HC Deb 27 November 1914 vol 68 cc1517-93

As amended, considered.


I beg to move, "That the Bill be recommitted to a Committee of the Whole House."


There was no Debate on the Second Reading of this measure, and we have not yet had any explanation of this Bill, or any justification of its far-reaching proposals. I do not think the House generally is aware of what the scope of this Bill is. Probably hon. Members have had it in their hands by now, and, therefore, I would not detain the House by any detailed examination of it. The last Section of the Schedule authorises the Government to issue an unlimited amount of the country's funds and credit for the maintenance and assistance in connection with the present War of food supplies, trade, industry and business, in the United Kingdom or any other country. So that by this Bill the Government could subsidise any private business man to any extent in any part of the world. I should not decline to give the Government that power if they declare that it is really necessary in this emergency; but when a power is asked for, which is unprecedented in this House, I think pains should be taken to fully inform the House of the necessity for such a measure. I have put on the Notice Paper a Clause with the object of preventing any alien or any enemy of this country from making an attack upon Government securities. If any other better means can be suggested, I shall be willing to accept them. If no man is allowed to sell the War Loan or Government securities unless he is in possession of the stock at the time, we are protected against an enemy dealing with those stocks; but while trading with a German in this country, either a German spy or a German enemy, is perfectly legal, he can go to the Stock Exchange and, upon the receipt of any news of a distressing character, sell Government securities. I am sure the members of the Stock Exchange do not want that. The object of my proposed Clause is to make that impossible. It is possible even for the German Government to operate upon our Stock Exchange, and the House must remember that our Censor may keep news from us for days which is in the possession of the German Government, who may, therefore, by their agents, keep operating against Government securities in this country before the public holders in this country have the news conveyed to them through our newspapers.

When one remembers that the news of the naval battle off the coast of Chili first came from German sources one can see that the German Government operating on the Stock Exchange, against Government securities might do a good deal of harm. It may be that my Clause is not needed, but I want to be satisfied that no German spy, interned German, or even the German Government itself, can attack the stocks which the public are asked to buy to provide the Government with the sinews of war. I understand that the Chancellor of the Exchequer believes he will be able to satisfy us on that point, and I trust that he may be able to do so, but I am obliged to put the Resolution in at this point so as to have the assurance.

After an examination of the Bill last night, I am afraid that I take a rather more serious view than I took yesterday after certain consultations I had, and I will just put one or two questions. Am I right in assuming that this Bill is to enable the Government to finance market speculations and even gambling transactions? I should be quite satisfied if I could get an assurance on the matter, but I think the House is entitled to know this Bill is not going to be used to help the speculator or gambler out of a hole in which he has got by his own recklessness. I notice in an answer published in this morning's newspapers that the Financial Secretary to the Treasury (Mr. Montagu) says that the Government are going to finance market differences at Liverpool. The Liverpool Cotton Exchange has been notoriously speculative. I do not mean that every member goes on speculating, but there have been notorious speculators there from time to time. These were Steen-strand and Morris Ranger. There was actually a crisis in the cotton trade when one of them failed, and the name of one, at any rate, does not sound like a man of the bull-dog breed. His name is no indication that he is of long residence in this country. I very much regret that my native county of Lancashire has to come to this House in order to be kept on their feet by the Exchequer, but if it has to be done I shall not raise any objection, though I think we are entitled to know if men who have been regularly speculating in the price of cotton are going to be financed by this Government in the same way as legitimate traders who may have bought in order to cover just orders from customers and be quite unavoidably in a difficult position. I hope the Chancellor of the Exchequer will be able to give the House some assurance that this Bill will not be used for financing those who have been recklessly trading.

I am bound to contrast the treatment of the speculators mentioned in this Bill, which contemplates advances to members of the Stock Exchange as well as those of Liverpool and all the discounters of bills and acceptors of accommodation bills as well as commercial bills, in giving them immediate relief to an unlimited extent, with the treatment of other members of the community. The brewers are being treated like Belgian burgomasters before the invasion of the Germans, and then with regard to the dependants of soldiers a great deal of care is to be exercised and a Committee is to sit for weeks before we can decide how many shillings shall be given them. The public, and especially that class from which you expect recruits, are already, it may be mistakenly, making contrasts and drawing unwarrantable differences between the treatment of high financial interests and the worker who is in just as difficult a position as are the big houses in the city. I mention that not with a view of arousing opposition against the Bill, but of enabling the Chancellor of the Exchequer if he can see his way to give some assurance to the country. I can only say in a general way that all parties in the House are asked to sacrifice principles by this Bill. We may have to do it. I can understand us doing it in order to support the Army or the Navy, or even the Treasury, but I do not think we ought to be asked to cast all our principles to the winds, Liberals, Conservatives, and Trade Unionists alike, in passing a Bill of this description unless the greatest necessity is shown. If the Chancellor of the Exchequer realises that, as I gather he does, I will not delay the House any further.


