Small Businesses (Credit Restrictions)

Part of the debate – in the House of Commons at 12:00 am on 28th July 1955.

Alert me about debates like this

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth 12:00 am, 28th July 1955

Most certainly. If any hon. Gentleman has any evidence of widespread hardship to small businesses, I will of course read it with care, and I will certainly bring it to the attention of my right hon. Friend. That is a promise which I mean quite sincerely.

I have no doubt that small businesses have had their share in the general increase of credit which has taken place over the last few months, and it may well be right that some of that increase should now be reduced. As I said a few moments ago, it is the marginal credit, whether given to a small or a large trader, that must now be pruned. In the new situation the credit squeeze is likely to affect all recipients of credit but there is no reason to believe that the banks will, in fact, be harsher to small businesses than to larger businesses.

In conclusion, I wish to say a few words about the present position in view of what was said by the hon. Gentleman opposite. I quite agree with him that ever since the war there has been a tendency for us as a nation to live beyond our means. I think he will agree that some years have been better than others. For example, 1948 and 1950 were both better years. I am bound to say that in 1950 this was partly because of a rather severe running down of our stocks before the Korean war, but that is history and I do not propose to dwell on it now.

I think it fair to say that 1953 was a very much better year, but I wish to make it perfectly plain that we are not satisfied at the moment with the state of the United Kingdom balance as a whole and that we are determined to see that the gold and dollar reserves are built up. We are deeply concerned at the present time both about the United Kingdom balance as a whole and also about the size and the trend of the gold and dollar reserves.

I think it only fair to remember that since the war there has been a number of big humps over which the British economy has had to go. The first was after 1945, when we had the job of re-equipping our basic industries and regaining our export markets. Then, in 1950, there was the Korean War, and I should be the very last to deny the enormous extra burden that our economy had to carry as a result of rearmament following that war. I can remember a friend of mine—I think I can certainly call him that; Mr. Crosland, in the last Parliament—making a speech in which he pointed out how enormously more difficult things were going to be for the Chancellor of the day, to whichever party he might belong, as the result of the Korean War.

Again, after the General Election of 1951, the present Government decided, as, I think, quite rightly, that we must step up the number of houses built each year and the amount of our resources to be devoted to housing. That meant a considerable extra strain. Finally, during this last year, the economy has responded very well indeed to the incentives which my right hon. Friend has given in three consecutive Budgets to investment in productive industry. But there can be no doubt that the very sharp upturn in productive investment, on top of a sharply rising level of consumption for more than two years, has led us once again to live beyond our means as a nation.

As I tried to explain to the House the other night in winding-up the debate on the economic situation, we strongly believe, as a Government, that it is important for our competitive position in the world that we should have a high and rising level of investment in productive industry. But it is also clear that, as a trading nation, we cannot afford inflation, and it is no good our trying to do too much at once and trying to live beyond our means.

Several hon. Members on both sides of the House have pointed out to me that, when I said the other night that we were tending to try to do too much at once, I was in fact only echoing very similar words used by the right hon. Gentleman the Leader of the Opposition at the time of the economic crisis of 1947. Credit restriction is only one part of my right hon. Friend's economic policy, but it is an important part.

The right hon. Member for Leeds, South (Mr. Gaitskell) asked the other night exactly what was the theory of our credit policy and how it worked out. In the first place, by raising the Bank Rate, we increase the cost of carrying stocks of goods against borrowed money, and, therefore, a rise in the Bank Rate not only helps confidence but also helps to prune our import bill. Then, again, I am sure that by our policy of ceasing to peg the Treasury bill rates, we have been able to grasp the credit base more firmly. I believe that the rise in Treasury bill rates over the last few months, about which I spoke on Tuesday, has had something to do with the fall in deposits.

Finally, and I want to be absolutely frank about this, we have taken on the task of grappling with bank advances, because, quite definitely, the present figure is not satisfactory. We intend to continue the orthodox monetary controls, and, at the same time, my right hon. Friend has asked the banks to make a definite reduction in their advances. We believe that this credit policy will make an important contribution towards getting inflation out of our system.