CONSOLIDATED FUND (APPROPRIATION) BILL.

HC Deb 02 August 1906 vol 162 cc1382-425

Order for Second Reading read.

Motion made, and Question proposed, "That the Bill be now read a second time."

MAJOR SEELY (Liverpool, Abercromby)

, in moving that the Bill be read a second time that day three months, said he would, in the fewest words possible, describe the present constitution of the Committee of Defence, and the changes which he respectfully submitted to the House should be made in that body; also the present drawbacks and the advantages of the proposed change. The present Committee of Defence was formed upon the lines laid down by the right hon. Gentleman the Member for the Forest of Dean and the right hon. Gentleman the Leader of the Opposition. He thought that was a true historical statement of fact. In 1894 negotiations took place between all those interested in the matter and between the two right hon. Gentlemen mentioned. A letter was written in February, 1894, suggesting that it was necessary for the safety of the Empire that there should be some such body set up. Under a Liberal Government a Committee of Defence was formed. That Committee, however, had no continuity in policy, for it kept no continuous record. It was not until 1903 that the right hon. Gentleman the Leader of the Opposition propounded, first at Liverpool, and then in the House, a scheme for a great Council of Imperial Defence. It was not necessary to remind the House how great were the issues involved in that Committee. How-ever much we longed for peace we could not retain it except by a readiness for war, and this readiness could only be obtained by co operation throughout the Empire. In 1903, the right hon. Gentleman the Leader of the Opposition made a statement to the House the result of which was the adoption of a.Resolution to the effect that, in the opinion of the House, the ever-growing interests of the Empire demanded the establishment of a Committee of Defence upon a permanent basis. After discussion, and with unanimous approval, a Committee of Defence was founded. This Committee was not quite the same as the one they had at present, but he ventured to assert, with great respect, that neither of them fulfilled the purposes they were designed to serve. What he would suggest was that they could not have a proper Committee of Imperial Defence unless that Committee included, not only representatives from the Colonies and India, but also representatives of the great political Parties in this country. He was aware that this proposal was somewhat novel to the House, but he would endeavour to show that it was not novel in other countries of the world. This England of ours, which had most complicated problems to deal with—greater far than any continental nation, the United States, or Japan—was the only country where great matters of Imperial stategy and defence were the sport of Party politics. We were the one country of all others where all must co-operate, —Liberals, Labour, and Tories alike— if we meant to maintain this great Empire under its growing burden of taxation and armaments. The modus vivendi with regard to the present Committee seemed to differ from that of the previous Committee. As he understood it the Prime Minister summoned from time to time the Secretary of State for War, the Secretary of State for the Colonies, the First Lord of the Admiralty, and two representatives of the Services, bringing with them experts. In addition, two members had been co-opted as permanent members, viz., Lord Esher and Sir John French, gentleman who were fully cognisant of all matters of defence. He had made some inquiry into the methods which prevailed among foreign nations who had far less reason for such Committees than we had. He found that in Russia they had followed England's example and instituted a Committee of Defence somewhat on the same lines. In Germany there was no Committee of Defence unless it was the Bundesrath which also included representatives from all parts of the Colonies. In that case the Emperor was supreme and the Prussian Minister of Defence was the chairman. In France a committee had been formed upon our own lines in April of this year. That consisted of the Prime Minister, as chairman, the Minister for War, the Minister for the Colonies, and the Financial Minister. The President had power to preside over the Committee whenever he thought desirable. He (the speaker) had now dealt as far as possible with the arrangements made by foreign Powers for the purposes of defence, and he would point out to the House that whereas all of them were governed under a party system none of them allowed the party system to completely control questions of imperial defence. After endeavouring to show what was our present system and how dangerously it differed from those of every other country he would ask the attention of the House to some other special dangers which beset us in following our present policy. The present system was to the last degree wasteful, inasmuch as there was nobody to advise each party, and they bid against each other, and made proposals involving large expenditure upon the Army and the Navy. He believed that half the burden we bore was owing to the competition of political parties as to who should produce the best scheme. It made for extravagance, and what was more, it made for confusion and ignorance in the public mind, and tended to produce war. Most people in the country could not understand questions of Army administration and could not follow the system of Army corps. They said it was too complicated, and puzzled by the complication and the differences of experts, they gave up the effort to understand our system of defence Arrogance was the prime cause of war, and arrogance was the child of ignorance There was no curb under the present system upon warlike enthusiasm, and this tended to produce war. Our party system made the co-operation of the Colonies in this matter well-nigh impossibe, because they resented being the plaything of English political parties. Party Government might be a good thing, and was a good thing within these islands, but a party caucus was a bad thing with which to govern the Empire, and we came up against this bed rock difficulty when we went to our Colonies and asked for their co operation and contributions. He thought a new plan ought to be tried on the lines he had indicated. No doubt the Leader of the Opposition would say that the first difficulty was foreign policy, upon which strategy depended. To that he would reply that, since Lord Salisbury made his famous speech about the wrong horse, foreign policy had been removed entirely from the realm of party politics. This, therefore, was a peculiarly favourable moment to attempt the plan he advocated. It might be held, again, that one party might be for economy and the other for extravagance. Here, again, this was an opportune moment, for everything that had happened since the beginning of this new Parliament had shown how great was the agreement of parties on the broad lines of policy in regard to economy. The constitutional difficulty, he admitted, was the greatest difficulty. The responsibility of the Cabinet must be maintained. But the Committee of Defence was not, and would not be, an executive body and the centre of power. It would be, consultative and advisory, and he urged that it was vital to make that source of information and advice as wide as possible. The right hon. Gentleman himself had said that the Committee of Defence, when it came to a decision, did not bind itself or the Government or its successors, but was a source of information common to both parties. That being so, Cabinet responsibility remained, as it was absolute and complete. He believed much good might come from some such scheme as he had advocated. Its advantages were manifest. First of all, there was the advantage of economy if we had a continuous policy based upon a continuous source of knowledge, because we should not fly from one policy to another and a party would not waste millions of money in order to dish the other party. Such a scheme would also make for peace and render Imperial co-operation, which had broken down again and again, possible. He was convinced that the Empire could not continue unless it was held together by some bond, and there were only two—mutual profit and mutual sacrifice.

For various reasons the profit basis was inapplicable for the moment to this Empire. There remained the community of sacrifice. If we could bring the Colonies to co-operate with us in the defence of the Empire he was convinced that they would not shrink from responsibility, and there would then be an end to these senseless bickerings as to whether the Colonies had, or had not, subscribed enough. He begged to move.

Amendment proposed— To leave out the word ' now,' and at the end of the question to add the words ' upon this day three months.' "—(Major Seely.)

Question proposed, "That the word 'now' stand part of the Question."

SIR GILBERT PARKER (Gravesend)

