Till Time's Last Sand

by David Kynaston

  Norman himself obdurately continued to hope for the best – ‘War not inevitable at all,’ he told Joseph Kennedy at the American Embassy in February – but Hitler’s annexation the following month of what remained of Czechoslovakia was a bad blow, stiffening even Chamberlain. Norman too, perhaps still more so, now shed his illusions. In early June the passionately pro-Hitler Duke of Buccleuch asked the governor to call on him at Grosvenor Gardens. ‘I reserve my opinion, contrary to his, that Hitler and Co are liars,’ was Norman’s summary of the conversation. And in terms of war preparations, the Bank by this summer was at full stretch, including shipping to Canada a huge amount of both its gold and that belonging to customer central banks. ‘We took enormous risks,’ remembered Bolton, ‘and when the war actually began we had about £500,000,000 of gold afloat in ships of 5,000 tons upwards.’ Other aspects of preparation involved, with the Bank working closely with the clearing banks, the detailed establishment of the appropriate machinery for exchange control; ensuring that the clearing system (to be transferred to Trentham Park in Staffordshire) would work smoothly; and a thousand and one other matters.

  On 26 August, Norman wrote to the Home Secretary, enclosing a letter from H. Lipschutz and requesting his naturalisation: ‘There is no doubt in my mind that Mr Lipschutz is an uncommon good oculist: he was put on to me by another non-Aryan – a Doctor – and probably saved the sight of an eye.’ It was too late. On 2 September, the day after Germany’s invasion of Poland, Norman had no alternative but to break the news to Lipschutz himself. ‘I have to admit,’ ended his regretful, dot-filled letter, ‘that there is nothing I can now do towards giving effect to your suggestions. And, while I have been searching, the sands of peace have been running out … so that there is no more for me to say … except to wish you well.’ Next morning, Britain’s ultimatum to Germany expired and Chamberlain gravely spoke on the wireless. ‘From now on,’ a mordant Norman announced to his secretary during that lovely sunlit Sunday, ‘we shall be simply rubber stamps.’14

  The severe economic depression generally of the early 1930s, and specifically the profound political fall-out from the 1931 financial crisis, had impacted in a major, long-lasting way – transcending matters of war and peace – on external perceptions of the Bank. The tone of the debates in the Commons in February 1933 – in the context of the Austrian Loan Guarantee Bill that in effect involved the British government making it financially possible for Austria to repay to the Bank what it had urgently and unilaterally lent following Credit Anstalt’s failure – would have been hardly thinkable a decade earlier. Strong criticism came from MPs sitting on both sides of the House. Rhys Davies condemned ‘a sordid international financial transaction’; George Lambert did not see why ‘my [Sheffield] constituents, many of them struggling men, should be called upon to pay Income Tax in order to buttress the dividends of the stockholders of the Bank of England’; Sir Stafford Cripps reckoned of the £4½ million now going to Austria that ‘the country will never get it back again until they nationalise the Bank of England and get it in that way’, adding darkly that ‘whether this item will then be traceable in the accounts, it is impossible to say’; Brendan Bracken, friend of Churchill and dominant figure at the Financial News, called it ‘practically a Bank of England Relief Bill’, observing that ‘we are always being told by the Government that they cannot afford a penny to get rid of our suppurating slums, or for any sort of social service, but they are quite willing to march forth with £4,500,000 to help the Bank of England’; and Sir William Davison wanted ‘a change in some of the governors of the Bank’, declaring it ‘high time’ that the Bank ‘stopped putting up its hands to shield itself from the camera of criticism, saying, “We are sacrosanct – you must not ask us any questions”’. Some of the most memorable invective came from the future creator of the National Health Service:

  Austria was in danger of defaulting [in the early summer of 1931]. The Bank of England, closely associated with the City of London, closely associated with the people who had lent money to Austria, saw the difficulty, and they did what they always have done – they rushed to their friends in the City and said: ‘We cannot allow Austria to default, otherwise all the people who have been lending money to Austria will lose their money.’ Therefore, the Bank of England stepped in to support the credit of Austria for the purpose of supporting their friends in London. That is perfectly proper for the government of the Bank of England to do. They have always done it. They have only been international buccaneers.

