EGYPT (STERLING BALANCES AGREEMENT)

HC Deb 20 March 1951 vol 485 cc2333-90

4.43 p.m.

Mr. Eden (Warwick and Leamington)

For reasons of which nobody has cause to complain, the period allotted for this debate has been very much shortened, and as I understand there are a number of hon. Members who wish to speak this afternoon, I shall put my points as briefly as I can. I had hoped earlier that some of the cause for this debate would have vanished, because as I was coming to the House I spent a penny on an evening paper and I saw a report from Cairo which indicated that at any rate there has been some modification—it was not clear how much—of the restrictions on shipping through the Canal. I gather that the Government have as yet no confirmation of that, however, and it may be that if we administer a little further pressure this afternoon we shall be encouraging the development we all want to see. At any rate, I propose to maintain my pressure unmodified by what is so far, unhappily, only a rumour.

The Chancellor of the Exchequer on Friday gave us his fuller account of the Government's motives and reasons for the actions they have taken and I studied at the week-end what he had told us in the hope that I would find some comfort in it. I must confess, however, that the more I probe this business the more anxious I become as to the position in which this House and the country will find itself as a result of this agreement. I can only hope that the fears I shall express will be dispelled, but at the moment I feel that the agreement as we know it is not one which the House should be asked to accept.

The Chancellor and the Financial Secretary set much store by the fact that this agreement was, as they said, purely financial and had no political implications. But as far as I understand its terms, this agreement grants to the Egyptian Government very important concessions. I know that that was not the view which the Government took when their representatives spoke to us at the week-end but, on the other hand, we have had the view of the Treasury representative in Cairo who is, after all, their spokesman and negotiator—because I understand that the Treasury negotiate all these things nowadays, although the Foreign Office may have a look in now and again. Mr. Waight, the right hon. Gentleman's representative in Cairo, who has been carrying on these negotiations, does not seem to agree in all respects with the Ministers he represents. At any rate, he spoke of this agreement as one in which valuable concessions have been made to the Egyptian Government. That is exactly how it occurred to me and that is exactly what I am complaining about in this present context.

Let me tell the House why I regard the concessions as valuable. If the Government admit that those concessions are valuable, then I do not consider that this is the moment at which we should make such concessions to Egypt unless the Egyptian Government modify the manner in which they have treated British interests in the last year or two. The truth is, however much the right hon. Gentleman may quite properly want to do so, that an important financial arrangement like this cannot be divorced from the general political relations between the two countries.

For instance, in his original statement the Financial Secretary said that action was to be taken by us under this agreement to facilitate the supply of petroleum products for Egypt. I shall say a word about that in a moment. But presumably an action of that kind is of real value to the Egyptian Government. The Chancellor of the Exchequer himself told us that if we had not retained that concession to the Egyptians in the agreement he could not have hoped to secure anything like so satisfactory an agreement, so that it is of value to the Egyptian Government—and it has nothing to do with finance. It has a wider political implication.

I am not at all moved by the argument that we have given the Egyptian Government assistance in respect of oil in the earlier arrangements we have made about sterling payments because, if that is the case, I do not think we should have done so. This situation has continued for more than a year and now at least is the time, in my judgment, when we should say, "No more concessions in this sphere until our rights, accepted and agreed under treaty, are safeguarded and treated with respect by the Egyptian Government." I want to say a word about the financial aspects and as I am not such an expert as my right hon. Friend the Member for Aldershot (Mr. Lyttelton) I shall tread as delicately as I can, but I have tried to master this difficult aspect of the problem.

I think this Egyptian scheme ought to be studied against the background of the release of sterling balances generally. Here we get into a pretty dangerous position, as I do not think the Chancellor would deny, ft is not easy to compare the strain which this new arrangement is going to place on our economy with that of the temporary arrangement which was enforced before. It may be—I think it will be—that over a short period—of a year, say—the new arrangements will impose a heavier burden than the previous temporary arrangement; over. a longer period it may be less. But what it is important that the House should recall is that the temporary arrangements were only interim arrangements; now we have to deal with a long-term settlement, and a long-term settlement against a very different background from that against which the interim arrangements were previously made.

We have been told by the Chancellor, quite rightly, that £300 million has got to be added to our bill—I think that that was the figure—for imports because of a further deterioration of the terms of trade against us during this year. We are ourselves short of raw materials for our rearmament programme, and can much less well afford unrequited exports today than at any time since 1945. I am bound to say that I should have thought that it would have been reasonable to ask the Egyptian Government to understand that aspect of the problem, when it is a fact that this re-armament, in which we are all engaged, must be of assistance to Egypt herself in the long run, as well as to us. It is not a great deal to ask of her that she should see that aspect of the problem, and see it as her contribution to these arrangements for world peace.

Let me mention briefly other aspects of this question. Of course, under the Colombo Agreement we have got to release—I think these figures are right—£246 million of sterling balances spread over six years—that is to say, about £44 million a year; but that release is spread evenly over six years. If the agreement with Pakistan is what I estimate it to be—I may be wrong about this, of course, but if it is—we shall be releasing something like £50 million this year, 1951 to 1952, and something like £40 million a year afterwards. The House will note that it is in this coming year that the biggest releases take place, when we are launching our re-armament programme. Then there is £7 million for Israel for two years, and with the present agreement with Egypt herself the heaviest payment is in this first year.

Therefore, I estimate that we are thus carrying a burden in 1951 to 1952 of £80 million of unrequited exports. That is a very heavy figure indeed. I ought to mention, in passing, that, over and above that, of course, there is the European Payments Union where, I understand, we are extending credits for about £30 million—for that alone; and, no doubt, there will be other credits due there. What they amount to no one can tell at this moment. For all these reasons it seems to me that we are piling up payments under these heads altogether in this first year, which is a dangerous thing to do in present conditions.

That would not be quite so bad if this arrangement now covered all of our engagements with Egypt, but I am not sure that it does that. There are, I think, about £80 million of sterling balances which are not covered by this agreement at all. What about them? Is there any understanding between the Government and the Egyptian Government that these other £80 million will not be demanded—or part of them demanded—by the Egyptian Government until the present agreement, at any rate, has expired, or very nearly expired? Can the Chancellor reassure us about that?

I do not want to labour this financial issue, but it does seem to me that the financial editor of "The Manchester Guardian" in some observations he made last Friday was pretty near the mark when he described the Government's action as "quixotic conduct." If we want to extend quixotic conduct, then I must say that there are other countries to which I should be much more ready to direct it at the present time than Egypt, who is treating us in so unfriendly a manner.

I am sorry to see that a Bill has now just gone through the Egyptian Parliament which will result in converting the National Bank of Egypt, a very well-known and, indeed, famous institution, into a purely Egyptian central bank. I am sorry about that, and I am sorry that Sir Frederick Leith-Ross, a very distinguished public servant, should not be continuing with the bank—though that may not be attributable to that decision. But anyway, he is a loss to that bank. In Egypt this is being held, as the right hon. Gentleman must know, as severing the link with sterling. That is what the Egyptians are saying. As the bulk of Egypt's foreign trade is likely to remain with sterling countries, I cannot help thinking that the Egyptians may be making a mistake from their own point of view in severing a link with the sterling area.

I leave the financial side of the matter, and for a few moments I should like to turn to other aspects, and, more particularly, the facility the Government have promised Egypt in respect of her oil requirements. Now, the Financial Secretary told us: His Majesty's Government will undertake to facilitate the supply of petroleum products to Egypt against payment in sterling up to a total value of £11 million per annum in each of the 10 years from 1951–60."—[OFFICIAL REPORT, 15th March, 1951; Vol. 485, c. 1781.] Now, the Government have always maintained—and, I think, rightly maintained—that there is some dollar content in all oil purchases by British controlled companies, and they will not, I imagine, dispute that there is, therefore, some dollar content in this concession. I do not know how much. Of course, it may be that, in addition to the provision of oil by British companies, some of this oil may have to be supplied by American companies, in which the dollar content would presumably be larger. On this we should like to be informed. If the assumption I have just made is correct, Egypt is, in fact, obtaining a material advantage. There are arrangements made to enable her to obtain her imports of oil from sterling. That is an advantage, and, in this respect, I agree with the negotiator in Cairo, the Treasury representative, that these are valuable concessions.

My contention is that it is unjustifiable to make concessions of any kind to Egypt in respect of the supply of oil while she continues to make the most serious difficulties for us in that very sphere. And not only for us. Mark the effect of this on the State of Israel, which is now having a very difficult time indeed, economically, especially in respect of the question of foreign exchange, while only a quarter of the Haifa refineries can operate, whereas if they could operate at their full capacity the manifest gain to Israel need not be stressed.

What is happening is that Egypt is saying, "Help me to obtain oil by payments of sterling." But that does not justify us, because Egypt asks for that, in turning a blind eye to the fact that she herself is interfering with our supplies of refined petroleum products. Let the House consider what is happening. Because of the Egyptian ban on our tankers through the Canal, the refinery of Haifa, which is, of course, British owned, is working at only from 15 per cent. to 20 per cent. of capacity, and that very small percentage is only just enough to supply the immediate requirements of the State of Israel herself. To make sure even of this, the tankers that carry the crude petroleum have got to take it either through the Persian Gulf, all the way round Africa, and through the Mediterranean to Haifa, or all the way from the Caribbean. It adds additional costs in freights, and charges of all kinds. How can that be defended by anybody? It is an absolutely fantastic situation, especially at this time when there is a world tanker shortage, and when there is a strong demand for refined oil products. The whole of this extra effort, the whole of this extra expense, is imposed upon us by the action of the Egyptian Government, which we hold to be contrary to the terms of the Suez Canal Convention.

What is the value of this? What are we losing? Let the House look at that for a moment. I mean, the value in money. I believe that the capacity of the Haifa refinery is about 4,000,000 tons a year of refined oil. At the moment it is turning out, as a result of the crude oil having to be brought a long distance, about a quarter of that—perhaps 1,000,000 tons. So three million tons of the capacity of Haifa is today idle, and it has been idle for nearly two years. Now, I suggest that the value of this lost output is not less than £20 million a year. That is a very considerable sum; and that is what the Egyptian Government are costing us and others by their unjustifiable action, which, I admit, the Government themselves have condemned. I endorse every word the Chancellor himself said in condemnation of this action, but what I cannot understand is why, if they condemn that action to that extent, they should at the same time grant special facilities in the very commodity in respect of which Egypt is treating us so very badly.

If it is important—and no doubt it is important—for Egypt to obtain her oil under privileged financial arrangements made with this country, I should have thought it was also desirable to ask that Egypt herself should, in return, desist from inflicting serious injury on British interests, and I should like that insisted upon before this arrangement comes into force.

The right hon. Gentleman told us—and in this again he was right—that the issue of the ships going through the Canal was before U.N.O. That is quite true, but it really is not relevant to our discussion here. Because U.N.O. is discussing this matter—and I am glad that it is—that is no reason why we should not try to get a settlement ourselves with the Egyptian Government; it is no reason why, meanwhile, we should ignore what is going on and not ourselves take steps to make the Egyptian Government understand that we are not prepared to condone conduct of this kind.

Finally, I should like to put this point to the House. The right hon. Gentleman said—and I do not think I am paraphrasing his remarks unfairly—that if he had not given this concession about oil we should not have got anything like so satisfactory an agreement, and he appeared to think that that was conclusive. But is it? If a country is not observing its obligations it is not usually wise to enter into some arrangement with it as if those obligations were being carried out. We have had issues of that kind before.

At this moment Egypt is admittedly—1 do not think anybody on the Government Front Bench would deny it—breaking certain definite engagements which she has with this country. I, myself, would feel very reluctant to enter into any new arrangements which admittedly advantaged a Government which is not fulfilling its fair undertakings to us. Of course, if these arrangements—and this I give to the Government—were part of a wider agreement which resulted in the satisfactory settlement of a number of our differences with Egypt the position would be completely different, and I should not now be standing here making this complaint.

But on the information we now have I cannot escape the conclusion that, in the words of the Treasury representative in Cairo, we have made valuable concessions to the Egyptian Government while they continue to treat legitimate British interests unjustly, and I do not believe that that is the best way to get good results in the political field later on. I think we would have done better to insist, politely but firmly, that any concessions in respect of oil would be granted only in return for full freedom for our tankers to ply their lawful trade through the Canal.

All these Egyptian questions are admittedly of great significance at the present time. Is it the Government's argument that these concessions have been made in order to try to create a better atmosphere for the political talks? If that is so, they cannot at the same time pretend that these decisions have no political significance. It is one or the other. The picture has to be looked at as a whole. None of us denies that. But what the Government seem to be doing is to be making concessions on one part of the front before they have dealt with the other at all, and I do not believe that to be good diplomacy. I repeat, I believe that this agreement enshrines a mistaken policy, and I hope the House will not endorse it unless and until we have had further and more satisfactory assurances of Egypt's conduct towards us than the Government have given us up to this time.

5.5 p.m.

Mr. Paget (Northampton)

I found myself in a good deal of sympathy with much of what was said by the right hon. Member for Warwick and Leamington (Mr. Eden). In a recent broadcast the right hon. Member for Woodford (Mr. Churchill) paid tribute to my right hon. Friend the former Foreign Secretary, who, he said, would be regarded as one of the great Foreign Secretaries of this country. I believe that to be true. I believe that the contribution to the Atlantic world which he made has been a great achievement. On the other hand, one must also recognise that it was a foreign policy which contained its failures, and surely this Middle Eastern situation is one of those failures.