said it was not the first time he had risen in this House to support the views of his hon, friend. The hon. and gallant Gentleman had said that the present Defence Committee, although a useful one, was not quite so effective as it might be, and had pointed out the process by which the Defence Committee had risen from its embryonic stage to its present and effective operation. Lord Rosebery recorded his idea that in regard to defence there should be no parties but only one great Parliament representing the general interests of the United Kingdom and the Empire. If that idea did not take with the British people, and this idea on the other hand became effective, he still believed that Lord Rosebery and the two right hon. Gentlemen on the front Opposition Bench who were responsible for the Committee of Defence had done great service to the Colonies and the Empire in this regard. But our Colonies as well as the present Opposition in Parliament ought to be represented on the ideal Committee of Imperial Defence. It was most essential that the Colonies should be admitted to the councils of the Empire. A good deal had been said about the non-contribution by the Colonies to naval defence. But the House ought to know the position of the Colonies. It was true that the Colonies had had no education in matters of defence until the last fifteen or sixteen years. It was only about fifteen years since that Australia began to contribute to the Navy. Canada had not contributed at all to the Empire's defence until this year, when she had taken over the fortress at Halifax, and had become responsible for that, which had previously been a burden borne by the United Kingdom. The reason why the people of Canada had not contributed before was because they were a continental people and had no idea that their produce had to be protected on its way to this country. The statesmen of Canada had not been educated to contributing to Imperial defence. He was told by a right hon. Gentleman in Canada only recently that all the Powers in Europe were vieing with each other as to which should have the largest army, and that it was simply national glorification. But he pointed out to the right hon. Gentleman that if Canada wanted to have markets for her productions in China or Japan and prevent the interference with that open door by Russia or some other Power we must have sufficient power behind us to enforce our claims. The right hon. Gentleman admitted there was a good deal in his argument. He could assure the House, however, that the change of public opinion in Canada, Australia, and New Zealand upon this question within the last ten years had been enormous. He appealed to the Prime Minister to consider very carefully whether it would not be well to invite colonial Parliaments to appoint permanent representatives to the Defence Committee. If the Colonies were admitted, members of both great political parties at home must be admitted, and the Government should have no fear in entrusting the larger secrets of policy to the Opposition which might confront them at any particular time. There was such a high patriotism in the House of Commons that this confidence was never likely to be abused. So far as the Colonies were concerned it was absolutely necessary that there should be constant evidence from the Colonies and India. They had something like it in the Council that advised the India Office. There should also, so far as foreign Powers were concerned, be a knowledge that should be common to statesmen on both sides. He believed economy would be greatly increased if a general knowledge of policy, which must more or less lapse when a Government went from office into opposition and lost its hold on the entire policy, were extended to the statesmen of the Opposition. There must necessarily be a loss to the country owing to the fact that right hon. Gentlemen who sat on the front Opposition bench were without information which would enable them to see the direction of the policy of the Government. They could not admit the Colonies unless they admitted the representatives of both Parties. They ought not to admit the representatives of both Parties unless they admitted the Colonies, or they would be without that great scheme of co-operation which he believed was the idea underlying the action of his right hon. friend as the Prime Minister of the time in establishing and inaugurating this Committee of Defence. If that were done they would have gone a good way towards lifting the Departments concerned with foreign and colonial affairs, and the Navy and Army, out of the sphere of acute controversy. He did not believe there was a single Member in this House who enjoyed controversy so much that he would not be willing for patriotic reasons to sink Party for the moment in order to secure freedom from those acrimonious debates which brought governments into difficulties, and, after all, served no purpose in Parlamentary life. Unless they had in Parliament ideals they would get nowhere. Many ideals that had been considered impossible had become in the end practical schemes. He believed this one would come to pass sooner or later, and he supported his hon. friend in pressing upon the Government the advisability of accepting his view.

MR. A. J. BALFOUR (City of London)

The question raised by the two hon. Gentlemen, everybody will admit, is of the supremest interest and importance to the well-being of the Empire. Obviously both the hon. and gallant Gentleman opposite and my hon. friend have been equally animated by a single-minded desire for the welfare of the Empire as a whole. They have not been advocating any mere Party question, and they have not looked at the subject under discussion from any narrow standpoint. The hon. and gallant Gentleman opposite surveyed the rise and growth of the existing Committee of Defence, which he told us had been of great interest to himself and others, and he mentioned the right hon. Member for the Forest of Dean, who has been very keenly anxious to see some machinery tried for dealing with these great subjects. Twelve years ago, as the hon. and gallant Gentleman reminded us, the subject was in its infancy. I do not know that my ideas have undergone any fundamental change. It is the fact that since then the Committee of Defence, not precisely on the old lines, was established during the period when I was in office. I am not sure that the character of that Committee is even now perfectly understood by the House or by the public. I do not, in the first instance, regard it as in any sense an alternative either for Cabinet rule or Cabinet responsibility. The Cabinet of the day is and must remain responsible for the whole policy of the country, whether it be connected with the size of our armaments, the management of our Colonial affairs, or the direction of our foreign policy. But I go further than that, and say that the Committee of Defence cannot really be dissociated to the extent my hon. friends imagine from the Ministers of the day who are directly responsible to this House. The hon. and gallant Gentleman told us that in making the Prime Minister head of the Defence Committee we were violating the practice which had been universally observed in foreign countries, because, he argued, the Prime Minister of the day is a Party leader, the head of a Party opposed to another Party, and if you put him at the head of the Defence Committee without the co-operation of the other Party you make that Committee what the Cabinet by common avowal is, and must be, a Party organisation. The Committee ought, on the contrary, so runs the argument, to be above Party. I would ask, in the first place, whether it be really true that foreign nations have been able to eliminate this element of the Party system from their Defence Committees. I gather that we are to a large extent the initiators of this policy, and that other countries have followed in our footsteps, if I may say so—a great compliment to the work we have endeavoured to carry out. But in following in our footsteps have they been able to avoid what the hon. and gallant Gentleman regards as a grave danger and serious evil? I am not sure that he has made out his case on that point. There is no exact parallel between the position in the United States, for example, or the French Republic, and the position of the British Prime Minister. Neither is there any exact parallel between the position of so carefully constitutional a Monarchy as ours has become and any foreign Monarchy I know of. It is rather dangerous to make comparisons where an exact parallel is not possible. I will venture to suggest two things. I do not believe the President of the United States can avoid having a Party side to his duties—he is elected by a Party. He has, of course, great national obligations which overpower the Party aspect of his position, but I imagine it is never wholly and absolutely eliminated. On the one side, then, there must remain, some Party element in the position of the President of the United States, and on the other, am I not right in saying that the position of Prime Minister of this country is not wholly Party? I do not believe any Prime Minister has ever considered himself as merely a Party leader. He is a Party leader, he fights for his Party, and in the nature of the case indulges in the day-to-day polemic of Party warfare; but every Prime Minister is and must consider himself as the representative, not merely of his Party, but, for the time being, of the country as a whole. This is an aspect in our affairs which the Opposition of the day are quite ready to acknowledge, and which we are anxious to see as far as possible maintained. It would, I think, be a great travesty of the British Constitution to say that the Prime Minister of the day is merely a Party leader, and I do not think it is an accurate representation of any Party Government to say that the President of this or that Republic can wholly remove himself from Party ties. The second comment I have to make is that, as far as my judgment and knowledge go, the hon. and gallant Gentleman has exaggerated the Party aspect of the Committee's work. He told us that one great cause of the increasing cost of armaments in this country or France is the rivalry between two Parties, each of which comes into power resolved to find some scheme different from that of its predecessors, and better, but which it costs a great deal of money to put in operation. I believe that would be an entire misrepresentation of the attitude of successive Governments. I am not going to minimise any differences there may be on questions of armaments on the two sides of the House; but, depend upon it, there never was a Government in the world who wished to spend money simply for the purpose of preparing some brilliant and popular change in order to eclipse what their rivals had done, and to claim some special credit for it. There may be some Gentlemen in this House who may be under the impression that sometimes gets abroad, that Governments like expenditure. No Government does. There may be extravagant Governments, or Governments that are accused of extravagance; but there never has been a Government in the world which liked spending money, because nothing is so embarrassing to a Government, or produces such interal friction in a Government. Nothing produces such difficulty in this House or such unpopularity in the country. Let hon. Gentlemen put it out of their minds that any Government would be so absolutely idiotic as heavily to burden their finances, not for something that is of Imperial importance, but merely in the hope that it will produce popularity on the platform. I, therefore, venture to say that inasmuch as no Government indulge in expenditure merely for the sake of expenditure, you do not avoid expenditure by putting members of the Opposition, whether Radical or Unionist, on the Defence Committee. Then comes the question, how are you going to work this extended body? As I conceive the Committee of Defence, it is a body summoned by the Prime Minister to assist him in dealing with matters that are outside the purview of any single Department, and it is his business to decide the heads of what Departments and what experts are to be summoned to a meeting of the Defence Committee. It is quite true that the Parliamentary heads of the Army and Navy and the experts of those two Departments must be summoned, because almost every question of Imperial defence, and strategy closely touches both of them. But it is not always necessary to summon, for instance, the Foreign Minister, who is perhaps the hardest worked of all Ministers. If some matter arises which touches him, of course he comes. It is the same with the head of the Colonial Office. To always summon the heads of all the Departments to the meetings of the Defence Committee would be a waste of time and labour. There is that elasticity in the constitution of the Defence Committee, as I conceive it, by which the Prime Minister may decide for himself whose advice he will ask for as occasions arise. That being the constitution of the Defence Committee, so far as this country is concerned, the question comes, what is its relation to the Colonies? Of course, I think the Colonies should have at command a place on the Defence Committee, and that place is open to them as the Defence Committee is now constituted.

MAJOR SEELY

They will not come.