I beg to second the Motion. I desire with the indulgence of the House to make a personal explanation. On Wednesday last I referred in this House to the management by the Bank of England, who have been acting as Agents for the Government in the matter of bills of exchange, and raised a question with regard to the procedure they have adopted with reference to various Classes of bills. Following my speech, the Chancellor of the Exchequer told me that he thought the matter ought not to be allowed to rest where it was, and that it was my duty to formulate, if I so desired, definite charges to which he would then reply in this House. He desired that I should speak first, and, accordingly, I have taken this opportunity of complying with his request. May I say that the reason I have been brought into this matter is this: At the beginning of last week I joined in the discussion and the report of my speech appeared in th "Times" newspaper. I think by the following post I received a letter from a gentleman called Mr. Crisp, who may be known to the House as the gentleman who in January floated large loans on behalf of the Chinese Government. Five Powers, including this Government, did their utmost to oppose that issue. At the same time Mr. Crisp was successful in the issue which he made on behalf of the Chinese Government. I ought to say further that he is a complete stranger to me. I have never had any communication directly or indirectly with him or with any of his friends in my life, and I regarded the position like many Members do when they receive communications from outsiders.

I went through all the papers he had sent me, and I came to the conclusion that his case was one in which it seemed to me great injustice had been laid upon him. Every consideration appears to have been given to alien enemies, whereas, as I consider, the treatment according to Mr. Crisp was not that which a Government Department—and the Bank of England are acting in this matter as the agents of the Government—was not proper. Having made that observation, may I say I think the House will not dissent from the view that any member of the public has a right to review the action of the agents of the Government. There can be no doubt about that. I must first explain to the House how this trouble arises. The whole of the civilised world is, in point of fact, hypothecated or marked out to various banking interests. In Russia, quite recently, the Rothschilds and the Barings had the whole issuing of Government securities there.

After the Jewish troubles some years ago the Rothschilds disappeared from the scene, and Mr. Crisp appeared on it. He went out and interviewed the Russian Government. Next the Barings in turn disappeared. Mr. Crisp had issued £16,750,000 of Russian securities on account of the Russian Government, while, during that time, the Barings had issued none. Their representative had not been successful, in fact, in obtaining any Government issues. When the Government came to the assistance of the accepting houses, the Bank of England wrote to all of them, asking them what advances they required and what bills they had. Accordingly, on 14th October, Mr. Crisp, on behalf of his bank—and although he is connected with several banks I am going to use his name personally in the remarks I have to make—replied that the acceptances held by his banks represented at that time about £250,000. On 15th October, the Bank of England wrote asking what security Mr. Crisp proposed to hand to the Bank, and on 16th October he replied proposing that a deed should be drawn up hypothecating to the Bank of England on behalf of the Government the securities attaching to the bills and acceptances. Mr. Crisp was then invited to see Messrs. Freshfield, who are the solicitors to the Bank of England. He accordingly did so, and they were asked to prepare a deed. I must now trouble the House with letters, because I think it is important that the full facts should be laid before it. Messrs. Freshfield wrote to Mr. Crisp on 27th October as follows— We have prepared the form of charge which we shall advise the bank is proper in the circumstances of the bills which have been presented by you and we enclose the form for your consideration. As you have informed us that the bills of which you have given particulars are only some of the bills which you propose to tender to the bank, we have made the charge a general one, but it will be advisable that there should be scheduled to the charge, not only all the bills in respect of which you will require assistance from the Bank of England, but also all the securities which you hold in respect of such bills. When you have considered the form of charge we shall be glad to see you upon it, in order to see that we have apprehended the position correctly, particularly in one respect, namely, that everything in the last three schedules relates to the bills which are mentioned in the first schedule. In the meantime we think it will be necessary that you should give us, as far as you can, particulars of the securities which are referred to in the second schedule to the charge the description of which is too indefinite. That was the first letter, and it was the only communication that Mr. Crisp had with Messrs. Freshfield, although the bank had asked that those deeds should be hypothecated to the Bank of England. I must tell the House here that at this time the securities attaching to those deeds amounted to £265,000. No complaint whatever was made by the solicitors to the Bank of England that the securities attaching to the bill were unsatisfactory.

