HC Deb 31 August 1914 vol 66 cc511-36

The only allusion I desire to make to the question which has been so much discussed to-night is to ask when it was discovered as to the reports in the "Times" that the statements were untrue, whether a direction was issued in the War Office with regard to those statements, and whether the Censor still allowed the articles which were proved to be false to be telegraphed all over the world, or whether he exercised his influence to prevent them getting into German or American newspapers? It seems to me that the right hon. Gentleman on the Front Opposition Bench, with whom we must all have the greatest sympathy, has entirely failed to explain that incident.' I cannot make even that allusion to this matter without saying that the long speech which we have had from the right hon. Gentleman illustrates one feature with regard to this situation which the House and the country will look upon with the greatest sympathy. I do not think we on this side of the House can sufficiently acknowledge the great help which my right hon. Friends on the Government Bench are getting from the Front Bench opposite in this crisis of the nation's fate and history. The right hon. Gentleman explained to us that he is working night and day, and he is trying to do everything he possibly can. He is only one of the many Gentlemen who sit on the Front Opposition Bench and who are giving most loyal support to the Government in this crisis. I do not think we ought to allow this further to pass without acknowledging the unrequited services which many right hon. Gentlemen and others who sit behind them are giving to the Government of the country.

I desire to turn the attention of the House to another matter. I am glad to see the Chancellor of the Exchequer has come in, because we have all been looking with some interest for his appearance in the Debate. We want to hear something about the moratorium before we separate. It is all very well to talk about the moratorium and ask questions, but if we cannot get my right hon. Friend to give as some information all our talk will come to nothing. My hon. Friend the Member for Barnsley (Sir J. Walton) tried to turn the attention of the House to the matter under unfavourable circumstances, and we all looked on his effort with the greatest sympathy, although none of us was able to do anything to assist. He was swept away in the stream of greater interest with regard to another matter which was then surging through the House. We have now got to a quiet moment, and, the right hon. Gentleman having come back, I want to ask what is to be done with regard to the moratorium on the 4th September? I believe the 4th September is the fatal day. Everybody's obligations, fortunately, have been postponed until that day. What is to happen on Friday next and afterwards? I have read very carefully the White Paper published this morning, but I cannot get any information from it. It appears to be rather a statement of what has taken place during the last month than any definite explanation of what we are to have after next Friday, and that is what we want to know about.

The White Paper gives us the result of the inquiries which the Chancellor of the Exchequer has made of bankers and business houses with regard to what they would like. I think we all agree from those replies, and from what we have heard in Debates in this House, that in some form or other the moratorium must be continued; but it is a question whether it need be continued in such a wide form as during the last month. There is a considerable body of opinion in favour of its being somewhat restricted if continued. I myself ventured to suggest to my right hon. Friend that the chief necessity for the moratorium existed with regard to foreign transactions and foreign business. Although our own banks want protection also, I think they have had a great deal of assistance through the issue of notes, and in other ways, and it may not be necessary to continue the moratorium in the wide sense in which it has been interpreted during the last month This is all the more the case because of another Bill which my right hon. Friend has passed, giving protection to creditors, especially small people in various ways, against being hardly pressed for their debts. Having regard to that Bill some more restricted form of moratorium will meet business necessities, but in some form I think it will have to be continued, and I should be glad if my right hon. Friend will tell us what is to take place.

I wish to mention one other matter which I think is of importance to the business community. The idea—which I believe was very largely the conception of my right hon. Friend, although he has included his colleagues in it—that by means of this moratorium in regard to debts incurred before the War, and by the help of assistance of national insurance, the trade of this country, owing to the powerful Navy which we have, might be kept going during the War, was a most splendid conception; and if that idea can be realised I believe that this country will have in its hands a more powerful weapon than the great armies of the Continental Powers who are engaged in this struggle. Let our trade be kept on, let prices be kept down, let an abundant flow of provisions and other commodities continue to come into this country, and we will be strong enough to fight the War in spite of any weapons that our enemies on the Continent may have If this great end is to be secured it will not be done by rhetoric in this House, nor by good wishes on the part even of the Government. It will be done by wise measures, carefully conceived, and carried out with the view of securing the object desired. So I want to draw attention to the working of the system of national insurance, and I shall be glad if my right hon. Friend will say a word on that subject when he addresses the House. The premiums charged by the Government have been far too high, and during the four weeks they have been steadily going down.

The Government commenced a system at 5 per cent. That was no use. That would not bring cheap provisions into this country at all. A premium even of 5 per cent. or 2½ per cent. allowed shipowners to raise their freights 50 per cent. for bringing in the ordinary supplies into the country. The Government started their system of insurance first at 5 per cent. They found it was ridiculous and they came to 1 per cent., then to 3 per cent., and now to-day, perhaps in view of this discussion, they have fixed the maximum rate at 2 per cent. It is still too high. One per cent. would be an ample payment, and there would be a vast business done now that the Navy has maintained its control of the sea, and if the facilities were understood, I believe that at 1 per cent. a high profit would be made. Even if it did not pay, say, for a month, then the premium could be raised to one and an eighth, or to one and a quarter. This dealing in 2 per cent. and 3 per cent. and 5 per cent., as if it were a mere trifle, shows the absence of exact knowledge in regard to the burdens which commerce will stand which have really made me almost ashamed of our representatives at the Board of Trade. If the great ends of the Government have in view, namely, to keep a stream of commerce coming and going to this country is to be secured, then there must be reasonable rates.

