Britain Announces End Of Credit Squeeze

Press, Volume XCVII, Issue 28630, 5 July 1958, Page 13

Britain Announces End Of Credit Squeeze

(N.Z. Press Association—Copyright) (Rec. 8 p.m.) LONDON, July 4. The Chancellor of the Exchequer, Mr Heathcoat Amory, announced the end of the credit squeeze in the House of Commons yesterday. The bank overdraft limit imposed last September will be lifted.

The “News Chronicle” said that this meant that bank managers could be asked at once for a loan to buy a house, a car, a television set —or anything else. The manager would be able to decide for himself the client’s “credit worthiness.”

The control of capital issues by the z Capital Issues Committee will also be eased. This means that t the limit on capital issues before the committee’s permission is required has been raised from £lO,OOO to £50,000. But the Government was determined to keep strict control on cash to finance hire purchase, the "News Chroncile” said./ So it was plugging a loophole by which hire purchase companies raised capital without the permission of the Capital Issues Committee.

The "dodge” was to buy companies whose assets consisted mainly of cash and pay for them by the issue of shares which were then sold in the market This would no longer be possible.

“Symbolic Importance” The "Financial Times’’ said in a leading article that the change had considerable symbolic importance. It was the first time since 1955 that the banks had neither been asked to keep their loans down to a snecified limit nor circularised afresh on the urgent need for severe restraint. Perhaps the best thing about the new system was the way it was announced, the newspaper said. Strictly speaking, there was no connexion between the two sets of measures. But the announcement of a new anti-inflationary device at the same time as the relaxation of the credit squeeze and in advance of the Radcliffe report should strengthen confidence in sterling at no cost to the internal economy, the "Financial Times” said.

In psychological terms, it had made a larger credit relaxation possible than would otherwise have been the case. “Yesterday’s measures show a flair and sense of timing that have been seen rarely in postwar economic policy, the leading article said.

“The Times” said in a leading article that the changes announced by the Chancellor combined further steps to relax restrictions and encourage investment with a provisional move towards a stronger system of central banking. The Chancellor had taken the view that restricting banks on the total level of their advances was damaging to good banking and thus to the public interest. But the newspaper warned that this was not the signal for relaxation without limit.