We have failed to pursue the sort of policy which gains us respect in the Middle East. The sort of policy which gains us respect in the Middle East is not a policy of giving way; it is not even a policy of conciliatoriness. The Arab States admire, and throughout their history have admired, power and strength, and it is that which our policy seems to have lacked. In Persia we are now getting the repercussions of that policy.

By what I always regarded as a mistaken policy with regard to Israel, we have in some degree taught the Middle Eastern States that the way to get concessions from the British is to twist the tail of the British lion. I feel that that must now stop. I hope that there will be a clear change in our Middle Eastern foreign policy now. It is quite impossible to separate this financial arrangement from the general foreign policy picture of the Middle East, and I am very glad to see on the Government Front Bench a representative of the Foreign Office taking notes, because I believe that this debate is even more its affair than that of my right hon. Friend the Chancellor of the Exchequer.

Surely it is time to say to the Egyptians, very firmly indeed, "Your quarrel with Israel must come to an end. It is Britain's policy that there should be a firm and coherent Middle East, a Middle East capable of standing up for itself. It can no longer be disrupted by this artificial squabble you are maintaining for internal political purposes. That sort of nonsense has got to stop. Part of that nonsense is interfering with our ships on their lawful occasions in the Suez Canal, and that has got to stop, too. We are not going to provide you with petrol when you seek to interfere with our ships on the sea."

Frankly, I should like to see our Navy given instructions to see that our ships are not interfered with on the sea. I do not think that that would injure our relations with Egypt. I think that it would have the opposite effect, because I am convinced that a strong and resolute gesture is the one way to get on with all Middle Eastern Powers. We have had a change of office at the Foreign Office, and I very much hope that that will also signify a change of policy in these respects.

5.9 p.m.

Lord Dunglass (Lanark)

I am very glad to follow the hon. and learned Member for Northampton (Mr. Paget) in this debate. I am sure he will have noticed the approval with which his remarks were greeted on this side of the House. If we could feel that he had among his hon. Friends the same support for his policy of a strong line in the Middle East——

Mr. Grossman (Coventry, East)

We supported that long before hon. Gentlemen opposite.

Lord Dunglass: —as for his proposal that our Government should take a strong line with Egypt, it would be a very good thing indeed.

Like my right hon. Friend the Member for Warwick and Leamington (Mr. Eden), I have read and listened- to the Chancellor's statements. The argument on which he seems to base his support of the Measure—his first argument—is that it is wrong to introduce political factors into a purely financial agreement. He can scarcely have consulted the precedents. There can hardly have been any post-war settlement in which politics and finance were not inextricably interwoven. He need look no further afield than the agreement which covers the transit through the Suez Canal, because if there was an agreement which is part political and part strategic, part economic and part financial it is that.

Nor, I think, is the right hon. Gentleman himself consistent. We have only to look at the Argentine meat talks to see that the talks, which were started on the narrowest basis, can, when political expediency enters into them, be widened, and widened, on his own authority, to take into account all matters at issue between the two countries. I would therefore suggest to the Chancellor of the Exchequer that the general argument that we cannot introduce political factors into a financial agreement falls down.

The next claim which the right hon. Gentleman puts forward, if I understand him aright, is that these sterling balances are Egyptian property, and he mentioned the effect of repudiation. I am bound to say to him straight away that I have never heard any mention of repudiation by any hon. Member on this side; we have mentioned modification and mentioned the altering of the timing of such an agreement as he is making, but there has been no suggestion of repudiation. But he does know, I think, that we on these benches have often said that we would put forward counter-claims because we consider that there are substantial and legitimate counter-claims which can be put forward. This caveat has often been urged by my right hon. Friend the Member for Woodford (Mr. Churchill). Apart from that, where our real quarrel lies with the right hon. Gentleman is that he seems to hold the view that Great Britain should fulfil all the obligations of a good neighbour while Egypt is free to flout both the spirit and the letter of her engagements.

The Chancellor protests, and we know that his protests are sincere; we know him well enough for that. But, at the same time, he gives away the greatest bargaining factor which he has under his own hand. When ordinary men and women of this country who look at these matters see how Egypt is behaving, I think that they regard it in this light: they know that our troops saved Egypt in the war, and they have seen, since 1945, Egypt carrying on an agitation for the evacuation of our troops from Egypt before the time of the Treaty expires. They have seen Egypt doing everything possible to embarrass our administration in the Sudan. They now see Egypt adding injury to insult by her blockade of our ships in the Suez Canal. They cannot understand why we should go out of our way to make an advance concession to Egypt. As my right hon. Friend said, this blockade has meant something like £20 million sterling a year loss to us, and they cannot understand why we should go out of our way to make an advance concession to people who are out to do us grave economic and financial harm.

The Chancellor shows great concern for our credit. I, like the hon. and learned Member for Northampton, would suggest this to him. He would see how steeply our credit would rise if His Majesty's Government would take some action which would show Powers that behave in the way Egypt is behaving that they cannot twist our tail with impunity. It may be, as the right hon. Member for Warwick and Leamington has said, that there is a good deal in this agreement which is good, but my submission to the Chancellor of the Exchequer is this: it is absolutely ill-timed and there is no excuse for going on with it now before the United Nations have inquired into the question of the blockade of the Suez Canal, and before we have entered on some general and wider talks in which we can safeguard our wider interests.

The right hon. Gentleman's excuses have been very thin. I cannot help thinking that there is a much simpler explanation for this action which they have carried out. I believe that it is a mistake. Government Departments have shown a complete lack of co-ordination in this country over the last few years, and if the Government have had a fault it is that, in a world which is charged with high tension politics, they have time and again missed the political significance of events. They did it at the beginning of the Schuman Plan. They missed the chance to influence that plan. Undoubtedly, they missed the political significance of the affair of the American admiral.

The other day, answers to Questions showed that the Treasury had taken a decision to cut the allowance which we had been going to pay for propaganda in Eastern Europe. Surely that decision could never have been taken if the Foreign Office had been consulted. Now there is this. I beg the Chancellor not to carry on with this agreement until the United Nations have pronounced on the matter of the blockade and to make this agreement a part of one which will safeguard the wider interests of this country.

5.18 p.m.

Mr. Thomas Reid (Swindon)

I will try to be brief, and I cannot undertake to follow on the lines of the hon. Member for Lanark (Lord Dunglass) because I profoundly disagree with him about the Schuman Plan, for instance for the document which came out with the Schuman Plan—and I well remember reading it—we were asked to pledge ourselves, blindfolded, in advance.

Mr. Boothby (Aberdeenshire, East)

No.

Mr. Reid

Yes. We were asked to accept in advance, the terms of the Schuman Plan and we were to be pledged. also, to federate. The Schuman Plan was only a stepping-stone to European Federation.

Mr. Maclay (Renfrew, West)

Will the hon. Gentleman, before he uses that argument again in this House or anywhere else in the country, please turn up the White Paper produced by His Majesty's Government and look at the tenth Note exchanged between the French Government and the British Government? Will he not speak about this again until he has done so?

Mr. Reid

I repeat what I have just stated. It was in the White Paper, setting out the plan, that all was with a view to federation.

With regard to the question of the American admiral. it is unfortunate that some of the facts leaked out in Denmark before all the facts were known. I do not agree at all that we and our technical advisers, the Chiefs of Staff, have been wrong about the case of the admiral, but that will come up later.

To turn to Egypt, the first thing I notice, and notice with regret, is that we are debtors, that we owe £234 million to Egypt. We have to pay that money unless, by mutual agreement, and not by unilateral action, Egypt agrees to reduce the sum at some time or other.

Mr. Boothby

Is the hon. Member suggesting that Egypt owes us nothing?

Mr. Reid

They owe their safety and security to us, but in the matter of finance we owe them £234 million. There is no getting away from that. We are bound to repay this money, money which, I agree, was accumulated during the war in the noble task which we and our Allies performed in saving Egypt and the world. It is a sad state of affairs that we now have to pay the debt we incurred in saving Egypt, among the rest, but it is a debt we legally owe.

We have now made an arrangement by which we pay back in 10 to 13 years £150 million, and we are paying it back at a smaller annual rate than in years gone by, which is something gained. The right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden) has recalled the other unfortunate debts that we have to pay to other sterling balance countries, and I think he arrived at the conclusion that on next year agreements we have to pay about £80 million, which is a very serious matter. Again, we are debtors, and these arrangements were made during the war with countries such as India, Ceylon, Egypt and the rest. Whether they were wise agreements or not I cannot say, but they were made and we have to honour our agreements.

Mr. Churchill (Woodford)

They were always subject to our right to put in our counter-claims.

Mr. Reid

I agree, but we cannot put in counter-claims unilaterally. [Laughter.] I should say that we cannot insist on counter-claims unilaterally. We can put in a claim and perhaps get the other side to agree, and I hope that that will be done in the case of this Egyptian loan.

Mr. Churchill

What is the good of putting in a counter-claim if the other side can say, "Away with your counterclaim" and there is nothing else to be done?

Mr. Reid

It does not follow that we sit down and say that there is nothing else to be done. There is £150 million disposed of under this present arrangement, with £80 million to follow. I sincerely hope that we shall ask and get Egypt to scale down this enormous debt.

Mr. Boothby

It depends on the Government.

Mr. Reid

It depends to some extent on the Government, but to a greater extent on Egypt.

I have some knowledge of the Middle East and of Egypt. I consider it one of the key spots, strategically, in the whole world, which at the present time is in an appalling state of weakness. The countries in the Middle East are being preserved from being overrun only by the Atlantic Pact countries. But for the North Atlantic Treaty Organisation these countries would have been overrun long ago. There is, therefore, need for unity in the Middle East, and there is need for them to give us in the West some assistance, moral and otherwise—material, too—to protect themselves and the world from the onrush of Communist imperialism.

In the case of Egypt, I would wish, as the right hon. Gentleman the Member for Warwick and Leamington has said, that this financial agreement was part of a general settlement. I wish it were; but is it, or is it not? We have to make some arrangements for the coming years. Is this the beginning of a general settlement? If it is, then it is a far more valuable agreement.

Mr. Crossman

Surely my hon. Friend does not wish to embarrass his own Front Bench in trying to defend this agreement on the grounds that it is good politics?

Mr. Reid

Finance agreements are not political agreements, and this agreement as it stands alone is certainly not a political agreement; but is it part of negotiations to effect a general settlement?

I say to my Egyptian friends that it is high time that these things were settled. It is no use carrying on with the blockade of the Canal, which is a loss to everyone concerned. It is imperative for Egypt to come to a settlement with Britain in the first place. If Egypt were wise, she would settle all these things and let the financial agreement be the beginning of the all-round settlement that is necessary for us all. There is the question of the troops in the Canal Zone. I hope that now the financial side is settled for the time being something will be settled about our troops in the Canal Zone. These troops, as every Egyptian knows, were sent there for the safety of the Canal. I hope that this financial settlement will also lead to a settlement of the question of troops in the Canal Zone and the prolonged Sudan question.

I appeal to the Egyptian people and to their Government. having made this good start on a financial settlement, to proceed to settle the rest in their own interests and in the interests of the world.

Mr. Janner (Leicester, North-West)

In the course of the very generous and novel point of view that has been put forward by my hon. Friend about a general settlement, is he also suggesting that it would be a good thing for Egypt to have a settlement with Israel?

Mr. Reid

I said that I wanted all the countries in the Middle East to unite, which would, of course, include Israel among the rest. It is time that they settled their squabbles, because Communist imperialism is on their borders.

5.28 p.m.

Colonel Crosthwaite-Eyre (New Forest)

My right hon. Friend the Member for Warwick and Leamington (Mr. Eden) drew attention, quite rightly, to the fact that if certain concessions had been obtained from Egypt, then this financial agreement might have been acceptable. But it is equally true to say that the terms of this agreement should only be accepted if they do not set a very bad precedent for all the rest of the sterling balances the Government will have to discuss in the near future.

I have never understood how the Chancellor has been able to adopt the attitude that these are legal debts, or, as the hon. Member for Swindon (Mr. T. Reid) has said, that "We are bound to pay" or "We legally owe." Let me remind the House that these debts were incurred during the course of war, but that there was never at any time an undertaking given that they would be paid in full—in fact. the reverse is true.

The Chancellor of the Exchequer (Mr. Gaitskell)

Does the hon. and gallant Member expect that in every case when a person borrows money, it is necessary to point out that he has to repay in full?

Colonel Crosthwaite-Eyre

In this case it was made clear by my right hon. Friend the Member for Woodford (Mr. Churchill) during the war that at the end of the war counter-claims would be put in for the services rendered to the country.

Mr. Gaitskell

Will the hon. and gallant Member say on what occasion the right hon. Gentleman ever made this claim in public during the war in respect of these countries from whom we were borrowing?

Colonel Crosthwaite-Eyre

I cannot say if the right hon. Gentleman says "during the war," but I can give him the date when he made that statement, which was never challenged, subsequent to the war.

Mr. Gaitskell

Does the hon. and gallant Member not see the importance of telling the people from whom one is borrowing money at the time and not after?

Colonel Crosthwaite-Eyre

The right hon. Gentleman will not catch me out with sophistry. My right hon. Friend made it clear after the war that these sterling balances were considered during the war to be subject to counter-claims.

Mr. Gaitskell

When?

Colonel Crosthwaite-Eyre

He made that statement after the war, and it has never been challenged by any hon. Member opposite until today. That is the complete answer. I fail to see why the right hon. Gentleman should challenge it now unless he has some information to the contrary.

Mr. Gaitskell

I understood the hon. Gentleman to say that the right hon. Gentleman said in public during the war when these steps were incurred that he told the countries concerned that he would put in counter claims. So far as I am aware he never said any such thing.