I could mention one country, and that is Morocco, to which there has been a regular weekly service, but no ship has gone to Morocco since the last week in July, and none will go for ten days more. They tell me that the reason is that they have to put down in cash nearly £1,000 in insurance before the ship could sail. This is almost the value of a small cargo, and that is insurance of the hull alone. If they had to put down insurance on the cargo, one could easily see that it would not pay anybody to speculate in the voyage to Morocco. So that I would want to suggest to the Government that if the fine object which the Government have in view, and upon which my right hon. Friend made such a splendid speech the other night is to be achieved, they will have to act somewhat differently. My right hon. Friend said that the facilities given to the banks and to the bill discounters were not given to help to raise their dividends or to pour wealth into their shareholders' pockets. Not at all. They have been given by the House and by the right hon. Gentleman to enable the trade of the country to be carried on, and to enable us to make a good show during the serious time before us. If that object is to be secured the Board of Trade must take a business view of the situation, and if there is a national system of insurance, reasonable premiums must be accepted. Afterwards, if you get experience that the premiums are a little low, you can raise them one-eighth or more to keep the thing right. I hope my right hon. Friend will explain to us in what form the moratorium is to be continued after Friday. I shall be very glad to see him sympathetic in regard to this system of national insurance.

The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George)

I promised I would make a statement on the Motion for Adjournment as to the financial position. But there have been other topics, I would not say more important, but of a more exciting character, which have occupied the attention of the House, and I think that at this very late hour it would not be desirable or very useful to give an elaborate explanation of the steps taken by the Government. I shall therefore confine myself to answering the questions put to me by my right hon. Friend the Member for Islington, and by my hon. Friend the Member for Barnsley. My right hon. Friend has asked me what is our intention in regard to the Government moratorium. In the discussion which took place in this House some time last week, I said that the traders and financial interests of this country were very divided as to the desirability of extending the moratorium, and those who were in favour of extending it were just as divided as to the limits of time for which that extension ought to operate. We have come to the conclusion after a survey of the whole position that, although the majority of the traders are rather in favour of bringing it to an end, it would be much too risky a proceeding to bring it abruptly to an end on the 4th September, because, although some interests might conceivably benefit, there were other interests just as important to the trade and commerce of this country which might be disastrously affected. We have, therefore, come to the conclusion that we must extend the moratorium at least for another month in its present form. I will just explain shortly why we have come to that conclusion. There were several suggestions made with a view to limiting the moratorium, and extending it in that limited form rather in the general way in which it operated during the last month. For instance, there were suggestions made that there should be a limit of the amount; that there should be a percentage of the debts covered by the moratorium recovered; that there should be a premium or interest charged on the loans. And there was another suggestion that there should be a limit in the class of business which would be protected by our moratorium. I will just state very briefly to the House why we could not see our way up to the present moment to adopt any of these courses.

With regard to the suggestion made that we should limit the amount protected by the moratorium—that we should raise the amount: some said from £5 to £50, some said to £250 to £500—there was this particular objection, that it would be open to the criticism that you were protecting the big debtor and not protecting the small man, who might be just as hardly hit by the circumstances of the War as the man whose indebtedness ran into thousands or a million. That seemed to be rather an invidious division. I come now to the other suggestion, that we should fix the percentage of the debts which would be payable during the course of the extended moratorium. For instance, there was the suggestion that we should make 10 per cent. of the debts payable; others said 20 per cent.—there were various suggestions as to the amount—but we have two objections as to that. Sums of 10, 20, or 30 per cent. would be more than some could pay and less than others ought to pay, and there is always the danger that when you fix a minimum it becomes a maximum If there was a suggestion in a Royal proclamation that people were expected to pay 10, 15, or 20 per cent. as long as they comply with the terms of the proclamation, they feel satisfied that they have done their duty. On the contrary, we feel it very important that we should impress upon those who can pay that it was their patriotic duty, that it was something they owed to the trade and commerce of the country, and to their country, that if they were in a position to pay they should not take advantage of the moratorium not to pay, and I am very glad to say that during the last few days, more especially, there has been a clear indication that people are taking in increasing numbers that view of their duty.

