SCHEDULE.—GOVERNMENT WAR OBLIGATIONS. (Hansard, 25 November 1914)

HC Deb 25 November 1914 vol 68 cc1153-64 1153

§ Obligations incurred in respect of—

1. Guarantees given to the Bank of England in connection with—

(a) The discount of bills of exchange;
(b) Advances to acceptors of bills of exchange;
(c) Advances in connection with loans made to members of the Stock Exchange;

2. Guarantees given in connection with bills of exchange drawn by traders having debts due from abroad which are not immediately recoverable, and in connection with advances to traders to enable them to meet liabilities under contracts entered into before the outbreak of war;
3. Payments on contracts of insurance or reinsurance against war risks of ships or cargo or for the relief of dependants of persons on insured ships so far as provision is not made for those payments by the application of premiums or otherwise;
4. Any loan raised by any of the Powers allied in the present War or by the Government of Egypt or by the Government of any of His Majesty's Dominion or any British Possession or Protectorate;
5. The maintenance, or assistance, in connection with the present war, of food supply, trade, industry, business, or communications in the United Kingdom or in any other country, or the relief of distres in the United Kingdom or in any other country.

1154

§ Amendment made: After the word "incurred" ["obligations incurred in respect of"] insert the words "in connection with the present War." [Mr. Lloyd George.]

§ Question proposed, "That the Schedule, as amended, be the Schedule of the Bill."

§ Mr. BOOTH
I am not sure that the Committee realises the far-reaching effect of this Bill as shown by an examination of the Schedule. This is a Bill where the Government does something totally unprecedented, and but for the fact that we are in a time of national emergency I doubt whether any quarter of the Committee would even have allowed it to be discussed so far without tremendous opposition. It shows that the Government may incur obligations to private individuals, particularly members of the Stock Exchange, to practically unlimited amounts. That may be necessary. I take it that the Chancellor of the Exchequer, upon the Third Reading of the Bill, will do what he omitted to do on the Second Reading, namely, justify such a far-reaching measure as this. I do not want to anticipate that speech, but I think the Committee should make it clearly to be understood by the Government that the explanation of the Chancellor of the Exchequer is open to review by the House. We must assume, for the moment, that he can make his case good, otherwise I cannot see how any Government could ask us to pass a Bill with such a Schedule as this. I beg to give notice that I shall move a new Clause to-morrow on the Report stage. I have not moved it to-day because of the inconvenience to Members of the Committee when an Amendment is a manuscript Amendment. The Prime Minister promised to-day that the subsequent stages of this Bill should be taken to-morrow, therefore I do not move the new Clause on the Committee stage. I shall, however, put it on the Notice Paper and submit it to the House to-morrow, with Mr. Speaker in the Chair.
I will tell the Committee the effect of it. When we are giving such vast help to the Stock Exchange, this is the time to ask for the consideration of the public interests on the other side. I do not wish to ask for anything unreasonable. What I ask is that the State should be protected against "bear" attacks upon Government securities while the War lasts. I shall propose a Clause making it illegal for any contracts of sale to pass unless the particulars are given and a certificate of 1155 ownership is attached to the contract note. At the present moment it is not unreasonable to ask that that should obtain during the War, so that no "bear" attack may take place upon the present loan, which might arise upon any news coming of an unsatisfactory character, say, a temporary reverse, of which advantage might be taken to boar down this War Loan, which would have an influence upon the taxpayers if we ask for a succeeding loan. In addition to that, I should like to point out to the Committee now that the aliens in this country, even belonging to enemy countries, who are interned in camps can operate upon the Stock Exchange against this Government's securities. It is not trading with the enemy, because they are in England. Therefore, we are in a position in which tens of thousands of enemies of this country can operate upon the Stock Exchange, bearing down Government securities at their own sweet will, and making money at the expense of large or small investors and the innocent, public. I mention the matter now because it seems to me of vast importance. Perhaps hon. Members of the Committee will think it over and be prepared to discuss it to-morrow. I will just give a precedent which occurred in France, when the French Government prevented an attack being made upon Russian securities during the Russo-Japanese war. Those securities were largely held in France and, as an act of friendliness to a friendly country, the French Government protected Russian securities by special legislation. It is only fair to ask that if a man sells Government securities he shall be in possession of them when he offers them for sale. I know there is a question as to certain industrial securities, but I shall move my Clause as applying to Government securities only and leave industrial securities alone. I shall put the Clause on the Paper to-night, and I hope hon. Members will be prepared to deal with it.

