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Monetary And Credit Policy

Volume 645: debated on Tuesday 25 July 1961

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I now come to measures designed to affect the private sector here at home. The Bank of England have called upon the clearing banks for further special deposits. In the case of the London clearing banks the call is for 1 per cent., of which half is to be deposited by 16th August and the balance by 20th September, 1961. In the case of the Scottish banks the call is for a percentage equal to one-half of that called for from the London clearing banks. In making this call the Governor of the Bank of England has made it clear that it is the intention that the impact should fall on advances.

The banks have been asked that, when reviewing existing commitments or considering new lending, they should be particularly severe on proposals related to personal consumption, including finance for hire purchase, as well as finance for speculative building, property development, or for other speculative purposes, so that all possible room should be left for the finance vitally needed for exports and productive industry. I am sure that, despite the difficulties, the clearing and Scottish banks will as usual give their full co-operation.

The Governor is also drawing the attention of the other United Kingdom banks, including the foreign and overseas banks and the accepting houses, to the action taken with the clearing and Scottish banks. He will see the British Insurance Association and ask that the insurance companies should observe a similar policy in their lending. I look to these institutions, also, to give me their support. It is not my intention to force a down-turn of private investment in productive industry. I am not pro- posing any change in the initial or investment allowances. At the same time, the demands made by private investment, particularly on the building industry, are growing rapidly and it is right that some less essential forms of development should be postponed. I do not rule out further measures if they appear necessary.

The Government do not intend to alter the present hire-purchase restrictions.