  As for the present proposed arrangement, Aneurin Bevan vainly asked the financial secretary, Leslie Hore-Belisha, ‘to take the House into his confidence and to tell us why we are asked to raise this money to reimburse the Bank of England’. ‘Is it’, wondered the eloquent Welshman, ‘as a wedding present to the Governor?’15

  Such parliamentary criticisms coincided with the publication of J. R. Jarvie’s The Old Lady Unveiled, a serious if hostile prosopographical examination of the Court. ‘The Bank of England is dominated by men whose interests are not primarily British but international,’ contended Jarvie. ‘Their main occupations are the financing of foreign states and distant enterprises and the earning of profits from monetary transactions which may easily be, and indeed often are, inimical to the economic health of our country.’ He also attacked the Bank’s lack of accountability:

  The essential facts concerning the Bank are impenetrably veiled. It is preposterous, for example, that the files cannot be inspected as with a public limited liability company … The directors neglect, even, to let the public hear occasionally an explanation of the more important moves made in the name of British banking and finance. Fugitive antics by Mr Montagu Norman and peep-bo frolics with the Press photographers are apparently thought to be adequate gestures.

  Over the next few years, the attacks mounted. From the left, G. D. H. Cole, the Labour Party’s prime academic economist, accused the Bank on the wireless in 1934 of paying ‘far too much attention to what they regard as sound finance, and far too little to industry and to the need to getting the biggest possible output of goods and doing all that can be done to prevent unemployment’; the following year, Labour’s leading figure on financial matters, Hugh Dalton, argued in the Banker that ‘the only choice’ was ‘between private politics, played by an irresponsible Governor, and public politics, played by accredited Ministers directing the Governor’; and in 1937, Labour’s Immediate Programme explicitly committed a future Labour government to turning the Bank into ‘a Public Institution’, which ‘will be administered by practical and experienced men under the general direction of the Government’, thereby enabling ‘credit’ to be ‘controlled in the interests of trade and employment’. Another critic, from somewhere in the political centre-ground, was Cunliffe’s old mucker. The Bank, Lloyd George told an audience at Nottingham in 1935, had been guilty of ‘cumulative blunders’ that had ‘cost the nation during the past 12 years more than would have sufficed to put through a gigantic scheme of industrial, agricultural and social reconstruction’. Nor was the Bank entirely spared by Conservatives. That same year, Harold Macmillan’s The Middle Way, a key text published in 1938, wanted the Bank to be made a public institution in order to be able to ‘influence the direction of investment’ in addition to just its volume; and the following year, a treatise called Managed Money, by Major J. W. Hills (a well-respected MP and financial expert), not only accused the Bank of being unhealthily obsessed by the exchange rate as opposed to concentrating on being ‘the judge of the money which trade, industry, and commerce require’, but concluded that there was no chance of the Bank becoming an adequate ‘Currency Authority’ unless its ‘controllers’ were ‘drawn from a wider area’.16

  The Bank was broadly unrepentant about its approach to the outside world. Its time-honoured custom, Harvey had explained to Keynes during the Macmillan Committee’s inquiry, was ‘to leave our actions to explain our policy’ – adding that ‘it is a dangerous thing to start to give reaso
ns’. Notwithstanding the severe blow to the Bank’s prestige caused by going off gold, Norman saw no reason to change. ‘I console myself with this thought,’ he ended in October 1933 his annual Mansion House speech, ‘that the dogs bark but the caravan moves on.’ All his listeners understood this application of an old Arab proverb: the dogs were the Bank’s critics, the caravan was the Bank, and the governor’s words were a polite version of a two-finger sign. Even so, the continuing attacks from all sides – stimulated by that PR disaster – did eventually make a difference, with the executive director Ruby Holland-Martin given the job of speaking to the press. Unfortunately, ‘though a most affable character’ (recalled the future Labour politician Douglas Jay, then working in the Daily Herald’s City office), ‘he turned out to know more about horsemanship than public relations’; and accordingly Norman’s rising star, Kim Cobbold, was deputed instead ‘and made a very much better job of it’.