§ 4.0 p.m.

§ The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George)
My hon. Friend will find, when I make my statement to-morrow—because part of the statement will deal with the arrangements made between the Government and the Stock Exchange—that we have taken complete powers to deal with matters of that kind. The assistance was rendered by us on the express condition that the Stock Exchange would only be opened 1156 subject to the conditions fixed by the Government, and certainly matters of that kind would be matters which we should deem it absolutely necessary that we should receive protection against. Therefore, it is not necessary to have any Clause in the Bill at all. However, if my hon. Friend will wait till he hears the statement I have to make, he will find I have anticipated the kind of apprehension he has in his mind, and it will be quite unnecessary to insert any Clause in the Bill. The worst of putting the Clause in the Bill would be that if we insert one Clause providing against one contingency, by a rule of law it is assumed that you have practically abandoned other conditions which we think would be absolutely necessary for us to insert when we assent to the opening of the Stock Exchange. The Stock Exchange is not to be opened at all, except subject to the consent of the Government, and then under conditions to be imposed by the Government at the time, and it would be far better for my hon. Friends that those conditions should be imposed which can be reconsidered from time to time, rather than that you should have one specific danger noted in the Bill and all the others left out.

§ Mr. BOOTH
Might I appeal to the Chancellor of the Exchequer then, to make his statement on the Report stage? My only opportunity to put the Clause down would come before the statement he intends to make on the Third Reading, and if on the Question that the Report stage be taken, or that Clause 1 stand part of the Bill, he would make his speech at the beginning of the proceedings to-morrow, if I am satisfied I need not lose my Clause. But if I wait for the speech on the Third Reading I shall have lost my opportunity, and I feel so strongly on it that, unless I am satisfied, I shall divide the House, and I have already been promised a substantial amount of support.

§ Mr. LLOYD GEORGE
I think, subject, of course, to what Mr. Speaker has to say, it will be quite competent for me to make my statement on the Question that Clause 1 stand part.

§ Mr. BOOTH
That is not put on Report.

§ Sir F. BANBURY
Might I suggest that, if the hon. Member moved to omit the Schedule, then the right hon. Gentleman could give his explanation?

1157

§ Mr. LLOYD GEORGE
The Parliamentary experience of the hon. Baronet has come to the rescue. That seems to me a very admirable suggestion. That raises the whole of the transactions entered into by the Government, therefore I think I should be in a position to make a statement upon that.

§ Mr. BOOTH
The hon. Baronet has suggested a very comforting means for the Chancellor of the Exchequer, but on this occasion he has deserted his follower and has not given me any help. I shall lose my opportunity to move the new Clause. I have been too well trained by the hon. Baronet to be misled by him so easily.

§ Sir G. YOUNGER
Why should not the hon. Member move his Clause, and then the discussion take place?

§ Mr. JOHN WARD
I am very interested in this short discussion, and unquestionably the statement of the Chancellor of the Exchequer makes it easier for us to allow the Bill to go through without any dispute, it is quite clear that immense assistance is going to be given to financiers in the City, and a great deal of protection and Government credit is going to be given to a class which, apparently, if we see the way they operate on contracts and things of that description, is not very friendly to the State when it is in difficulties. I was wondering whether there were any conditions attached to the assistance, because I notice that the last part of the Schedule refers to subjects which, naturally, we on these benches are very interested in. I note that in case of any assistance that is given to a workmen's organisation relating to distress, unemployment and matters of that kind, the Government Department controlling these affairs have been very strict. In every case they have insisted upon a quid pro quo. They have insisted upon a heavy burden being placed upon trade unions before any assistance is given, and it would seem, certainly, very onesided if the business could only be given to a workmen's organisation to meet the distress created by the War on condition that they shouldered very heavy burdens themselves before that assistance could be rendered, if gentlemen from the City can get all that they want and all the protection and credit of the Government behind them without shouldering any burden at all. Even apart from the hon. Member (Mr. Booth), it was our intention to know something about the conditions under 1158 which this assistance was going to be given. It seems so easy for wealth and influence to get all the help possible with very little responsibility, even in this national emergency, while we know, as trade union officials, from practical experience, that it is one of the most difficult things in the world for us to be able to secure assistance because of the onerous conditions which are imposed upon working-class organisations.