The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George)

Does my hon. Friend say that the securities Mr. Crisp was prepared to hypothecate, and which were sent in in the first instance, were of the value of £265,000?


I will give my right hon. Friend the exact amount. It was £267,606. That is the value of the securities he was prepared to hypothecate to the bank. I will deal with the class of securities offered later on, but I must say I think my right hon. Friend showed by his interjection, that he was unaware that this large amount of securities had been tendered. I ask the House to observe that the Moratorium was lifted on 4th November. On 2nd November, two days before it was lifted, Mr. Crisp received this letter, which, I think, everyone in the House will admit shows bias and prejudice:— With reference to your application for advances I have to inform you that the bills submitted are not approved. On 3rd November Mr. Crisp wrote to the Bank of England, and, by invitation, he saw the Governor of the bank, who met him in this way. He said, "We do as we like here." Mr. Crisp asked, "Have you any objection to these bills; do you say that they are bad?" "No," was the answer, "we are not going to take them." Mr. Crisp then pointed out that great facilities had been given to German firms and that the bills were those of substantial people, and he asked why they were refused. To that no answer was given. No request was made for other securities, but there was simply a formal refusal, with the statement that they "were not going to discuss the question." That was the way in which Mr. Crisp was received, and he is prepared to swear an affidavit that that was what took place. Mr. Crisp then, on 6th November, appealed to the Chancellor of the Exchequer, and wrote the following letter:— This bank is placed in a position of great difficulty by the action of the Bank of England in the matter of acceptances falling due for payment, funds to cover which cannot be furnished by this bank's customers. A list of the bank's outstanding acceptances was furnished to the Bank of England in due course, and at the latter's request, the manager saw Messrs. Freshfield about a deed, hypothecating to the Bank of England the securities deposited with this bank by the drawers of the bills. There was no apparent hitch until 2nd November, when the Bank of England wrote that the bills submitted by us were not approved, although they had between 21st October and 2nd November taken up and paid for bills amounting to £57,000. It would seem that something had transpired to influence the Bank of England suddenly to change its attitude, but we have no means of knowing what has caused the change, and cannot therefore do anything to meet the case. I beg to point out that the bills submitted by us would appear to be exactly of the character provided for by the Treasury scheme, seeing that the drawers, when English houses, cannot, owing to the inability to obtain remittances from abroad, cover, and in cases where the drawers are foreign bankers or commercial houses, the latter cannot remit either because of exchange on London not working or the state of war prevailing—as for example at Lodz, where the Germans, until a few days ago, were in possession. Our present situation is that through the expiry of the Moratorium we must honour our acceptances notwithstanding the fact that the Emergency Powers Act prevents our suing our English debtors, and the war makes it impossible for us to obtain anything from our Continental debtors. On the other hand our solicitors advise us that if our acceptances be dishonoured, a holder can present a petition to wind up the bank, the Emergency Powers Act notwithstanding. We have every reason to believe that the parties responsible to us will, given time, pay in full, but, in any event, we can give all reasonable security that our liability in respect of the bills can be discharged within a reasonable time after the conclusion of the war, whereas at the present time we cannot call in loans, nor obtain payment of sums due to us from abroad. In these circumstances, we beg to ask your intervention to secure for us the benefit of the scheme of which other institutions situated like ourselves have taken advantage. That was the first letter. Following that came a letter to Lord Reading. Before that letter was sent, on 10th November, a letter was addressed to the Bank of England by Mr. Crisp, which I think I ought, also to read, so that the House may have the whole matter before it:—

"10th November, 1914.

The Chief Cashier,

Bank of England, E.C.

Dear Sir,

Pre-Moratorium Bills.