MR. A. J. BALPOUR

But they have come. We had a Minister from Canada who gave us most valuable information on certain aspects of the military defence of Canada. I remember also that the Australian Colonies consulted us on matters of defence, and we were able to give them assistance for which they were very grateful. I quite agree that the representatives of the Colonies would not come habitually. There is no need that they should come habitually. Remember that the interest of the great self-governing Colonies in the question of Imperial defence is largely naval; and if they are assured that we are keeping up an adequate Navy, so far as we are concerned we protect them from all over-sea dangers which they have to fear. Of this I am confident, however you may model or remodel your Defence Committee, you will never induce the Colonies to give us here complete control over the military forces which they maintain and for which they pay. We must accept facts. There is no use kicking against the pricks. We must adapt our military system to what is 1he ultimate constitutional necessity of the Empire. That of course, makes it less important that the Colonies should have permanent Members on the Defence Committee; but if ever an emergency arises in which they wish to co-operate with us the Defence Committee, as at present constituted, can adopt the means precisely suited to meet that emergency. Therefore, I am not at all sure that the gains which the hon. and gallant Member anticipates from his proposed reconstitution of the Defence Committee are at all likely to be attained by it, while the change itself would carry with it evils of a special character. The hon. and gallant Gentleman desires that the Leader of the Opposition should once a week sit among the Ministers of the Government to which he is opposed and share their most intimate counsels and some of the most difficult problems with which they can concern themselves.

MAJOR SEELY

I hope I may explain that that was not my suggestion at all. That position, of course, would be ridiculous. What I contemplated is that the Leader of the Opposition should sit on the Defence Committee, say every three months, not to discuss details as to single battalions or single ships, but questions of great Imperial strategy.

MR. A. J. BALFOUR

The hon. and gallant Gentleman does not quite apprehend the character of the work done by the Committee of Defence. It never discusses single ships or single battalions. These are questions for the First Lord of the Admiralty and the War Secretary. Even when we determined to make a change in Army armaments, deciding that there should be two types of guns— 18-poundors and 15-pounders—the matter never came before the Committee of Defence. It was decided by the Cabinet on the advice of the War Minister and the experts of the Department. The question intimately concerned Imperial defence in one sense; but it did not belong to the class of questions which, I think, can with advantage be brought before the Defence Committee. If the great problem, as I conceive it to be, of the defence of the North-West frontier of India should arise, you could not deal with it by itself. It could only be dealt with in co-operation between the Home Government and the Indian Government. Therefore, it comes, in my view, within the purview of the Defence Committee. I can well understand also that the Defence Committee might be asked to consider or reconsider such a problem as the two-Power standard for naval defence, for it is a question that touches so many interests that it cannot properly be regarded solely as a naval question. The Committee of Defence never has been, and never ought to be, concerned with the small matters of Departmental administration. But does not the hon. and gallant Gentleman see that it would be impossible to work his system under which the Leader of the Opposition is to be called in by the Government every three months to discuss big questions of Imperial defence and strategy? Just consider what the position would be if I were called in for consultation by the Government during the past six months. There is no doctrine more clear than that it is the gravest mistake to diminish the amount of your regular forces until the expansible Army on which you have to rely in the event of a sudden struggle for national existence is in working order. The Government take exactly the opposite view. They are sanguine that they will be able to find an expansible Army.

THE SECRETARY OF STATE FOR WAR (Mr. HALDANE, Haddington)

indicated dissent.

MR. A. J. BALFOUR

Well I can only read their speeches in our three Parliamentary debates as meaning that the Government have absolutely resolved that the Regular Army is to be largely diminished, although they have not got anything like an expansible Army. Suppose I had been present at the discussion of that great question, I should have urged on the Defence Committee what I am now urging. I should be able to cross-examine the members of the Council and the right hon. Gentleman. We should not agree, and I should come down to the House armed, illegitimately armed, with all the information which I had been able to extract from them and their experts. I should be in a false position, and I feel quite sure they would be; and I do not think for a moment they would have accepted any person on the Committee, knowing that his views differed so profoundly from their views, who would have every chance of forging weapons in their inner councils by which to attack them. Supposing I had been present during the last few months when naval policy was under discussion, and finding that the Prime Minister did not hold the two-Power standard in the same sense that I do, which I believe is the fact. The two-Power standard of naval strength as I understand it, is that we ought to have a Navy equal to deal effectively with any two Powers that can be brought against us. In my view that means a Navy not strictly and mathematically equal to two other great naval Powers, but a Navy with that margin of safety without which you could not with serenity enter on a struggle on which the very existence of the country depends That is not the view of the Prime Minister. His view, as I understand it, is that the idea that France and Germany would ever combine against us is so remote that you may put it out of account. That is an interpretation of the two-Power standard absolutely different from the way I look at it, and one most menacing to the safety of the country. The idea of imagining that international friendships are of s t permanent a character that you may put aside absolutely the idea that your friend of to-day may not be your enemy to-morrow is not an adequate basis of national defence. I say you must go beyond mere probability. If you ask me my opinion upon foreign relations, I should say it is most improbable that we should be at war with France and Germany combined in the next two or three years; yet I say, nevertheless, that to put ourselves at the mercy of a coalition of those two Powers, even if it be an improbable contingency, is insanity from the point of view of Imperial defence. But that is the view of the Prime Minister. And how is it possible that people who differ so fundamentally as he and I upon that question could possibly come to any useful agreement sitting round a table? The Government have given two absolutely inconsistent accounts in the two Houses of why they have diminished their shipbuilding programme. In this House the explanation vouchsafed had something to do with The Hague Conference, and for the rest it was entirely based on the opinion of the Naval Lords, of which no account was really given. It appears from the statement of the First Lord in another place that the diminution was not concerned with The Hague Conference, but that the Admiralty were not satisfied with some of their plans, and they wanted to try further experiments. They were two quite different accounts. On this Question of the two-Power standard we have reached a fundamental difference between the two sides; and if the Prime Minister's views are shared by his Party, I say a more dangerous policy than that now initiated in regard to the Navy has never been made before, and it is one which I believe, when the country understands it, the country will not readily endorse. Had I been asked to go to Whitehall when this question was under discussion, who knows but I might have been so eloquent on the two-Power standard, or so strong on the question of getting your expansible Army into a fit state for fighting European Powers before diminishing your Regular Army, that I might have persuaded even His Majesty's Government? But in soberer moments I should think it extremely improbable that I should have been able to move them by any counsels I could give them. The position is one into which no Leader of an Opposition ought to be put. The reasons I have put forward make me doubt the practicability of such a plan. We have to work this country on the Party system. I have never disguised from myself the inevitable dangers which are inherent in that system, but neither have I declined to recognise its great advantages. I believe a strong and homogeneous Government, even though I differ from it, is better than a weak and hybrid Administration; and, though I honestly admit I do not think the Party system is working well at this moment in the best interests of the Empire, I do not believe it will be improved by any admixture in its councils of an Opposition element, even if it be as patriotic, single-minded, and able as we may hope some Oppositions are.

THE PRIME MINISTER AND FIRST LORD OF THE TREASURY (Sir H. CAMPBELL-BANNERMAN,) Stirling Burghs

My hon. and gallant friend who introduced this subject, if I may use a homely phrase, has caught a Tartar. He proposed in the most amiable and non-Party spirit to make a certain alteration in the constitution and practice of the Committee of Imperial Defence, and the right hon. Gentleman has made this amiable non-Party Motion the occasion for a vehement, sustained, and argued attack upon, first, the military, and then the naval policy of the Government. Of course everything is lawful on the Second Reading of the Appropriation Bill, but it is rather hard on my hon. and gallant friend that his innocent proposal should be made the vehicle for a speech of that kind. I do not want to use strong epithets, but I could repeat something of what I have said before in regard to some parts of the right hon. Gentleman's speech. I will deal in the first place with the Committee of Imperial Defence. I have never been strongly prejudiced in favour of the Committee of Imperial Defence. I was always afraid it might get beyond its proper bounds, that it might interfere with the responsibility of the Cabinet and the Ministers charged with the two great Departments, and that, therefore, the results might be unfortunate in the interests of the country. I confess that I have modified my opinion in this respect, and I think that these dangers and evils have been avoided.

MR. A..J. BALFOUR

Hear, hear.

