could speak for a great length of time on that, but I am not going to. For the reasons I have given, I regard the opposition put up against this Bill as puerile. I regard the case for nationalisation as overwhelmingly strong, and because that is my view, and the view of my whole party, I shall go into the Lobby with the Government on the Second Reading to-night, if there is a Division. But my strong advice to hon. Members on this side of the House will be not to carry impetuousness to the point of folly. They should accept the Second Reading without a Division.

With some knowledge of the time-table, I do not propose to detain the House very long but I am not disposed to give a silent vote to the Second Reading of this Bill. The hon. Gentleman the Member for Bath (Mr. Pitman) spoke of the Government being intoxicated by their majority. From what we have heard in the Debate this evening I think it has been revealed that the Opposition are overcome by the inferiority of their minority.

On a point of Order. It was not I who said that.

I am working to a timetable and shall be in trouble with the Chair if I give way. We have had a variety of arguments from the Opposition benches, but it was pleasing to hear the hon. Gentleman the Member for East Aberdeen (Mr. Boothby). The main argument we have heard from the Opposition seems to suggest that we ought to expect a more moral approach and a more moral control of the Bank of England if we leave it in the hands of a few people who are elected by a small clique than if that control be by a body of men appointed by the Crown. It is not an argument to which I could subscribe, nor, I believe, one to which any thinking man could subscribe. I am very sorry that this Bill, the first of our nationalisation experiments, should leave me without much joy in my heart.

I want to direct my remarks to the compensation Clauses. I think the Chancellor of the Exchequer has been unduly generous, and that it is very unfortunate that the amount of Government stock to be issued is of the order as set out in the Bill. The hon. Member for Rugby (Mr. W. J. Brown) gave us an insight into the history of the Bank. The hon. Member for East Aberdeen, I think it was, brought us up to 1697, the date of the formation of the Bank when its capital was a little over £1,000,000. From then up to 1782 the capital rose to just over £11,000,000. In 1816—andI only want to mention these figures because I think we have not had a true presentation of the financial compensation being offered under this Bill—that capital of £11,500,000, by one stroke of the pen and by a little manipulation, became, without any subscription, £14,500,000, the figure at which it stands today—a 25 per cent. appreciation of the Bank's stock.

Therefore, what the stockholders of the Bank of England have been receiving for the past 20 years has not been interest of 12 per cent., but interest approximating more closely to 15 per cent., and in return for the actual subscribed capital of £11,500,000 the Government are giving £58,000,000 of Government stock. If the Chancellor wished to perpetuate what I regard as this iniquitous 12 per cent. which has been enjoyed by the Bank of England stockholders over a long period, the least he could have done would have been to perpetuate it on £11,500,000 rather than on £14,000,000. I suggest that this interest of 12 per cent. on Bank of England stock has been an immoral return, although I know that opinion is not shared by hon. Members opposite. I believe that interest ought always to bear some relation to the risk which is involved. The risk in this case has been small for a very large number of years, and certainly it has not been a risk which justified interest of 12 per cent. Somebody has had to earn this 12 per cent. The miners, the farmers, the shopkeepers, the industrialists of this country, have had to work to provide it. I am surprised that the Chancellor should seek to perpetuate what I regard as a folly of the past.

The Chancellor described the Bill as a model, but I was very pleased to hear him say also that it was not to be taken as a precedent. I wonder how far my right hon. Friend will be able to resist the arguments for taking this Bill as a precedent when we come to nationalise the other industries of the country. Of course, this Bill will be taken as a precedent. What will happen when we come to nationalise the transport system? What will happen when a small transport undertaking which has made 50 per cent. interest over a period of years wants to have 17 times the capital stock at 3 per cent.? I suggest that such an undertaking would be as much entitled to this as the stockholders of the Bank of England. What will happen to those undertakings about to be nationalised which have failed to show any return at all, but have worked at a loss? Will the Chancellor suggest that they should pay money to the Exchequer for the privilege of being taken over? Although the Chancellor may say that this Bill is not a precedent, it will be used as a precedent by every undertaking which the Government propose to nationalise in the years to come, and it is a very dangerous and immoral precedent. We shall come up against cases in which abnormal dividends have been paid over a number of years. I regret that in this Bill we are doing something which will lead the Government and the Chancellor, in our future nationalisation proposals, into very difficult circumstances.

