‘MINUTES OF EVIDENCE. 287 ‘4 December, 1990.] Profesor A. T. Bowser and Mr. Coun @. Cram. [ontinved. income of persons below the income tax limit, and ‘not wage arners, I'am not aware of any possibility of extimating eithor the change of numbers or the hango in their precumable incomes over four years ‘That wives another point of doubt as to the exact turn of tho percentages. T am sorry always to. be fomphaising the inaceuracy of the figures, but it ust be agreed that the Committee must only report fn that range of accuracy which is evtablished. 9029. Mr. Bevin: Ts that firare £1,025 million tered at all os the resalt of the ether changes due fo doathe?—Yee, I have altered it as a result of Studying the total of Schedule D in 1998 as against sat. £023. Chairman: What figure did you get?—A tery slight difference—€1,916 million. My main Alteration was on this question of not income from tverseas. There, T think, T have not paid attontion to the increase of money received ‘rough Govern ‘ment payments, but whether that is germane to any- thing ‘that the’ Committeo ie thinking of, I do not now. (Mr. Clark): The diference. in’ the wage tstimates between £1,720 million and £1,680 million oes depend mainly on whether you take the 5 per tent. rise in the insured population or the 3 per feat. riee in the total population ‘of working age (Profesor Bowley): ‘May T say, finally, that i appears to me That one gets a certain consistency Between 1924 and 109% in these estimates. If there Tad been very Tittle profit on export, and @ moderate profit on home-produced goods, one would arrive at the conclusion that the growth of income betwoon 1924 and 1928 was very much on the lines of the figures of Table'©. T think the whole thing hangs ‘together and is comistont with that kind of hrypothesie, ‘9024. Then the real trouble is that considerabl section of our industries ig) not, making profit? (Mr. Clark): And it Bappens to be a section ahich employe very large numbers that Se to say, a lot of ithe very big trades, which include industries ‘making very emall profits, ‘9025. Unless any other members of the Committee hhave questions to put to Professor Bowley and Mr. Clark, it only remains for us to thank you for coming. We are much obliged to you. Have you made all the comments by -way of criticism that scour "to you, Profesor” Bowley?—(DProfessor Bowley): Yes. 1 undorctand that the exact detail ‘of all the tabies is not important. T have confined Inyself to the more general figures 9028. Ar. Brand: Tt is a very common statement ‘that a largo part of our suffering is duo to our high wage bill compared with other’ countries.” Would ‘you say those figures ‘reflected that?—We have not ot before us the evidence about other countries. I ‘Nould imagine that the dificalty of exporting ie due fo circumstances in other countries, and that a large dlificulty im FORTY-EIGHTH DAY. Wednesday, 18th February, 1931. Puneet ‘The Rt. Hon. LORD MACMILLAN, Chairman, Mr. ERNEST BEVIN. The Rt. Hon. LORD BRADBURY, G.C.B. | ‘The Hon, It. H. BRAND, C.M.S. Profemor T. E. GREGORY. D.Se. Mr. J. M, KEYNES, CB. Mr. LENNOX B. LEE. Mr. CECIL, LUBBOCK. Mr J. T. WALTON NEWBOLD. Mr. J) FRATER TAYLOR, Mr ALA. G. TULLOCH, Sir FREDERICK: LEITH-ROSS, K.CM.G., OB Mr. G. ISMAY, Secretary, Tho Right Hon. Mowzscu Couusr Noxotax, D-8.0., Gorernor of tho Bank of England, and Sir W. ‘Gey Gnaxer, G.B. 9027, Chairman: This Meeting of the Committee thas boon called for tho purpose of further discussion ‘vith the Governor of the Bank of England and cor- {tain of his colleagues on one or two topics on which it is desirable that our evidence should be amplified There were also some matters upon which we have not yet received evidence which it is dasirable to corer before we proceed to the completion of our Report. Tn particular, realising as wo do that tho practical end’ of our Heport is to make soggestions ‘whereby the financial system of this country, and indeed of the world, might subserve the recovery of industrial prosperity, we are anxious to have further evidence from the Bank of Bngland with regard to the efforts which ave know that they have recently heen making in. that direction. This morning we have the advantage of the presence of the Governor ‘of the Bank once more, and with him Sir Guy Granet, who has been particularly associated with thir aspect of the Bank’ work. We propace to dis- ‘ous: with the Governor and Sir Guy Granct the ex 8081 @) ., called and oxamined. perience of the Bank in relation to the Bankers! Industrial Development Company Ltd. T understand that Sir Guy is fully conversant with the details of this matter and will be able to assist us there, and possibly the Governor would wish to add some general Sbecrvations upon tho poliey of this development. T think, Mr. Governor I might ask you this general question fist of all. ‘The Bank has, T have Fo doubt, realised. the very dificult times through which industry is passing just naw in this country, find it has boon as an outcome of that realisation that the Bank has addressed itself to the question of how finance, represented by banking interests and particularly by the Bank of England, could best fssist in the process of recorery. Would that be 3 fair statomont of the genoral outlook of the Bank? (ar. Norman): 1 think that would explain ve setting up of this company. ‘9028. Perhaps you would tell us, Sir Guy, what were the general lines that were indicated to” yo that you should follow when you were approached tr288 18 February, 1981.) "The Right Hon. Movrscw Cou Nomuax, D-8.0., COMMITTEE ON FINANCE AND INDUSTRY. [Continwed, ‘and Sir W. Gor Gnaxer, GB. ith this project?