SIR H. CAMPBELL-BANNERMAN

When we came into office I found a certain amount of trepidation.—so strong had been the opinions I had expressed about the Committee—lest there should be some interference with its action and an alteration of its powers. But I said to those who approached me on the subject that it was to continue exactly as it was until I found practically what its working was, and if we had any reason to alter it we should do so; if not, we should do our best to continue it efficiently. My experience of this Committee has been most satisfactory. I think that my hon. and gallant friend a little mistakes its proper function, and from a greater part of the speech of the right hon. Gentleman its creator and author, he seems also to have mistaken its function. The Committee of Imperial Defence is an opportunity for the Government to fortify itself with regard to the naval and military policy and the general defence of the Empire by the direct opinion of the best experts in the two services. The naval and military authorities meet round a table with the members of the Government and discuss all the technical questions which are brought before it, but it has nothing to do with policy, nothing whatever to do with the naval and military policy on a large scale. To my mind it has nothing to do with the question of what is the standard of two or three nations we should be equal to. What they have to supply is the information how we can best equal these if we wish to do so, but it is the political Members of the Cabinet who have to determine the policy of the country, with the expert assistance and the technical knowledge necessary to carry out that policy. Therefore the right hon. Gentleman, if he had been fortunate or unfortunate enough to be summoned to one of our meetings, would not have been asked whether he agreed with me that some standards laid down for the Navy are excessive and possibly in their nature absurd. He would not have been asked to agree with the Secretary for War as to whether the reductions in the Army could safely be made with the prospect which is before us of being able to create, expand, and develop a force sufficient for the defence of the country. Those are questions of high policy with which the Cabinet deals, but which are beyond the ken, in that stage of them at least, of the Committee of Imperial Defence. The right hon. Gentleman also would have been in this position. He would have been among men who had a very easy means of knowing what the opinions of the right hon. Gentleman were, because the discussions of the Committee under the last Government, and the conclusions to which they came on one subject after another, are recorded and are open to us for examination; so that we have a perfectly sufficient knowledge of what the right hon. Gentleman's views were last year and the year before. My hon. friend thinks that an advantage would be obtained by adding to this Committee other people, either Members of Parliament or peers, who did not belong to the Party in power, and therefore had no direct Ministerial responsibility, and perhaps ultimately introducing also members representing the Colonies and other parts of the Empire. The Colonies and the other parts of the Empire have been consulted and can be consulted fully whenever it is their desire or in the public interest that they should be consulted. To constitute them members of this body would, I think, be a somewhat singular course to take; and I am strongly of opinion that the best course you can take to secure the very best men is to give them direct responsibility, and that the opinion of any person however illustrious and however capable he may be, if brought into a Committee of that kind without official responsibility is not of so much value as the opinion of those who, though in the receipt of public money, are from the position they occupy bound to do their best in the public interest. I therefore do not agree with my hon. friend that this Committee requires to be supplemented by such aid. But the right hon. Gentleman has taken this opportunity to launch some observations against our conduct within the last week or two in respect to the Army and Navy. With regard to the Navy, he says that he and I would find ourselves totally at variance as to the standard we should set up for the shipbuilding under the Admiralty. He refers to my criticism upon the two-Power standard at the present moment. I do not say that the two-Power standard is not sometimes a very reasonable thing, but when the two Powers you take are the two Powers who are perhaps more likely to be antagonistic to each other than any other two Powers you can find on the continent of Europe, when you know that we are in close relations of friendship with one of these Powers, recently established and improved by public instruments, when we know also that we are on excellent terms both with the people and the Government of the other Power; when we know further that if these two Powers are building ships fast they are building them against each other, to suggest that we should take these two Powers as the test and criterion of how much money we should expend on our Navy and what strength the Navy should be is, I think, to use a phrase already used, what may be called a preposterous idea. I go further and say that, if you examine the present strength and the existing proposals of these two Powers, they will not support the increase which is sometimes advocated for our Navy. Even if you take that as your test, if you examine both the character of the ships and the rate of their building and the other elements which go to support that view, I say that they will not bear out those large ideas of advance that are entertained in some quarters. No; we have done nothing with regard either to the Army or the Navy which has weakened at all the practical strength of the country for defence. It does not follow at all that because you do not build, because you drop an ironclad out of your programme, that you are below the strength required for your purpose. Though the two-Power standard is a convenient standard it is not everything. and we ought to consider what the requirements of the Navy are, just as we consider what the requirements of the Army are, and see that we have a sufficient Army and Navy for those requirements. That is the business of the Admiralty and the War Office, and the distinguished sailors at the Board of Admiralty, and the distinguished generals who advise my right hon. friend. I do not think that it is any part of the duty of the Committee of Imperial Defence to meddle with and pronounce an opinion on the general policy of the Government either in naval or military matters. I think it can give the Government, as it does, with great effect and success and with the most perfect loyalty the best technical advice on all professional matters which the officers summoned to it are so well qualified to give. I do not think the right hon. Gentleman was justified in the attacks he made upon us, or in the use of some of the phrases with regard to our relations to the other Powers. When he conjured up the idea that, after all, friendships and alliances might not last long, and that we must be always ready for an eventuality in all circumstances— when he said that at the present moment, I do not think it was the kind of thing which is likely to conduce to the best interests of this country or of the peace of Europe. I admit that the right hon. Gentleman has often shown himself a strong advocate of peace, and I do not wish to insinuate that he has any evil designs on the peace of Europe or against our friendship with other nations. But there are some things about which it may be said that the less they are talked about the better, some hints almost amounting to threats made by public men which had better be left unsaid. He was guarded in his language, but his general tone implied that I was entirely wrong in my supposition and hypothesis that a combination of these two Powers in open warfare against us was an impossible contingency. I think it is unfortunate that he implied that there could be this combination. It is on that ground that I have interfered in the debate, which, as far as it concerns the action and constitution of the Committee, I would much rather leave to my right hon. friend.

*SIR J. JARDINE (Roxburghshire)

said he had to ask he House to come down from the high level to which debate had been raised that afternoon to an ordinary question of administration. He referred to the leasing of the Ceylon Pearl Fisheries. He did not think any apology was needed for bringing this question before the House inasmuch as Lord Elgin had washed his hands of the responsibility for it and they had been informed by the Under-Secretary for the Colonies that there were great defects in the procedure, and after a series of questions they had been told by the Under-Secretary that it would be an advantage if they could refer to the late Colonial Secretary, who was at that time the candidate for St. George's, Hanover Square, and who now was the actual Member for that constituency. His remarks would be more a criticism of the past Government than a criticism of the present, because Lord Elgin said that the business was practically finished when he took office, and that he had no course open to him in accordance with the precedents of the Colonial Office, but to bring to a conclusion what had almost approached a settlement. The Colony had called in tones of burning complaint for some alteration of this contract, which had caused a great loss to the revenue of the Colony. The fisheries had been leased from 1906 for twenty years at an annual rental of £20,660 which was far too low. In 1904 the net. profits were £61,000; in 1905 they were £153,000; and in 1906, the first year of the lease, they were £89,000, the average of four years being about £80,000. Why, it was asked, had the rent been fixed so low when these enormous profits were being earned? It had been alleged, that an average had been taken over twenty years; but of that period eleven years were barren and belonged to the time before the Government of Ceylon had taken the fisheries in hand, employing for that purpose Professor Herdmann, a learned expert on pearl fisheries, and Mr. Hornell, another marine biologist. The costly investigations and the organised system adopted by the Government had some years ago eliminated uncertainty from the fisheries, and converted them into an industry as valuable as any of the municipal enterprises in this country which were so jealously reserved for the public benefit. The Colony also spent £10,000 on Mr. Dixon's highly successful machine for separating the pearls, and Mr. Hornell's dredging was reported as successful. So that Governor Blake on June 14th, 1905, wrote to the late Colonial Secretary as follows— There seems no reason to apprehend a failure of the annual fishery in future years. Again in November, 1904, the Government Agent telegraphed that Mr. Dixon's machine prevented loss or damage to the pearls and was working well. The negotiations for a lease of the fisheries began in 1904, but how the scheme originated had never been explained.

