Monetary System

Part of the debate – in the House of Commons at 12:00 am on 26 November 1959.

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Photo of Mr Harold Wilson Mr Harold Wilson , Huyton 12:00, 26 November 1959

The Chancellor will be surprised, and perhaps even flattered, to know that I study his speeches with more care than perhaps he does himself. We know how modest he is. Only two or three weeks ago, I quoted one of his Budget speeches, with which he immediately disagreed, not realising the source from which I was quoting. I can assure him that his speeches are my favourite bedtime reading, and that is why I never get enough sleep. I also assure him that I was not misrepresenting the view which he put across. I do not say that he has ever said that this monetary policy alone would solve all problems. Of course, I have not said that, but what the Chancellor has done, though in not quite so picturesque a fashion as his predecessor, is to suggest that the rate of interest and control over the supply of money were at the root of this problem. I will give some quotations to bear this out. First, perhaps the right hon. Gentleman will not mind this somewhat long quotation from paragraph 451 of the Radcliffe Committee's Report: When we confined our questions strictly to the direct effect of interest rate changes in making business men alter their decisions to buy or sell goods and services, we were met by general scepticism. The insignificance of interest changes in relation to other costs and to the risks involved was emphasised to us again and again, in relation not only to fixed investment but also to stocks of commodities. We were told also how taxation in effect halves the interest cost; this belief has evidently bitten so deeply into business consciousness that it may well weaken the force of interest rate changes even when it is not strictly applicable. We heard from the executive heads or financial directors of several great industrial firms which are themselves responsible for about one-eighth of the gross fixed investment within manufacturing industry in the United Kingdom that in their plans for capital development they assume a more or less steady interest charge and would not alter their existing plans even if they thought somewhat higher rates had come to stay. The Committee went on to say that, even when they took evidence about smaller firms, and from experienced bank managers about the position of smaller firms, 'Here also we were met with general scepticism.