RADCLIFFE CONFESSIONAL BOX
By NICHOLAS DAVENPORT
THIS week came the White Papers on the state of the economy from which the shape of the Budget can be seen. The vigorous trade expansion and the current deterioration in the balance of payments—both were underlined and the need for restraint duly emphasised. This is the curtain-raiser for Mr. Amory's third appearance as an equilibrist on the Budget stage. But let no one suppose that the Treasury knows exactly how to keep the economy in balance. Its information is generally late and incomplete; its techniques are still largely experimental and the effects of its mixture of monetary restraints, fiscal measures and direct controls are almost impossible to dis- entangle. All this emerges as clear as daylight from the oral evidence taken by the Radcliffe Committee. The most that Sir Robert Hall claims, as economic adviser at the Treasury, is that the 'authorities' are reasonably satisfied that the economy does move more or less in the direction towards which their monetary policy is being directed!
The first volume of the evidence published by the Radcliffe Committee is a formidable tome of nearly a thousand pages, double-columned, but it is well worth exploration for it contains gems of official solemnity which are wildly funny. My favourite witness is Sir Edmund Compton. The Committee is examining the Treasury knights on the relationship between the Treasury and the Bank of England as defined by the badly drafted Bank of England Act of 1946. Section 4(i) de- clares that 'the Treasury may from time to time
give such directions to the Bank as, after consul- tation with the Governor of the Bank, they think necessary in the public interest.' Section 4(iii) adds that the Bank may give directions to the com- mercial banks 'if so authorised by the Treasury.' None of these powers has ever been formally exercised. The Committee is naturally puzzled by this quietism and wants to know whether the Treasury can direct the Bank to direct. Sir Edmund replies (1294): 'Wren the Bill was before the Select Committee . . Lord Catto put it on record that in effect the Bank could not be directed to think something. . . . That was the position and that was not challenged.'
In the view of Mr. Cobbold, the present Governor, the question of directing the com- mercial banks is, in fact, the sole responsibility of the Bank—the initiative lies with the Governor, he has said, not with the Chancellor—but the power has never been used because there is diffi- culty in legally defining 'a bank.' The Committee asks whether the hire-purchase finance companies are legally banks for the purposes of the Act. Sir Edmund replies (1304): 'The question has not arisen. Not having applied this [clause] we have not had to face the question of defining the bodies whom the Treasury should declare to be persons to whom directions should apply.' Pro- fessor Sayers asks if the Treasury has not yet arrived at a definition of a bank which would survive legal challenge. Sir Edmund (1307): 'No, because we have not been in the position of con- templating action under the Bank of England Act.'
I hope Lord Dalton, if he reads this and can stop laughing or choking with rage, will mark this passage for comment in the third and final volume of his memoirs. I hope all future Labour leaders will take note that Clause 4 of their con- stitution does not need to be abolished; it only needs to be handed over to the parliamentary draughtsmen and the heads of the civil service who will take good care that it is made harmless or meaningless. In 1946 these Labour politicians (intoxicated by their electoral success) fondly imagined that they could capture the financial Establishment by just passing a simple Act of Parliament without displacing the Establishees. They must now realise their mistake, their lack of understanding of how the Establishment works. How inept they appear beside Mr. R. A. Butler, who in answer to a question as to how he would judge opinion inside the Bank said (12389): 'It depends on one's intuitive qualities as a political animal . . . walking about the jungle. Usually when one has been in the jungle for some time one gets some idea what is going on, not necessarily through official sources.' But the Labour leaders never knew what was going on inside the Bank and by their ill-written Act of 1946 made the Bank in effect far more inde- pendent of political influence than it ever was under Montagu Norman. I tremble to think what might happen if there were a weak Chancellor and a strong, dominating Governor. But perhaps we shall not have long to wait for an amending Bank of England Bill. A de-nationalised Bank would give greater freedom of action to the Treasury. As Mr. W. F. Crick, the monetary expert of the Midland Bank, said in evidence (10557): 'The Bank of England has this en' grained resistance to change which makes me, after many years, almost despair of ever having a monetary system which is really abreast of the demands Made upon it.'
Perhaps the most frank of witnesses is Sir Robert Hall—the only one of the Treasury knights who seems to retain a sense of reality in all the monetary moonshine. He is the first to admit that there has been a conflict between the objective of high employment and the objective of sound money. One cannot understand the period up to 1956, he said (1376), 'without recog- nising that there has been a dilemma.' Monetary policy, he added, was not addressed primarily to the price level before September, 1957. Will Mr. Amory revert to Mr. Thorneycroft's position on Monday? Not if he listens to Sir Robert's advice, for one thing stands out from his evidence—that the conduct of economic policy is such a corn' plicated and uncertain affair that the Treasury can only be sure of results when it operates a simple form of control like that over building and hire-purchase trading.
What a wonderful day Monday would be If Mr. Amory were to say that he had been reading the massive evidence taken at the Radcliffe cony mittee and had decided to do nothing at all.
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