We are now coming towards the end of a long and extremely interesting Debate, in the course of which we have had a very large number of maiden speeches. There has, I think, been nothing like it since that unfortunate incident which happened to the Sabines some 2,500 years ago. It would be invidious for me to pick out individuals when all in their different styles and with their different arguments interested the House and when all are speakers whom the House will be glad to hear again in the future. It would certainly be wrong of me to pick out hon. Members opposite because they might well feel that to them compliments from this side of the House were merely an embarrassment; but I would like to refer to the admirable speeches made by my hon. and gallant Friend the Member for Flint (Lieut.-Colonel Birch) and the hon. Member for Bath (Mr. Pitman).

May I turn now from the maiden speeches to the speech of the right hon. Gentleman the Chancellor of the Exchequer in opening the Debate? One of my hon. Friends, speaking in the Budget Debates last week, in complimenting the right hon. Gentleman on his speech, said that it had two merits, those of audibility and emphasis. Without at all straining at the truth, I may say that to-day the right hon. Gentleman reproduced both those qualities in full measure; but, personally, I think there is another quality for a speech, not perhaps essential, but at any rate important, and that is that it should present a reasoned argument for the case which is being put. And there, I must confess, I found the right hon. Gentleman rather lacking. He started off by waving a piece of paper with some letter or other on it, inscribed "Living in the Past, "or something of that sort, and then he went on to say that his object in bringing in this Bill was to make an honest woman of the Old Lady of Thread needle Street. The right hon. Gentleman knows that strict as one's morality may be there are really times when the age of the partner and the length of the connection are such as to make that a work of supererogation.

In fact, I was rather pleased when the hon. Member for South Leeds (Mr. Gaitskell), who, I believe, is one of the right hon. Gentleman's disciples in another life as well as this, sprang gallantly, but I fear unsuccessfully, to his rescue. The hon. Member tried to provide an argument for this Bill. It was a novel argument, but, I think, unconvincing. He said that Mr. Montagu Norman had once been photographed in the corridor of a wagon-lit, and if that was not an argument for the nationalisation of the Bank of England, what was? When I think of the postures and positions in which, thanks to the enthusiasm of their public relations officers, right hon. Gentlemen have to be photographed, I think that is carrying censoriousness too far. The leader of one section of the Liberal Party also announced, for his followers who are now thronging the benches, that he and all his party would vote in favour of the Bill. I was not surprised at that announcement, because I understood it to be their settled policy that, while opposed to nationalisation in general because some of their supporters might not like it, they would support nationalisation in particular because some of their supporters might like that. But I must confess that, although I had to be out of the House for some part of the speech of the hon. and learned Member for Montgomery (Mr. C. Davies), when I came back and asked my right hon. Friend who had been kindly taking a note for me what he had to record in the way of argument, he showed me a blank sheet.

Finally, may I refer to the speech of my hon. Friend the Member for East Aberdeen (Mr. Boothby), who also said that he was going to take the whole of his party into the Lobby in favour of this Bill. I have known my hon. Friend's financial views for a very long time, ever since about 21 years ago when he and I wrote a book together. I may say it was only because one of the other co-authors was a publisher that it ever saw the light of day. It is indeed to the credit of my hon. Friend that, in the whole of those 21 years, having once made up his mind, he has never allowed any subsequent facts to alter it.

What are the arguments brought to us for this Bill—not broad financial talks, not the appearance of the hidden hand, but arguments for the actual Measure which this House of Commons is being asked to pass? We upon these benches are in favour of, and believe in, private enterprise and so, of course, do hon. Members opposite. In fact, they are going to leave nine-tenths of the industries of this country under private enterprise. [An HON MEMBERS: "Temporarily."] No, not temporarily. If hon. Members will study the speeches of the right hon. Gentleman the President of the Board of Trade, they will see that he is going round telling all industries: "It is so easy. Just have a working party and you will not get nationalisation. "The hon. Lady opposite, the Parliamentary Secretary to the Ministry of Food, will no doubt confirm this and say that if you have the temporary inconvenience of vaccination, you will be saved from the fatal disease of smallpox. Though we believe in private enterprise we do not work it up into an ideology. We are prepared to be convinced that there may be times and occasions, when an individual industry might have its services and efficiency increased by control rather than by continuing as an industry under private control. We are ready to listen to arguments in any particular case, and in this particular case we are more ready to listen to arguments than in any other. It does not occur to me that central banking calls for those qualities of quick decision and willingness to take risks which the export industries require. Central banking wants experience, judgment and caution, and those are just the qualities which are less likely to wilt under the control of the State.

