BRITISH LENDING POLICY

New Zealand Herald, Volume LXXIII, Issue 22390, 9 April 1936, Page 10

BRITISH LENDING POLICY

Light has been thrown on Britain's foreign lending policy, by the Chancellor of the Exchequer, in answering a question in the House of Commons. At the request of Mr. Chamberlain, the City of London has refrained, except with his approval, from issuing overseas loans ever since Britain suspended the gold standard in September, 1931. The technical reason for the suspension was that Britain had been borrowing short-term money and lending on long-term. When the Labour Government's profligate spending disturbed confidence, foreign lenders recalled their London balances, while London could not call in her long-term loans and was caught 'short. Since the more or less automatic correctives applied by the gold standard had not availed to save the exchange situation, there was the greater need to control it when the gold regulator was removed. The Chancellor has been armed with the Exchange Equalisation Fund and also with the informal restraint he has exercised on foreign lending, a restraint loyally observed and supported by the City. This voluntary arrangement ia now to receive more formal recognition by the appointment of an expert committee to advise the Chancellor on applications for foreign loans. Mr. Chamberlain explains that this move . does not involve any radical alteration of the present policy of restriction. The considerations the committee is to take into account in making recommendations do, however, give a valuable indication of policy. Its first care will be to guard the stability of the exchanges, "to protect sterling against sudden and dislocating strains." Next it is to consider the effect of loans on exports. That is, British financial bread is no longer to be cast on the waters; like the tariff, it is to be used to nourish British industry. There is even a hint of sterling diplomacy being exercised in foreign economic spheres. Finally the committee has to see that domestic capital requirements are not sacrificed to overseas demand*.