We therefore thought it was very much better that we should make people feel that the moratorium was only for people who could not pay, and whose inability to pay was due to the circumstances of the War, and that it was incumbent upon those who could pay to do so. That is one reason why we thought it was so undesirable to put in a fixed percentage, lest it might be regarded as a hint from the Government that they were expected to pay 10, 20, or 30 per cent., whereas, as a matter of fact, it is their duty to pay the whole of their debt if they could afford to do so. It has been suggested that you should impose a penal rate of interest which would drive people who could afford to pay to pay in their own interest. It has been said that some withheld payment because they found it more profitable to keep the money for their own purposes, and their own trade or business, but the danger of a penal rate of interest is this: If you could say that where people could pay and withhold payment, you would then impose a penal rate; that might be one way of doing it, but if we impose a heavy rate of interest upon all those who withheld payment, whether they could afford it or not, the result would be that unless you put on a very heavy rate it would still be worth those people's while to withhold payment under present conditions. That is what I am advised will be the result unless it was a heavy rate of interest. If it were a heavy rate it would be oppressive to people who could not afford to pay. Therefore we were in a dilemma, and very reluctantly we came to the conclusion that that was not desirable during the month of which we now propose to extend the general moratorium, and that it was undesirable that we should impose that great burden.

I come to the last suggestion. We shall have to consider at the end of the period the limiting of the classes of debts to which the moratorium should extend. It is quite clear to anyone who has followed our financial conditions during the last few weeks that it would be quite impossible, even at the end of the month, to bring the moratorium entirely and absolutely to an end. There is a certain class of debt to which the period will probably have to be extended, possibly to the end of the War. For instance, take bills. It is quite clear that at the end of the month we shall have to extend the moratorium to them because it will be quite impossible to make the necessary arrangements, because you will not have received remittances from the belligerent countries. On the Stock Exchange these remittances had practically ceased in respect of foreign bills, and there was no immediate prospect of them being collected before the maturity of the bills. There are some of them which you cannot collect until the War is over and probably for a considerable time after that. Take the belligerent countries. There has been a suggestion that you should have a sort of clearance by which you can set the bills due from those countries against the bills due from this country, but that will take a very long time, and there would still be a very considerable balance. You could not get those bills collected for a considerable time after the War. I am told it will take twice the length of the War to get the money in. If the War lasts six months, you probably will not get the money for another six months. If it lasts a year it will probably take another year before you get remittances from those countries. It depends very largely, of course, upon how the War turns out, their exhaustion, and the position they will be in at the end of the War. At any rate, you are not going to get business flowing with belligerent countries until after that date—and even with countries not engaged in the War there is going to be difficulty—because trade with Europe has to a very large extent come to an end, not merely with belligerent countries but with Russia and France.


You mean friendly belligerent countries, those who are our friends.


I am not merely taking in belligerent countries, but also friends.


Friendly countries.


That is right. They are all belligerents, but I am taking countries not belligerents. Take the Baltic for instance. [HON MEMBERS: "Italy."] Even in Italy the Exchanges are closed. I was told to-day it was very difficult to open up with Genoa and Naples. The arches of the aqueduct have somehow or other been blown up for the time being, and it is therefore very difficult, as far as Europe is concerned, for us to feel confident that you can receive remittances in respect of an enormous sum of money which is due to this country. That is why I say, so far as bills are concerned, I cannot see any prospect that at the end of this term of a month you will be able to bring the moratorium to an end. I am not going now to indicate the lines upon which the Government are proceeding in their inquiries to find out whether it is possible to limit your moratorium in respect of the classes. If you can it is certainly desirable. For instance, the retail traders are in the main in favour of bringing the moratorium to an end. The foreign merchants are against bringing it to an end for the reasons which I have indicated. It may be possible at the end of the month to be able to discriminate between these various classes of business, although it is very difficult. It is so difficult because the moment you declare a moratorium in respect of one debt you find that it affects the receipts of the next class. Therefore, I do not feel the same confidence as I otherwise might feel in respect of that matter. Those are the lines on which we are examining the position.

11.0 P.M.

But we shall be able to bring it to an end all the sooner if we get the assistance of those engaged in the various branches of trade, and notably of the banks. If the bankers will assist us, we can bring the moratorium to a close earlier than is otherwise possible. I am not going to criticise the action of the banks. No doubt at the beginning some of them got very frightened, and many of them helped the notion that men who were in a position to pay need not do so. I was told by a leading banker that this was going on in some banks. There were men who ordinarily accumulate large credit balances in order to pay their monthly bills, and some of the bankers said to them: "I would not pay my monthly bills. I would keep that credit balance. You do not know what is going to happen, and therefore it is desirable you should have it in your favour." That is as bad a thing as could possibly occur, because on the authority of these priests of the financial world business men were having inculcated into their minds the idea that although they were in a position to pay it was their duty to take advantage of the moratorium and not to pay.