We came here to-day ready to listen to arguments that, under the proposal to control the Bank of England, it would be more in the public interest and more to the national advantage than it is at present. I could think of at least three possible lines of argument which could have been advanced. The first would have been that there had been occasions in the past when the Bank of England had prosecuted a financial policy independent of, and in conflict with, the financial policy of the Government of the day, and that it was impossible for a Government charged with full responsibility for national affairs to find an important part of its policy thwarted in that way. Another would have been that, even if the Bank of England had been subservient to Government control the particular method of selecting the Governor was not such as to provide for the Government the best possible financial advice. The third argument was that here was an institution which had in the past made unduly large profits which might as well have come into the Exchequer, profits which should have gone to the taxpayer rather than into private hands.

Let us examine those three possible lines in relation to this Bill. Take the first, that the Bank of England has pursued policies in contradiction of that of the Government of the day. I have not heard in a single speech any real attempt to prove that there has been in the past, certainly in recent years, any conflict of that kind. That is not the growth of war conditions or even of the last few years. Any one who reads that book to which the right hon. Gentleman the Chancellor of the Exchequer referred on the history of the Bank will realise that that is a process which has been going on for 200 years of its life, and that, little by little, in fact, the Bank of England has become a public institution, though still under a private Court. So far back as 1931, the present Foreign Secretary, then a member of the Macmillan Committee, said, in his dissenting minute, that the Bank had, in practice, acted as a public body.

I was very interested to see in the Debate to-day that, although a few people skirted round it, no hon. Member opposite, in fact, attempted to advance in a critical assembly such as this the arguments very often advanced by Members of their party to enthusiastic but uncritical audiences in the country, and that is the argument that the events of 1931, and the fall of the Labour Government, were due to the action of the Bank of England and the banks. They cannot do it here, because they know it is not true. They know that, in fact, there was no conflict on that occasion between the Bank of England and the Chancellor of the Exchequer of the day—a Socialist Chancellor, Lord Snowden. I know it is the fashion to laugh when you mention the name of Lord Snowden, but I remember being in this House when Mr. Snowden, as he then was, was a name which evoked from the benches opposite, not jeers but cheers. I remember him opening a Socialist Budget and getting just as many cheers as the right hon. Gentleman the Chancellor got last week, only, then, he was being cheered for increasing the Income Tax, whereas the right hon. Gentleman was being cheered for reducing it. Both of those Budgets, I remember, were referred to as Budgets for the common man. Indeed, it is a sombre thought for right hon. Gentlemen on the Front Bench opposite that the cheers of their supporters can so soon change into jeers. At any rate, it is a sombre thought for those hon. Gentlemen who do get the cheers of their supporters. [Interruption.] Under a very strict time-table, any time I take away now must mean taking it away from the right hon. Gentleman who is to speak later.

Perhaps the right hon. and gallant Gentleman will pardon me, but, as he was in the House at the time of the catastrophe of 1931, may I remind him that it was certainly not Lord Snowden who had trouble over the loans from America, but the Bank of England?

Is the right hon. and gallant Gentleman aware that consistency is the refuge and consolation of the dull-witted?

:If I might reply to the only interruption that is relevant, that of the hon. Member for Bridgeton, I would say that I do not think it matters what the particular financial trouble was. The fact was that the Bank of England and the Chancellor of the Exchequer were in perfect agreement on all measures that were being taken and there was no conflict.

They presented the Chancellor with a fait accompli.

I now turn to the second argument—the argument that, admitting that there was no conflict in the past, yet the advice given by the Bank of England to the Treasury has been wrong, and that that is because the present system does not throw up the right Governor to advise the Chancellor. Well, of course, clearly, that is not an argument that can be advanced on this Bill, because, before we knew the details of the Bill, the Chancellor hastened to tell us that the one direction in which it was not going to make any difference was that of the Governor of the Bank of England. The right hon. Gentleman came upon Elijah as a chariot of fire, and the mantle of Elijah fell—back on Elijah.

Well, we on this side of the House are delighted. It gives us great confidence, as the earlier announcement was intended to give us confidence, that the Bank will be conducted in future just as it was conducted in the past. But it seems to make a good deal of nonsense of some speeches which have been made—I will not say by hon. Members opposite but by less responsible Members of their Party when they have talked about the hidden hand of finance. Then, when the hidden hand is revealed, we see it is just the same hand which is to go on. One thing, of course, we are particularly delighted about is that the right hon. Gentleman, by fixing the term as five years, has made it extremely improbable that the appointment of a successor to Lord Catto will interest him.