Colonel Crosthwaite-Eyre

The right hon. Gentleman is trying to misrepresent what I said. What my right hon. Friend said was that these sums, due by way of sterling balances, will be subject to counter claims, and according to his own statement that was made at the time the balances were being accrued. It was after the war that he made that statement to the House, and it has never been contradicted. The right hon. Gentleman now says that my right hon. Friend has made a mistake, and I hope he will prove it. Otherwise I repeat to the House that at the time the sterling balances were being accumulated by the countries concerned, my right hon. Friend the Member for Woodford had already entered the proviso that these amounts would be subject to counter claims.

Mr. Gaitskell

I am only saying that according to my information that is not so. The right hon. Member for Warwick and Leamington (Mr. Eden), who is sitting opposite to me, was a member of the Government, and if he will get up and tell us that at that period the people concerned were told that the Government were going to put in a counter-claim I shall accept it.

Mr. Eden

I cannot charge my memory on the spur of the moment with the period when these counter-claim declarations were made. I rather think that it was during the war, but I have not got the information at my finger tips. We will try to find it before the conclusion of the debate if it is still wanted.

Mr. Glenvil Hall (Colne Valley)

It is within the recollection of those who were in the last Parliament that the first time we heard publicly that the counter-claim would be made was when the right hon. Member for Woodford (Mr. Churchill) made the statement at Question Time about 1946 but not before, and certainly not at the time when the money accumulated against this country.

Colonel Crosthwaite-Eyre

After what has been said by my right hon. Friend we can for the moment leave this point and, no doubt, it will be the subject, if necessary, of further question at a later date. It is not really important for the purpose of this argument at what date my right hon. Friend made this statement that counter-claims would be made. Hon. Gentlemen opposite are equally committed to this policy. They always try to get rid of it, but if we go back to 1945 and from then onwards, until 1947, we find that there is nothing but a dismal tale by the Chancellor of the Exchequer of that day, now the Minister of Local Government and Planning, of promises to enter counter-claims, but he never did anything.

I would direct the attention of the right hon. Gentleman to what he promised to do under Article 10 of the Anglo-American Financial Agreement. Let us look again at what he promised. He promised to release a certain amount of these balances for immediate use, and then he promised to release a further amount after 1951, and finally as to the remainder he undertook that the balances to be adjusted as a contribution to the settlement of war and post-war indebtedness, and in recognition of the benefits which the countries concerned might be expected to gain from such a settlement. Then it goes on—and this is the vital phrase: The Government of the United Kingdom will make every endeavour to secure an early completion of this Agreement. What have they done? Absolutely nothing to carry out the paragraph promising to scale down sterling balances. In February, 1947, the Minister of Local Government and Planning said that in all the negotiations about sterling balances account must be taken of the comparative war effort of the parties. Shortly afterwards I asked him whether that word "must" was the operative word in the sentence, and he replied, "Yes."

Perhaps the right hon. Gentleman will tell us tonight for the first time what action has been taken by His Majesty's Government to scale down these debts. I would remind the House that in 1945 they amounted to £350 million. They stand at the same figure today despite all these releases, which have only resulted in a further piling of debts on our shoulders. We are like Sisyphus, who had to roll a stone up a hill, and found that when he got it a certain way it rolled back to the bottom.

There can only be one cause of generosity of this nature, and that is if the sums we release can be afforded by us and will not be any further strain on our economy. The Chancellor has recently made gloomy speeches in this House and on the wireless. He knows as well as I do that in the first two months of this year the visible balance of trade showed that we have incurred 40 per cent. of the total deficit on visible trade accounts that we incurred last year. January and February have shown an adverse balance of £140 million against a total of £350 million for last year.

How can he, with that fact in front of him, say we are going to have further unrequited exports in the case of Egypt? The right hon. Gentleman knows about the shortage of raw materials. His colleague the President of the Board of Trade has told this House how rationing of raw materials is going to be necessary. He has stressed how all materials available must be used to full effect if the rearmament programme is to be successful and the national economy maintained. Yet we are today asked to allow this amount of unrequited exports to Egypt.

I have heard many defences of the situation in Egypt. I have heard, for instance, that they cannot be counted as a co-belligerent. It is said we went there and used them for our own purposes and we were there because our needs demanded occupation of Egypt. Let me remind the House that they declared war on 26th February, 1945, at a time when the end of the war was in sight, and they were at such a distance from the front line that they felt it would be wise to account themselves one of the victorious nations.

We are told that we must be careful and kind to them, because during the war they gave their cotton crop to us in order to enhance our hard currency reserves. I tried to find what was the amount which they actually gave to the sterling area, and I must confess that I have not been able to discover the figure. One has, however, got the figure of their exports to the U.S.A. and Canada between 1945 and the middle of 1950, and in that period the total amount of foreign exchange, of U.S. and Canadian dollars, earned by Egypt averaged 4½ million Egyptian pounds. That is a very small sum when we consider what we have released to them.

Again, I suggest that there is no case in equity for these releases,' particularly when this House remembers that whilst they during the war had surrendered their cotton crop we had surrendered the whole of our overseas trade, most of our investments, and our reserves of hard currency. If there is to be any equation, surely it should be on the basis that both sides surrendered what they had, and, therefore, one should consider only the build-up in the post-war period.

May I come to that? In 1945, even while the war was still on, we granted the Egyptians £10 million of hard currency for their available use. By the time that figure came up for review in the middle of 1947 they had already had 32 million Egyptian pounds worth of convertible currency. Surely that is a tremendous sum. It was a gesture that was certainly generous. Equally, in 1947, we promised them under that agreement that we would give them further releases. We promised them £20 million in cash. We said that we would undertake to pay out of sterling balances for any stores or warlike installations that were in Egypt and that they bought. I think that was a fair suggestion. But what has never been told to this House is what price the Egyptians paid. Did they pay a fair market price? At what sum were these installations sold?

Also, we undertook to service the Egyptian public debt in countries outside Egypt, including, if necessary, ex-enemy countries. In 1949 we added to our commitments. We said that we would give them £5 million in dollars. We gave them £12 million sterling immediately and £18 million to bolster up the current account of the National Bank of Egypt. Now we are going to release a further £10 million a year on current account for the National Bank of Egypt and to make a special grant of £14 million in currency convertible to dollars. Even if we had not any right to institute counterclaims purely on our own account, surely we had the right to do one thing, and that was to put in counterclaims so as to ensure that this money would be used for the benefit of the Egyptian people, and in particular for the poorer classes in Egypt.

We have not done it. We have made no conditions whatever. This money can be used exactly as the Egyptian authorities like. I could understand the opinion of hon. Gentlemen opposite that all this generosity to Egypt, which I have recited, should be used to build up the unfortunate people of Egypt, but this money is released purely for luxury purchases in Cairo. That is what it comes to. I have looked up the trade figures and have seen how this money has been spent, on luxury motor cars, cosmetics and so on. Nothing has gone to help the unfortunate Egyptian peasant.

We should object to this agreement which is releasing more money at a time when we need every penny for ourselves, for our own internal commitments and for re-armament, and which will be used merely to afford luxury to a few in Cairo. I can see no justification whatever for this agreement. It is extravagant because it goes far beyond anything that can be demanded by the Egyptians. We should use our resources in this country in order to see ourselves secure and to fulfil our own immediate aims, which are very much for the benefit of our own people, rather than merely pandering to the wishes of a few rich people in Cairo. For these reasons I hope that this agreement will not be accepted.

5.45 p.m.

Mr. Harold Davies (Leek)

I want to bring the picture painted by the hon. and gallant Member for New Forest (Colonel Crosthwaite-Eyre) round to the subject of payments. In all fairness and balance I would point out that the right hon. Lady the Minister for National Insurance has only just returned from Egypt where she has been investigating the system of social insurance—the Opposition may smile, but it is a beginning—including widows' pensions and social insurance, which the Egyptian Government are setting up. We must point out in all fairness that for the first time in history there is a definite change in that direction.

Secondly, there is one direction in which we made conditions for a loan of money. The hon. and gallant Member will remember—I think I am right, but I am subject to correction—that the Anglo-Egyptian Commission, which was a buying commission for cotton, made a profit of some million pounds during the war. We said that £400,000 of that money would be returned, on condition that the Egyptians used it for supplying rural water schemes in Egypt. This is an appropriate moment for us to hear something from the Treasury bench about that specific promise of £400,000.

I want to ask a few questions. If the Treasury did not make this agreement, what kind of hiatus would we have? What would the situation be economically in this transitional period? It is no use acting in a nihilist fashion, and I do not want to use the word "repudiating," because perhaps it would be wrong, as the Opposition would not support complete repudiation. At this moment it is our duty on this side of the House to exercise a little more judgment than has been exercised on the other side during the last 14 days. In this period, while we are re-arming, if we can get some kind of definite idea about how much of our sterling balances and unrequited exports are to be extracted during the next 12 months or couple of years, it would make it much less difficult for the defence programme and for the war effort—the cold war effort—in this country.

Frankly, for any Financial Secretary or Chancellor of the Exchequer to say that a dramatic financial agreement like this is not a political one, when we are dealing with a volcanic area like the Middle East, is a hopeless kind of statement for a Chancellor to make to a sophisticated House of Commons. Do we completely accept that there are no political implications or possibilities? What is being hidden from this House? If this agreement is the beginning of a new type of rapprochement, a beginning for the first time in six or seven years of a real foreign policy in the Middle East, I welcome it. Here we have failed more than ever, so far as a crystal clear foreign policy is concerned, in the Eastern Mediterranean. If this is a step towards such a policy, then, whatever excuses may be made from the Treasury bench, I would welcome that approach.

I would emphasise what has been said on both sides of the House that it is time that this foolery with the Israeli situation finished. The situation must now be recognised. I am delighted to see that Egypt has made an honest start at uplifting the standards of the fellaheen. She has made an honest start. With an improvement in the standards of living of the fellaheen and the eradication of the basic problems of poverty and hunger, I am convinced that the Israeli and Egyptian nations can live side by side.

As to traffic through the Suez Canal, every nation—even the United States of America with all her money—must realise that Clapham Junctions of world affairs like the Panama and Suez Canals are, in a shrinking world, no longer the property of the nation to whom they have so long belonged. They are now essential links in modern civilisation. Kipling said that transport is civilisation. The Panama Canal, the Suez Canal and the Isthmus of Kra are instruments of world policy. We have a legitimate right to speak about this. We on this side of the House may make apologies for our reasons for being in Egypt. In 1882 we sent ironclads to bombard Alexandria because the people there could not pay their debts. That was an example par excellence of the use of the mailed fist.

Mr. Somerset de Chair (Paddington, South)

The hon. Gentleman seems to be a little confused about the events of 1882. At that time Britain and France were invited by Khedive Tewfik, whose position had been affected by the revolu- tion of Arabi Pasha, to enter Egypt to restore the Khedive. The other matter had nothing to do with it.

Mr. Davies

Despite these euphemisms, nobody denounced it more than did Lord Randolph Churchill himself. If we are to go into legalistic points about the payments and counter-claims, there is a big question mark as to why we are in Egypt at all. There is the issue of the unification of the Nile Valley, the presence of our troops and the issue of the Suez Canal. If the financial agreement will help to get real discussion on these points, it will be justified, but it is a political act. As to the Sudan, there was once a brilliant young lancer officer who wrote a magnificent article about it. Hon. Members may recognise the style. This is what he said about the Nile Valley: Here, then, is a plain and honest reason for the River War to unite territories that could not definitely have continued divided, to combine peoples whose future welfare is inseparably intermingled; to collect energies which, concentrated, may promote common interest; to join together who could not improve apart. These are the objects which history will pronounce have justified the enterprise. This was written in most excellent prose by the right hon. Member for Woodford (Mr. Churchill), many years ago, about the geographical and natural need for unity in the Nile area.

Within all these agreements at the present moment, over-shadowing them all, is the issue of sterling balances. If the Government seek support in this House, they can only get that support on the grounds of a clear new foreign policy approach in this area. If the Government are asking for that approach, there must be co-ordination between the Foreign Office and the Treasury. I am not the type of person who attacks officials who have no chance to reply, but more than ever at this critical time in the history of humanity it is necessary for a democratic House of Commons to have a power over its Foreign Office. This House must be much better informed than it has been in the past on what has been taking place in the Middle East. If the Treasury and the Government think that this will help, they will get our support. All I can say is, that while we are worried about the squeeze that Egypt may have put on us, I wish God-speed to the new Foreign Secretary in bringing about a rapprochement in Middle East affairs.

5.56 p.m.

Mr. Mott-Radclyffe (Windsor)

The hon. Member for Leek (Mr. Harold Davies) has been a little unfortunate in one or two of his facts. On a matter of historical accuracy he was very properly corrected by my hon. Friend the Member for Paddington, South (Mr. de Chair). I wish to correct him on another comparatively small point. When he read an extract from my right hon. Friend's book "The River War," he referred to him as a lancer. My right hon. Friend the Member for Woodford was not a lancer but a hussar. When the hon. Member said he thought that a new approach was being made in the Middle East. I do not know whether he felt that future historians would regard as the starting point the visit to Egypt of the right hon. Lady the Minister of National Insurance. I am not quite certain whether that will be one of the great landmarks in the history of our relations with the Middle East.

Mr. Churchill

The Pyramids will last longer.

Mr. Mott-Radclyffe

The hon. Member for Swindon (Mr. T. Reid) regretted that we were debtors to Egypt, but I think that he appreciates as well as any other hon. Member in the House that those debts were very honourably incurred in her defence and that no counter-claim was made. I hope that the Chancellor will explain exactly why any suggestion of a counter-claim has hitherto fallen on deaf ears on the Government Front Bench.