§ Sir A. MARKHAM
I wish to utter my strongest protest at the manner in which this Bill is being taken. We had the Second Reading yesterday; we are asked to take the Committee stage now, and to take the. Third Reading to-morrow on a matter on which there is no urgency.

§ Mr. LLOYD GEORGE
There is.

§ Sir A. MARKHAM
Perhaps the right hon. Gentleman will be able to show the House why there is urgency for one or two days, and why, as we had no statement on the Second Reading, we could not have at all events a statement on the Schedule, which gives the right hon. Gentleman an opportunity of dealing with these matters. I have a number of questions on the Paper for the Chancellor of the Exchequer, and perhaps he will take the opportunity now of giving the House some information on a matter involving a liability of many millions of money of which the House up till now has been kept in complete ignorance. The first question I had on the Paper for to-morrow, which is too late if I do not get the information to-day to deal with it, is to ask the right hon. Gentleman— If he will state the total sums of money advanced under the Treasury claim to acceptors of pre-moratorium bills of exchange to 21st November instant? That information the right hon. Gentleman must have and has had for some time past. The next question I had is: Whether, before advances have been made by the Bank of England to acceptors of pre-moratorium bills of exchange under the Treasury scheme, the securities deposited with the accepting houses by the drawers of such bills have been hypothecated by deed to the Bank of England for the security of His Majesty's Government? The third question is: If he will state the total sums of money advanced to 21st November under the Treasury scheme or pre-moratorium bills of exchange to private banks or accepting houses who have representatives on the Board of Directors of the Bank of England? The next question is: Whether the Bank of England under the Treasury scheme have, in all cases, before making advances to accepting houses on pre-moratorium bills of exchange, 1159 asked that collateral security should be given in addition to the securities, if any, deposited by the drawers of the bills with the accepting houses; and if so, what margin of collateral security has been asked for or obtained by the bank for and on behalf of His Majesty's Government; and if collateral security has in all cases been demanded by the bank from the private banks or accepting houses who have representatives sitting on the Board of the Directors of the Bank of England? When the bill market came to a standstill at the beginning of the War, City representatives of accepting houses came to the Exchequer and said, "We have here taken bills to a very large amount of money." We have not yet been definitely told how many millions. They asked him for relief. The first point I wish to put is, Why was the Bank of England constituted the agent of the Government in this matter? It seems to mo a most extraordinary proceeding that the Bank of England should be the agent of the Government in the matter at all, because on the board of directors of the Bank of England we have a number of accepting houses. I will start with the Governor of the Bank of England, Mr. Walter Cunliffe, who represents an accepting house, Messrs. Cunliffe Brothers; Mr. B. Cokayne, another director, is a partner of the firm of Antony Gibbs and Sons; Mr. C. H. Goschen is a member of Frühling and Goschen; Mr. E. C. Grenfell is a partner in Morgan, Grenfell and Co.; Sir Everard Hambro is a partner in E. J. Hambro and Son; Mr. F. H. Jackson is a partner in the firm of Frederick Huth; Mr. M. C. Norman is a partner in the firm of Brown Shipley; Lord Revelstoke is a member of the firm of Baring Bros. and Co.; Mr. Tiarks is a member in the firm of Schroeder and Company.
I will deal first with Baron von Schroeder, an alien enemy who was naturalised a few hours after the War broke out, who has acceptances, I am told, for several millions of money and who has a representative on the Bank of England. Like all companies, the Bank of England has acting directors and quiet directors. Some sign their cheques and draw their fees and go away, but there are always some dominant people on a board of directors, and there are some old gentlemen, wine merchants and others, on the Bank of England who have, no doubt, done very good work in their time. After all, the chief active people in the Bank of England are the private bankers. The hon. Baronet (Sir F. Banbury) will tell me that under the constitution of the Bank of England no banker is entitled to sit on the 1160 board. That is not so. It is and it is not. If he will refer to the official Stock Exchange List for this year, under the heading of private banks, he will find this list of names that I have given classified under discount houses and private banks, and, at all events, they sit on the board of the Bank of England. The official Stock Exchange Book is an authority which the hon. Baronet will accept. At all events these houses he will not deny are accepted houses. I ought to have read out the name of Mr. Kindersley, of Lazard Brothers, for an enormous amount of acceptances on the market. These gentlemen, like all accepting houses, have millions of money in bills of which they have acceptances. The bills orginated in many cases in Genmany, and the Bank of England seems to have given a preference to bills originating in Germany over those originating in France and Russia. That I cannot say, but no doubt we shall have an explanation later on.