—(Sir Guy Granet): Ido not really Femomber that. The idea was, as far as T can recollect, that ihe Bankers! Industrial Develop Company was formed as an instrament in abmorsal times for dealing with finance in respect of industry hhaving rogard tothe fact that, the times. be abnormal, it was dificult for the ordinary issuing hhoase or financial ageney to find the money. ‘9020. Could you give ws ome sort of account of ‘what you have beon doing, something Tike a Chai Imai gives at general meeting of his company ; he ‘ells the shareholders who aro interestod im it what it has been doing and what progress has boon made? Perhaps 1 had better, for th plain the constitation of the Development Company. That is a company which was brought into being by the efforts of the Governor Gof tho Bank, and it has a capital of 6,000,000. Tt ‘private’ company and the 6,000,000 is. divided into two classes of shares; #1,500,000 are subseribed by practically all the Doposit Banks and Merchant Bankers and Finance Houses of the country and 1,600,000 by the Bank of England, ‘There is a pro- vislon, first, that the life of the company ix ta be for fire sears only, Tt can be prolonged by pecial Resolution, but T take it that that provision ie iui portant, because it acems to indicate what wae 1 {he Governor's mind, namely, that this ‘yas a ten porary creation to deal with an abnormal situation ‘The other point about its constitution is that the capital, though it is for ‘a nominal amount of ££6,000,000, cannot bo ealled up to the extent of more ‘than 25 per cent., except in the event of liquidation, fand that the eapital which Ie eubecribed by the Bank GF England is put behind the other capital; that i to aay, the whole of the £1,500,000 subscribed by the Bank of Bngland has to be paid up before the est of the subscribers can be called ‘upon to pay Anything in excess of that 25 per cent. So that ‘the Bank of England has taken ‘aot ouly very sub: om but ‘2030. Yes, I follow that—Then the Board of the company cousists of tix gentlemen, with the Govesdcr ‘a Chairman. ‘The other five are Baron Schréder of Schrders, Mr. Peacock of Barings, Mr. Wage of Hilbert Wang, Mr. Bruce Gardner and myself, ME, Bruce Gardner is the Managing Director of the Securities Management Trust, which is a ereation of the Bank of England, It is'an organisation which ‘the Bank created in ordor to enable it to deal with problome arising out of its connection with ‘the Tationalisation of industry, and it has the advantage ‘of having on its organisation experts on law, labour, ndustry and economics, s0 that itis very well equipped to deal with ail industrial problems, and Mr. Bruce’ Gardner in’ his capacity ‘of Managing Director of the Securities Management Trust is able to give us the beneiit of the proseneo and the work of all those gentlemen af the Securities Management ‘Trust, from which we have derived great advantage 9081. When did this Securities Management Trust ‘come into existence?-—About two years ago. (Mr Norman): Th the latter part of 1099, 9092, Was that the first movement that was made in this direction of having, %0 to speak, a co ‘operative eouncil?—(Sir Guy Granet): 1 think 0, ‘ut that was before my time. T cannot speak at ‘to that, except from hearsay. I cannot give definite evidence, 9088, As regards the Bankers! Industrial Dovelop- ‘ment Company, its purpose and policy would, I suppose, he set out in ite Memorandum in the usual sway? Yes. 909. T have » quotation from it here.—Might 1 say a little more about that, just to show you how t works? 2005. Please do—T will nob be long, T have gen you the Bourd, "Mow of ‘those gentiemon havo an Alternate whom they dasignate to do the work for them. The ‘Governor has’ designated me as. Bie Alternate and, im that capacity, T take his plage ia the Chair at the moctinge. ‘The other alternates are Major ‘Pam for Baron Schroder, Mr. ‘Nigel Cumpe wil for Mr. Wagg, and Mr. Keefor for Mr Pesca As a matior of fact, the Board ‘which rogulsly works is composed of Mr. Peacock, Major Pam, Mr Keefer, Mr. Nigel Camptol, Mr. Bruce. Gardaer tnd myself” So" that. there ‘are. txo. mombers of the Tard and four alternates. We ‘mock. every eek regularly, but over and shove that we have ie Formal’ meetings and, of course, we. are. in” dally touch, not-only with one ‘ancther” uty T_ think T fan say, with some industrialins or other. Then, a Fegards the purpose of tho company, that ‘war ale vertised, and Thad better quote it) ‘The purpa tnd “policy” of the company. is To recive, aa foneider schemes for the reorganisation and Fe equipment of the basic Industrie of the county Shen browght forward from within. the. partiulat industry, and, if approved, to procure she sapaly Gf the necessary fnancial support for carrying om the scheme,” "So that the position te that wa have fot, not to suggest ourteleer what industry ould be grouped, or on what lines they should ho groupe ‘but to wait ontil something, happens. OF sour, ‘has is the theory; aa'a matter of fact, one has %0 doa good deal of work by conversation and inte course’ apd co on.” "We do not suggest bat We discuss things before they come ap to us in the form of a schome, and that goes on all the time: Ta theory, we caanot. do anything, excopt recite something’ which {a submitted #0 us ‘9096. The initiative is supposed to come from the industey?