I do not understand the argument that the agreement with Egypt is a purely financial one. As my right hon. Friend the Member for Warwick and Leamington i(Mr. Eden) said, the British Treasury official who conducted the negotiations in Cairo described the financial agreement as a good send-off to political talks which will take place in London and Cairo shortly. The Chancellor himself openly admitted that had he attempted to link the question of the sterling balances with that of the illegal blockade of the Suez Canal he would not have got an agreement. Therefore, from his own mouth he has admitted that the implications of the agreement were not purely financial.

The truth is that no agreement of this sort ever is purely financial. A Treasury colleague of the right hon. Gentleman is now negotiating over meat in Buenos Aires. Will the Chancellor claim that the implications of these negotiations, be they successful or unsuccessful, are purely financial? Nor do I believe that it can be argued conversely that the illegal blockade of the Suez Canal is purely political, because it has involved this country and others in losses running into millions of dollars. In the Middle East, where our interests are vital, strength is respected and weakness is despised. It is incredible that at no stage during the negotiations for a financial agreement was the question of the illegal blockade of the Suez Canal ever raised.

I cannot understand how any Government of whatever political colour, worthy of the name of His Majesty's Government, could possibly have made these concessions when the Egyptians in the first place have unilaterally repudiated the 1936 Treaty and when, in the second place, they are carrying out an illegal blockade of the Suez Canal quite contrary to the terms of the Suez Canal Convention.

I want to point out one other aspect to the right hon. Gentleman. Any weakness shown by His Majesty's Government in their relations or in her negotiations with Egypt, is bound to have serious repercussions upon Anglo-Persian relations. And Anglo-Persian relations are going through a very critical stage owing to proposed nationalisation by the Persian Government of the Anglo-Iranian oil interests. Indeed it would be ironic, and almost funny if it were not so serious, that our vital oil interests in the Middle East should be threatened by a policy of nationalisation by another Government. I beg the Chancellor to recognise that the more he gives way to Egypt, the more difficult it will be to stand up to Persia. Like a snowball, weakness grows. The Government must stop giving way to anybody who shouts loudly enough. They must stand up for Britain's legitimate rights, and particularly for those upon which vital military and economic interests in the Middle East depend.

6.2 p.m.

Mr. Crossman (Coventry, East)

I shall not follow hon. and right hon. Gentlemen opposite in making a sweeping attack on this agreement. Least of all shall I follow the experts of the City of London who set themselves up to be such great examples of financial rectitude and then seem to advocate the general principle, "Welsh on your debts if you possibly can." I am willing to be convinced that this agreement, in its strictly financial terms, is a good agreement for this country, and I want to concentrate on the clause on which the right hon. Member for Warwick and Leamington (Mr. Eden) concentrated, the clause dealing with oil.

All the rest of the agreement seems to me to be perfectly intelligible and perfectly defensible, but I would say this to my right hon. Friend: I can understand that we have to release sterling balances, because we have never frozen them. But what matters is not how much sterling we release but what the Egyptians do with the sterling when we have released it. What matters is that we have only a limited amount of goods and capital equipment to go overseas in this year of re-armament. Surely, therefore, it is important to see that those goods and that capital equipment go to the people who strengthen the cause of democracy, and not to those who will use it for luxury cars in which to drive round the streets of Cairo.

We have had trouble, as my right hon. Friend knows, in the last debate on Egypt. It was about 14 Centurion tanks—not about money, but about the things which the Egyptians were to buy with the money which the right hon. Gentleman was granting them, very properly, under the sterling balances agreement. I would like to feel sure that my right hon. Friend and his colleagues are planning our export licence policy in such a way as at least to ensure that none of the money released under this agreement can be used for the purchase of arms by the Egyptian Government. I should like to feel perfectly certain by having a categoric reassurance tonight that none of the money will be able to be used for purchasing jet aircraft or Centurion tanks or other things which should go to people who can use them most usefully.

Captain Soames (Bedford)

Does the hon. Gentleman include in that the destroyer which is now lying in one of our dockyards?

Mr. Crossman

I am including all arms. It is not merely a question of how much money the Egyptians get, but whether we are ensuring that they will not be able to purchase with that money weapons which would be much better sent to other countries.

Mr. Churchill

On the contrary, the destroyer which is being finished here, which we need for our anti-U-boat defence, is to be sent to Egypt. As I understand it, instead of our getting any return for this important export—important from every aspect—a line is drawn through a part of our so-called sterling balance.

Mr. Crossman

I am grateful to the right hon. Gentleman, because what he says merely confirms the need for an assurance being given to the House that the release of these balances will be accompanied by a change of policy under the new Foreign Secretary in regard to export licences. This is what the House is more concerned with than the technicalities of financial agreements. We are really concerned about whether arms will go to Egypt again.

May I make one other point on that? Let us take two countries in the Middle East, Israel and Egypt. The Israeli Government is now in the middle of a disastrous economic crisis. It is desperately short of sterling. If it had sterling it could buy the food necessary to prevent starvation. The Chancellor must remember that sterling is being released to the Egyptians in very large quantities. It will certainly not go to the poor fellaheen. At the same time. we are refusing credits to Israel and Jordan—they have been given relatively generous sterling settlements because they have very small balances—which would enable them to develop their strength.

It is the discrepancy between the amount of goods which Egypt will be able to acquire under this settlement, and the desperate failure to provide the means by which Israel and Jordon could get an adequate supply of goods which is the political issue to which we call the attention of the Chancellor. [Interruption.]I realise that under no sterling credit agreement could he possibly give Israel or Jordan more generous treatment. All I say is that we should give them more generous commercial agreements.

To turn to the oil clause, the right hon. Member for Warwick and Leamington mentioned the loss to Israel involved in the closing of the Haifa refinery. The loss to this country should not be underestimated. I do not know whether anybody has calculated the amount of dollars we could have earned from the Haifa refinery if it had been in full supply since 15th May, 1948, when it closed. It is a long time since we have been deprived month by month of the dollar earning capacity of the Haifa refinery, and it is ironic to recall that the country which has deprived us of millions of dollars under this agreement, has special privileges to prevent its using dollars to buy oil that really is generosity! I know that turning the other cheek is a noble and ethical principle, but I do not think it is understood in the Middle East. It was not understood when Lord Stansgate went to Egypt in 1946 and granted, straight away, the main thing the Egyptians wanted, the withdrawal of British troops. That was not thought to be generosity; it was thought to be weakness.

The Chancellor of the Exchequer may say that this is a strictly financial agreement. I wish that he and I could have had a tour of the Middle East together to compare notes. In this Chamber he may be able to tell us, "I do this, my right hon. Friend does that; this is my part in the work, that is his part of the work." Out in the Middle East they do not make those distinctions. They do not say, "This right hon. Gentleman is doing this and, therefore, it is a financial agreement; that right hon. Gentleman is doing that, therefore it is political." They see it all as British policy, and every Middle Eastern country will be judging this agreement fairly or unfairly, especially the oil clause, and saying, "Some more Danegeld by the British to the Egyptians."

Now, my right hon. Friend knows as well as I do that the Egyptians are not the only recipients of Danegeld. The Iraqi cut off the pipeline to Haifa three years ago. Each year the Chancellor has arranged that they shall be provided from this country with just sufficient sterling to make up for any losses they might have incurred on the oil royalities from the pipeline—the pipeline they closed in order to prevent us earning dollars. This year the agreement with Iraq was made again. It may be a noble and a generous thing to do, but in the Middle East it is thought to be Danegeld; it is thought that the Iraqi and Egyptians are so hostile that we have to treat them gently. And our friends in the Middle East—they are not many, Israel, Jordan and Turkey—do not appreciate the fact that their friendship and loyalty are repaid by being given less because their price for friendship is not so high.

I agreed with the hon. and learned Member for Northampton (Mr. Paget) when he said that our problem in Persia is not unrelated to our treatment of Iraq and Egypt. If we pay a man more the more hostile he is to us, and if we pay our friends less because they are loyal friends, there comes a time when somebody in Persia says, "If I want to squeeze some more out of the Anglo-Iranian Company, I must be really hostile to the British, then I will get a couple of million more." This is not an unrelated fact.

Time after time in the last five years, from this side of the House, we have consistently complained that we have always rewarded our enemies and adjudicated against our friends. It is a disheartening situation, which I must describe as the last dying kick of a policy which has utterly failed. We here below the Gangway are left in some difficulty. In any normal circumstances, one would find it very difficult indeed to support the Government on the agreement.

Mr. Boothby

Vote against it.

Mr. Grossman

The hon. Member, having failed in his attempt to drive us hysterical in other ways, will not achieve anything so stupid now.

We have to observe, thank Heavens, that we have a new regime at the Foreign Office. We will give that regime a chance to see whether it will reshape our Middle Eastern policy; and we shall hope that when the new Foreign Secretary masters his officials he will not permit the Chancellor of the Exchequer to say, "These are purely financial affairs." The new Foreign Secretary should, in future, say to him, "No. In the Middle East, the purely financial often is the most highly political. In the Middle East I must have a concerted, co-ordinated policy." It is in that spirit of good will and constructive hope to the new Foreign Secretary that I shall vote for the Government today.

6.12 p.m.

Mr. Boothby (Aberdeenshire, East)

I do not want to detain the House for more than a few moments, but the Chancellor of the Exchequer must realise that this has been a very rough debate for him. I have listened to every sentence of it, but I have heard absolutely no defence of the Government, from either side, of any sort or kind, except a word of two from the hon. Member for Leek (Mr. Harold Davies), who painted a wonderful picture of Egypt as a great welfare state.

Mr. Harold Davies

The hon. Gentleman knows that that is completely untrue. Egypt was not painted as a wonderful welfare State. What I said was that there, for the first time in history, was the beginning so far as a social welfare State was concerned.

Mr. Boothby

I would recommend the hon. Member to study the Egyptian income tax, and especially their surtax.

Mr. Davies

I described their social welfare.

Mr. Boothby

The hon. Member would find their taxation even more significant and interesting; and he could then make his comparisons between the Pashas and the unfortunate rich, or the so-called rich, in this country. I do not think he would find it a very fine example of the welfare State.

The hon. Member for Swindon (Mr. T. Reid) asked whether the agreement was part of a general political settlement, or was purely a financial agreement. I can see the hon. Member's difficulties, because the Chancellor of the Exchequer has already told us that it is a purely financial agreement, and his financial representative in Cairo has said that it is the beginnings, and the favourable beginnings, of a great step forward to a big political settlement. We are, therefore, a little bewildered about what it really is. The only thing about which we seem to be absolutely solid is that -it is a pretty bad show, whatever it is intended to be part of, or not part of.

I could not agree more than I did with the remarks of the hon. and learned Member for Northampton (Mr. Paget). I think that our policy in the Middle East—I am on the record about this—has been disastrous in the last three years; and I think it remains disastrous today. We created the national home for the Jews. We then left them to fight for it against odds of 10 to 1; and we have not done much for them since. I have always believed that that is a stain on British history, and will be so regarded for generations and indeed centuries to come.

Since then we have done very little for Israel, but we have done an awful lot for Egypt. We have sold them jet fighters.

Mr. Crossman

Lincoln bombers.

Mr. Boothby

The only thing, I think, which is fairly certain is that they do not do very much flying. We have done this despite the fact that they have blockaded the Suez Canal, in direct defiance of the terms of the Suez Convention. They have prevented our tankers, as has been said over and over again, reaching the Haifa refineries, in flagrant defiance of their written obligations.

I entirely agree with what the hon. Member for Coventry, East (Mr. Cross-man) has just said, that the oil clause in this agreement, quite apart from the question of sterling balances as such, which is a wider issue, is absolutely scandalous in existing circumstance. There is no other expression which can be used to describe it. We are making special arrangements, for years to come, to give Egypt facilities for importing oil at the very moment when, in defiance of her international obligations, she is denying oil to this country and refusing our tankers access to the Suez Canal. The Chancellor of the Exchequer knows perfectly well that this is an indefensible proposition.

In conclusion, I have a few remarks to make about the sterling balances generally. There was a little argument just now about when we first put forward the idea that we had some counter claims in this matter. I remember very well the negotiations preceding the first American loan. The Americans then insisted upon the scaling down of the sterling balances generally, almost to the point of making it a condition of that agreement. This was published all over the world at the time of the negotiations, when Lord Keynes was in Washington, and after the Agreement was signed. It was well known when the right hon. Member for Colne Valley (Mr. Glenvil Hall) was Financial Secretary to the Treasury, long before any of these negotiations were entered upon, that the Americans had stressed most strongly that we must scale down these sterling obligations. I understood that the Treasury had agreed to that.

Mr. Glenvil Hall

I do not think that what the hon. Member says is disputed. The point in dispute was whether the right hon. Member for Woodford (Mr. Churchill) had, at the time these balances were piling up, said to those to whom we owed the money, "We are not paying you in full. There will have to be some sort of readjustment later."

Mr. Boothby

Let us glance for a moment at the merits. I quite agree that India and Pakistan—Dominions—have special claims for our consideration; but is it not quite obvious that we have counter claims for what we did for all these countries? Does it satisfy the House that the Chancellor of the Exchequer should come here and say, "We put in these counter claims to Egypt, but they would not pay the faintest attention to them; they brushed them aside. Nevertheless, we are going to hand over to them £150 million during the next 12 or 13 years"? That is what the right hon. Gentleman has said—that unfortunately, the Egyptians would not listen to our counter claims, which is just too bad; so we have to leave them out, and give them the money all the same.