However, in December, 1904, the Blue-book showed the late Colonial Secretary negotiating with Sir J. West Ridgeway and a syndicate of financiers. A suggeation had been made that it was necessary to get a firm of high financial standing to come in and take up the matter. The syndicate consisted not of the people of Ceylon, who were interested, nor the great traders of this country, nor of the people of India, but of what was called the South African clique. They called up only £1,687 10s. They spent £200 on obtaining the concession, £106 on registration, and £110 on preliminary expenses —£416 in all—and during the progress of these secret negotiations they actually sold what they had got for £11,000. An increment of that sort gave an indication of what the real commercial value of this concession was. That profit ought to have gone to the Colony and not to this Gulf syndicate. A short time after, a limited company, the Ceylon Pearl Fisheries Company was formed. It was registered on March 3rd, 1906. That company had a capital of £165,000, of which £86,000 was paid up. It was a significant fact that no prospectus was issued either of the Gulf syndicate or the Ceylon Pearl Fisheries Company. Time went on and the arrangements were made and the lease was sent out. He was not conversant with the practice of the Colonial Office on those matters, but it appeared from the Blue-book that the Ordinance which made the lease legal was drafted in the Colonial Office, as was also the lease of the concession, and they were sent out to Ceylon with the intimation that they should be passed by the Legislative Council of the Colony. The intention to lease these valuable fisheries was not advertised in any way, and this secrecy was one of the matters the public of Ceylon complained most seriously about. The intention was unknown in the great centres where merchants most do congregate either in this country or Scotland or the great centres of the East from which people were attracted to the pearl fisheries in Ceylon. There were many Scottish firms of high financial standing on the shores of the Indian Ocean in Calcutta, Madras, Bombay, Rangoon, and Colombo—one might almost say from China to Perim—and had it been known it would have resulted in the real financial value of these fisheries being ascertained by competition and tender. But there was no invitation given to anybody to tender, and the matter was entirely unknown to everybody save the limited number of persons who formed the syndicate. One could not refrain from asking the question: Why was this valuable property allowed to go in this way? Why was it leased at all when it was paying so well? The people of Ceylon would have preferred to have kept it themselves, as he could show from the great complaints that were published in the newspapers. It might be said that it would be difficult for the Government to manage such a thing, and that they had better grant a lease than undertake to manage these fisheries, but that was not the view taken by the independent members of the Legislative Council or the public officials in Ceylon, who had invested in the shares, nor by the firms with German names— Derenberg, Albu, Neuman, Friedlander, Mosenthal et hoc genus omne who make up the limited company. If it were said that they could not test whether the bargain was a good one until twenty years had passed, there were three tests that seemed to show that the bargain had been entirely and tremendously to the advantage of these people who obtained the concession. The first was that £11,000 had been intercepted by the Gulf syndicate even before the company was formed; the second was that the 6 per cent, ordinary £1 shares In the limited company with only 10s. paid up were now selling at 20s. and 22s., and the third was that the Is. deferred shares were, after a profit of £21,000 had been made, to get as much dividend as the 10s. men. And so these 1s. shares were changing hands already for 11s. or 12s. This was the market valuation; and an old poet had told us that— the real worth of anything Is how much money it will bring. What seemed to him a departure from the ordinary rule was made by this secrecy in the framing of the Ordinance, while the proposal to lease was given no advertisement of any kind, and in that way this unbusiness like procedure was the cause of what seemed a great injury to the Colony. As there was no rent ascertainable by the ordinary competition of commercial men the Colony, for the next twenty years,would be making great losses. These South African magnates would probably make more out of the pearls than they would have made out of the gold in the whole of South Africa to the great injury and disgust of the Crown Colony of Ceylon.

MR. LYTTELTON (St. George's, Hanover Square)

observed that the hon. Gentleman had drawn a very gorgeous picture of the future of this industry. Whether it would be realised—he trusted it might—was a matter of pure speculation. While he was Secretary of State his concern was to see, firstly, whether it was desirable that there should be a lease of these fisheries; and secondly, if it were expedient to have a lease, that the very best possible terms were obtained for it. Throughout the course of this session, various innuendoes derogatory to the honour of Sir West Ridgeway, had been made in the course of sporadic questions addressed to the Under-Secretary for the Colonies. As Sir West Ridge way was unable to defend himself, it was desirable to state that there was a misapprehension with regard to his position, and that he was not Governor of Ceylon at the time of these negotiations. On the contrary, he had left Ceylon more than a year, and he was scrupulous not to give anyone any opportunity for saying he influenced the Government with regard to the negotiations. The negotiations were carried on in Ceylon entirely by Colonel Foss. It was in February,1905,that the Ceylon Government suggested to the Imperial Government as a basis of discussion that £15,000 a year for twenty years would be an adequate and proper basis for discussion. It was not until the August following, after careful thought and assisted by the experts at the Colonial Office, that he, as Secretary of State, sent an ultimatum that the rent which the Ceylon Government had fixed at £15,000 should be raised to £20,000—an increase of nearly 30 per cent. As the House knew, that was after more negotiations recommended to the Ceylon Government for acceptance, and on February 8th, 1906,after the present Government had come into power the Second Reading of the Ordinance took place in Ceylon. The negotiations went on for several months more, and it was not until February l6th this year—long after he had left the Colonal Office and the present Government had come into power—that the Third Reading of the Ordinance in Ceylon was sanctioned. While it would not have been in good faith had Lord Elgin receded from the negotiations after they had reached that stage, if there had been anything in the slightest degree improper or in any sense fraudulent on the part of the syndicate or anybody else it would have been wrong to have continued the transaction. But that was not suggested even by the hon. Gentleman opposite, who said the deal was improvident. No one could possibly impeach Sir West Ridgeway's conduct, because, with full knowledge of all these facts, the Government appointed him Chairman of their African Commission—a position which demanded not only the highest integrity, but also the highest wisdom and prudence. As to why this matter was not put up to tender, there were two very substantial reasons. It was not the practice of the Colonial Office and other State departments to put concessions of this sort up to public tender, because, if they did they either had to accept the highest tender, and perhaps get an undesirable person to deal with, or, if they rejected the highest tender, they had to enter into awkward explanations. Rightly or wrongly, it was not the practice of the Colonial Office in such cases to put these concessions up to tender. In this case there was an even more conclusive reason. The Government of Ceylon and the Colonial Office were not able to ascertain the terms upon which they were willing to grant a lease until months and almost years of negotiations and after these protracted negotiations it would have been a breach of faith to put the bargain up to tender. He would give the authorities who had been in favour of the course taken. In the first place, the Government of Ceylon were anxious not to retain this property in their own hands. They expressed that desire through the Governor and the executive council unanimously, having been required by himself and by his successor, Lord Elgin, to vote not as officials but as they thought right on the merits of the case. The officials of the Legislative Council were given a free hand in the matter, and they voted to the extent of two-thirds in favour of this concession. It was quite true that some of the members of the Council were paid members, but they were left absolutely unrestricted in giving their opinions. They were men of the highest standing and character, and he did not regard the acceptance of pay for public service as absolutely disentitling those who received it from giving a straightforward and unbiassed opinion on questions submitted to them. It was incorrect to say that no native members voted in favour of this plan. Outside the official members there voted for it not only the representatives of the Chamber of Commerce and of the general European committee, but the representative of the Cingalese provinces. The one-third who voted against it consisted of Colombo representatives and natives. After months of consideration, he himself approved of this bargain, and all his expert advisers at the Colonial Office, and, what was perhaps more important to hon. Members opposite, Lord Elgin after he came into office approved it in a despatch, some part of which he thought should have been read in answer to the questions which had been asked.

THE UNDER - SECRETARY OF STATE FOR THE COLONIES (Mr. CHURCHILL,) Manchester, N.W.

asked what the right hon. Gentleman meant by that remark.

MR. LYTTELTON

said he meant, what he said. In the course of these sporadic questions, in which, he understood, allegations of bad faith were being made, it would have been better not to withhold the expressed opinion of the present Secretary of State.

MR. CHURCHILL

thought the right hon. Gentleman's complaint against him was undeserved, as the despatch had been published in the Blue-book and had been laid upon the Table of the House.