  Norman himself, in the twentieth year of his governorship and seventeen years after the start of the BBC, took to the airwaves, giving in March 1939 a radio talk about the Bank. The first part was historical, the second an uncontroversial survey of its main activities, and the third a look at how it was run, including the assertion that ‘you will find now that more than half of the directors come from trade and industry, commerce and shipping, and barely a quarter are merchant bankers’. Then, towards the end, came the big picture:

  In monetary as in other matters the Government of the day must have the final word, and this is fully recognised. The essence of this system of management is that the Bank is able to give independent advice to the Government, with whom the final decision must rest. On the other hand it is not controlled by bankers, nor does it compete any longer with them. This means that we get real co-operation from the banks and bankers in carrying out policy, a co-operation which is also fully shown by the imperial and foreign banks in London. For my part, I would sum up the vital characteristics of the Bank as: experience in affairs; co-operation, on all sides; independence of judgment. But these three things – experience, co-operation, independence – are no good unless people have confidence in you. I like to believe that the Bank with its long history and tradition, stands high in the public esteem; but only by service to the public can that esteem be maintained through times good and bad.

  ‘I should like you,’ concluded Norman, ‘to believe – and please to remember – that we value and are always trying to justify the confidence and the esteem, perhaps indeed the affection, which surely are summed up in the name “The Old Lady of Threadneedle Street”.’17

  A resonant message, but by this time it did not help the Bank’s reputation that Norman in particular was often viewed as excessively pro-German. Two months before his broadcast, the governor’s unauthorised visit to Berlin provoked the leading trading unionist Ernest Bevin into publicly warning about the harm being done ‘to the cause of Democracy and Freedom’, while the Evening Standard ran a very hostile cartoon by Low; and then in the early summer of 1939 came the damaging affair of the ‘Czech gold’. This was largely down to the brilliant and relentless investigative work of the financial journalist Paul Einzig, who from mid-May exposed how the BIS had successfully instructed the Bank to hand over to the Reichsbank a gold deposit of some £6 million belonging to the Czechoslovak National Bank. A ‘breach of trust’ to ‘the Czech people’ was one accusation made in the Commons on 26 May; while specifically in relation to Norman and Niemeyer, the Bank’s two directors on the BIS board, Bracken declared that ‘they came, they saw and they capitulated’, before accusing them of ‘a very squalid form of financial appeasement’. The controversy reverberated. By 6 June the New York Times was reporting a widespread cross-party feeling in Britain that not only should the BIS be ‘liquidated’ before it ‘furnished any more sinews of war to Germany’, but that ‘the odd relationship between the British government and the Bank of England should be re-examined without delay’; and that same day, in the Commons, one MP frankly put the question, ‘May I ask the Prime Minister why he does not make the great Mr Montagu Norman Chancellor of the Exchequer?’ The Bank for its part – despite Norman privately informing the actual chancellor, Sir John Simon, that ‘the Bank of England are not aware whether gold held by them at any time in the name of the Bank for International Settlements is the property of the National Bank of Czecho-Slovakia’ – declined to engage in a public defence. What that public must instead ‘settle’, Sir Alan Anderson (still on the Court) observed in early June to Norman, ‘is whether they wish – in finance – to maintain the machinery of international discussion instead of force. If they do then the umpire must be left free to decide & sometimes he will decide against us …’ Yet the fact was that the rules of the game had changed; and as Einzig would reflect many years later, the Bank would have been far less bruised by the episode if it had brought itself to depart from its adamantine policy of ‘never explain, never apologise’.18