Lastly, there is the argument that this institution has been making vast and undue profits, which could well be assumed by the State and go to the benefit of the taxpayer. Well, the Chancellor of the Exchequer—and I am not on this going to argue with him—went out of his way to make us understand that the compensation he was giving was based exactly upon the profits which the shareholders are receiving and have been receiving for the last 20 years. He would not do that, would he, if he thought those profits were extortionate, if he thought those profits were disproportionate, if he thought those profits were excessive? In fact, of course, financially, nothing is going to happen. The shareholders will not lose, the Treasury will not gain, and only the Court of Directors, which is now in the Government service, may well look forward to a greater remuneration than they received when they were merely the elected of a private institution.

Why oppose the Bill?

:I can see no argument that has been advanced for any definite advantage which will accrue from the passage of this Bill. I should now like to look at the other side and see whether there are not possible disadvantages which may be put on the other side. The first of those possible disadvantages is the loss of confidence abroad, and that loss of confidence, if it occurs, will not be caused by speeches made by hon. Members on this side of the House because, I say quite frankly, I do not think this Bill—especially with Lord Catto as the new Governor—will make any difference at all [HON MEMBERS:"Why argue?"] I am going to tell hon. Members why. The loss of confidence will be caused by hon. Members opposite, because they have to go down and pretend to their constituents that something will happen as a result of this Bill; they have to go and say that it will cause a great financial revolution, that the whole conduct of finance henceforth will be different. People abroad, naturally, do not enjoy our political maturity, and they do not understand the Government, in these critical days, as we can, of course, understand coming forward and asking the House of Commons to pass a Bill that does not mean anything at all. They will be impressed by the speeches of hon. Members opposite and they will really think that it does make some difference. That loss of confidence, were it to occur, is not a thing we could face with any equanimity.

It is the fashion, of course, to talk as if banking and its ancillary services bring in nothing to the country as a whole. That, of course, is quite untrue. The fact that the centre of finance was in London, due largely to the Bank of England, did bring in a very considerable amount in invisible exports before the war and, even more directly, it was largely the cause of the big entrepreneur trade which brought in a great deal both in shipping and in services and labour in this country. I hope hon. Members opposite will keep that in mind and, having in mind the great responsibility they bear, will tell their constituents the truth about this Bill. I yield only to some in my admiration to the Chancellor. He has great natural gifts, sharpened in his early days by the best possible and most expensive education and last week, in his Budget, he showed an innate Conservatism which was pleasing to Members on this side of the House. But I am afraid that with all those advantages it will be a very long time before the world wide phrase, "Safe as the Bank of England," is superseded in its world wide currency by its new rival, "Safe as Dr. Dalton." This loss of confidence is, I think, a real danger, arising not from the facts but from the appearance of the Bill.

I turn for a few moments to Clause 4. The right hon. Gentleman said that it had given rise to difficulties, and that he was surprised because he thought its language was simple and clear. I would like to give an example of that simplicity and clarity. Sub-section (4) says:

"In this section the expression 'banker' means any such person carrying on a banking undertaking as may be declared by order of the Treasury to be a banker for the purposes of this section."

It seems to me that something has been left out. The Sub-section should go on:

"In this section the expression 'banking under taking 'means any such banking undertaking carried on by a banker as may be declared by order of the Treasury to be a banking undertaking for the purposes of this section."

I was, however, extremely relieved to hear two things from the right hon. Gentleman. First, he made it clear—and I confess that it was not clear to me from the language—that the initiative in the operation of Sub-section (3) is in the hands of the Court of the Bank of England itself, and that the Treasury can only come in upon their motion. Second, was his announcement that he would consider an Amendment excluding powers in Sub-section (3) in the case of revealing the confidential, accounts of customers of the Bank. I hope that when we come to the Committee stage the right hon. Gentleman will be prepared, in order to remove any possibility of misunderstanding, to go even further. It is all very well for the right hon. Gentleman to say, "there is no intention to use these powers. "The fact is that he takes these powers. It is another of the instances which we had on the Supplies and Services (Transitional Powers) Bill, where the Government take enormous power and come to the House and say, "We do not mean to use anything but a small fraction." Why, then, take the power? Up to now it has been the practice of the House to grant to the Government powers they intend to use, and not to grant powers which the Government say they have no intention of using. Therefore, we shall hope that the right hon. Gentleman will be prepared, on the Committee stage, to consider words which might exclude other possibilities which exist in the Clause as drafted, but which we hope we need not believe he has any intention of using.