That is not my idea of a reasonable or rational negotiation. The fact remains that the Chancellor of the Exchequer has now given away scores of millions of pounds, for years to come, in the form of totally unrequited exports, at a time when our balance of trade is adverse and when we are in desperate need of raw materials. I do not think that that is a wise policy. I do not want to tread on any corns, but I venture to say that the Government do not possess the necessary authority to dish out millions of pounds of the British taxpayers' money in the form of unrequited exports for years to come when everybody, on both sides of the House, who is honest with himself, knows very well that in these negotiations they have not fought for British interests.

The Government have made concessions, quite unjustifiably, to the Egyptian Government, under conditions which the House regards as quite intolerable. I venture to suggest that unless the right hon. Gentleman gives a much better and more helpful reply than at present appears likely, hon. Gentlemen opposite should at last pluck up their courage and vote against this, agreement, and let us have that Dissolution which we all desire so much.

6.20 p.m.

Mr. Clement Davies (Montgomery)

This has been not only a very interesting, but a very instructive debate and I hope the Government Front Bench have taken advantage of the instruction they have had from every part of the House.

I agree that, so far, in every speech there has been criticism of this agreement and criticism of the policy of the Government. I do not think there was one hon. Member on the benches behind the Chancellor who had a good word to say in defence of carrying this agreement through as it is today, not even the hon. Member for Swindon (Mr. T. Reid). He tried to defend it but really fell back on the plea of guilty with a rider for mitigation of sentence. What we are all anxious to know is what the Government propose to do? Here we are, on the Adjournment of the House, and I was hoping, as other hon. Members were hoping, to have heard earlier from the Chancellor of the Exchequer what were the proposals of the Government in connection with this matter. So far as we understand it, all that has happened is that an agreement in terms or in principle has been made. It has still to be put into full form and still to be signed by the respective Governments.

The hon. Member for Coventry, East (Mr. Crossman) hoped that there would be a change of policy now there has been a change at the Foreign Office. May I remind the hon. Member of what the new Foreign Secretary has said on this very question in answer to the questions which were raised last Thursday? It is rather interesting to see how these questions are regarded. I think it has been instructive to all of us to realise how necessary it is, before Governments come to agreements of this kind, that they should put the matter to the House so that they can get the opinion of the House on whether the policy should go through or not.

The attitude taken by the Foreign Secretary was this. He said: My hon. Friends have asked about that in connection with other matters, and the Leader of the Opposition has always supported the view that the Government have a right to make treaties and agreements and the House a right to upset them afterwards."—[OFFICIAL REPORT, 15th March, 1951; Vol. 485, c. 1785.] That may or may not be the view of the right hon. Gentleman the Leader of the Opposition—I do not know—but that was the statement made by the new Foreign Secretary; he supported it. The Government now realise the views of the House as expressed from every quarter, that hon. Members do not like this agreement, do not like the way it has been made. They dislike the policy hitherto followed by the Government in the Middle East, they dislike its tenderness towards Egypt, and they dislike its intransigence in regard to Israel. Instead of helping Israel, Jordan and other countries to come to an agreement the feeling in those parts of the world is that the Government have rather discouraged them at the request of Egypt.

I agree with all the epithets that have been thrown at the Government for daring to suggest that this is purely a financial matter, quite unconnected with policy and our position in the Middle East. They are certainly connected. Are we to say that the financial right hand is entitled to do something without any consultation whatever with the Foreign Office left hand, and that the Foreign Office knew nothing at all about this? Merely to put it in that form supplies the answer straight away. What we are now anxious to know on every side of the House is: Is there now a change of policy in the Foreign Office, with a new Foreign Secretary? If there is, will this agreement be signed now, in spite of the opinion of the House, or be withheld until further negotiations can be entered into on a far broader basis, dealing with all the matters which arise in the Middle East? Will those matters then be submitted to the House, so that it may know and judge for itself of the Tightness or otherwise of that new policy? We are entitled to know that from the Chancellor of the Exchequer, and I wish he had intervened earlier.

6.25 p.m.

Mr. Geoffrey Lloyd (Birmingham, King's Norton)

There has been in the House this afternoon a really extraordinary consensus of agreement that it is the oil issues in this agreement that are really its important and most objectionable feature. I rise briefly to deal with those issues, but before I do so, I wish to make a passing reference to the financial side of the question.

I want to draw particular attention to the important point made by my hon. Friend the Member for East Aberdeenshire (Mr. Boothby) with regard to the Financial Agreement between the United States and the United Kingdom in December, 1945. I need not repeat the general argument, but there was an obligation under that Agreement for the scaling down of the sterling balances according to the different circumstances of the various countries. I would direct the attention of the Chancellor of the Exchequer to Article 10 of that Agreement which is headed, "The Accumulated Sterling Balances" and ask him whether he could interpret that Article in relation to the Government's conduct in negotiations leading up to this financial Agreement?

In particular I should like him to resolve for me, and incidentally for the House, the curious contradiction about the conduct of these negotiations and the question of whether or not the Government have ever made a counter-claim in this regard in respect of Egypt because, on 28th November, 1950, the Chancellor is reported as replying in respect of this matter: I cannot accept that it has ever been our policy to put in counter-claims."—[OFFICIAL REPORT, 28th November, 1950; Vol. 481. c. 946.] The other day my right hon. Friend the Member for Woodford (Mr. Churchill) asked specifically: … whether these sterling balances were not always, in accordance with the policy of the National Coalition Government, to be subject to off-sets made against them by claims for having defended the freedom and safety of that country during the period of the war? The Financial Secretary to the Treasury replied: Yes, Sir, these claims were made by the Government in 1947; but unfortunately agreement on that point could not be reached with the Egyptian Government."—[OFFICIAL REPORT, 15th March, 1951; Vol. 485, c. 1783.] The House would rather like to know which of these two hon. Gentlemen is correct and whether or not the Government have in fact made the offset claims in respect of sterling balances in regard to Egypt. I shall leave that subject except to say that if they had conducted the negotiations with Egypt in such uncertain voice as they have informed the House about the matter, they cannot have pressed them very successfully or energetically.

I turn to the oil issue which I think falls naturally under two separate heads. First there is the loss of oil which results to the sterling area oil programme as a result of the closing down of the Canal and the non-working of the Haifa Refinery and, secondly, our facilitation of supplies of oil especially to Egypt. I deal first with the question of our losses in oil by the closing down of the Haifa Refinery and I would remind the House that Haifa is a major oil refinery. At the beginning of the war, it had a capacity of two million tons. It was so important during the war that towards the end we increased the capacity, even when we were under the stress of war, to four million tons a year. It is extremely important both in peace and in war for supplying oil requirements throughout the Mediterranean area. According to the best of the estimates which I have been able to obtain, this refinery would cost £40 million to build at present.

There is, in the oil supply situation, a bottleneck in refineries. That is a limiting factor in the production of oil, particularly in the sterling area. That is why the Government are now pressing on so hard with the construction of refineries in this country. Therefore, when this oil could not come through the Canal to Haifa, it was definitely a loss to the sterling area oil programme of the total amount of oil that could have been refined at Haifa. That refinery was closed in April, 1948, and it remained totally closed until September, 1950, a period of two and a half years. We were, broadly speaking, losing oil to the extent of four million tons per year during that period, so the House will see that the total amount which we lost during that first period of two and a half years was 10 million tons of oil.

All this time we have been engaged in supplying Israel, which has this great refinery within her borders, with refined products from refineries in the rest of the sterling area. But in September, 1950, it was thought that that really could not go on any longer. It was, therefore, decided to start up the refinery to the extent of 20 to 25 per cent.. even though it was necessary to bring the oil almost literally from the ends of the earth in order to do so. Accordingly, during the period since the refinery has been operating to the extent of about 20 to 25 per cent., or about one million tons per year, the loss of oil to the sterling area has fallen to about three million tons per year. That has been going on for about six months, so we have lost about 1,500,000 tons during the last phase of this difficult time.

We have, therefore, lost altogether about 11½ million tons of oil so far as a result of the unfortunate position at Haifa, and through the action of the Egyptian Government in regard to tankers coming through the Canal. At present values that quantity of oil would represent a cost of about £80 million. I think that the hon. Member for Coventry, East (Mr. Crossman), asked how much it would cost in dollars. I do not think that 200 million dollars would be too large a figure to give, but the Chancellor can no doubt enlighten us further if he has made the calculation.

What have we to do in order to keep this refinery operating as it is at the present time, on a 20 to 25 per cent. basis? Most of the oil is coming from the Caribbean on the other side of the Atlantic. That entails a round voyage of 11,500 miles. It is 4,500 miles more than would be the voyage to the Gulf of Persia and back. Think of the waste of tankers this sum involves, which has been put as high as 30 tankers. Remember, too, that tanker freights have advanced by 200 per cent. in the last two years. Who can say what effect in forcing up these freights has been caused by these excessive demands for tankers to bring this oil these ludicrous distances across the world to be refined in Haifa because oil could not be brought from the Persian Gulf.

I turn for a moment to the other side of the question, namely our facilitation of oil supplies to Egypt. The Financial Secretary told us the other day that this had been going on on a temporary basis for three years. If we accept the present figure in the Agreement of £11 million worth of oil a year, it means that Egypt, with a production of about 1,500,000 to 1,750,000 tons, needs an extra 1,500,000 to 1,750,000 tons, which would be worth about £11 million. We have done that for three years, which is the same time as we have been suffering on the other side of the balance sheet the loss which I have already described. That would amount, on present figures, to about £30 million worth of oil. Let us say, in order to take a perhaps conservative figure, that it is only £20 million: it means that in one way or another Egypt has made a draft on the sterling oil programme to the tune of about £100 million in the last three years.

If we look into the future it is still the case that we shall lose, as my right hon. Friend the Member for Warwick and Leamington (Mr. Eden) said, to the extent of £20 million and that we are to continue to facilitate Egypt to the extent of £10 million. That again means a continuing draft to the extent of £30 million a year upon our oil resources. The Government say that we must not mix the financial agreement, which they say is purely financial, with any larger political question, such as they assert is that of the tankers coming through the Canal. I can understand that point of view though I may not agree with it, but is there not a very big financial side to us in the damage that we are suffering as the result of the Egyptian action in the Canal?

Supposing that the Government wished to avoid, for reasons of diplomacy—I do not say whether that would be a right or wrong reason—large political issues of that kind, would it not have been possible to have gone in a commonsense manner to the Egyptian Government and said, "You ask us to facilitate the supply to you of £11 million worth of oil a year. Part of that oil would naturally be supplied from Haifa, which is so near to Alexandria—just over 150 miles or so away. We will undertake to facilitate the supply of the £11 million worth of oil to you if, and mark this, this suggestion is a compromise with which the House might not agree and you will agree to facilitate the passage through the Canal to us of oil equivalent to the amount which we engage to supply to you"?

I do not say that that would be the right line to have taken, but I say that it is a possible line that might have been taken which would have kept the matter open on a financial plane, and would have avoided the larger political issues. If "The Times" is right in stating, as it did the other day, that Egypt has put herself in a false position from which it is difficult for her to climb down, that would have given a reason on an economic and financial ground why she should modify her existing strict policy. That might have had the effect of unfreezing the position and producing a situation from which we might have got into an altogether superior position.

I wish, with respect, to offer a remark or two on the broader question. The Government have, in the last few days, brought forward in this House the doctrine that an economic and a financial question has to be kept strictly segregated from a political question. I do not know exactly upon what they found that doctrine, but it is surely running counter to the whole of the development of diplomacy during this century. During that time the whole history of diplomacy has been that economic and financial questions have become of more importance and have coloured the complexion of almost every political question.

So much is this the case that the actual structure of the Foreign Office has in recent years been modified. The old distinction between the consular, commercial and diplomatic services has been abolished. That has produced a service which deals with all these matters because it is desirable to treat economic, financial and political matters in a unified way in order to deal with them more effectively. And that applies also even to the entrance qualification for the Foreign Office at the present time.

I very much agree both with the hon. and learned Member for Northampton (Mr. Paget) and the hon. Member for Coventry, East (Mr. Crossman), that whatever distinction may be made between purely financial and political questions in this House, that is not the kind of distinction likely to be made in the Middle Eastern countries. I feel that both on the purely financial side, and particularly on the oil side, there must have been created in the minds of people in the Middle Eastern countries a sense of great weakness on the part of His Majesty's Government.

The hon. Member for Coventry, East, has referred to possible repercussions about Egypt, and this further issue of the tankers, on the Persian situation. I do not know whether the House has noticed, but now there has been a reaction otherwise, in that there is a project coming forward for the nationalisation of the Canal. So we get a sense of weakness produced in one country creating an impression in another, and it comes back again all round. I think it would be true to say—and those who have more practice in diplomacy than I would agree—that an impression of weakness in diplomacy is, in its effect, not only specific, but balances are concerned, in what her strong they take advantage of us and that, I am afraid, as the hon. and learned Member for Northampton has said, will be the situation likely to develop in the Middle East.

I would suggest therefore that we require further assurances from the right hon. Gentleman. Unless he is able to give satisfactory assurances he ought to withdraw this agreement, and this House ought to make it clear in the Middle East that there is a limit beyond which this country cannot be pushed.

6.42 p.m.

The Chancellor of the Exchequer (Mr. Gaitskell)

The proposed agreement has to some extent been criticised on its merits as a financial agreement. But I think the House will agree that the major part of the criticism directed against it is that it did not contain some political quid pro quo, and particularly a change in Egyptian policy regarding the Suez Canal.

I want, first, to make it plain that there was no lack of co-operation here between the Treasury and the Foreign Office. There was, of course, the very closest consultation between myself and "my right hon. Friend. As a matter of fact, at the time when these financial discussions started, last December, the Egyptian Minister for Foreign Affairs, who was then here, was also having some political discussions with my right hon. Friend. We have never said, either, that there should be a complete distinction always between economic and political affairs. Obviously, that would be very silly. All we have said is that this was, for better or worse, a purely financial agreement. It may be argued that it should not have been—and I propose to deal with that argument in a moment—but I wish to make plain that we are not saying that under no circumstances should we mix up these two things.