So long as that idea obtains in the minds of business men you will never bring the moratorium to an end, and everybody knows that the sooner it is brought to an end the sooner you will get the real flow which is necessary to keep business going. I am very glad indeed that that attitude on the part of bankers is disappearing, and that in the last week there has been a considerable change for the better. This is affecting the business community. People are paying much more freely, especially those who are desirous of behaving decently towards their neighbours, and I am sure that in the course of the coming month there will be a very considerable change in the general attitude of the business community towards each other. They will pay out much more freely, and then we shall be in a better position to deal with the moratorium than we are at the present moment. Confidence is gradually beginning to be reconstituted, and really I hope in a few weeks we shall be in a position to take a substantial step towards getting rid of the moratorium.

I do not think it desirable for me at this moment to enter into any further explanation of the steps we have taken, and I will therefore confine myself to answering the question put by my right hon. Friend on the question of the insurance of ships. Although I had the honour of initiating that proposal in this House, it is now being administered by the President of the Board of Trade. But I will venture to answer the criticisms of my right hon. Friend. No one could tell at the start what would occur. We had never been engaged in a war under such conditions, and certainly not in a naval war approaching these conditions. No one could tell the extent to which commerce would be distributed by the cruisers of the enemy which had escaped before war was declared. That was quite impossible. If my right hon. Friend will look at the Report of the Committee, he will find that men with every confidence in the efficiency of the British Fleet came to the conclusion that the depredations that were possible were of a very substantial character. I am very glad to be able to state they have not approached the anticipations of the Committee, and the main mischief which they have effected up to the present has been almost negative. No one could have anticipated that at the time. I do not believe that anyone in this House who had devoted his time to the naval problem would have confidently predicted that as little damage would be inflicted in the first month of the War as has been achieved by the enemies' cruisers. That is a matter of very pleasant surprise to everyone, because, although we based the whole of our insurance plan upon the assumption that we had secured the mastery of the sea, we thought it would necessarily take time.

We proceeded on the assumption that the worst would come in the first month, that gradually the problem would diminish in intensity, and that at length the mastery of the seas would be established. But it has been established practically in the first month, and that has surprised the most sanguine expectations of those who have believed in the British Navy's mastery of the sea. That is why the State Insurance Committee have been in a position to reduce their premiums rapidly almost from week to week. Let me remind my right hon. Friend of this: What has happened is just what you would have expected. At first the underwriters never thought they could take the risks. They thought possibly they would be too high, but gradually they began to realise that they were not so great as they anticipated, and they were able to quote rates which were considerably lower than the State rates. Those rates were for the safest routes. Our insurance premium was based on an all-round premium for all the routes covered. The moment you had private competition, Lloyd's naturally took the safest routes and were able to quote for the safest routes on much lower rates than we could quote for the routes all round.

My right hon. Friend the Attorney-General points out that they are not compelled to take any risks, so that they can pick and choose. The Government cannot. We have to take all the risks over all the routes. There are some routes which are acknowledged to be the worst risks. [An HON. MEMBER: "You do not take the worst risks!"] We take all risks for all routes. There are some routes in which the Admiralty did its best to forbid trading, not because we are afraid of the route but because we do not want them used until the Navy had established mastery over those routes'. Some routes are more risky than others. Lloyd's naturally left the worst risks to the Government, and therefore the premiums which my right hon. Friend quotes are the premiums which are established not by the Government but by the independent Committee we set up to fix them for the very worst routes. It is a matter of very great gratification that for the very worst routes that are left we are able to quote an all-round rate of 2 per cent. after a month of War. It is very satisfactory, and it is not so much a matter of complaint as a matter of gratification and congratulation on the whole.


made an observation which was inaudible in the Reporters' Gallery.


My right hon. Friend hopes they will quote 1 per cent. So do I. I can assure my right hon. Friend that these risks are considered by a very able Committee, and a perfectly impartial Committee. They compute them on the basis of captures already made. Since War was declared the number of British merchant vessels sunk or captured has been five, representing a total tonnage of 20,000 tons. I think our total tonnage is something like 20,000,000 tons.


Is that all?


That is all. I think that is one of the most remarkable achievements in the history of any Navy. It is very difficult for us to protect such an enormous expanse, but there it is. We have done it.


Can my right hon. Friend give the figures of our captures?


There is this difference, our ships keep the seas. The German ships do not, and if there are no ships on the seas you cannot capture them. Our ships go freely through every part of the globe. There they are to be captured, if anyone can, and they are half the mercantile marine of the world. They go freely everywhere as long as they are satisfied about their freights. They may be held up for that. They are not held up because they are afraid of the enemy. The German ships are lurking in neutral harbours. They are not taking the sea. My hon. Friend must not look at the figures of captures, because we cannot capture them in neutral ports. Our captures are very considerable. That is the reason why I am confident that with patience and with the steps we have taken British trade will not merely go on freely, but will be booming in a very short time, because we are the only manufacturing country now in Europe. We have only America to deal with as a great manufacturing country. Other manufacturing countries are occupied with this great War. The Germans as competitors have practically disappeared from the markets of the world. There is no reason why our manufactures should not go to every part of the world. The routes are free to them, and once they establish exchanges and are able to adapt themselves to the changed conditions trade will go on. There is nothing the matter with our trade. It is the most extraordinary position in the world. Here are £350,000,000 of bills of exchange. They are not money which we owe to other countries, but money which other countries owe to us. Practically they have been paid already by British banks and financiers. We have financed in these bills goods which we have not received yet—which are on their way. We have financed goods which we have sold to other countries. These are not debts which are due from us to anyone else. They may be debts which are due from one British subject to another. We owe nothing. Our assets, which, I suppose, are about £15,000,000,000 to £20,000,000,000, are absolutely sound. There has been a provisional breakdown of credit but that will be re-established, and the moment the machine is set going there is no reason why, in spite of this terrible war, we should not be able to conduct our business very much as we have ever done.


