New Clause. — (Repeal of s. 36 of 8 and 9 Geo. V, c. 15.)

Part of Orders of the Day — Finance Bill. – in the House of Commons on 8th July 1924.

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Photo of Mr Arthur Samuel Mr Arthur Samuel , Farnham

I have put down an Amendment which goes further than this Clause, and I must therefore support my hon. Friend opposite. I go so far as to ask that the Stamp Duty which is chargeable under the Stamp Act, 1891, should be extinguished. I do not ask for that because I want the 2d. to be saved to the taxpayer. I want it for a far wider purpose than that. I want to help us to get back to a free export market for gold. One of the steps towards that end, and I think I have explained it on many occasions, is the increased use of the cheque. The cheque was invented originally as a substitute for the wasteful bank-note. Cheque currency is one of the most wonderfully useful instruments of finance that have ever been invented, and the clog of a duty of ld. or 2d. on cheques operates towards preventing the extension of the use of cheque currency.

We have got in this country a great and popular use of cheque currency. France is trying to get it, and the United States and Germany are trying to get it. I do not agree with my hon. Friends opposite in saying that there is a greater cheque currency in the United States. They do not know how to handle a cheque currency in the United States in any way comparable to the way in which we handle it, and Germany, France and the United States would do anything they could to get their system of finance on a similar basis of cheque currency. While we have this splendid system, what we are now doing is, for this trumpery £3,000,000 a year, putting a clog on the use of cheques. People are disinclined, I do not know why, to draw small cheques now and spend the two pennies per cheque. They prefer to draw large cheques and to have a large number of notes immobile in a drawer or in their pockets. It is a stupid thing to have much money in hand liquid in this way. I avoid carrying much money about me. If I have it I spend it. It burns a hole in my pocket, and the man who draws more notes than he wants, just to save the 2d. on the cheque, will fritter it away or spend more than he requires.

The Chancellor of the Exchequer gets£3,000,000, and, because people will not use cheques on account of the 2d., he may get a few pounds for postal orders. But that is all the advantage which he gets. The disadvantage is that people carry too many notes in their pockets while, if they left some of them in the bank, and drew out their payments by cheque, as they were wanted, those same notes would be available to be lent, and if they were left in larger volume in the banks there would be a larger amount of money to lend, and money would be cheaper. There are in issue now £290,000,000 sterling currency notes, and, if you add the Bank of England notes, you have an issue of something like £407,000,000. If you could induce people to take out fewer notes and, instead, use cheques, by taking the 2d. stamps off, you would probably leave a hundred millions more in the coffers of the various banks, and, in the result, you would lose £2,000,000 or £3,000,000 stamp duty, but you would probably, owing to the banks having more money to lend, bring down the price of money and be able to borrow on your Treasury Bills more cheaply, and very likely you might get back your£3,000,000 quite easily by the smaller interest you would have to pay for the Treasury Bills.

But I would go a little further. The more currency notes that you have in existence, because people draw a larger volume of currency notes to avoid paying the 2d. on cheques, the larger amount of gold cover you have got to have. That is a block on our road towards a free export market in gold. If you have not to keep so much gold to cover these notes, because you are using cheques, you have gone a step towards that very desirable goal. If you do not use notes but cheques, the cheques will be drawn by a man on his own credit account, and they provide their own fiduciary cover. I am not pleading that this duty of 2d. should be taken off cheques because I want to save the taxpayers' pockets. It is because I want to take away what is a stumbling block on our road towards a free export market in gold, that I think that the Chancellor of the Exchequer ought to look at the matter from the wider point of view, rather than from the point of view of revenue.