  War in September 1939 meant evacuation: somewhere between a third and a half of the Bank’s regular London staff, including almost everyone on the Stock side, decamped to rural Hampshire.19 ‘There are wash-houses some 200 yards away, with limited hot water and unscreened baths,’ an appalled J. A. Mulvany wrote to his family on the 9th, the day he arrived at Hurstbourne Park near Whitchurch, the estate belonging to Lord Portal. ‘The girls,’ continued Mulvany, ‘are better off, being mostly put up in the mansion, as their billets were found to be lousy! Principals and the like also have rooms in the mansion.’ Further missives over the next six months continued to paint a distinctly critical picture:

  Work started at 8.15 – the whole Stock-Side, including Chief Accountant’s, in a glass-covered sort of factory shed 90 yards square. I was at first drafted to Passing, but Berry soon came and grabbed me in exchange for another, so that I found myself back on my own joint with my machinist, Miss Graham. Spent a long day till 5 getting my account pages in order. We are not straight yet – as a whole – and the arrears of work is colossal. They say it will be weeks or months before we catch up, if we do. (10 September 1939)

  Holland Martin has been round and it is rumoured that he has insisted on everyone having proper beds!… (14 September 1939)

  I can’t get any certain news about the weekend: we can only hope for the best. The Bank Policy seems to be to make things as difficult and unpleasant for the staff as they possibly can. If we were really conscripts we would receive more considerate treatment … (20 September 1939)

  The latest totalitarian pinprick is a system of categories by which the staff are compelled to feed at certain allotted times whether suitable or not. I needn’t add that no one is consulted as to times that might suit … (4 October 1939)

  The sensation was a ‘riot’ and ‘strike’ at Overton (Div. Prep.) over their Gratuity. Most of them were offered about £3 or less – and refused to accept it! Next day they staged a genuine sit-down strike until Holland Martin arrived post haste, harangued them, and promised that if they’d sign for the paltry bonus their grievance would receive every consideration. (7 November 1939)

  Late work looks like going on and on and on and on – the girls are getting very fed-up. (27 February 1940)

  The Governor is here today on an ‘informal’ visit – he has been strolling round the factory with an entourage of satellites, and ‘chatting’ with a few carefully selected (beforehand) members of the staff. I only hope he has to eat the same lunch as was the fate of the masses. Not b----- likely! (19 March 1940)

  Mulvany may have been more disgruntled than most about his enforced exile, but it is possible anyway that the women had a jollier time. Naree Craik, hitherto at St Luke’s, was among the several hundred female clerks despatched to Hampshire right at the start of hostilities, in her case soon living in one of the purpose-built chalets (each housing twenty-four women and a senior clerk) overlooking Overton Village, near to Whitchurch. ‘As the men were called up for war duties,’ she would recall, ‘the women took over the wor
king of the machines’:

  The Addressograph cut the names and addresses of stockholders on small metal plates. Those were fed into another big machine of that make, which printed the information on large sheets. Those were checked, then passed on to the Sensomatic Ledger Posting operators. I learned to operate all three. A Chambon machine printed the basic warrants. Each warrant had to be ‘protectographed’ through a small machine which wrote the net amount in words. Finally, the finished warrants were checked by other clerks, folded and placed in envelopes. Those were then inspected, counted or proved to be sure the address and totals were correct. We were expected to do 1,600 a day. Warrants going to foreign addresses bore asterisks and had to be removed from the bundle separately; presumably payments were suspended.

  When there was a lull at work, any girls who wished were allowed to help the farmers who were short-handed. I learned to bind and stook the corn, to build a haystack, to thin beet, and to pull up charlock. It was hard work but interesting for a town girl like me. I felt I was doing my bit towards the war effort …