--Yer—and more than supposed T venture to think i ought. Th would ben dresdfel. Ching if industry thowght thae horo was © body of bankers or economists who were gring to tell industry NOW they ought to be organised; that would at once set their bration wp- And, besiden, cbviowly i oubht to. come from the industry. Wo have nat Iewomfedge, “You asked. mo, ‘with reference the company, whether, in my opinion, the company had frtitad ite exintonce. ‘That ix very ill great deal of good and, in order. to. a” that, T. would ost Tke to. "point out. the sort of Aificultion that we have had to deal with. First of fll, apart from the fact that we cannot product fchemes ourselves, when we do get a scheme, bvionsly ‘that scheme has got to be very carefully investigated, not only generally, but from the pol of view of detail, costings and’ so on. The ‘of, 's. sshome in’ really very oftan the costing ‘whether, in point of fact, if vow got ® certain groupe ing, you aro going to be able to effect economies it Droduetion. That” takse “a long. time to hed properly, and T want you to realise that we ot got a whole group of experts whom we can Pu ‘on to schemer so that we can be examining three oF four schemes at one time; we have got to do them tone by one. Andther diffculty that ‘we have found, nd in roeard to which T think we have done some food, inthis. When we began we. got various hemos, expecially in the Steel Tndustey, for putting ‘ompanier together and so on, and some of them: feemed pretty good, but we had nothing whatever to show us whether, if we found money for a scheme. of rationalisation in ome place, we were not really foing to do harm somewhere cls. Wo had not a Dicture before ‘us. of the Tines on which the Todustry should be reorzanised in this country wo wore entirely in the dark. That Apparent to us very soon and, as a resilt, we iinecting of persone representative of the Principal distriets in Great Britain and we put {hing before them and had discussion. We imMINUTES OF EVIDENCE. 289 18 February, 1981.) ‘The Right Hon. Movracu Const Nowesx, D.8.0., [Continued ‘and Sir W. Gor Gaxer, @.E. persons representative of Scotland, of the North- ast Coast, of the Midlands and of South Wales, tnd we had 4 long discussion with them and. pointed fout our difficulty; they quite agreed and they also ‘greed that tho only useful thing to do was to try, fn behalf of the Steet Trade, to produce some Report 2 a guide to the lines on which rationalisation ‘hould take place in the Stecl Industry. Having fagrood to do that, they then agreed to ask Mr. Bruce Gardner to act as their Secretary. in the ‘matter, ‘That meant that he had to do the work a he spent a vers groat amount of time on. producing the Report; it was done piecemeal and submitted, step by. step, to those gentlemen, and finally he has produced » Report which T think is'a very valuable fue and which lis the complete approval of those ientlemen. To the extent that they are representative of the Steel Trade of Great Britain, it has tho spproval of the Stool Trade; it is not a public Re- port yet, but fis approved by four very representa. five uroups of steclmakers in the countey, and T think’ if we had done. nothing lee, are have. done Something there which is extremely useful to indus- fry, becauso othorwise you were bound to go wrong fs regards the Steel Taduetry 9097. But a survey of that sort ‘to some practical” stops, ‘obviously. the is it moth 098. With a viow to ascertaining the possibilities we business and how far it is wise of proper to Supply further finance to it?—Yes. I sco 1 havo mitted one thing. I ought to have said what we hhad actually done in point of fact, apart from our Aliffculties. We have, in fact, actually floated only fone acheme, but we have ono more which is just Feadys practically everything bas been done except the Prospectus, It is ready. Another scheme has heen. fully. investigated and. practically approved, another has reached almost. that stage, and. then, Ibeyoud that, there is quite a large number of schemes which are simply in the process of discussion. tt takes a Tong time before you get even two people ‘9039. Suppose you have had a thorough investiga tion of a particular branch of industey and hav heen able to assess ite position and. its. pomsibilitic ‘with thet guidanoe which you receive, how docs th of Company proceed todo its own job, that ie to aay, dive financial assistance? Once Sou realiso that the reposition ia one which deserves your support, what form exactly doos your assistance take?