Will the right hon. Gentleman say something about the issue of currency notes to manufacturers?


We thought we had arranged that with the banks. I think it would be a very serious departure if we were to start banking business with traders ourselves. We have not got the machinery. After all, as my hon. Friend knows very well, a banker makes advances very largely from his knowledge and experience of the man he deals with. Of course he likes to see securities, but he deals with the man.


He ought to do it.


I quite agree with my hon. Friend. I do not think that the State ought to deal directly with traders unless it is compelled to do it—unless the bankers fail us. It is their interest to carry on the business of the country, but if it were conceivable that the banks of this country were to refuse, I do not say in the first fortnight of panic, but were to refuse permanently to carry on the business of the country, then we should be driven to do something of this sort. Rut it would be the very worst thing that could happen. We have no machinery for the purpose. The Bank of England has very few branches, whereas the great joint stock banks have branches in every town. They have managers who know every trader. They know not merely what every trader is worth in cash, but they know his character, and that counts with a banker who advances money to a man. All that is the accumulated experience of these managers and their predecessors which has been going on, perhaps, for generations. We have not got that great organisation which in the case of the banks has taken so long to perfect, and it would be a great calamity if the action of the joint stock banks drove us to improvise some sort of machinery ultimately as a last resort and as a consequence of despair. I do not think it is desirable or necessary. I have heard tales of rather stupid panic on the part of some banks and managers, but it was panic. I am sure it was. I believe it has passed away. It is the worst thing that could happen in the interest of the banks them selves that they should take up that sort of attitude with the traders of the country. They have realised all these Bills. I have not the actual figures at the present moment. They know that they can go to the Bank of England and receive this credit, and it is better for them to go on trading as banks. If that happens, I nope we shall be able to declare an end to the moratorium.


I do not think it is desirable that we should allow this discussion to close without a reference to the entirely successful manner in which the Chancellor of the Exchequer and the Treasury officials have dealt with a financial crisis altogether unprecedented in its character. The formation by the Chancellor of the Exchequer of a Committee consisting of bankers and professional men of standing to advise him was the right step at the moment. The result has been that the Treasury and the banking and commercial community have acted in entire unison. I venture to say that the Chancellor of the Exchequer was, until quite recently, by no means a popular figure in the City of London. I think that he will appreciate that. I venture now to say that there is no more popular figure in the City of London than the right hon. Gentleman himself, because the steps which he has taken have been recognised not only as producing successful results, but as having been wise in themselves. I gather that one hon. Gentleman opposite indicated some doubt as to the wisdom of the manner in which banker" have dealt with this matter. To-day is the last day of the month. To-morrow will be issued the statement of balances and of advances made by bankers, and the right hon. Gentleman will find that, notwithstanding the condition of stress, a larger amount of advances by bankers to their customers than in the previous month has been recorded, and that there will be bigger balances than existed a month ago. In other words, notwithstanding the financial crisis through which the country has passed, the bankers, taken as a whole—there may be exceptions—have given accommodation to their customers, which in the aggregate will prove to be increased accommodation as compared with a month ago, and that notwithstanding the fact that the high rate of interest which existed for a short time induced a large number of customers to pay back money which they had borrowed from the banks so as to avoid the high rate of interest.

The object of the banks has been to avoid hoarding. At first, many individuals came to the banks with cheques which were to be paid in gold, with the obvious intention of taking the gold away and hoarding it against a crisis which they thought might occur. Such customers have been discouraged. But where a customer comes to the bank with a demand for legitimate accommodation, for a legitimate advance out of any balance belonging to him for the ordinary customary purposes of wages or of discharging trade debts, bankers have invariably met such requirements. They never shelter themselves behind the moratorium. The moratorium has only been used by bankers to kill the hoarder, to prevent him doing to trade the injury which is done by the man who attempts to hoard. I wish to say how very thoroughly I agree with the doctrine laid down by the right hon. Gentleman as to the manner in which the moratorium may ultimately be brought to an end. I quite agree that the expedients which were suggested of a minimum percentage of payments, and of a heavy rate of interest, would have effects of evil far greater than effects of good. I also agree with him that the limits of classes of moratorium that is to say some classes of debts would not get the advantage of the moratorium, while others should—is the way to which ultimately I think he, under the guidance both of his official advisers and his City advisers, will resort. The moratorium must come to an end some day. It will come to an end gradually, but I believe that it will come to an end without any serious injury to trade, and we shall find ourselves tided over the crisis without any serious injury to our trade, and without any serious number of failures arising from the circumstances that have arisen generally. The whole arrangement is full of promise of ultimate success, and the country will be very grateful indeed to the right hon. Gentleman for his efforts.