§ Mr. LLOYD GEORGE
That is not true.

§ Sir A. MARKHAM
That is what I am given to understand. I am glad to hear the Chancellor of the Exchequer say it is not true, but he knows it is very difficult to prove where a bill originates from. The accepting houses found these millions of money in bills, and in the ordinary course of events bills which have been accepted are discounted, their endorser being liable for payment to the holder, whoever he may be. There are as many as half a dozen endorsements on the back of many of these bills, and, as far as I can understand, the holder has a right against the last endorser, and after he has exhausted the credit of the last endorser he can move up the list but not down. The drawer of the bill, if it is endorsed, is the last man to be shot at. Everyone of the large joint-stock banks was responsible for every penny in their coffers for all these bills of exchange. Under the Government scheme the acceptors of these bills are given the privilege of going to the Bank of England, and the Bank of England, acting as agents for the Government, say whether the bills they bring are approved or not. The sole determination rests with the Bank of England whether they approve them or not. The point I want my right hon. Friend to answer is, What steps have the Bank of England taken to hypothecate the securities attaching to these acceptances when they originally came into the hands of the acceptors who take them in turn to 1161 the Bank of England. Have these securities attached to the acceptances been hypothecated by the Bank of England in all cases? The second question is, has collateral security, altogether outside the securities attaching to the acceptances, if any, been asked for by the Bank of England in all cases, and how they have discriminated in saying which bills are approved and which are not. The fact remains that the Government have pledged the credit of this country to make good to every joint stock bank in the country the full value of all the acceptances which the accepting houses are unable to meet. I do not say for a moment that the Bank of England has not acted judicially in the matter. Of that I have no knowledge. It seems to me a curious proceeding that the Government should commit to the Bank of England, whose board consists of members of whom a large number are directors of accepting houses, the right of saying which bills shall or shall not be accepted. It seems to me to place the bank, first of all, in an invidious position, and secondly, it seems unfair to the outside people who are not in the inner ring of the Bank of England. The third point I wish the Chancellor of the Exchequer to deal with is this: I particularly want to know whether collateral security has been asked in all cases, because my right hon. Friend is perfectly aware that the Government have said that at the end of a term—one year after the end of the War—"If you fail to meet your obligations, we will make you a present of the whole of the money you are unable to meet, without having regard to the endorser of the bill." I understand that the Chancellor of the Exchequer has relieved endorsers of bills of their liability. If this Bill did not become law the acceptors would be liable. I do not see how this is worked out in practice.
It is within my own knowledge that the Bank of England has refused, as regards certain houses, to approve their bills when they have approved bills in a similar category drawn by the same people in other banks. That has caused immediate damage to the accepting houses which did not come under their scheme. The same procedure seems to have been followed in relation to advances made by the banks. The House is aware that the banks came to the Chancellor of the Exchequer and said, "We have here 1,200,000,000 of deposits in this country," and the Chancellor said, "I am prepared to issue 1162 Treasury notes to 20 per cent. of your deposits if for that accommodation the banks pay the Treasury 5 per cent." I have twice asked what the Bank of England has done about the 5 per cent. Have they been in communication with the Chancellor of the Exchequer to reduce that in consideration of finding the money to really make liquid the War Loans which they have agreed to discount 1 per cent. from the bank rate? When the Government gave the facilities which were only given to clearing banks, all the other banks, including the Colonial Banks, were placed in a different position. The small banks, although they have depositors, have been refused this accommodation unless they are members of the clearing banks. I think the Chancellor of the Exchequer ought to tell us why that is so. In conclusion, I want to have a definite reply as to the hypothecation of deeds. I wish to know whether there has been any privilege shown to the Bank of England. I do not know whether there has been. The Chancellor would be well advised to make a statement on this subject, because he is dealing with a difficult problem. I do not object to the principle of the Government action. It is only the machinery I take a strong exception to. It does seem to me that when pledging the credit of this country there ought to be—especially in foreign countries and in the Colonies—no objection raised as to the bills which the Bank of England ought to take. There should be no suspicion of favouritism in the matter as regards banks which are approved as agents of the Government.