May I deal, first, with one or two other minor points—points, at any rate, out of the main argument—which have been raised by a number of hon. Members. I have been told that this agreement will be regarded as entirely favourable to Egypt in comparison with Israel and Transjordan. I am bound to say that I do not think that that is really justified. We treated Israel, so far as her sterling balances are concerned, in what her own Finance Minister regarded as being an extremely generous way. We have, in fact, agreed to the full repayment of the remaining balances in two years.

As for Transjordan, as is well known to hon. Members and to the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden), we are, after all, subsidising the Transjordan Government, or rather the Jordan Government, to a very considerable extent; and we have had extremely satisfactory financial discussions with them which proceeded so far as I know, in complete harmony. I have never heard a criticism from the Jordan Government about them, so I do not think that anyone can say that it is much more favourable unless one says that any agreement which involves a lot more money over a long period of time is a lot more favourable. But that is to say, that no debt of this kind should ever have been accumulated.

That brings me to what I think we must regard as the first crucial question raised here: whether the settlement should have included something else. That means that we have to ask ourselves in what circumstances would we have had no settlement at all. We must be realistic. I know that hon. Members who feel strongly about the subject will agree that if we say we ought to have insisted on this, that and the other, we have also to face the fact of what would happen if we did not get agreement.

We must here come back to the origin of these balances, and I am glad to see the right hon. Member for Woodford (Mr. Churchill) in his place. They relate to the purchases we made in Egypt; money we spent in Egypt; what we bought from Egypt during the war years, less what we—the sterling area as a whole—sold to Egypt during that period. They were the difference between receipts and payments so far as sterling trade was concerned with Egypt in those years. The sterling balances, in consequence, rose from about £40 million in 1939 to nearly £350 million in 1946. This was sterling payments to the credit of Egypt in the Bank of England and other banks here. There was no attempt, at that stage, to distinguish these balances in any way. It was simply the net result of all the sterling transactions between ourselves and Egypt during those years.

I find it perfectly natural that most of us—certainly a very large number of hon. Members here—should feel that all this expenditure was incurred by us for the benefit of Egypt, and we should therefore resent having to acknowledge any debt. I understand that point of view; and I may say that in 1947, when negotiations were started in an attempt at a long-term agreement, this point of view was very forcibly expressed by my right hon. Friend the Minister for Local Government and Planning, who was then Chancellor of the Exchequer. This is what he told the House: At the outset of the negotiations in London on 6th June, I made it clear that British public opinion does not recognise the moral validity of the debt of some £400 million arising out of the war-time association of Egypt and the British Commonwealth. I, therefore, urged the Egyptian representatives to make proposals for the cancellation, in whole or in part, of this war debt arising out of our war effort, so costly both in blood and treasure in defence of Egypt. The Egyptian Government have not so far felt able to respond to this appeal, but the clear judgment of His Majesty's Government is on record."—[OFFICIAL REPORT, 3rd July, 1947; Vol. 439, c. 1518.]

Mr. Churchill

Did the right hon. Gentleman make this statement in the House of Commons?

Mr. Gaitskell

Yes, Sir, in the House of Commons, in the course of negotiations. Indeed, even before that our representatives in Cairo, at the preliminary discussion preceding the London negotiations, had, in fact, proposed to the Egyptians that there should be a cancellation. The talk about counterclaims and cancellations is really a matter of words. We have never clearly put forward counter-claims, but we did ask for the cancellation of part of the debt. Unfortunately, the Egyptian Government refused, quite firmly and politely, and said it would be completely impossible at that time, in 1947, and since, to reach any agreement on this matter.

Having said that, I must emphasise that to record our opinion on cancellation—and I mentioned this during the course of the negotiations last December—is not the same thing as cancelling, by our own unilateral action, an obligation which has been incurred as a result of those transactions in the war. That has never been our policy. My predecessor made this plain in December, 1949, when he said that, quite obviously, we could not scale down any debts without agreement with the other parties. In the 1945 Loan Agreement, to which reference has been made, the wording is that the Government of the United Kingdom intends to make agreements with the countries concerned. The hon. Member for Aberdeenshire, East (Mr. Boothby) will remember that there are various types, including some cancellations.

Mr. Churchill

Did we pay the American debt for the First World War? Mr. Baldwin made an agreement, but the agreement was not fulfilled.

Mr. Gaitskell

As far as I am aware, there was no unilateral repudiation of the debt.

Mr. Churchill

The unilateral action consisted of our not paying the money and their acquiescing in that.

Mr. Gaitskell

That was in circumstances when we really had no more gold or dollars left, as far as I can recollect. I agree that one can say, "This is unfair; we think you ought at least to cancel some part of the debt."

Mr. Walter Fletcher (Bury and Radcliffe)

Why not freeze the balances?

Mr. Gaitskell

That is a very different proposition. I will bring some arguments to bear on that and other points which I will come to later. That is quite different from repudiating a debt unilaterally.

We must remember, whether we like it or not, that there is a different point of view about this matter in Egypt. I must say that while listening to some of the speeches, it struck me that some hon. Members did not have very much idea of what the feeling and public opinion was there. We must remember that Egypt occupies a key situation in the Middle East—a very important situation. We may as well take note of their attitude. Egypt was neutral in the last war.

Colonel Crosthwaite-Eyre

No.

Mr. Gaitskell

Neutral until practically the very end of the war. Throughout all the war, during which we were running up these debts with Egypt, she was neutral. She did not invite us to assist her. She was not one of our Allies in the war. She was merely carrying out the 1936 Treaty in giving us the facilities which she had undertaken to give. As the right hon. Gentleman the Member for Warwick and Leamington will remember, because he negotiated it himself, there was nothing said in that Treaty about giving us these facilities for nothing. It was understood—it must have been understood; and I am sure that he would not disagree—that we would pay for these facilities; that we would make some arrangement about them.

As far as I have been able to discover, at no time while these payments were being made was anything said to the Egyptians about our scaling down the debt in future or having some special post-war settlement or putting in any counter-claims. This point arose earlier in the debate, when the right hon. Gentleman happened to be out of the House for a moment. If the right hon. Gentleman can point to anything that was said to the Egyptians at that time, or indeed anything said publicly in this House or anywhere else during those war years, that we intended to do this, I should be only too interested to hear it. I have searched everywhere, but I have been unable to find anything.

Mr. Churchill

Naturally, I cannot supply all this out of my memory; but this I do know. It was the solemn, repeated agreement of the War Cabinet, of all parties, that we should put in our counter-claims for repayment as against the debt which was being piled up. Whether that was imparted to them or not, I could not remember at the moment. [HON. MEMBERS: "Ah!"] Hon. Gentlemen opposite say "Ah." What is the point in that? I thought it was a fair thing that the British, who were dying in defence of Egypt against Rommel, and so forth, should have some claim to consideration for the cost of maintaining our troops. It is a great pity that it was not brought up. I agree that I cannot at this moment quote when it was done, but it is clear from the statement of his predecessor, quoted by the Chancellor of the Exchequer, that we thought that was right and proper. We should have insisted upon that and enforced it by the simple process of not letting them draw on the sterling balances.

Mr. Monslow (Barrow-in-Furness)

Can the right hon. Gentleman say whether there was a recorded Cabinet minute of that?

Mr. Churchill

I am sure there was.

Mr. Gaitskell

A decision taken within the Cabinet is one thing. I can well understand that attitude, but surely the right hon. Gentleman will appreciate that it is one thing to say to oneself, "We will put in a counter-claim afterwards; we will demand some cancellation," as we have done; but it would have been very much better if we wanted to enforce that demand upon Egypt to be able to say, "We told you at the time that we were going to do this." Does the right hon. Gentleman mean to say that it would be in good faith to say to the Egyptians, "Sell us the cotton and the other things we need. Here is the sterling for it. We have it in mind that we are not going to pay you, but we are not going to tell you about it now"?

Mr. Churchill

I think it would have been in perfectly good faith, after the war was over, to say to the Egyptians, "Here is our counter-claim. We maintain that one must be set off against the other." I am quite aware that there are things like cotton, and so on, which were of a commercial character. I am speaking of the actual money paid out for the maintenance of the armies which saved Cairo and Alexandria from being pillaged.

Mr. Gaitskell

It is unfortunate that these moneys were never separated—never put into a separate account. The right hon. Gentleman cannot get away with that. It is one thing to say, "Yes, we will put in a counter-claim," as we have done; it is another thing to say that that implies that they should give way.

Mr. I. J. Pitman (Bath)

Has there been any counter-claim?

Mr. Gaitskell

Whether it is described as a counter-claim or as a cancellation is really a matter of words. What I said earlier is that we have asked that part, or the whole, of the debt should be cancelled. In 1947, we asked that and, in fact, the point arose in later discussions.

Mr. Pitman

But the Government have not put in a counter-claim.

Mr. Gaitskell

That really is only a distinction of words. One puts in a demand for a cancellation because one says, "We have done something for you." There is not much difference between the two. I might say that these sterling payments, all lumped together, were not even blocked until 1947. They simply remained in the account of the Egyptian Government, or the Bank of Egypt, with the Bank of England. The Egyptian Government could have used them as they wanted. They did not, in fact, use them very much at that time, because there was very little to buy.

In the circumstances, I cannot see how, on the basis of what had happened then, we could have unilaterally cancelled them or failed to honour them.

Mr. W. Fletcher

Why not freeze them?

Mr. Gaitskell

I will come to that point in a moment.

I ask the right hon. Gentleman the Member for Woodford to bear this point in mind. Suppose, after obtaining these goods and facilities from a country professedly and, indeed, obviously neutral until the very end of the war—handing over sterling for this purpose—we then say, "Now we are not going to pay you," what sort of an impression would that create, should such a need arise on any future occasion? What sort of attitude is Egypt, or any other country from whom we might want to buy in similar circumstances in a future war, to adopt if they know that, after the previous one, we simply repudiated the sterling debt?

Mr. McAdden (Southend, East)

America helped us just the same.

Mr. Gaitskell

Before I go any further——

Mr. Churchill

Were there not very considerable representations made on this matter by the United States, that we should curtail our sterling balances in his way as part of the general process of Lend-Lease applied, in a different form, to other quarters of the world?

Mr. Gaitskell

I have already explained to the right hon. Gentleman that in the 1945 Loan Agreement which we signed we undertook to try to make agreements with the countries concerned; but it takes two to make an agreement. That is a different point.

I turn to the post-war issue of these debts, because we really must have that background in mind before we judge the immediate proposals before us. To begin with, there was no blocking whatever and the Egyptian Balances were completely free. We made available in the first few years up to 1947 quite a substantial amount of dollars. At that time, Egypt was a member of the Sterling Area, and that was, no doubt, something which had to be taken into account. We released—converted, if you like—52 million dollars a year on the average at that time. That was in the first 2½years.

In 1947, we had the negotiations for a longer term settlement, which, as I have said, broke down, and, meanwhile, we had Egypt leaving the Sterling Area, and then the blocking of the balances by agreement. This was an agreement made, and not, so far as I know, criticised at the time, under which Egypt agreed to the blocking of £357 million worth of dollars, subject to a particular right to draw for certain purposes including those mentioned by the hon. and gallant Member for New Forest (Colonel Crosthwaite-Eyre), and also the annual agreement on releases for current purposes. We then had negotiations every year on how much was to be released. These always took place with great friction and lasted a very long time before they were concluded, and they certainly did not help our political relations with Egypt.

In the course of these years, we released the following sums of money; in 1947, £35 million; in 1948, £32 million; in 1949, £12 million, and in 1950, £18 million. These were the results of the annually negotiated agreements under the general agreement of 1947. I do not think that anybody who took part in those negotiations—and I can only recall the very last one of all—could disagree with the fact that the whole procedure was profoundly unsatisfactory to everybody concerned. We were faced each time with the major problem of what to do supposing we could not agree on the releases.

Mr. Churchill

You did not pay up.

Mr. Gaitskell

No, you did not pay up; in other words, when they presented the cheque, you dishonoured it. That is the problem, but there are other difficulties that we have to bear in mind.

I want to say something about the so-called dollar and oil arrangements which have been referred to by a number of speakers, and which, I can see very readily, have created a great deal of difficulty for reasonable persons. I want to explain them. Even before the blocking of the balances, there were arrangements to provide dollars each year, as, after all, other members of the Sterling Area were also entitled to dollars. After the blocking of the balances, there were also some further releases of dollars. For example, $25 million in 1948.

In 1949, a new arrangement was made, and I assure the House that the purpose of this was purely financial, and it was that, instead of giving them straight dollars, we were able to say that we would facilitate the supply of oil against sterling. There was nothing in our minds or in the minds of the Egyptians about getting hold of physical supplies. There was no difficulty about that at all. All that was involved was that we should provide them with this oil, some of which involved us in dollar costs. It was, in other words, for better or worse, simply a way of providing them with a little dollar ration that was not a straight dollar ration. It happened to be a convenient way of doing that particular thing, and that is all there was in it. There never has been any idea in our minds of facilitating supplies in the physical sense.

The position which we had reached in 1950 was that these negotiations in each year took a very long time, were extremely difficult and were concluded only with the greatest of difficulty. In the course of the discussions in 1950, it was suggested that we should then negotiate, or try to negotiate, a long term settlement. I have yet to see what is wrong in trying to negotiate a long-term settlement of what is a purely financial matter, and perhaps the House will agree that there is a lot to be said for it.