The right hon. Gentleman referred to something I said, and rather misquoted me. He spoke of penal interest as having been suggested by me, but I never meant to suggest a penal rate of interest. What I meant to say was that the rate of interest should not be preferential and that it should not be better for a person to take advantage of the moratorium than to borrow from his own bank and pay the person to whom he owes the money. No person can borrow from his bank at the bank rate.


I always borrow at the bank rate.


Then the hon. Gentleman is in a favourable position, and all I can say is that he is a more fortunate person than the ordinary trader. The great mass of persons who borrow from the bank cannot borrow at the bank rate. If a person is under the compulsion of borrowing to pay what he owes a man, I think the rate of interest ought to be 1 per cent. above the bank rate. For myself I would very much rather it was 2 or 3 per cent. above the bank rate. If you allow a person to borrow money on better terms than he could ordinarily borrow I do not think you will see the moratorium come to an end as speedily as you desire. My own opinion is that it would be very much better for the country as a whole to inflict a certain amount of hardship on people in order to get rid of the moratorium and have a fresh start on a clean basis. You would inspire fresh confidence, and you would sooner bring the moratorium to an end if you put on pressure and caused a certain amount of hardship than if you allowed them to drag on. I do protest against people being enabled to borrow money from other people on extremely easy terms.

In regard to the right hon. Gentleman's observations with regard to foreign trade I should like to refer to the extraordinary difference between the state of trade in this country and the state of trade even among friendly belligerents. In regard to food stuffs the people are taking it away and dealing with it just as usual. That must be very satisfactory to us. As to the capture of merchant ships I was not enamoured of the Government scheme, and was quite prepared to have taken the risk, whatever happened, but I calculated it would have been very much worse. It is a complete surprise to me and to nearly everybody else that only five ships have been taken, and if that result had been anticipated nobody would have asked the Government to undertake a State insurance scheme at all. I understand some hon. Gentleman referred to the fact that we had not made a larger capture of foreign vessels. Foreign vessels are mostly lying up in neutral ports. I know a case of a foreign and a British vessel which sailed at the same time with cargoes of tea. The tea on the British vessel has been in London three weeks, and some of the tea is probably drunk, while the German ship is now in Lisbon and seems likely to remain there, so that the tea will not be available for quenching the thirsts of Germans or Englishmen till the war is over. I would ask the right hon. Gentleman seriously to consider whether the rate of interest ought not to be advanced at least to the figure at which people in good business can normally borrow from their bankers without pledging securities.


I am glad the right hon. Gentleman lent no currency to the charges so freely made against joint stock banks that they unjustifiably have refused accommodation during the later stages to the crisis. It must be obvious that a bank has an interest in maintaining and possibly increasing its profits, but it does not increase those profits by refusing accommodation to traders and keeping its assets. On the contrary, it is by that operation, shutting off the ordinary stream and the source of the profits which it seeks to maintain or increase. If a bank pursues that policy it is only doing so because it considers its duty to be to prevent panic in the public mind and runs on banks, which would be most likely to ensue in cases where the depositor began to be alarmed at the possible absence of security for his deposits. As an illustration of the irresponsibility with which general charges of that kind are made I say I made inquiries in a quarter in which I had the best right to ask for first-hand information, and I was informed that they had only traced three complaints that had been made. The answer to them was that accommodation had been refused once in a case where the intention was discovered to exist of buying for the purpose of holding up an article of general consumption. There was another case where a subordinate functionary mistook his instructions; this mistake was promptly rectified. There was the third case where the borrower refused security which he was perfectly well able to give, and notwithstanding they accommodated him. The White Paper circulated this morning from the Treasury shows the immense number of inquiries addressed by the right hon. Gentleman the Chancellor of the Exchequer to a very wide body of traders, bankers, stockbrokers, all kinds of transport providers and general merchants and others; to ask them whether the bank facilities given before the war and now were comparable. Out of the replies received no less than 6,341 said that the bank facilities before and after the War were reasonably comparable, and no more than 969 answered that they were not so reasonably comparable. Under these circumstances I hope we shall hear no more of general, loose, and irresponsible charges that the joint stock banks have failed in their duty or that at least if they are to be made definite, particulars will be forthcoming in such a form as will enable a proper answer to be made.