MR. LYTTELTON

said it would have been better, considering the imputations that were being made in certain quarters, that a few lines, at any rate, of the despatch should have been read to the House in order to have dispelled the imputations when they were first made. Lord Elgin wrote, on 9th May, this year:— In the present instance I am not called upon to say more than that the lease appears to me to have been drafted with a sincere desire to safeguard to the utmost the property and interests of the colony. It may be true that the development of the fishery upon a scientific system offers good prospect of a greater return in the future than has been obtained in the past, and affords at least the hope that the barren cycles which have been so common in the past will not recur to the same extent. But the operations necessary to that end are, as you are well aware, of a highly technical and experimental character, and I am very doubtful whether any machinery which could be set in motion by the Government would be suited to develop processes at once so doubtful and so delicate. In twenty years time the Colonial Government will receive back the fishery, not only intact, but in the most perfect state to which commercial enterprise and scientific methods can raise it, and in the meanwhile a regular and substantial payment is assured upon which the Government of Ceylon can count with certainty in their financial arrangements. Twenty years are, no doubt, a considerable period in the lifetime of individuals; but if within that time all the resources that science can contribute towards systematic development of the fisheries will have been applied and thoroughly tested, the period will not, I think, be regarded as excessive or unfortunate in the history of a fishery which has lasted for more than 2,000 years. That was the deliberate judgment of Lord Elgin. With all this weight of. authority he had cited, the responsibility of any Secretary of State would have.been very grave in rejecting a lease of this kind. But he did not wish to shelter himself behind authorities. What were the merits of this case? For 100 years the net produce of this fishery had.averaged £10,000 a year, and for the last twenty years it had averaged £20,000 a year, including the biggest year ever recorded. The rent obtained was £20,000 a year—not a bad beginning—and the company had come under obligations to.spend, if reasonably required, 3,000,000 rupees on the fishery during the currency of their term, to do nothing which was injurious to the fishery, and not to fish at all during the last three years of the term if necessary and desirable. These things were matters of certainty, and it was an administrative advantage for the Colony to be able to make their financial calculations with certainty. It was hoped that by scientific cultivation the fishery would prosper, but that cultivation must be constant and continuous. This fishery it was hoped would prosper more when the large development expenditure which was provided for had been made. The Under-Secretary for the Colonies would sympathise with this because he had always been a great advocate of economy, and had distinguished himself as an economist and a critic of Governments for their lack of economy. For many years not a single pearl was obtained. That was said to be due to the terrible play of wind and tide upon the banks on which the oysters matured. It was therefore suggested by the scientists that the oysters when a year old should be transplanted from the exposed banks to banks less exposed. But that transplanting would cost a lot of money, a fact which operated on the minds of the Legislative Council in deciding to lease the fishery. Another scientific suggestion was that large quantities of matter should be brought from a distance with which to stiffen the banks on which the oysters were bred so as to resist the operations of wind and tide. Suppose that tons of this matter were cast into the sea year after year and the result was fruitless? He could well imagine the lecture which the Under- Secretary as an economist would administer in these circumstances to the Legislative Council if the fishery were retained in their hands. In his own experience the golden promises of scientific men had been too often falsified for him to place any great confidence in them. At any rate, it was certain that the expenditure to be made on the improvement of the fishery could not have any good results for two or three years. So much for the hopes held out by the scientists. What was the estimate of business men? In the year 1903 or 1904 this concession was offered to four of the largest firms in London at a rent of £12,000 a year. They all refused it on the ground that it was too speculative.

MR. CHURCHILL

When was this?

MR. LYTTELTON

Before the offer was ultimately accepted. T believe in 1903. These firms—

MR. J. HENDERSON (Aberdeenshire, W.)

Name one firm.

MR. LYTTELTON

The names of the firms are—Rothschild, Sir Ernest Cassel, Wernher Beit, and one other whose name has escaped me.

MR. DALZIEL (Kirkcaldy, Burghs)

Were they in possession of the same facts as have subsequently been brought out?

MR. LYTTELTON

said that was a very pertinent question. He did not think they had before them the whole of the facts which were put before the Colonial Office. But it was important to bear in mind that the rent of £12,000 which these four great houses refused was afterwards increased to £20,000. There were also the important considerations that in addition there was to be a large expenditure on the scientific cultivation of the fishery, and that there was ample security against injury to the fishery during the whole of the period of the lease. The only other charge advanced against the transaction was the secrecy in which it was alleged the matter was kept. There was absolutely no foundation for that statement either in Ceylon or in this country. References to the proposal were frequent in the Ceylon newspapers in March, 1905. Since that time references to the proposal were frequent. He quoted from the Ceylon Mail, which had now joined the Under-Secretary, to show that the offer to the syndicate was a fair one; and said that as regarded the supposed secrecy the terms were perfectly known so far back as November, 1905, and were the subject of discussion so far back as March in that year. He knew that Members of this House held different views as to what the function of the capitalist was. He knew that some Members thought that all capitalists ought to have a millstone tied round their necks and be thrown into the sea, but in a condition of things such as prevailed in this instance where the Government had to administer fisheries from which there were exceedingly capricious and uncertain results, where one had to make a large annual expenditure and where the revenue was uncertain, that was the moment when the capitalist was eminently suitable to step in to the assistance of the Government. The capitalists might win or lose in the actual working of the lease, and nobody could deny that this was a speculative transaction, but, whatever happened, the whole result of the speculation would be in the hands of the Government with absolute security at the end of twenty years time. Whether the arrangement was right or wrong the future alone could prove.

MR. CHURCHIIL (Manchester, N.W.)

said that the House would be convinced that whether the right lion. Gentleman judged rightly or wrongly, he had at any rate given the most careful consideration to the question, and possessed himself most thoroughly of the facts. He did tot disagree largely with many of the arguments which the right hon. Gentlemen had used, but he felt it his duty to the House of Commons also to submit to their consideration the other side of the argument. He thought both sides were simply stated, and he thought that they should be balanced one against the other. It was a very diffcult and complicated question, and no one he thought could be blamed severely for taking one particular view or the other. The right hon. Gentleman appealed a great deal to authority. He quoted various experts, he quoted the Legislative Council of Ceylon, and he quoted a despatch which was printed in the Blue-book, to which he should presently refer. For himself he did not propose for the moment to refer to authority. He would only submit one or two reasonable considerations which he thought must force themselves upon anyone who gave a careful consideration to the details of this transaction. The House was well aware that the basis of the lease was that Ceylon was to receive-£20,000 a year from the syndicate, and that the syndicate bound itself to spend £10,000 a year upon the- development of the fisheries subject to certain restrictions, and it also bound itself to take over the fisheries, as to the value of which the opinions were very divided, for a term of years. It was always a nice question to say what were the proper functions of Government and what were the proper functions of private enterprise. He thought the House of Commons, or at all events this House of Commons, would be inclined to think that public ownership and control were better than private speculative ownership and control, other things being equal. The right hon. Gentleman had explained how he came to fix £20,000 a year. He said that an average of twenty years was the foundation of his lease, and that the Government of Ceylon would receive as much as they had been able to make for themselves by their own unaided exertions for the preceding twenty years. He was inclined to think that to justify in principle the transfer of property from the public to the private interest there ought to be some clear and substantial gain which should determine the decision. Now in the last twenty years there had been eleven or twelve barren years. But the last four years had realised a total, excluding the present year, of £330,000, or an average of about £80,000 a year. But the question was not dismissed when they said that the average profit during four years was £80,000 a year. The sum of £330,000 capitalised at 4 per cent, was something like £12,000 or £13 000 a year, so that the fact was that the net profit for the last four years would have realised two-thirds of the profit which would be made under the agreement of the right lion. Gentleman during the next twenty years. The right hon. Gentleman went most carefully into the negotiations which extended over two or three years, and the delay had been very profitable to the Government of Ceylon. In consequence of the record fishery of 1905 the Government succeeded in raising the rent from £15,000 to £20,000. He had always heard that procrastination was the thief of time, but in this case procrastination seemed to him to have been particularly profitable. Turning to the future, the arguments seemed to him to show that the late Government were wrong in holding that the profits would be not more in the next twenty years than had been received in the last twenty years. Sir Joseph West Ridge-way obtained a survey by a professor who wrote a most elaborate report, contained in a volume which extended beyond the limits of an ordinary Blue-book, upon the Ceylon Pearl Fishery and the methods which might be taken to improve it. The information and the recommendations contained in that report gave scientific grounds for the belief that the pearl fishery would not only be equal to the fishery in the past, but would be better and more certain in its results. The professor indicated four processes, some of which had been referred to by the right hon. Gentleman, by which the fishery might be made more lucrative and more certain. These included the transplantation of oysters from exposed sands to sheltered beds, and he also spoke of what he called culture. That was the putting down of artificial beds to which the oysters might attach themselves. An ingenious process was also alluded to by which the pearl might be created in the oyster. He pointed out that with new scientific methods and delicate and complicated processes a better prospect was opened up than under the old crude method of diving under the water to bring up the oysters. There was another very pregnant factor which the right hon. Gentleman did not mention. He would give the right hon. Gentleman a reason which had led to the high value in the last four years of the fishery. During the last ten or twelve years there had been an immense appreciation in the price of pearls. It might be conceivably 100 per cent., and there was every reason to believe, surveying the general outlook of the world, that this appreciation would continue. The Continent of America and the great German Empire were producing every day numbers of wealthy people, and the demand for these objects of beauty was certain to increase with the expansion of civilization and with every development in the world. The fisheries in the future would be twice as valuable as they had been in the past, and yet we had bound ourselves not to take any further profit in future from all the resources of science and had cut ourselves off from all the improvement that would be effected in the value of the fisheries by the growing appreciation of the pearl. He thought that these were grave considerations when they were considering this lease on its merits. What was the position of the Government in regard to this matter? The whole tone of the right hon. Gentleman's speech was frank and manly, and he had come forward and taken the whole responsibility of the lease. When the present Government came into office the right hon. Gentleman had already written to the syndicate saying that he was satisfied with the conditions of the lease. He agreed with the right hon. Gentleman on this matter. If the Government had discovered anything in the nature of fraud they would have been justified in preventing this matter from going further, He was as convinced that there had been no fraud as he was convinced there had been little wisdom. In view of the fact that there had been no fraud it would have been a breach of faith on the part of the Government to go back from a bargain which had been definitely concluded only a few weeks before by the responsible head of the Colonial Office.