I am instructed by my board to inform yon that, on receipt of your notification of the 2nd inst., that the bills submitted to you were not approved, a communication, as far as practicable, was sent to our principals and other parties responsible to this bank for covering the bills. The replies which have so far been received are all to the effect that it is impossible to remit funds, and in this connection I enclose herewith copies of two telegrams received from the Commercial Bank of Siberia, Petrograd, and Messrs. Handelshaus 'Ad. Lessing,' Petrograd. There is every reason to fear that we shall experience the same difficulty when endeavouring to obtain funds from other parts of the world, especially Scandinavia, for some time to come, and certainly we cannot get anything from enemy countries.

Assuming that the bills held by the Bank of England amount to £150,000, and that you will hold over such bills for a reasonable time, my directors can arrange to take up the remaining outstanding acceptances as they fall due."

Then a letter goes to Lord Reading from Mr. Crisp, dated 13th November, which is as follows:—

"13th November, 1914.

Dear Lord Reading,

At my interview on Tuesday last with yourself and Sir John Bradbury, you were good enough to say that yon would be seeing the Governor of the Bank of England later that evening, and that you would speak to him on the subject of this bank's acceptances. The impression that I carried away from the interview was that the Bank of England would give us assistance under the scheme, and I was greatly disappointed to hear nothing on Wednesday or Thursday. This Friday morning the following letter is received from the Bank of England:

Pre-Moratorium Bills.

'I beg to acknowledge receipt, of your letter of the 10th instant, and in reply to say that the bank is not prepared to hold over the acceptances of your bank now in their hands.'

Their letter is in reply to one sent by the bank on Tuesday last, of which I also beg to enclose a copy:

'My colleagues on the board were of opinion that the Bank of England would not refuse to hold over the acceptances in their hands, even though they decline to sanction an advance of funds to meet the bills in the hands of other holders. The letter received to-day compels one to adopt the conclusion that this bank was, from the beginning, marked for destruction. Were it not so, the Bank of England would surely indicate its requirements and not meet every approach, as it has so far done, by a direct negation. How the Governor of the Bank if England can reconcile his financial conscience to giving accommodation freely to foreign institutions and to branches of foreign banks, which has been so arbitrarily refused to this institution, I cannot possibly understand.

May I make one last appeal to you? If the Bank of England can advance charges against this institution on which it bases its discriminations, these charges should be made in the presence of a representative of this bank, and my colleagues and I would be fully content to abide by your decision on the one point of issue, namely: Is the Bank of England aware of some fact which justifies it in withholding the benefits of the scheme adopted by the Treasury for giving temporary accommodation to accepting houses?'"

That request is not an unreasonable one. It has never been acceded to. No charge has ever been made that the bills are not good, and no investigation of the bills has ever taken place. Before I proceed with my story, I must read now a further letter from Lord Reading, although it is not quite in sequence, in reply to Mr. Crisp's letter:—

"Treasury Chambers,

Whitehall, S.W.,

13th November, 1914.

Dear Mr. Crisp,

In consequence of the interview you had with Sir John Bradbury and me, I saw the Governor of the Bank of England and discussed with him the matter respecting your bank's acceptances. The result confirms the statement, which I made to you at the interview that the Bank of England was ready to deal with the acceptances of your bank as coming within the arrangement as to pre-Moratorium bills, provided you gave security. I told you at the time that the bank had discounted a number of acceptances of your bank pending the giving by your bank or security, but up to the present moment no security has been given.

In order that there should be no misunderstanding about it, let me repeat that the Bank of England is still ready to hold over your acceptances which have matured, and to advance funds under the arrangement made with the Government, provided your bank will give them reasonable security. I think the best course will be for you to send to the Treasury a full statement of the security you are ready to offer.

Let me disabuse your mind entirely of the idea that there is any desire to deal otherwise with your bank than upon the ordinary business lines which have actuated the Bank of England in approving or refusing to approve acceptances. You are quite mistaken in your conclusion that your bank has been from the beginning marked for destruction.

Yours very truly,

(Signed) READING."