I think the business community will be very glad to hear the announcement that the moratorium is to be extended. I would point out, however, that it will be very difficult to get the foreign exchanges into working order again so long as the business community and the community generally have to keep their funds in hand until the moratorium ceases. At the present moment there is a very largo amount in the banks with a view to providing for the 4th September, and up to to-day—that is within four days of that date—the Government had made no announcement of what its intentions were. The consequence has been that the business community, with a certain amount of sagacity, has kept its resources within its grasp. Now that the Chancellor of the Exchequer says that the moratorium will be extended for a month the position will be no better, because those who are more wise will not part with their resources for the period covered by the extended moratorium. The announcement with regard to bills of exchange certainly improves the position. If in the Proclamation a certain definite extension of bills of exchange could be announced beyond the extension of the moratorium, bankers and merchants would be encouraged to part with a certain proportion of their resources represented by these bills of exchange. But as long as the moratorium is to be extended for a month the business community is bound to retain its resources in this country, and there will be great difficulty in re-establishing the foreign exchanges. There has been a certain attempt to do so, but the difficulty is very great in view of the fact that very few of the countries are willing to part with gold.

I would also suggest that with the extended moratorium perhaps the Chancellor of the Exchequer would provide that the goods referred to in the moratorium need not be tendered again. A considerable number of persons and banks have been under the necessity of tendering the goods, and those who were to have received them have declined to take them under the moratorium. Under the extended moratorium are the goods to be left continually with the view of tendering them to the buyers, or would the Government in the Proclamation provide that the goods already tendered should be considered a legal tender for the contract which they represented? It would be against inconvenience and against restraint on trade if it was legally held that a new tender was required under the extended moratorium.

I hope the Government will come to some international agreement in regard to raising the moratorium at some given date in the future. Each country is afraid to raise the moratorium for fear of what the other countries are doing. If by agreement amongst the friendly countries some portion of the moratorium were affected, it would be a great facility in enabling countries to resume transactions. If this country has to pay its debts and does not receive its payments the business community will be in a position of considerable difficulty. I believe this could be done, so long as the proportion of the moratorium lifted is not too high. Credits in this country are so considerably over what this country owes to other countries, there would be very little difficulty in resuming. An antecedent proceeding, to my mind, must be a resumption of the Stock Exchange. There is not the slightest doubt that the bankers, in view of their securities, would be far more in favour of the moratorium coming to an end. But I do not think it is right for the Stock Exchange to think that the Government should do everything. In France there was a system by which certain stockbrokers guaranteed each other. If some such system of mutual guarantee on the part of the Stock Exchange, assisted by the Government, were attempted, it might be well. It would be impossible to resume business on the lines to which the City has been accustomed, but because you cannot commence immediately on a large scale, to suggest that you should refrain from commencing at all seems to me to be a policy of despair. I have not the slightest doubt that if the Chancellor of the Exchequer will back up the Stock Exchange, on a basis of a mutual guarantee such as I have mentioned, that the Stock Exchange will be able to reopen in most important business in an effective manner. If facilities are given for a market to first-class securities I believe the first steps will have been taken for raising the moratorium.


I wish to emphasise what the last speaker has said in reference to the moratorium being extended for one month only. I am afraid the only effect will be quite the contrary to what is expected, as very great uncertainty will exist in the minds of the trading community as to what is to happen at the end of the month. Procrastination is the great fault, and I attribute the misfortunes, as I may call them, that happened to the financial world in this country to the procrastination that took place towards the end of July. If we had had the early wishes of the bankers complied with it would have been well. I do not blame the Chancellor of the Exchequer, because he acted upon the advice of men who should have known the opinions of the banking community. Had action been taken on the 30th July, I believe that the business of the country would have gone on quite smoothly, without any great necessity for the measures we have had. As a banker I have to thank the Chancellor of the Exchequer for the great assistance he has rendered to the banking community. Bankers have one duty to perform above all others and that is, that as the custodians of public money our first duty is to our depositors. We have to consider that having this money which does not belong to us that we are not free to handle that money for the purposes of any other finance if there is any likelihood of that money being locked up permanently and not available for the repayment of depositors if they call upon us to pay. And that has been, I feel confident, the mainspring of the attitude which has been adopted by the bankers. Owing to the action of the Chancellor of the Exchequer we have been put in a magnificent position and we are to-day able, and in fact there was never any doubt, as to the ability of the joint stock banks to meet every liability they have had, and we were prepared to meet any run from the first, and to carry on the usual business of the country.