MR. LYTTELTON

said the Legislative Council had not accepted it at that time.

MR. CHURCHILL

asked if the right hon. Gentleman suggested that after having from the Colonial point of view expressed himself as entirely satisfied with the conditions, the present Government should have telegraphed out that the bargain must be thrown up. The right hon. Gentleman would accept the view that in the absence of anything in the nature of fraud they were not entitled, unless they were to commit an act of bad faith, to intervene in any way. In these circumstances they had tried in the Blue-book to make the best case. They had put forward the considerations which influenced the right hon. Gentleman and which undoubtedly told in favour of the course he adopted. They dwelt on the certainty of the revenues to Ceylon as against the risk, and upon the delicacy of the processes to be employed and the probable uncertainty of the success of the Government in dealing with those processes. They had pointed out that after twenty years had passed the fisheries would come back and all these doubtful experiments, although hopeful, would be in their concluding stage and we would have the benefit of the fisheries in a perfect condition. He considered that those arguments were perfectly valid and good, although it was not possible to consider them except in relation to other arguments which he had thought it his duty to bring before the House. He did not desire to make anything in the nature of an indictment against the right hon. Gentleman, but he must say it was a pity that the Legislative Council of Ceylon had not an opportunity in the first instance of affirming the principle of the lease. It seemed to him that in respect of the tenders, such a proposal as this ought to have been brought before the public in some official manner, in order that the various public bodies might have got into communication with the Colonial Office so as to arrive at the truth. Even if tenders had been called for, the Government was not pledged to take the lowest. The Government was always entitled to investigate the substance and character of the firms which tendered quite apart from and prior to any considerations of their claims upon their merits. He thought that the right hon. Gentleman did not sufficiently appreciate the possibilities of the future. It was a pity not to have waited a little longer in view of the remunerative results of the delay that had intervened, and it was also a pity that only within eight days of leaving office the right hon. Gentleman wrote the letter which concluded the transaction. Though he had drawn attention to some of the errors in connection with the lease, he was convinced that there had been no fraud, and that it was not necessary for anyone to put a dark interpretation on any of the transactions that had taken place. But some familiar names seen elsewhere had cropped up unexpectedly in connection with these fisheries. It might be that certain people had special aptitudes for finding out the possibilities in connection with precious stones or gold, and whose aptitudes led them almost by a subtle instinct to move to a point where profit could most surely be made. He thought that the Government in Ceylon, when they expressed the opinion that these fisheries were worth £15,000 a year, were expressing an honest opinion, and he thought that the right hon. Gentleman in all these negotiations had been animated by the most sincere desire to do right. He was bound to say that the tendering firm had acted in a perfectly straightforward manner. They had been perfectly honest, and, in addition, they had been extremely wise. He heard with very great regret indeed the aspersions made against the part Sir Joseph West Ridgeway took in this business. It was perfectly true that Sir Joseph West Ridgeway had ceased for a year to be Governor of Ceylon before he was in any way connected with any proposal in regard to the lease of the pearl fisheries. It had been suggested that Sir Joseph had utilised special information which came into his possession as Governor. He was informed that that was wholly inaccurate. While he was in Ceylon he had no communication with Professor Herdmann, and had no information as to his investigations except what was contained in the Report of the Royal Society. He left Ceylon in September, 1903, and it was not until June, 1904, that he was invited by Colonel Foss to join a syndicate to treat for a lease of the fisheries. He agreed only on two conditions—that the Colonial Office did not object and that the firm should be of high financial status. He believed the right hon. Gentleman would bear him out that in any conversation Sir Joseph West Ridgeway had with him on the subject of this lease, he made it clear that he proposed to have a financial interest in the affair. From his study of this question he was convinced that Sir Joseph acted throughout with perfect candour and integrity. His holding was a very small one—1,000 £1 shares and 1,600 1s. shares.

MR. LYTTELTON

said he was informed that when the rent was raised Sir Joseph West Ridgeway reduced his holding by a half and advised his friends to do the same.

MR. CHURCHILL

said it was a fact that when the rise in rent took place Sir Joseph West Ridgeway reduced his holding by one-half. There had been so much questioning upon this subject that he had thought it necessary and right to enter upon the question in detail with the representatives of the parties concerned and to make a frank statement of the case.

MR. MENZIES (Lanarkshire, S.)

said that he had never made, and he hoped he never would make, any charge against the ex-Colonial Secretary that would give the slightest idea that there had been anything improper or any want of good faith on the part of the right hon. Gentleman. There had been nothing dishonest about the right hon. Gentleman's connection with this matter. He had acted to the very best of his ability. His complaint against the right hon. Gentleman was that he had not shown much business capacity in the matter. He believed that if such firms as Cassel, Beit, and Rothschild had had the same information as the other company the Colony would have had the benefit of £60,000 more per annum in its coffers. For a Colonial Governor, after his term of office had expired, to introduce a syndicate to the Government and then join it himself was a dangerous precedent. He had never supposed that the financial profit of this matter was anything whatever to Sir Joseph West Ridgeway. But was there any precedent for the action of Sir Joseph?

MR. LYTTELTON

said he understood that in the case of the Burmah mines the chairman of the company was Sir Lapel Griffin, who had only then recently returned from the Indian Civil Service.

*MR. REES (Montgomery Boroughs)

said as one personally acquainted with Sir West Ridgeway he entirely accepted what had been said as to his connection with this matter by the ex-Colonial Secretary and the present Under-secretary, and he would add that his information was that the details of the transaction were well known to the commercial community of Colombo. But he would pass from that matter, as he thought it had been fully discussed, and would call attention to the position of British Indians in the Transvaal, where they laboured under disabilities which were greater than any endured under the most rigid caste system on the Malabar coast. Having said that everything possible should be done to alleviats the position of our British Indian fellow subjects in South Africa, he drew the line at bringing coercion to bear on the Colony, being convinced that they must be allowed to manage their own affairs, and that when there was a difficulty it could not be got over by urging upon the Colonial administrations sentimental considerations. Turning to the question of the Chinese Customs, according to the exceptionally well-informed correspondent of The Times alterations in the method of management had been made by the Chinese Government in spite of the assurances which had been given to the contrary. He asked for an assurance that the resignation of Sir Robert Hart had not been caused by such interferences on the part of the Chinese Government. He wished also to refer to the question of the increase in the Turkish Customs. The right hon. Gentleman the Secretary for Foreign Affairs stated on Wednesday evening that he had succeeded to a certain position in regard to the increase of 3 per cent, which he was now bound to maintain. He submitted that in point of fact the present Government in December, 1905, formally consented to allow tbe Turks to include military expenditure in the Macedonian Budget. He would point out that Turkey had to faee in Macedonia a heavy existing deficit caused by military ex-penditure, which was being paid out of the existing Turkish Customs, and if the right hon. Gentleman consented to a further increase of 3 per cent., it was possible and probable that the extra revenue gained would be applied to financing the scheme of the Baghdad Railway. If that wag likely to follow as a consequence of the increase he thought we should not agree to it. But if that railway were constructed, it ought to be an absolute sine qua non that England should have control of the section between Baghdad and the Persian Gulf, and that the rest of the line should be under international control. This project, which was upon a commercial basis at present, by reason of the immense importance of this route to our trade, to cur position in Persia, and to the defence of India, was likely to become of even more importance politically than commercially. No doubt the right hon. Gentleman might have very little to say on this subject, but what he wished to point out was that both in the House and in the country the very great importance of this question was entirely under-estimated. It was a question as important as the construction of the Suez Canal, and it would introduce greater changes into the future of the far East than, anything that had happened since the Suez Canal was constructed. It appeared to him that the Foreign Office was in a position to treat this as an open question, and he hoped the Government would not consent to letting this 3 per cent, go, out of a hope that Macedonia might profit, which was doubtful. Any man who had visited the Turkish Empire would tell them that the abuses and the difficulties which often occurred between the different races which had been brought together under the Porte were due more to ethnical and local conditions than anything else, and that the Porte allowed them all to do pretty much as they liked, provided they kept the peace one with another. The importance of this question was very imperfectly apprehended both inside and outside this House. He hoped the matter would be treated by the Government in the same manner as Lord Lansdowne treated it when he laid down the doctrine that England must maintain: the status quo in the Persian Gulf at all risks. In conclusion he trusted that the right hon. Gentleman would believe that he was not endeavouring to pry into the Foreign Office secrets by bringing this matter forward, and he believed the House would be grateful for anything the Secretary of State cared, to say upon these points.