Up to this date, the Treasury and the Bank of England have not told Mr. Crisp what they consider reasonable and have not given any information as to what is the actual amount of collateral security which they want deposited. The securities for the bills and acceptances amounted to £267,606. I have gone through those securities myself; they are made up of a very considerable quantity of timber in the Port of London, metals, bonds, foreign trade bills, and bank securities. There is not a single "kite" in the whole lot. They are all trade bills or bills which Mr. Crisp's acceptance house considered, at the time, were good security, and are those of people whom he or his bank have dealt for years and who have always met their obligations? Most of these bills have been refused. The drawers are the same drawers as those of other bills which have been taken by the Bank of England and by the other accepting houses, yet, when they come to Mr. Crisp, they are bad, and when they get into the hands of the other accepting houses 80 per cent. of them are good. After all, the drawer is the man who becomes eventually liable. It is true the Chancellor of the Exchequer will say "the accepting house is the only house I look at," but, after all, what is the law? Is it that when a man draws a bill and it is in time and gets into the hands of the acceptor it is taken as currency in the market? The bank may hold it for a week and pass it on, according to the position of the bank, from day to day, but every single endorser of the bill is liable to make good to the holder the full value of the bill if the acceptors cannot meet their obligations. The drawers have had the money, and the drawers of these bills are precisely the same class of people whose bills are bad when they get into Mr. Crisp's hands, but good when they get into the hands of the other accepting houses. Last night the Home Secretary said:— Baron Schroeder was naturalised because there would have been a very grave injury to great and material British interests if he had not been naturalised. I do not think it needs a very extensive knowledge of City affairs to understand that if the doors of Messrs. Schroeder had not opened on the morning after Baron Schroeder was naturalised—as they would not have opened if he had not been naturalised—there would have been very serious consequences in the City of London…… It is a very large—I believe the largest—accepting house in the City of London.… It would have been a disaster if the doors of Baron Schroeder did not open on the following morning."—[OFFICIAL REPORT, 26th November, 1914, col. 1591.] 1.0 P.M.

There you take the bills of an alien enemy and turn them into cash. This alien enemy would have been ruined if he had not come under this scheme. If he had not been naturalised none of his securities of any kind would have been negotiable or saleable, and he must have gone into bankruptcy, because the amount of these bills, which we are told are worthless, which was then £250,000, has been reduced to £144,000. The drawers and the holders have already, since the War, lost £106,000. The Bank of England have taken up £118,000 of these bills. I think the right hon. Gentleman thought the amount was only £56,000. There is therefore only a balance of £26,000 outstanding. How comes it that the Bank of England in the first place could have taken up these bills to the extent of £106,000 without any getting any debt of hypothecation? The Bank of England have put Mr. Crisp to all the possible inconvenience they could, but at the present moment the security of the country has been pledged by the Bank of England for Mr. Crisp's bills because they came into their hands a few days after the War and were all dealt with in the same manner. If the Bank had acted judicially in this matter, would they not first have given more than two days' notice that these Bills were not going to be accepted? Why did they refuse to say which Bills they disapprove of? Why did they refuse to say which of the £267,000 securities they considered bad, and why did they refuse to say what additional reasonable collateral security they required? Mr. Crisp, when he was asked for collateral security, wrote to the Treasury and said, "I am prepared to deposit collateral security if you want it."


When did he say that?


In a letter to the Secretary to the Treasury on 16th November. The collateral security offered amounted to £55,000; Troitzk Railway 4½ per cent. Bonds, guaranteed, both principal and interest, by the Russian Government, which were taken at the official quotation of 91; £20,000 City of Baku 5 per cent. Bonds; and £11,000 Borough of Gisborne 4 per cent. Bonds, valued at £72,980. When that security was offered he was told that was not what they wanted. He asked, "What do you want?" but he got no answer. He was simply told that the bills were worthless, or words to that effect. Yet you take Baron von Schroeder because it would be a national disaster if you did not. Surely the time has come when we should do away with the Bank of England as far as this country is concerned and have a National Bank, the same as all other countries, because we have got to a stage when the whole credit of the country is going to be involved in national disaster and the country has to come to the assistance of a German accepting house. The banking position is most unsatisfactory. The Treasury do not know what they are talking about. Mr. Crisp had an acceptance of £18,000 with the Bank at Prague. The Bank at Prague were willing to pay the money and said, "If you bring your securities over we will give you a cheque." Mr. Crisp wrote to the Board of Trade, "I have this money; may I take it?" The Board of Trade referred the matter to the Treasury, and the Treasury wrote a silly letter. It shows that Sir John Bradbury does not really understand the bill business; naturally it is not quite his province. He tells them they are not to take the money. This is the firm which had the money. The Treasury refused to allow him to have the money, and refused to allow him to come under the benefit of the scheme. This is the letter:— Your letter of the 20th ult. has been forwarded to this Department by the Board of Trade, and in reply I am directed by the Lords Commissioners of His Majesty's Treasury to say that they have now decided that it is contrary to public policy to permit the receipt from enemy countries of British acceptances held in those countries.… That means that the money is to take up British acceptances maturing in this country. All that Mr. Crisp asked was whether he could hand the securities over to the bank and receive cash from the bank in London, but the Treasury prevented him from having it. My Lords are not prepared to give any assistance towards the collection of bills which have been held by enemies since the outbreak of war. The foreign bank at Prague is prepared through their London house to pay. The Treasury says No, yon must not take the money, and they do not allow him to come under the benefits of the Treasury scheme, while they allow others who have bills at the same time to have the cash. I want to ask my right hon. Friend some questions. He will, of course, say that Mr. Crisp is an undesirable person. For a long time past he has shown his most perfect ability in dealing with these matters. I have no interest, directly or undirectly, in Mr. Crisp. He is a complete stranger to me. I have had this case brought to my notice, and as a Member of this House who has been here for fifteen years, I have to say that this is the first personal case I have ever brought to the attention of the House, but it is a case which I thought ought to be brought before the House, and, therefore, I have done so.