There is one other point which I do not think the right hon. Gentleman can refute. If any directions are given, under this Clause, by the Treasury, through the Bank of England, to the private banks, they should be laid before this House. It is not only that we should have the right to know if such directions are issued, but it is only fair to the directors of the private banks themselves. They are the trustees for shareholders and depositors, and if they are forced, by Government action, to do something which they themselves do not think wise, it is only fair to them that it should be known that this has been done, not on their decision, but on the decision of the Government, and any responsibility for what happens must fall, not upon them, but upon the Government.

To sum up, we on this side of the House believe that this Bill can do no possible good, and may do very considerable harm. Of course, we know the real reason why it is being introduced—not a reason given by anybody in the House tonight. We know that the hon. Members opposite have got to socialise something. The Bank of England may not be the most important industry; it may not be the industry which will respond best to public control; it may not be the industry where the results are likely to be greatest, but it has this one supreme benefit—there is no other industry which you can socialise in five Clauses and a short Title. This Bill—if I may copy the gestures of the right hon. Gentleman—is not a national necessity, it is just a party symbol. That is why we, on this side of the House, oppose this Bill. We oppose it not because it is a danger, but because it is a sham; not because it is going to do harm, but because it is going to do nothing at all. We object, when there are so many realities, so many real problems, demanding the attention of the Government of the day, that the processes of this House, and the time of its Members, should be wasted on a piece of political eyewash.

The House probably does not know yet whether this Bill is going to be taken to a Division or not. [HON MEMBERS:"It is."] Well, I am glad of that assurance, because, up to now, the speeches we have had from the other side of the House have not given us any real indication of just what His Majesty's Opposition intend to do tonight. I think if the Second Reading Debate has done nothing else, it has given a good deal of pleasure to the right hon. and gallant Gentleman the Member for West Bristol (Colonel Stanley). He must have thoroughly enjoyed making his speech. Whether his right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) will be equally pleased when he comes to read it, I do not know, but the right hon. and gallant Gentleman who has just finished speaking, must have completely forgotten the arguments which were used earlier by his right hon. Friend. If I understand the right hon. and gallant Gentleman the Member for West Bristol there is nothing in this Bill except eyewash, whereas the right hon. Gentleman the Member for the Scottish Universities—and I took his sentence down—said that the Chancellor of the Exchequer in his speech failed to lay bare the "full enormity" of what was being done under this Measure. Later he said he was not sure whether his party would take it to a vote. [An HON MEMBERS: "Which party?"] The party opposite, or whatever party it is for which the right hon. Gentleman speaks. What did emerge quite clearly was that the right hon. Gentleman, who-normally chooses his language with some care and some regard to the meaning of words, was quite certain that this Bill was something more than eyewash, as the right hon. and gallant Gentleman the Member for West Bristol described it. It occurred to me that the right hon. Gentleman the Member for the Scottish Universities was rather "putting on an act"; that he had one eye on the City of London and, remembering what happened a few months ago, that he might possibly be afraid that the Conservatives would lose even the City of London, if they were unable to show, even for one evening, that the party to which I think I may claim he really belongs, was putting up a fight against the Socialist menace.

As the hon. Member for Rugby (Mr. W. J. Brown) said in a very humorous speech, the one real point of any substance which the right hon. Gentleman the Member for the Scottish Universities made—and I think it was also made by the right hon. and gallant Gentleman the Member for West Bristol—was that this Bill, and its passage through this House, will mean a loss of confidence on the part of other nations. On examination, it is clear how illogical this contention is. The other nations who are members of the sterling group, are in it either because they are members of the British Commonwealth of Nations or because they are very closely bound to us, in other directions. In every case the central bank, the institution of the country concerned, is now under national ownership. It strikes me as a curious argument that in those countries where, already, those banks are under national ownership, the fact that this country has come into line would be a source of fear and bewilderment.

The right hon. Gentleman the Member for the Scottish Universities, said that the part of the Bill which would create most controversy was Clause 4. That, undoubtedly, has been the case to-night. He asked what hidden power lurked behind the provisions of Clause 4—would it mean, for example, interference with the joint stock banks and the ratio of liquid assets and resources which they kept. A short answer is that of course that the Bank of England is now able to expand or contract the credit available, and that right will continue, and it seems to me it must continue, under national ownership. The Bank of England can now, by open market operations, expand or contract the credit available, and it is a power which is always exercised with restraint. When the Bank passes, under national ownership, there is no reason whatever why that power should not continue to be used with the same restraint.

