It is not to be wondered at that the City of London welcomes the new decisions arrived at by Sir John Simon, Chancellor of the Exchequer, in connection with the res-ions placed on British lending abroad. It has been suggested that the change in policy which he announced followed as an immediate result of the report made by M. van Zeeland on the investigations which he undertook at the request of the British Government into the economic foundations necessary for the establishment of a per. manent peace. In general he found that a greater degree of fluidity of commerce, exchange, etc., was one of the chief necessities of the present situation, and in a series of important recommendations which were published quite recently he showed what could be done toward alleviating the lot of some nations which are suffering from the prevalent exaggerated form of nationalism, Sir John Simon announced the intention of the government th slacken somewhat the restrictions which have been placed on the investment of British money abroad in an endeavour to encourage the suitable expansion of international capital transactions. It will Be noticed from the Chancellor's explanation that what the Government intends to do is to loosen the present strict control of the investment of British money in foreign commercial undertakings. The present practice of closely scrutinizing applications for permission to do so will still be continued, though the basis upon which the Advisory Committee, which assists the Treasury in this matter, will be more liberal than in the past, and should, therefore, permit the freer fow of British capital abroad. Thus the change envisages the raising of new money in the British market on a long-term basis on behalf of British borrowers, for the purpose of acquiring assets or developing enterprises in foreign countries, and also concerns itself with transactions involving large blocks of foreign-owned securities.
Applications in both these classes would have to go as usual before the Advisory Committee and would, in general, receive its sympathetic consideration, though it is apparent that while the Committee will make its decisions along almost completely generous lines, the eventual decision will always be governed by the desirability of granting the necessary permission in the 1 light of public policy. On that ground there might still be cases where permission would be refused, even though from all other aspects the proposed investment abroad might be wholly desirable. In this is to be found a complete answer to recent rumours that certain nations unable to obtain consent to float loans on the British market, because of prevailing restrictions, have sought to effect private credits the proceeds of which they intended to devote to their own gov-emmental purposes. There have been reports to the effect that attempts have been made by Italian and Japanese authorities to obtain credits under the guise of commercial transactions, and Sir John's reply to a, question indicating something of the sort showed that the government had no intention of being beguiled into permitting amy such manœuvres to succeed. From all this it is quite clear that the Treasury, through its Advisory Committee, will need to be completely fled as io the non-political character of any such transactions before any permission will be given for British capital to go abroad, but that where it is convinced that the funds are to be used for commercial development, whether it foreign countries or not, sanction to employ them in that manner will mot be so difficult to obtain in the future as it has been in recent years. The variation of policy does not in. this instance amount to a complete change, but is rather a very good indication of the elasticity with which the original scheme was formed, and its adaptability to the new conditions which are arising.
That there is a graver side to the matter was indicated by Sir Robert Kindersley in October last in a speech before the East Midland Savings Conference at Leicester.
He revealed that Great Britain was living on her capital, and that there was a great need for Great Britain to keep intact Mer investment as an essential contribution to the nation's rearmament effort. Adverse trade balances had in the past been largely financed by the immense income Great Britain receives from her verseas investments, the income from which, in 1936, paid for more than half the adverse balance of merchandise trade. Through the operation of various factors the overseas investment undergoes an annual wastage, by repayments, bankruptcies and defaults, and it is imperative in Britain's own interests that this wastage should be made good. If the national income from investment were to fail, nct merely would there be difficulty in pursuing rearmament without grave impairment of the standard of living: the whole structure of British trade and industry would be threatened. It is apparent, then, that British investments overseas should be maintained at their customary level, if not increased whenever possible. These considerations naturally do not apply to short-term lending, and especially that of a non-commercial nature, and it is clear from Sir John's statement that this involved considerations and raised special difficulties which rendered it generally undesirable. It is inevitable that this should be the case, for, on the face of things, it does not amount to that type of investment abroad calculated to give the results of which Great Britain must always stand in need. The announcement by the Chancellor of the Exchequer is, therefore, all the more cordially to be welcomed. It indicates a thorough comprehension by the Government of Britain's economic and commercial needs, and of its determination to see that there shall be no deterioration of the British position in this very important matter.
Text read from the printed page and cleaned; old type leaves the occasional error.