—Then we try to constrict security which we cam offer to. the Public with our backing, something to which we Shik it is legitimate to ask the public to subscribe, ‘with our backing and with the knowledge that we hhave gone inte tl. But T agree, our conception of our duty is that we have got 20 take certain risks which an ordinary isting house could not afford to take, 9010, Quite.—That does not mean that we do not investigate, but T think we have got to be prepared to deal with a lest complete security and’ ack for ‘subscribers for 8 les complete security than a private issuing house could do. 9041. Mr. Brand: By “your backing’ you do rot mean your gasrantes?--No, we have not thought tf ont guarantee yet, and I hope we shall not have to. ‘9042. Mr. Keynes: What is the porpose of your capital, called and wncalled ?—Tt is im order to ereate ‘credit machine, so to speak. ‘That is what T under- Stand, In the event that Me. Brand has just men- Goned, where we thought it was a case in which we Would have to guarantes, oF to take private stepe to Finance, it pute us in the position of being able to get any money within reason offhand, ‘9043. You have not intended, in the case of rather small propositions, to take pi the securities youre flees and then inane to the public a security which would be covered by your own holding of a variety of 80st (2) ‘inaller issues?—I think that is certainly im con templation, but that case has not yet arisen. ‘That certainly is one of the things T would contemplate ‘doing, ‘O44. Ono of the criticisms that has boon made is ‘that while, if a very big concern wants » large sum of capital, it can usually get it, the present methods of “issuing capital for concerns ‘that want, «ay, 1£100,000,” aro. vory “expensive? Yes. nothing to do with the B.I.D. You mean general jn business? 9015. I did not know whether or not that had any- ‘thing to do with you. You are only looking at Yery big’ things? "Yes." We of the B.1.D. deal with big propositions er hypotheri. They’ have got to. be schemes of rationalisation. Are you suggesting that ‘we onght to deal with Tittle things? 0046, No. I was merely asking whether the Tittle things come within your purview or not, You say thoy do not?—-No, not the little things, Smaller ‘things than are contemplated by that declarati ‘hinle, must, ‘That is my personal opinion. T-do not know ‘whether my colleagies on the B.L-D. agree, or whether the Governor agrees, but T have that feeling ‘that wo must deal sometimes—certainly where tt i caso which isnot inconsistent. with ultimate ationalisation—with the smaller unit. 9047. Mr, Tulloch: You use the expression think it is contained in your Memorandum that you. ro- ceive and consider schemes of reorganisation, and 20 ton, of basic industries Yoo. 8018, Do you confine yourselves to the basic indus- tries?—Well, no; T do not think so; but that as the charter, that we are only to consider basie industries. Tia caso came before me im which Thad to decide whether a thing ougit to come before the Board of the BILD, or not and T thought it was © scheme which was beneficial to industry, 1 would ct care whether it was a basic industry or not. But, agein, that is my own particular view. 0049, I should like to understand this, if T can. You used the words that you have to take cortain iaks which sn ordinary istuing hous cannot. afford to do. Could you expand that 9 Tittle and toll us ‘cxaetly what yom mean by risks; yon donot guaran: tee, T think you said?—No. An ordinary isuing hhowss doing an industrial ierue would have to bo very ‘careful when it makes an Seaue to see that, 60 far as it'ean, ie produces security awhich is ‘good one, fand stands tho test not only of a valuation of assets but of « good record of earnings. A private issuing hhonse wonid not dream of laulng @ dobonture om = new prospect, howerer attenctive, a mere—T will Call it apecalation, but eomething which was all in the future. We must, I think, issue oF find money for something—assuming we find it is a good thing hich it based, toa certain extent, on estimates of ‘what ie going to happen in the future. Again, Tam peaking for myself; T do not want the BLD. to find money recklesely, of course; also I do not want the BLTD. to take the wholo of the risk and leave the company without any responsibility at all.” T think the TVT.D. onght to try and get some sort of fectrity from the ‘company that it ie financings though, ae T say, I donot think that the B.D could. properly be expected to require auch security fa private iseuing house 9050. Tt would really mean this, that you would be asking the public to take cortain, rieks which an ordinary issuing bouse avould ‘not ask the public to take, That is the reply, is it not?—Asking the ‘public? ‘0651. Yee. You are not backing tho scheme by guarantee. You are putting the. issue out?—We ‘Slwaye try to put a thing out, because that is a test ‘te to whether 1b ia'& good thing or not. ‘9052. 12 out at! iatue, which perhaps: an ordinary ining “house might’ not venture to do Waving regard to the security Behind itf— agree, re