If the Financial Secretary would allow me to interrupt, may I ask if it is not true that the Bank of England can determine the volume of cash in the commercial banks? Does the hon. Gentleman suggest that, in future, the ratio between the banks'cash and their deposits should be subject to direction by the Bank of England?

I do not altogether understand what the hon. Gentleman means, for the simple reason that what he states is now the fact and will continue to be the fact when this Bill becomes an Act of Parliament. [HON MEMBERS:"No."] Of course it is a fact. It always has been and always will be. It is quite obvious that the crux of this matter is to be found in Clause 4 (3) which states that the Bank—not the Treasury but the Bank—may, if it thinks necessary in the public interest, request information from and make recommendations to bankers. The initiative, in the first place, is with the Bank of England, and the Treasury will be guided, as my right hon. Friend the Chancellor of the Exchequer explained, by the views of the Governor and the Court of Directors. The right hon. Gentleman the Member for Scottish Universities asked whether, when this Bill becomes law, it will mean that the staff of the Bank of England will become civil servants. The answer is, "No." The Bank of England staff will remain as it now is, outside the framework of the civil service proper.

The hon. Member for Bath (Mr. Pitman), who has the distinction in this House of being a Bank of England stockholder, an ex-director of the Bank and one, I gather, who intends whatever happens, to hold on to the stock which he now possesses even when it it converted into Government stock, thought that the compensation which the Government intend to give to the holders of Bank stock was fair, but he went on to say—and I am afraid I did not follow him here—that though the compensation was fair in the short run, it was unfair in the long run. I presume he means by that, that if one looked forward to some time which I think will probably never arrive—certainly not in his lifetime nor mine—when there will be a breakdown of the assets in the Bank, the compensation then would not be fair. I take it that that is what the hon. Member has in mind. This question of compensation, of course, has been referred to by many speakers during the Debate, but I think my right hon. Friend the Chancellor of the Exchequer explained the matter very clearly in his opening speech. The compensation, as he said, is not to be taken as the kind of compensation which will be paid in other directions, as and when further industries are nationalised. It is only to be taken as applicable to the present Bank of England stock, because it is regarded, all round, as compensation that is fair and reasonable in the circumstances of the case.

Might I ask a question? The Chancellor of the Exchequer described this as a good bargain from the point of view of the Treasury. Does he mean that it has been subject to negotiation between the Chancellor of the Exchequer and the Bank of England?

In the sense in which I think the hon. Gentleman means "negotiation," the answer is "No." The position has been fixed at the present figure because this does, more or less, indicate what the present yield at the market price is.

What is the meaning, then, of the word "bargain"?

The point has been made over and over again during the Debate, that no credit has been given for the equity of the business, but this criticism pays very little attention to the facts of the case. It has long been the policy of the Bank, as has been pointed out by several speakers, including my right hon. Friend the Chancellor of the Exchequer himself, to stabilise dividends at 12 per cent. For the last 23 years at least dividends amounting to 12 per cent. per annum have been paid year by year to its stockholders. It cannot, therefore, be said, as some hon. Members have argued to-night, that there is any claim on the part of the stockholders to any distribution of the Bank's assets in addition to this. That view is confirmed by the market price, which we shall find, if we examine the Stock Exchange List, does give, and will give, at the rate of exchange from one stock to the other, the same yield as 3 per cent. perpetual stocks. The nearest Government stock to this, as the Chancellor of the Exchequer pointed out in his opening speech, is the Three per cent. Local Loans Stock. At no time have the stockholders, the holders of Bank of England stock, had the expectation either of bonuses or of any further distribution of the Bank's assets. Therefore, it is fair that the compensation which the Government are to pay should be calculated as it has been, and the basis of compensation proposed should be acceptable to all concerned.

Would the Minister be good enough to answer the question which I asked him earlier this evening? What is the amount of the Reserve Fund of the Bank of England?

The answer is that that question is quite irrelevant. The price to be paid, as my right hon. Friend the Chancellor of the Exchequer has said, and as I have now tried to amplify and repeat, has been based on the income from the present stock. The rate of interest which stockholders now get, is going to be continued at least until 1966, when the Government have the right, if so minded, to pay the stock off at par. What the reserves amount to is quite irrelevant to this matter. For one thing, the Bank of England is a private institution. It publishes no balance sheet. That is one of the charges levelled against it in many speeches up and down the country at Election times, and other times.

I do not think the question of reserves is irrelevant. As we know what the shareholders are to get out of this transaction, is it not right for the Commons of England to know what the Government are going to get out of it?

