GOVERNMENT AND BANK
By NOEL F. HALL THE nationalisation of the Bank of England is one of the issues selected by the Labour Party for submission to the electors. So much has changed since this was a burning topic in the early 'thirties that the pros and cons of nationalisation are much more elusive than in pre-war days. The Bank is no longer the custodian of a quasi-automatic gold standard, and thus responsible for taking decisions with far-reaching consequences in both our internal and our external affairs. Exchange Equalisation account techniques, at present replaced by exchange control, are now at the centre of our external currency arrangements. Special schemes must necessarily be maintained for managing for the time being our exchanges with those countries which have been occupied Allies, with our ex-enemies and also with the large number of neutral suppliers who, during the stress of war, have accepted large sums of sterling in payment for essential supplies. These schemes will have to be fitted in with the proposals put forward by the experts at the Bretton Woods Con- ference. All this makes it inevitable that the Government of the day, through the Treasury, must remain the policy-making and directing authority, the Bank of England acting as its agent and one of the advisers to the Chancellor and Cabinet. There can in the foreseeable future be no substantial secrets of international financial affairs hidden from the Chancellor of the Exchequer and his experts. The present Governor of the Bank of England will not find it necessary to adopt aliases when taking a holiday abroad. If he and his staff travel abroad on the international financial business of the country, they will go, so far as policy is concerned, as much under instruction as any other official mission. Only on technical matters will they speak and act as principals. It will not be possible to carry on the business of government or the affairs of the Bank of England itself on any other basis.
Changes of equal importance and significance have taken place in the position and responsibilities of the Bank in the domestic field. In past controversies the Bank was frequently blamed for short- comings in financial matters which were largely due to deficiencies in the number and variety of our institutions and to the policies of the Government of the day. The Bank embarked, for example, in the late 'twenties, on salvage work for depressed industries, and took into its service persons to assist it in this task. The proposed future policy for special areas and industrial dispersion, and the new Finance for Industry Corporation, will presumably rid the Bank of further direct responsibilities in this field. But as the banking agent for the•Governrnent it will have greatly extended tasks, which will require a high degree of expert knowledge and technical skill. The great extension of the social services will involve the amassing and investing, through the Commissioners for the National Debt, of very large sums of money indeed. It will be for the Bank to ensure that the inflow and outflow of these funds do not disturb unnecessarily, and perhaps on occasion dangerously, the gilt-edged and other security markets. The Treasury Deposit Receipts will have to be
replaced by some less negative form of credit instrument, and the financial system will have to be cleared, as promptly and smoothly as possible, of past Government obligations, to liberate funds and experienced man-power for new investments and new enterprises needed both for internal development and for the export drive.
In performing these tasks on behalf of the Government, the Chief Cashier of the Bank has to cope with the constantly changing detail of current financial facts. These cannot be handled by Parliamentary debate nor by reference to higher authority. To enable him to deal with them the Bank needs to remain in the closest possible contact with all financial institutions in London, British and foreign alike, which have short funds to invest and future obligations to meet. If cheap money is to be maintained, all idle balances must be collected and kept at work. This will not happen if there are any doubts or fears as to the terms upon which such money can be released as and when required to meet the legitimate day-to-day obligations of its owners. To arrange that this shall always be the case is the primary responsibility of the Bank of England, and the .degree to which it holds the confidence of those with Short money to put to -work will have an important bearing on the cost at which the Government can borrow and on the capacity of the City of London to sell financial services throughout the world, these services making an important, even though invisible, part of our exports.
As banking agent for the Government, the Bank of England must necessarily remain a monopoly ; whether it is anti-social or totali- tarian is a matter of opinion. It is claimed that its work would be better done if the Governor were to be appointed by the Chancellor of the Exchequer and if the Bank were to become in some sense a department of the Treasury. At the same time, proposals are put forward to give civil servants wider opportunities of obtaining business knowledge and experience. This is an admission that the civil service, as at present constituted, could not adequately dis- charge the duties of so specialised and technical a body as the Bank of England. What must be contemplated is some new method of nationalisation designed to avoid bureaucratisation which appears when executives have to act in the name of a Minister of the Crown, and when the details of their activities are subject to Parliamentary question.
Technical matters and details of organisation are not suscePtible of decision in a general election. But if there is a widely held suspicion that our financial affairs are managed by a wink and a nod by those in the know, to the disadvantage of those not in the know, this may make formal changes necessary in order to confirm public confidence in the relationship between Bank and Treasury which has worked singularly successfully during the war. This is an issue that can suitably be put before the electors. Should the decision at the polls reveal public confidence in existing arrangements, opponents of nationalisation would do well to fortify that confidence. More information about the Bank and its activities and its relations with the State could, without damage to our affairs, be made available. Members of the Bank staff could without impro- priety be given more latitude in discussing matters of public concern and in disclosing the mind and day-to-day achievements of the Bank. If that happened, the public at large would probably quickly lose interest in the affairs of the Bank, as many of its activities are today highly technical in character, and information about them would be dull to the point of boredom. But if the electors do manifest a lack a confidence in the existing arrangements and formal changes are made, it will be well to realise that such changes will not materially alter the day-to-day work of the Bank. There need be no panic rush from sterling. The timorous need not sell Government securi- ties and buy diamonds, to be carried about on the person in a body- belt. It is unlikely that the Governor and Directors of a nationalised Bank will be blund by any stronger obligation than the present Declaration to which they all subscribe and to whiCh, indeed, the civil service is pledged in somewhat less graceful language. Each Director today undertakes "faithfully and honestly to demean him- self according to his skill and understanding" and "to be indifferent and equal to all manner of persons." It has yet to be proved that the undertaking is violated.
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