Mr. Boothby

Not for a bad settlement.

Mr. Gaitskell

The hon. Member would be against any sort of settlement, because he does not like the Egyptians. I am saying that, in principle, it is thoroughly desirable to have a long-term settlement, because it gives an element of certainty, security and fixedness about the whole thing which was absent in these annual negotiations. I am not saying that any long-term settlement is better than a short-term one, but, if one can get a satisfactory agreement, there is a very great deal to be said for it.

It is at this point that the political issues come in, and it has been suggested that we should have insisted on a change in Egyptian policy so far as the Suez Canal was concerned. I have already explained our attitude to this. We deplore the action of Egypt in this matter, and I entirely agree with what the right hon. Gentleman said about the losses so far as Haifa is concerned, although I do not think it can be so serious now, because the supply situation, generally, is a good deal easier. Undoubtedly. however, it has been a loss to us and to other countries which have a right to a share of the output of the Haifa refineries. We protested a number of times about the losses imposed on our shipping, and we have told the Egyptians that we shall be putting in a claim for demurrage losses and other losses caused by them.

It is fair to say that, if we are considering the Haifa situation, we cannot now ignore the position of Iraq, which is the country from which the oil comes and which, of course, has refused to supply it. I am not quite sure whether the Opposition are contending that we should engage in some sort of economic war with Iraq, but I think that would be very difficult. Iraq is an ally of ours, and is again an extremely important territory and we want to see that country in a secure and prosperous condition.

Mr. Eden

I really do not think that question enters into it at all. In respect of Egypt, what has happened is that we have objected to our traffic through the Canal being interfered with. Egypt is stopping our traffic through the Canal which it has the right to use, and all that we want is that our ships should be allowed to go where,-legitimately they have a right to go.

Mr. Gaitskell

I am not saying that it is exactly the same, but I am saying that, if we talk about Haifa, it is perfectly proper to bring in the question of Iraq. In fact, as a result of representations made, we have secured certain modifica- tions from time to time in the attitude of the Egyptian Government, but we are not the only Government involved in this, and we considered that the United Nations was the right place for this matter to be considered. It has, in fact, already been raised in the Security Council, and Sir Gladwyn Jebb expressed our views very forcibly on this subject.

Mr. Boothby

What happened?

Mr. Gaitskell

It has been referred to the Mixed Armistice Commission, because it is an essential part of the whole complex of problems associated with the war between Israeli, Egypt and Iraq and the other Arab countries We have also considered recourse to legal arbitration, but Egypt has not signed the Statute of the International Court, and we cannot compel her to go to arbitration. Therefore, the right thing is to take her to the Security Council, which is exactly what we have done. I contend, therefore, that since a long-term agreement is obviously to our advantage, if we pay at all, and I think we must pay——

Mr. Paget

What have we got a Navy for if not to see that our ships can go on their lawful occasions at sea?

Mr. Gaitskell

I would only say that that seems to me to beg the whole question which is being put at Lake Success. We cannot really start introducing our Fleet when the matter is under consideration by the United Nations. I do not think it would exactly improve the situation in the Middle East, and, on those grounds, I contend that we were perfectly right in trying to negotiate a long-term settlement.

I am not going to spend much time on the agreement itself—which has received very little attention from anybody—except to make the obvious point that the rate of repayment is £10 million to £13 million a year, compared with an average of £28 million a year in the three previous years. In other words, it certainly reduces very substantially the drain upon our own economy. In fact, it reduces it by about half, and, so far as dollars are concerned, there is a reduction from 22 million to perhaps 18 million dollars compared with what was previously the case.

I am not saying, of course, that all the features of this agreement are equally satisfactory to us. Indeed, it is very rare to have an agreement in which one gets everything one's own way. The right hon. Gentleman spoke of concessions as though we were making them all the time. We have made some concessions, and the Egyptian Government have made very substantial concessions from the point at which we both started in these negotiations. I do not propose to go into them, but I can assure the House that the Egyptian Government asked for very much more than they are getting. I am not prepared to disclose what it was; it would be quite improper—and the right hon. Gentleman knows that—to disclose exactly what the different proposals were at the different stages.

Mr. W. Fletcher

Would the right hon. Gentleman, as he promised, say why freezing these balances or blocking instead of freeing them, which does not bring repudiation into the matter, was not adopted as a policy?

Mr. Gaitskell

Certainly, I was just coming to that.

The question we have to ask ourselves is whether we are not going to have a settlement, and that really seems to be the point adopted by hon. Members opposite. We have to face the prospects of not getting a settlement, and, that being so, we have, as my hon. Friend said, to consider the implications of such a position. Obviously, there is the possibility —indeed, the certainty—that if we do not get a settlement, before very long we shall reach the point when, in fact, Egypt presents the cheque and we have to dishonour it and say, "We are not going to release the sterling." That is, in effect, what we are bound to face.

That is the first thing. There are some further consequences which we have tried to consider. It is quite obvious that had we taken that course we should soon have found ourselves involved in an economic war with Egypt. Should we really have come out of that war very much strengthened? We spend £60 million a year on cotton alone at the moment. All that cotton would have been dollar invoiced to us. Make no mistake about it, that is what would have happened. The Egyptians would certainly have demanded dollar payment for everything, and our whole trade with them would have gone on to a dollar basis. It so happens that the things we get from them are essential. They would also, of course, have demanded dollar payments for the expenditure on our military forces in the Canal zone.

I am not saying that we could not have done a lot of daamge to them. We could. Undoubtedly, we could have refused them the facilities of the transfer account in the sterling area. But I cannot help feeling that it would have been very unwise of the Government to have involved themselves in an economic war of that kind. Do hon. Members really believe that in the present state of the Middle East friction of that kind, with refusal to supply on each side and with refusal of financial facilities, would have been any improvement from the political angle for which they are so concerned?

I am bound to say that I should have thought it would be the most stupid policy to adopt in present circumstances. We did, of course, have to consider these possibilities. I suppose there might have been circumstances in which, if the Egyptians have been completely adamant and had insisted on complete repayment of all the balances and the release of all the dollars straight away, we should have had to say to them that we could not do that and risked an economic war. But I am bound to say that, in view of the agreement which has been reached in principle, and which I claim on financial grounds it is highly satisfactory to have, I think we

should have been extremely unwise to have provoked such an appalling state of friction between ourselves and Egypt.

Mr. C. Davies

Before the right hon. Gentleman sits down, would he answer me this question? Assuming that his arguments are correct, assuming that we owe this debt, assuming that we have to pay it, and assuming that there is no counterclaim, does he still say that it is right for His Majesty's Government, in spite of the appeal made on the other side, to make this as an isolated agreement without regard to anything else?

Mr. Gaitskell

I think it is perfectly right to make a financial agreement of this kind, as we have made other agreements with other countries and with Egypt herself. But that is not to say that I think we should do nothing about all the other political problems between us. Of course not. But the real question is, do we get anywhere except into an economic war, by refusing to have an agreement? That is the issue we have to face. I do not think there is any answer to that, and because I believe that an economic war would have the most disastrous con-sequences, I commend this agreement to the House.

Question put, "That this House do now adjourn."

The House divided: Ayes 294; Noes, 291.

Division No. 63.]	AYES	[7.18 p.m.
Acland, Sir Richard	Brown, George (Belper)	de Freitas, G.
Adams, H. R.	Brown, Thomas (Ince)	Deer, G.
Albu, A H.	Burke, W, A	Delargy, H. J
Allen, Arthur (Bosworth)	Burton, Miss E.	Diamond. J.
Allen, Scholefield (Crewe)	Butler, Herbert (Hackney, S.)	Dodds, N. N
Anderson, Alexander (Motherwell)	Callaghan, L. J	Donnelly, D.
Anderson, Frank (Whitehaven)	Carmichael, J.	Driberg, T. E. N
Attlee, Rt. Hon. C. R	Castle, Mrs. B A	Dugdale, Rt. Hon John (W Bromwich)
Awbery, S. S.	Champion, A. J.	Dye, S.
Bacon, Miss Alice	Chetwynd, G R	Ede, Rt. Hon. J C.
Baird, J.	Clunie, J.	Edelman, M.
Balfour, A.	Cocks, F. S.	Edwards, W. J (Stepcey)
Barnes, Rt. Hon A. J.	Coldrick, W	Evans, Albert (Islington, S.W.)
Bartley, P.	Collick, P.	Evans, Edward (Lowestoft)
Bellenger, Rt. Hon F. J.	Collindridge, F	Evans, Stanley (Wednesbury)
Benn, Wedgwood	Cook, T. F.	Ewart, R.
Benson, G.	Cooper, Geoffrey (Middlesbrough, W.)	Fernyhough, E.
Beswick, F.	Cooper, John (Deptford)	Field, Capt. W J.
Bevan, Rt. Hon A (Ebbw Vale)	Corbet, Mrs. Freda (peckham)	Finch, H. J.
Bing, G. H C	Cove, W. G	Fletcher, Eric (Islington, E.)
Blenkinsop, A.	Craddock, George (Bradford, S.)	Follick, M.
Blyton, W. R.	Crawley, A.	Foot, M. M.
Boardman, H	Crosland, C. A. R	Forman, J. C.
Booth, A.	Crossman, R. H. S	Fraser, Thomas (Hamilton)
Bottomley, A. G.	Cullen, Mrs. A.	Freeman, John (Watford)
Bowles, F. G (Nuneaton)	Daines, P.	Freeman, Peter (Newport)
Braddock, Mrs. Elizabeth	Dalton, Rt. Hon. H.	Gaitskell, Rt. Hon. H T N
Brockway, A. F	Darling, George (Hillsborough)	Ganley, Mrs. C. S
Brook, Dryden (Halifax)	Davies, A. Edward (Stoke, N.)	Gibson, C. W.
Brooks, T. J. (Normanton)	Davies, Harold (Leek)	Gilzean, A.
Broughton, Dr. A. D. D.	Davies, Stephen (Merthyr)	Glanville, James (Conselt)
Gooch, E. G.	MacColl, J. E.	Royle, C.
Gordon-Walker, Rt. Hon. P. C.	McGhee, H. G.	Shackleton, E. A. A
Greenwood, Anthony (Rossendale)	McGovern, J.	Shinwell, Rt. Hon. E.
Greenwood, Rt. Hon. Arthur (Wakefield)	McInnes, J.	Silverman, Julius (Erdington)
Grenfell, D. R.	Mack, J. D.	Silverman, Sydney (Nelson)
Grey, C. F.	McKay, John (Wallsend)	Simmons, C. J.
Griffiths, David (Rother Valley)	McLeavy, F	Slater, J.
Griffiths, Rt. Hon. James (Llanetly)	McNeil, Rt. Hon. H.	Smith, Ellis (Stoke, S.)
Griffiths, W. D. (Exchange)	MacPherson, Malcolm (Stirling)	Snow, J. W.
Gunter, R. J.	Mainwaring, W. H.	Sorensen, R. W.
Haire, John E. (Wycombe)	Mallalieu, E. L. (Brigg)	Soskice, Rt. Hon Sir Frank
Hale, Joseph (Rochdale)	Mallalieu, J. P. W. (Huddersfield, E)	Sparks, J. A.
Hale, Leslie (Oldham, W.)	Mann, Mrs. Jean	Steele, T
Hall, John (Gateshead, W.)	Manuel, A. C.	Stewart, Michael (Fulham, E.)
Hall, Rt. Hon. Glenvil (Colne Valley)	Marquand, Rt. Hon. H. A.	Stokes, Rt. Hon. R. R.
Hamilton, W. W	Mathers, Rt. Hon. G.	Strachey, Rt. Hon. J.
Hannan, W.	Mellish, R. J.	Strauss, Rt. Hon. George (Vauxhall)
Hardman, D. R	Messer, F.	Summerskill, Rt. Hon. Edith
Hardy, E. A.	Middleton, Mrs. L.	Sylvester, G. O.
Hargreaves, A.	Mikardo, Ian	Taylor, Bernard (Mansfield)
Harrison, J.	Mitchison, G. R.	Taylor, Robert (Morpeth)
Hastings, S.	Moeran, E. W.	Thomas, David (Aberdare)
Hayman, F. H.	Monslow, W.	Thomas, George (Cardiff)
Henderson, Rt. Hon. Arthur (Tipton)	Moody, A. S.	Thomas, Iorworth (Rhondda, W.)
Harbison, Miss M.	Morgan, Dr. H. B.	Thomas, Ivor Owen (Wrekin)
Hewitson, Capt. M.	Morley, R.	Thorneycroft, Harry (Clayton)
Hobson, C. R.	Morris, Percy (Swansea, W.)	Thurtle, Ernest
Holman, P.	Morrison, Rt. Hon. H. (Lewisham, S.)	Timmons, J.
Holmes, Horace (Hemsworth)	Mort, D. L.	Tomlinson, Rt. Hon. G.
Houghton, D.	Moyle, A.	Tomney, F.
Hoy, J.	Mulley, F. W.	Turner-Samuels, M.
Hubbard, T.	Mulvey, A.	Ungoed-Thomas, A. L.
Hudson, James (Ealing, N.)	Murray, J. D.	Usborne, H.
Hughes, Emrys (S. Ayrshire)	Nally, W.	Vernon, W. F.
Hughes, Hector (Aberdeen, N.)	Neal, Harold (Bolsover)	Viant, S. P.
Hynd, H. (Accrington)	Noel-Baker, Rt. Hon. P, J.	Wallace, H. W
Hynd, J. B. (Attercliffe)	O'Brien, T.	Watkins, T. E.
Irvine, A. J. (Edge Hill)	Oldfield, W. H.	Webb, Rt. Hon. M. (Bradford, C.)
Irving, W. J. (Wood Green)	Oliver, G. H.	Weitzman, D.
Isaacs, Rt. Hon. G. A.	Orbach, M.	Wells, Percy (Faversham)
Janner, B.	Padley, W. E.	Wells, William (Walsall)
Jay, D. P. T.	Paget, R. T.	West, D. G.
Jeger, George (Goole)	Paling, Rt. Hon. Wilfred (Dearne V'lly)	Wheatley, Rt. Hon. J. (Edinb'gh, E.)
Jeger, Dr. Santo (St. Pancras, S)	Paling, Will T. (Dewsbury)	White, Mrs. Eirene (E. Flint)
Jenkins, R. H	Pannell, T. C.	White, Henry (Derbyshire, N. E.)
Johnson, James (Rugby)	Pargiter, G. A.	Whiteley, Rt. Hon W
Johnston, Douglas (Paisley)	Parker, J.	Wigg, G.
Jones, David (Hartlepool)	Paton, J.	Wilkes, L.
Jones, Jack (Rotherham)	Pearson, A.	Wilkins, W. A.
Jones, William Elwyn (Conway)	Peart, T. F.	Willey, Frederick (Sunderland)
Keenan, W.	Poole, C.	Willey, Octavius (Cleveland)
Kenyon, C.	Popplewell, E.	Williams, David (Neath)
Key, Rt. Hon. C. W.	Porter, G.	Williams, Rev. Llywelyn (Abertillery)
Kinghorn, Sqn. Ldr. E	Price, Philips (Gloucestershire, W.)	Williams, Ronald (Wigan)
Kinley, J.	Proctor, W. T.	Williams, Rt. Hon. Thomas (Don V'lly)
Kirkwood, Rt. Hon. D.	Pryde, D. J	Williams, W. T. (Hammersmith, S.)
Lang, Gordon	Pursey, Cmdr. H.	Wilson, Rt. Hon. Harold (Huyton)
Lee, Frederick (Newton)	Rankin, J.	Winterbottom, Ian (Nottingham, C.)
Lee, Miss Jennie (Cannock)	Rees, Mrs. D.	Winterbottom, Richard (Brightside)
Lever, Harold (Cheetham)	Reeves, J.	Wise, F. J.
Lever, Leslie (Ardwick)	Reid, Thomas (Swindon)	Woodburn, Rt. Hon. A.
Lewis, Arthur (West Ham, N.)	Reid, William (Camlachie)	Woods, Rev. G. S.
Lewis, John (Bolton, W.)	Rhodes, H	Wyatt, W. L.
Lindgren, G. S.	Robens, A.	Yates, V. F.
Lipton, Lt.-Col. M.	Roberts, Goronwy (Caernarvonshire)	Younger, Hon. K
Logan, D. G.	Robertson. J. J. (Berwick)
Longden, Fred (Small Heath)	Rogers, George (Kensington, N.)	TELLERS FOR THE AYES:
McAllister, G.	Ross, William (Kilmarnock)	Mr. Bowden and
		Mr. Kenneth Robinson.
NOES
Aitken, W. T.	Bennett, Sir Peter (Edgbaston)	Braithwaite, Lt.-Cmdr. Gurney
Alport, C. J. M.	Bennett, Dr. Reginald (Gosport)	Bromley-Davenport, Lt.-Col. W
Amery, Julian (Preston, N.)	Bennett, William (Woodside)	Brooke, Henry (Hampstead)
Amory, Heathcoat (Tiverton)	Bevins, J. R (Liverpool, Toxteth)	Browne, Jack (Govan)
Arbuthnot, John	Birch, Nigel	Buchan-Hepburn, P. G. T.
Ashton, H. (Chelmsford)	Bishop, F. P	Bullock, Capt. M.
Assheton, Rt. Hon. R. (Blackburn, W.)	Black, C. W.	Bullus, Wing Commander E. E
Astor, Hon. M. L.	Boles, Lt.-Col. D. C. (Wells)	Burden, Squadron Leader F. A
Baker, P. A. D.	Boothby, R.	Butcher, H. W.
Baldock, Lt.-Cmdr. J. M	Bossom, A. C	Butler, Rt. Hn. R. A. (Saffron Walden)
Baldwin, A. E.	Bower, Norman	Carr, Robert (Mitcham)
Banks, Col. C	Boyd-Carpenter, J. A	Carson, Hon. E.
Baxter, A. B.	Boyle, Sir Edward	Channon, H.
Beamish, Major Tufton	Bracken, Rt. Hon. B	Churchill, Rt. Hon. W. S.
Bell, R. M.	Braine, B R	Clarke, Col. Ralph (East Grinstead)