My right hon. and gallant Friend and Members of his party will be able to ask this question as and when we deal with this matter in Committee. The plain fact is that I am not in a position to give to the House to-night any figure which will indicate what the reserves standing in the books of the Bank of England are. That information, for the purposes of the Second Reading, is irrelevant. What is clear is that right hon. and hon. Gentlemen opposite appear to-night in a new role. Usually, they call upon the Government to practise economy in the expenditure of public money. To-night they appear to desire—I do not know why—that more money than is necessary, should be given to the stockholders. [HON MEMBERS:"No."] We are purchasing the stock of the Bank of England for a price which seems to most people fair and reasonable, and which gives to stockholders a fair return.

On a point of Order. Should I be in Order, Mr. Speaker, in moving the Adjournment of the Debate until such time as we know what the reserves of the Bank of England are, and whether there is a loss or a profit to the Government, or to the Bank of England?

Certainly not.

We have had a crop of maiden speeches to-night, most of them, as Members in all quarters of the House will agree, of an excellent quality. There were two on this side to which I should like to call special attention. One was from the hon. and gallant Member for Sudbury (Lieut.-Colonel Hamilton), and the other from my hon. Friend the Member for Kettering (Mr. Mitchison). Both these speeches showed an understanding of the realities of the situation, which right hon. and hon. Gentlemen opposite did not seem to grasp. I listened to most of the speeches to-night, and I wondered, from time to time, whether hon. Members opposite had really read the Measure and had realised what it seeks to do, because many of the speeches and many of the fears which they voiced were completely groundless.

Clause 4 seems to have attracted the fears of right hon. and hon. Gentlemen opposite more than any Clause in the Bill. This Clause provides for Treasury directions to the Bank, and gives legal form to what is, in actual fact, the relationship between the Treasury and the Bank. The Bank now does recognise that, in all matters of major policy, the Treasury has the last word, and it has loyally carried out this arrangement; decisions taken by the Treasury have been put into operation by the Bank. It is therefore a logical step that the relationship which has existed between the Treasury and the Bank, should be given something more than informal recognition, and should be put into statutory form, which while leaving the Bank as an independent chartered institution, should give the Treasury the ultimate responsibility for saying what the policy should be.

As my right hon. Friend said, directions can only be given after consultation with the Governor of the Bank, and that in itself is a safeguard against many of the fears which have been voiced here to-day. The day-to-day management will continue to be in the hands of the Bank, and responsibility for it will be left to the Court of Directors. The central monetary and financial authority will still be with the Treasury, but the Treasury, in consultation with the Bank, will be able to make Government policy effective in many directions. As my right hon. Friend the Chancellor indicated earlier, there will be an opportunity to consider in Committee some of the fears which have been voiced by hon. Members opposite. They seem to fear that as and when the Bank comes under public control the Government will be able to interfere in the day-to-day management of the joint stock banks, and that it will be possible for the Government of the day to interfere with the accounts of private individuals. That has not happened in other countries where there is a central bank under the control of the State and there is no reason to suppose it will happen here. Nevertheless, that fear exists, and if a form of words can be found, my right hon. Friend is willing to consider embodying an Amendment in the Bill when we reach the Committee stage in order to clarify the position.

This is the first of the Government's Nationalisation Measures. It marks an epoch in the life of the country. It is the first, and, to many people, one of the most crucial measures. We, on this side of the House, believe it is essential to make a start with the central financial machine of the country. [HON MEMBERS:"Why?"] For the simple reason that he who controls the purse, controls other things, too. We discovered that in 1931, when the party on this side of the House learned its lesson, a lesson we have never forgotten, namely, that those who control the financial policy of this country, can affect the life of a Government, however right that Government may be, and, can, on occasion, dictate to that Government. We think that is wrong, and that it is time that kind of thing was stopped. Therefore, on behalf of the Government, I ask to-night for the Second Reading of this Bill, knowing full well it will help this Government to implement the policy which they placed before the electors at the last Election and for which they secured such an overwhelming mandate.

We have just listened to what, I am sure, the majority of hon. Members hoped was going to be an illuminating speech. But the hon. Gentleman the Financial Secretary has made one of the most astounding statements we have ever heard in this House. He has come down to-night to inform us, towards the close of the Second Reading Debate on a Bill for the acquisition by this nation of the Bank of England, that the Government have not the faintest idea—and that he has no figures at all to give the House—of what is the bargain they have entered into with the Bank of England. He does not know, apparently, and certainly he has no information to give us, whether or not the taxpayers' money is being used to buy assets, or to incur liabilities on behalf of the Government. It is a most extraordinary thing, and it shows very little appreciation of the sense of the House, that we should be asked, on such information, to take such a momentous step as is proposed here to-night.