§ Mr. LLOYD GEORGE
My hon. Friend (Sir A. Markham) did not give me notice that he was going to raise this question to-day.

§ Sir A. MARKHAM
I gave notice last night to the Financial Secretary to the Treasury.

§ Mr. LLOYD GEORGE
I am rather surprised to hear that. I saw my hon. Friend this morning and he did not inform me of the notice. My hon. Friend agreed that this matter should be raised to-morrow, and I understood that the House acquiesced in that proposal. I thought it was a very proper suggestion that the discussion should take place to-morrow, because it was for the convenience of the Treasury that it should be put off till then My hon. Friend has asked a series of questions, which were put down for to-morrow. 1163 I am not prepared to give the information at present, but I would say that some of the things he stated I know to be absolutely untrue. With regard to all these matters, I shall get information which will be given to-morrow, but I would point out that my hon. Friend did not give a single case or a single illustration of what he considers to be favouritism by the Bank of England.

§ Sir A. MARKHAM
I never said so.

§ Mr. LLOYD GEORGE
I certainly understood him to suggest that, and I think the impression left on the House was that in every case where there was any refusal by the Bank of England there may have been favouritism. I may tell my hon. Friend that there was no favouritism by the Committee of the Bank of England. The bank transacted the whole of this business, with Mr. Cole as chairman of that particular Committee. He is not connected with an accepting house. When the Government handed over the whole of that business—and a very difficult and invidious task it was—Mr. Cole discharged it with very great ability and perfect impartiality.

§ Sir A. MARKHAM
The Governor himself was interviewed by persons who had a grievance on this matter.

§ Mr. LLOYD GEORGE
If anybody who had a grievance went to the Governor he was bound to see him. If people who had a grievance went to the Governor, it showed the confidence they had in the Governor's impartiality and ability. Mr. Cole was chosen as chairman of the committee, and he discharged his duty impartially. With regard to some of the questions asked by my hon. Friend he says that they are not statements but simply inquiries. But inquiries can be put in such a form as to convey to the general public that something has been done which ought not to have been done. He ought to have been in a position to give me privately, or to give to the House publicly, some sort of information to support the innuendo against those very responsible gentlemen who have a difficult task to discharge. If my hon. Friend had told me that he would insist on bringing up this matter to-day I should have been in a position to reply to his questions. I shall be in a position to do so to-morrow and to give answers to all the questions he put to me.

1164

§ Sir A. MARKHAM
Will the right hon. Gentleman say what statements are untrue?

§ Mr. LLOYD GEORGE
I will give him one straight away. The hon. Member stated that the small banks have been refused accommodation. It is absolutely untrue. There are just two or three houses which, for reasons that I think will satisfy the House, were not given the same accommodation as was extended to other houses. I think these houses are the last houses in the world which would think it desirable to have a discussion in public.

§ Mr. JOHN WARD
There was one point which struck me as more interesting and more suspicious than that. I do not know whether the right hon. Gentleman took notice of it, namely, that certain houses could get this arrangement for a definite kind of security, while other houses, which had the same sort of bills, could not get the security. That is what seemed to me serious.

§ Mr. LLOYD GEORGE
That shows the danger of the sort of questions put by my hon. Friend in the case of persons with suspicious minds. I do not say that my hon. Friend has a suspicious mind, but to people not acquainted with the details of what is going on, the suggestion which will be gathered from what my hon. Friend said was that there has been strong favouritism shown to some particular houses. I think before a statement of that kind is made there ought, at any rate, to be some sort of evidence. It is the first time I have ever heard the suggestion made. When I come to tell the House how many bills there were to be dealt with, I think my hon. Friend will be satisfied that there were not many cases of that kind.

§ Sir A. MARKHAM
Can we not be given an idea now of the number?

§ Mr. LLOYD GEORGE
That is exactly the statement I propose to make to the House to-morrow. My hon. Friend did not tell me that he proposed to raise this subject to-day, and therefore I have not my statement ready. I understood that the House assented to the proposal that it would be better to have the discussion to-morrow, when we could have a full discussion. It will be put down as the first Order to-morrow.

§ Schedule, as amended, added to the Bill.

§ Bill reported; as amended, to be considered To-morrow.