Clarke, Brig Terence (Portsmouth, W)	Hulbert, Wing Cmdr. N. J	Prescott, S.
Clyde, J. L.	Hurd, A. R.	Price, Henry (Lewisham, W.)
Coiegate, A	Hutchinson, Geoffrey (Ilford, N.)	Prior-Palmer, Brig. O.
Conant, Maj R. J. E.	Hutchison, Lt.-Com. Clark (E'b'rgh W.)	Profumo, J. D.
Cooper, Sqn. Ldr. Albert (Ilford, S)	Hutchison, Colonel James	Raikes, H. V.
Cooper-Key, E. M.	Hyde, Lt.-Col. H. M	Rayner, Brig. R
Corbett, Lt.-Col Uvedale (Ludlow)	Hylton-Foster, H. B.	Redmayne, M.
Craddock, G. B. (Spelthorne)	Jeffreys, General Sir George	Remnant, Hon. P
Cranborne, Viscount	Jennings, R.	Roberts, Major Peter (Heeley)
Crookshank, Capt. Rt. Hon. H. F. C.	Johnson, Major Howard (Kemptown)	Robertson, Sir David (Caithness)
Crosthwaite-Eyre, Col O. E	Jones, A. (Hall Green)	Robinson, Roland (Blackpool, P.)
Crouch, R. F.	Joynson-Hicks, Hon L. W	Robson-Brown, W.
Crowder, Capt. John (Finchley)	Kaberry, D.	Rodgers, John (Sevenoaks)
Crowder, Petre (Ruislip—Northwood)	Keeling, E. H.	Roper, Sir Harold
Cundiff, F. W.	Kerr, H. W. (Cambridge)	Ropner, Col. L
Cuthbert, W. N	Kingsmill, Lt.-Col W. H	Ross, Sir Ronald (Londonderry)
Darling, Sir William (Edinburgh, S.)	Lambert, Hon. G.	Russell, R. S.
Davidson Viscountess	Lancaster, Col. C G	Ryder, Capt. R. E. D.
Davies, Rt. Hn. Clement (Montgomery)	Langford-Holt, J	Sandys, Rt. Hon D
Davies, Nigel (Epping)	Law, Rt. Hon R K	Savory, Prof. D. L
de Chair, Somerset	Leather, E. H. C	Scott, Donald
De la Bère, R.	Legge-Bourke, Maj. E A H	Shepherd, William
Deedes, W. F.	Lennox-Boyd, A T	Smiles, Lt.-Col. Sir Waller
Digby, S. W.	Lindsay, Martin	Smith, E. Martin (Grantham)
Dodds-Parker, A. D	Linstead, H. N	Smithers, Peter (Winchester)
Donner, P. W.	Llewellyn, D.	Smithers, Sir Waldron (Orpington)
Douglas-Hamilton, Lord Malcolm	Lloyd, Rt. Hn. Geoffrey (King's Norton)	Smyth, Brig. J. G (Norwood)
Drayson, G. B.	Lloyd, Maj. Guy (Renfrew, E.)	Snadden, W. McN
Dugdale, Maj. Sir Thomas (Richmond)	Lloyd, Selwyn (Wirral)	Soames, Capt C.
Duncan, Capt. J. A. L.	Lockwood, Lt.-Col. J C	Spearman, A. C. M.
Dunglass, Lord	Longden, Gilbert (Herts, S. W.)	Spence, H. R. (Aberdeenshire, W.)
Duthie, W. S.	Low, A. R. W.	Spens, Sir Patrick (Kensington, S.)
Eccles, D. M.	Lucas. Sir Jocelyn (Portsmouth, S.)	Stanley, Capt. Hon. Richard (N Fylde)
Eden, Rt. Hon. A.	Lucas, P, B. (Brentford)	Stevens, G. P.
Elliot, Rt. Hon. W.	Lucas-Tooth, Sir Hugh	Steward, W. A. (Woolwich, W.)
Erroll, F. J.	McAdden, S. J.	Stewart, Henderson (Fife, E.)
Fisher, Nigel	McCallum, Major D.	Stoddart-Scott, Col. M.
Fletcher, Walter (Bury)	McCorquodale, Rt. Hon. M S	Storey, S.
Fort, R.	Macdonald, Sir Peter (I. of Wight)	Strauss, Henry (Norwich, S.)
Foster, John	McKibbin, A.	Stuart, Rt. Hon. James (Moray)
Fraser, Hon. Hugh (Stone)	MeKie, J. H. (Galloway)	Studholme, H. G
Fraser, Sir I (Morecambe & Lonsdale)	Maclay, Hon. John	Summers, G. S.
Fyfe, Rt. Hon Sir David Maxwell	Maclean, Fitzroy	Sutcliffe, H.
Gage, C. H.	MacLeod, Iain (Enfield, W.)	Taylor, Charles (Eastbourne)
Galbraith, Cmdr. T. D. (Pollok)	MacLeod, John (Ross and Cromarty)	Taylor, William (Bradford, N.)
Galbraith, T. G. D. (Billhead)	Macmillan, Rt. Hon. Harold (Bromley)	Teeling, W
Gammans, L. D.	Macpherson, Major Niall (Dumfries)	Teevan, T L
Garner-Evans, E. H. (Denbigh)	Maitland, Cmdr. J. W	Thomas, J. P. L. (Hereford)
Gates, Maj. E. E	Manningham-Butler, R. E.	Thompson, Kenneth Pugh (Walton)
Glyn, Sir Ralph	Marlowe, A. A. H.	Thompson, Lt.-Cmdr. R. (Croydon, W.)
Gridley, Sir Arnold	Marples, A. E.	Thorneycroft, Peter (Monmouth}
Grimond, J.	Marshall, Douglas (Bodmin)	Thornton-Kemsley, Col. C. N
Grimston, Hon John (St Albans)	Marshall, Sidney (Sutton)	Thorp, Brig. R. A. F.
Grimston, Robert (Westbury)	Maude, Angus (Ealing, S.)	Tilney, John
Harden, J. R. E	Maude, John (Exeter)	Touche, G. C.
Hare, Hon. J. H (Woodbridge)	Maudling R.	Turner, H. F. L.
Harris, Frederic (Croydon, N.)	Medlicott, Brig F,	Turton, R. H.
Harris, Reader (Heston)	Mellor, Sir John	Tweedsmuir, Lady
Harvey, Air Codre. A. V. (Macclesfield)	Molson, A. H. E.	Vane, W. M. F.
Harvey, Ian (Harrow, E.)	Moore, Lt.-Col., Sir Thomas	Vaughan-Morgan, J. K
Harvie-Watt, Sir G. S	Morrison, John (Salisbury)	Vosper, D. F.
Hay, John	Morrison, Rt. Hon. W. S. (Cirencester)	Wade, D. W.
Headlam, Lt.-Col. Rt. Hon. Sir C	Mott-Radclyffe, C. E.	Wakefield, Edward (Derbyshire, W.)
Heald, Lionel	Nabarro, G.	Wakefield, Sir Wavell (Maryleborne)
Heath, Edward	Nicholls, Harmar	Walker-Smith, D. C.
Henderson, John (Cathcart)	Nicholson, G.	Ward, Hon. George (Worcester)
Hicks-Beach, Maj. W. W.	Nield, Basil (Chester)	Ward, Miss I. (Tynemouth)
Higgs, J. M. C.	Noble, Cmdr. A. H. P.	Waterhouse, Capt. Rt. Hon. C-
Hill, Mrs. E. (Wythenshawe)	Nugent, G. R. H.	Watkinson, 'H.
Hill, Dr Charles (Luton)	Nutting, Anthony	Webbe, Sir Harold
Hinchingbrooke, Viscount	Oakshott, H. D.	Wheatley, Major M. J. (Poole)
Hirst, Geoffrey	Odey, G. W.	While, Baker (Canterbury)
Hollis, M. C.	O'Neill, Rt. Hon. Sir Hugh	Williams, Charles (Torquay)
Holmes, Sir Stanley (Harwien)	Ormsby-Gore, Hon. W. D.	Williams, Gerald (Tonbridge)
Hope, Lord John	Orr, Capt. L. P. S.	Williams, Sir Herbert (Croydon, E.)
Hopkinson, H. L. D'A,	Orr-Ewing, Ian L. (Weston-super-Mare)	Wills, G.
Hornsby-Smith, Miss P.	Osborne, C.	Wilson, Geoffrey (Truro)
Horsbrugh, Rt. Hon. Florence	Peake, Rt. Hon. O.	Winterton, Rt. Hon Earl
Howard, Greville (St. Ives)	Perkins, W. R. D.	Wood, Hon. R.
Howard, Gerald (Cambridgeshire)	Peto, Brig. C. H. M	York, C
Hudson, Sir Austin (Lewisham, N,.)	Pickthorn, K.
Hudson, Rt. Hon. Robert (Southport)	Pitman, I. J.	TELLERS FOR THE NOES:
Hudson, W R. A. (Hull, N.)	Powell, J. Enoch	Mr. Drewe and Brigadier Mackeson.

Adjourned accordingly at Twenty-eight

Minutes past Seven o'Clock.