I am absolutely convinced that hon. Members do not appreciate the position of this country with the finance of the world. The Chancellor of the Exchequer has told us that the acceptances amount to no less than £350,000,000 sterling, but there are other liabilities owing to the merchants and manufacturers of this country from all parts of the world, and it is utterly impossible for those merchants and manufacturers to obtain the amounts which are owing to them so long as hostilities continue. It is equally impossible for the commercial community to finance fresh transactions which are absolutely necessary to the conduct of the industries of this country unless there is some certainty that they are not going to be called upon to pay enormous sums of money which they have no means of collecting from those who owe it to them. The indebtedness of foreign countries on acceptances and open credit is at least £300,000,000 sterling as the Chancellor of the Exchequer has put it, and if war were to come to an end to-morrow the trade of the world is so disorganised that we could not hope under the most favourable circumstances to receive payment either for bills which have been drawn up from different parts of the world against produce or for the accounts which are owing to the industrial community for goods supplied to different parts of the world. We are asked every day to finance fresh transactions for orders which are being received by manufacturers and we are also asked to finance shipments of goods of produce to this country, but we are unable to undertake these transactions. These are transactions which are not generally undertaken by joint stock banks; they are in the hands of private bankers. We have transactions from all parts of the world to all parts of the world which are financed from this country, and unless the finance houses are assured that they are not going to be called upon to face sums which they cannot collect it is utterly impossible for them, in the interests of their creditors and themselves, to undertake fresh liabilities, and it is for that reason that I think the Chancellor of the Exchequer would be well advised to state as promptly as he possibly can what the intentions of the Government are in respect to these amounts which have to be met at some time or other by the commercial and financial institutions of the country outside of the great banks. There is one means, I think, that would meet the difficulty if the Chancellor of the Exchequer could undertake it in any way. The suggestion was that the Government should advance on first-class securities a certain percentage for the purpose of enabling the bankers to reduce their liabilities out of their own resources. It is utterly impossible at the present time to realise any security on the Stock Exchange.

I am not connected with the Stock Exchange, but we advance money from settlement to settlement on stocks and shares and we know perfectly well that those who are compelled to take those advances find themselves unable to pay off the bankers for those advances, and the accepting houses and merchants, if they wish to pay their liabilities, have got securities of their own and they are equally unable to realise those securities. The Committee of the Stock Exchange have very wisely decided to close for a certain period and abolish the fortnightly settlements with a view of preventing any panic which might take place. Seeing the impossibility of the realisation of securities I would ask the Chancellor of the Exchequer in the interests not of past transactions but of the trading and industrial concerns of this country to consider whether it is possible for him to create a certain amount to be advanced, gilt-edged securities of British corporations, the colonies, consols, and others which all the large merchant houses are not in a position to put in as security for loans. The joint stock banks are unable, in view of their duty to their depositors, to make very large advances on such securities knowing perfectly well that there is no market for them. If the Stock Exchange was to be opened to-morrow the result would be disastrous to every investor in the country because if they wanted to realise there would be a great depreciation in the value of all securities, and that would be accelerated by the operation of "bear" speculators who would take advantage of those who have to meet their obligations. The Chancellor of the Exchequer stated that the joint stock banks were encouraging merchants not to pay their accounts. As a director of one of the largest joint stock banks I am absolutely convinced that there is really no foundation for such an accusation.

The joint stock banks have loyally done everything they possibly could with a view of assisting the industrials of this country and the merchants in these very hard times, but the banks must always bear in mind that they have to provide for those depositors, many of them very small depositors, who have entrusted their moneys with them and to whom the loss of their deposits would mean absolute ruin. The Chancellor of the Exchequer must bear in mind the class of people who have in the joint stock banks something like one thousand million sterling and who have to be protected. The industrials of this country, owing to the stoppage of their trade by this war, are also deserving of some protection and some assistance from the Government, and I would suggest that the Chancellor of the Exchequer could assist them by allowing the banks, on examination of their accounts, to advance them money on the accounts owing to them. They have a law in America which is acting exceedingly well, by which large traders are enabled to hypothecate trading accounts for a consideration in money which they take at an advance for the purpose of continuing and expanding then-trade. They take advances from the banks, and they hypothecate specific debts to the banks as security. If the Chancellor of the Exchequer could see his way to pass a short Bill to enable traders and managers to hypothecate those debts as security, it would enable the joint stock banks to give them greater facilities than they are at present able to do. I know-that it is practicable, but I do not know if the Chancellor of the Exchequer would have time to do it during the present Session. If so, I am absolutely confident that it would bring relief to the commercial community. The Chancellor of the Exchequer also referred to the opportunities that we had at present for the extension of trade. I have had over forty years' experience as a merchant trading in different ports of the world, and I know that the system of great credit which has been introduced by Germany during that period in commercial transactions to cut us out of the international trade has succeeded immensely, and in many countries they have obtained a large bulk of the trade entirely owing to the facilities which they have given.

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This system is a pernicious one which I would not recommend, but we have the opportunity, if we can give our industrials a certain amount of facilities at the present time, to enable them to manufacture and ship largely against orders, of recovering their position in the markets of the world, and during the time that this war lasts reintroduce the good system which obtained in all places when we used to trade for cash and cash only. I believe that once having recaptured the markets, our competitors will not be in a position in the future to give those insane facilities which caused so much trouble to the commercial community throughout the world. I would ask the Chancellor of the Exchequer to consider whether he cannot see his way to make some definite statement as to the prolongation of the moratorium until at least one month after the cessation of hostilities for such transactions as are connected with those countries engaged in the war, where we know absolutely for a certainty that it will take them at least six months, if not twelve months, to readjust the whole of their financial and commercial conditions after the war has come to an end.