CONDITIONS IN BRITAIN

Waikato Times, Volume 116, Issue 19458, 24 December 1934, Page 9

CONDITIONS IN BRITAIN

A COMPREHENSIVE SURVEY BY CHANCELLOR OF EXCHEQUER. SIGNS OF DEFINITE IMPROVEMENT (Omcial Wireless.) RUGBY, December 20. The Chancellor of the Exchequer, Mr Neville Chamberlain, In the House of Commons, In a debate on the adjournment for the Christmas recess, gave an Interesting review dealing with the spreading Influence of cheap money. He referred in the flrst place to the saving In Interest effected by •the conversion of loans, which resulted in the saving of £37,000,000 annually in interest on the national debt. Following upon that was the consequent reduction in the rate of interest on short money, and, although that was not of a permanent character yet, it was helping the finances. They had been able to reduce the interest costs on the national debt 'by something like 20 per cent since 1931. That was a considerable alleviation of the country’s burdens, but it did not stop there. ' , 1 The heavy fall in Interest rates in London affected- other parts of the Empire. There had been a number of conversions by the Dominions, and in particular Australia had’ been able to effect some very important conversions of her debt, benefiting the finances of Australia and increasing her purchasing power, which was of benefit to Britain. Again, new loans were being l’aised in the colonies on practically the same basis as they could be raised here for the British Government., '. The colonies had thus fully shared in the advantages. Help to Local Authorities. The same applied also to the borrowing by local authorities. Some of the larger ' authorities had raised money at 3 per cent, and smaller authorities had been able to borrow from the local fund at from 33 per oent. Those were nOn-permanent loans.' Long-term borrowers again were able to obtain loans at something like one-third cheaper than at any time since the war. . That had undoubtedly been of very great advantage. As for industrial borrowers, they had been able to convert something like £100,000,000 since the National Government look office, resulting in a saving to them of about £1,000,000 annually.. . Effect of Cheap Money. Dealing‘with the effect Of cheap money in the industrial field, Mr Chamberlain referred to the work of the bankers. An industrial development company had been formed largely at the instigation and with the assistance of the Bank of England for financing large Industrial corporations after a proper examination • of> their prospectus and that of their credits. It was designed to provide medium term loans and smaller amounts to small firms. . . Regarding the situation in Lanca- j shire, which had been raised during tiie debate, he agreed that a good deal of the trouble arose out of the financial chaos during the 1920-21 inflationary boom. Its lesson was that they should not repeat it in attempting measures which would bring other parts of the country into the same condition. Stabilising Currency. Mr Chamberlain dealt with the suggestion for attempting to stabilise values between the pound and the dollar here. He said the question was that of the level at which stabilisation should be effected. Stabilisation on a common international standard currency would be very helpful. “We all hope that it may be for the best in all interests. .The levels of the currency in the countries of the Empire and those countries linked with sterling remained very stable for three years, and the exchange of goods and trade showed a very gratifying increase at a time when international trade generally was inclined to shrink.” At present sterling had on one side a gold block and on the oilier the dollar, also on the gold standard. The real difficulty was that the dollar and the franc were not in harmonious relationship. In consequenoe of this disharmony the pound, which stood between the two, was dear in terms of dollars, but not so dear in terms of francs. The present freedom to move in either direction and thus achieve a fairly stable position for the pound, would be lost if they had stabilisation. An attempt to stabilise while disharmony existed would result In a position where they had to go off gold or follow a policy of inflation. In the present circumstances they could not afford the risk involved in stabilisation, and thus rob (Continued In next column.)

themselves of the 'freedom to move the pound as required. Government and Bank. Passing on to the relations between the Government and 'the Bank of England, Mr Chamberlain accepted the view that the-ultimate responsibility' for the country’s monetary policy must lie with the Government, and said they were not on the gold standard. The relationship between the Treasury and the bank must be closer than ever. Indeed, the whole management of sterling was discussed continually between representatives of the Treasury and the bank. On this question, however, he called ■attention to the generally accepted resolution at Genoa in 1922, that banks —especially the banks of issue—should be free from political pressure, and be 'conducted on lines of prudent finance. The Financial Policy. With regard to the financial policy generally, Mr Chamberlain said it had not changed in any material aspect since, on behalf of the Empire delegates, it was declared at the London conference. lie believed that if they continued to pursue Hie policy laid down at the conclusion of that conference it would continue to produce good results.