The argument put forward for the nationalisation of the Bank of England really amounts to nothing at all. I do not believe there is anybody on this side of the House who regards nationalisation as a party issue. I am perfectly prepared to say that again. I do not consider, and I do not think anybody else considers, that there is anything inherently wrong in the State running a business, if it can be established that it is more efficient to do so, than to run it by private enterprise. But there has been no evidence whatever to suggest that the State can run the Bank of England better than the present Governor and Board. It has been proved throughout its history that the Bank of England is a very efficiently run organisation. It has been proved that it has been run efficiently for the country and the people as a whole, as well as for its depositors, and for those who own the Bank of England, its shareholders. Nothing has been said to-day to suggest that it will be run any more efficiently for the future shareholders, namely, the taxpayers of this country, than it has been run in the past. It has been shown conclusively by many hon. Members that Government Departments have not hitherto shown any aptitude at all for running businesses efficiently. I see no reason why they should suddenly reverse the usual process, by undertaking what is admittedly a complicated business, in running the Bank of England more efficiently than it has been run in the past.

Reference has been made to a certain episode in 1931, and I think thereby the Government have very largely shown their hand. In 1931 they had to go to the banks and seek their advice as to how to run the finances of this country. What the right hon. Gentleman the Chancellor is now trying to do is to underwrite in advance his failure, to run the country next year. If by virtue of this Bill, which he is pressing through the House, he is able to ensure that he can order those who are competent to advise him as to the finances of this country to tender that advice, he will probably feel that his dignity will suffer less than if he has to go to them cap in hand and seek their advice, admitting his own failure to avoid the financial tribulations which are likely to come upon this country, as they came in 1931.

I agree very largely with what my right hon. and gallant Friend the Member for West Bristol (Colonel Stanley) said, that either this Bill means something, or it means nothing. No hon. Member opposite has yet been able to tell us which. We have succeeded in eliciting one thing which I believe has not previously been divulged as to the Government's intentions regarding nationalisation. It is that it is not proposed to make the employés of the Bank of England public servants. I confess that I did think at one time that was their only reason for bringing in the Bill, that they were afraid of a strike in Thread needle Street, but apparently their fears on that account have been overcome, and they are not going to make civil servants out of the Bank employés. But what are they going to do? I find it very difficult to foresee any object at all, except possibly the mere fact of being able to state that they have accomplished a measure of nationalisation in this country. But that, although it may give them a certain Socialist pride in their own achievement, will certainly give no benefit to the country as a whole.

We have heard several times to-day of the old phrase "As safe as the Bank of England. "I am quite sure that it is felt very largely in foreign countries that the reason why that phrase has grown into history is because, although Governments may come and Governments may go, and policies may change with changing Governments, the policy of the Bank of England has remained as a steady and progressive financial policy, guiding this country throughout its history and development. If the present Government or any other start monkeying about with financial policy, if they start changing their financial policy from year to year as Governments may change from year to year, that cannot achieve anything except a very grave and serious disruption of confidence in what still is, as it has been in the past, the financial centre of the world. It may well be that the right hon. Gentleman no longer wishes to see London the financial centre of the world. If that be so, he is going to sacrifice a very substantial income for the Budgets of the future. I most strongly and seriously object to the fact that we are asked to pass this nationalisation Bill without any sufficient reason, or even any reason or justification, being put forward for it, and above all, without any information whatever to show us, on what we are being asked to expend the taxpayers' money.

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Divide.

I hope I am not being indiscreet but, as a back bench Member of Parliament, I feel that I am entitled to ask the Financial Secretary, now that he has had time to find out the figures, whether he can give any answer to the

Some weeks ago, I asked the Chancellor to give the assets of the Bank of England, and he then replied that he would give the information on the Second Reading of the Bill. We are told to-night that we may have it on the Committee stage, but I ask the Chancellor to give that information now.

Answer.

It will suffice for now—[HON MEMBERS:"No!"] If hon. Members want the answer, I will give it; if not, we will take the vote. It will perhaps suffice for now if I say that, following the Second Reading, the Bill will go to a Select Committee, whose duty it will be to examine these things in the closest detail. When I said to-night that I was satisfied that it was a good bargain for the State, I intended to imply, and I do now say, that what the State is obtaining, by reason of taking over the Bank of England, is substantially greater than the total sum which is being paid in compensation.

rose—