MR. JOSEPH WALTON (Yorkshire,. W.R., Barnsley)

asked the House to turn its attention to the present situation as it affected our Colonial interests in the far East. Our Colonial interest s in China were enormous. In approaching this subject, he was placed in a difficulty owing to the extraordinary fact that the Blue-book or report in regard to the foreign trade of China had not been published by the late Government since the year 1903.. It was almost inconceivable in the year 1906 that a nation with more trade in China than all the other nations put together should not have the trade statistics of the greatest of all neutral markets in the world up to a later date than 1903. There were two or three important questions in the present situation in China to which the House might well give its attention. There was the question of the Chinese maritime customs. The Chinese Government had appointed Chinese officials at the head of the maritime customs. The House knew that many years ago the control of the Chinese maritime customs was placed in the hands mainly of European officials, at the head of whom was Sir Robert Hart as inspect or-general. Various loans had been concluded between China and various. European countries to the extent of £45,500,000, guaranteed on the security of the receipts of the maritime customs, which were to remain under the inspector-generalship of Sir Robert Hart or some other European, but they learnt through, the correspondent of The Times that the Chinese controller who had been put at the head of the maritime customs by the Chinese Government had taken very active steps in the matter of control, and this after the assurance: received from the Chinese Government in answer to the representations of the British Government that the control should remain in the hands of Sir Robert Hart. In 1899 we were told that so long as British trade was predominant in China so long a British subject should be controller of the Chinese maritime customs. He therefore asked the right hon. Gentleman the Secretary of State for Foreign Affairs to give the House so far as was consistent wth his office a statement of the position in China to-day. These Chinese officials had given orders that no statistical returns or reports should be published in future until they had received their official sanction. That simply meant the establishment of a Chinese censorship and the abolition of the excellent branch by which the Chinese trade had been known to the world. That was a most serious thing so far as British trade was concerned. It meant not only a breach of faith on the part of the Chinese Government so far as the guarantee for the £45,500,000 of loans was concerned, but also with regard to the war debt at the end of the rising in China, which was £64,000,000. But that was not the most important part so far as this country was concerned, because our commercial interests far outweighed any financial interest we might have in the Chinese loans. If the Chinese Government were not compelled to adhere to their engagements it would not be long before Chinese officials would be placed in control of every port through which British goods were sent and would inflict the most serious injury on our trade. Then there was the question of British interests in Manchuria. We learnt from The Times correspondent that the Japanese Government on the one hand and the Russian Government on the other were faithfully performing their pledges with regard to the evacuation of Manchuria, but we also learnt that through three ports in Manchuria, Japan and Russia were sending in goods without the usual import duties being imposed on them. At the present moment only the port of Newchwang was open to the trade of all nations. We knew that the military conditions had imposed on Japan the necessity of delaying somewhat the opening of Dalny and other ports to the trade of the world, but the House hoped to have to-day some indication from his right hon. friend that all these matters were receiving the careful attention of the Government and that before long the present conditions would be altered and we should have the open door throughout Manchuria for the trade of the world. The condition of things in Manchuria of late had been detrimental to the trade of this country. It was most alarming. In the last four years our trade in Manchuria had diminished by 4 per cent, whilst that of the United States of America had increased 120 per cent, and that of Japan by 300 per cent. This country would be the last to begrudge Japan some considerable commercial advantages as partial recoupment for the enormous sacrifices she had made to keep Manchuria open to the trade of the world. He thought it was only right to draw attention to the change in the position and the diminishing amount of British trade in Manchuria relatively to the trade of our friendly competitors, the United States of America. It behoved the British commercial community to wake up, and to try to ascertain more fully the causes which had led American trade to develop so enormously in the last four years while British trade was diminishing in a country where there was no hostile tariff whatever to hinder the progress and development of British trade. He wished to refer briefly to the question of the non-carrying into effect of the Mackay commercial treaty concluded between this country and China. A communication had been received from seventy of the leading British merchants in Shanghai, calling the attention of the Government to the fact that China ignored the Mackay treaty, or rendered it ineffective in most of its essential points. He was quite aware that certain of its provisions were not to be operative until the other nations had given their assent to the treaty, but that did not by any means apply to the whole of the provisions. One of the provisions, for instance, was in regard to the removal of obstructions, and the making of improvements by the conservancy of the Wangpo River, which was provided for in the Protocol of 1901. So far as we knew, these improvements had not yet been taken in hand. He hoped to hear from the Secretary of State to-night that there was some prospect of this matter being speedily dealt with. Then there was the question of the uniform national coinage which the Chinese bound themselves to provide for. Years had gone by and, so far from a uniform coinage having been instituted, mints were set up over China which were issuing an enormous quantity of debased coinage, making "confusion worse confounded." This was acting most detrimentally to the commercial interests and real prosperity of China. He asked the Secretary of State whether he could give any opinion as to when we might expect that stipulation on the part of the Chinese Government to be given effect to. Then the abolition of the Likin was dependent upon the agreement of other nations with the treaty which we concluded. He hoped that there was some prospect of the other nations falling in with the treaty which he believed had already been agreed to by Japan, as well as ourselves, and that there was some reasonable hope that in the not remote future this system of internal customs in China which was a restriction and hindrance to trade would be removed. As to the question of the Imperial maritime customs of China, he did not contend that it could be expected that the Chinese nation, comprising nearly 300,000,000 of people, would for a long period allow the administration of their affairs, or even the development of their country, to be largely taken in hand by foreigners. He believed they would take it in hand themselves. He desired that they should do so, because he believed in China for the Chinese. But at the same time, we knew that they had not yet reached that stage. The Chinese had come under certain obligations, and they ought not to be left to their own sweet will until they had properly discharged them. The Mackay treaty included provisions as to the question of mining legislation. The Chinese Government undertook to look into the mining rules in operation in Great Britain, India and other places, and to select such as were suitable to the conditions of China. But so far as he understood, nothing had been done towards the fulfilment of that undertaking. Then there was the question of inland navigation regulations. The House knew with what a nourish of trumpets the Tory Party came down and told them it had come to an agreement with China for opening the waterways, so that British ships should take British goods to every riverside station in China. He was afraid that the prospect of enormously expanding our trade with China in that way had not been fulfilled. He should like to know from the right hon. Gentleman, what progress, if any, had been made to secure that the agreement made by Sir Claude Macdonald, in 1898, would be fulfilled. There was no question that in the conduct of our relations with China we must take into consideration the fact that following the example set by our Japanese allies, the Chinese were bound to wake up. They were an intelligent, and in some directions an educated people, and we might rest assured that they would in the future exercise much greater power, influence and force. As to the question of railway concessions, he should like to know from the Secretary of State whether concessions were in danger of being lost to British concessionaires through their failure to fulfil properly their part in the agreements entered into with the Chinese Government. He considered that it was a great misfortune for this country not to have had the largest share in supplying the Chinese Empire, the greatest on earth, with a system of railways. We had taken a back seat altogether in the matter of laying down railways in China, whereas Russia, France, Germany and Belgium had forged ahead, supplying that great Empire with its railways. We had been told that British concessionaires had secured the right to build 2,800 miles of railways in China. He wished to know how much of that work had been done and what further amount of mileage still remained in the hands of British concessionaires. He believed that the Chinese nation ought to possess its railways. He believed in the state ownership of railways, but he saw no reason why European syndicates should not build the railways under proper arrangements by which the lines could be transferred to the Chinese Government as soon as it was in a position to take them over. The Chinese railways paid better than almost any other railways in the world. The only shares and stock in railways which he happened to possess that had increased in the last few years had been those which he held in Chinese railways, whereas the shares and stock of railways in this country and in other parts of the world had steadily gone down. There was no question as to the profitable nature of enterprise in a densely populated country like China. Why British investors and commercial people had failed to take an adequate share of the trade with China was really past understanding. In spite of all that Tory speakers had said in the last three years, he could only conclude that the trade of this country had been so very flourishing that manufacturers, having their order books full, had not looked for an increase of orders by enterprise in China. The fiscal system of this country, under which we had free imports, enabled us to compete successfully in great neutral markets like that of China.

And, it being a quarter-past Eight of the clock, and there being Private Business set down by direction of the Chairman of Ways and Means under Standing Order No. 8, further Proceeding was postponed without Question put.