My right hon. Friend will, of course, as I have seen him often do in this House, get hold of some minor point. I have seen him do it successfully on other occasions. He does not deal with the speech delivered from the Front Opposition Bench, but he takes some poor little back bencher who has criticised him, and he belabours him to death, devoting the whole of his argument to that speech. I am sure my right hon. Friend will reply to me to-day in the same way. I would ask him to answer a number of questions. That is what I want him to do. I wish him to give the House the reasons for the action that has been taken without getting away from the main issue. I am not making any attack upon the Chancellor of the Exchequer. Of course, he naturally feels, placed in the position he occupies, that he must fight for those people who have been acting as his agents in these matters by saying that this amounts to an attack upon himself. It is natural that a man must support his agents. It is his duty to say: "We must stand up for the Bank of England. We take the whole responsibility for their action." I know that it is his duty to speak not only for himself, but, in fact, for everyone in those circumstances. No one pays a higher tribute in the country to the Chancellor of the Exchequer than the House of Commons for the way in which he has met the difficulties with which we have been faced during the past three months. This is not an attack upon him. The questions I wish to ask the right hon. Gentleman are:—

  1. (1) Were accepting houses, who had members of their firms on the board of directors of the Bank of England, asked to hypothecate by deed the securities attached to their acceptances?
  2. (2) Were such accepting houses asked, in addition, to provide collateral security?
  3. (3) Was any scrutiny made of the bills accepted by the accepting houses associated with the Bank of England, and, if so, were they given notice that any of their bills would not be approved?
  4. (4) If so, was such notice given only two days before the moratorium was lifted without any previous intimation, and were such accepting houses told what amount of collateral security they had to deposit?
  5. (5) Why, seeing that the drawers of Mr. Crisp's bills were, in the opinion of the Bank of England, bad security, the bills of these same drawers were good security when in the hands of other accepting houses? and
  6. (6) Why were facilities given to Baron von Schroeder—a Gorman alien accepting house—and will he say how many of his bills were approved, and how many rejected?


I shall endeavour later on to deal with the points which have been raised by my hon. Friend, but they form only a part of the whole of the transactions of which I have to give an explanation to the House of Commons. The only comment I make at the present stage is this: The transactions were very important, they were of a very wide character, and they referred to a very considerable number of persons, and I think it is rather satisfactory that up to the present the only complaint which has been put forward with respect to the action of the Bank of England has been confined to their action in regard to one person. I would ask the House to hold its judgment in that particular case until I come to deal with it, when I hope to be able to satisfy the House that the action taken by the Bank of England in those circumstances was the only action that could have been taken consistently with the trust which had been cast upon them, and consistently with the interests of the taxpayers. I think I ought, first of all, to try to make clear to the House why we incurred all these very abnormal and unusual liabilities. There is no doubt, as my hon. Friend has pointed out, that we have, I will not say, departed from any principles which have been accepted in this country, but that we have undertaken responsibilities which no Government has ever been called upon to undertake in the past. Our defence of that is that the circumstances were of a very unusual character. They were quite unprecedented. We have never lived under such conditions, and we were driven, under a very great emergency, to take emergency measures. I should like, first of all, just to explain to the House why we took these steps with regard to bills of exchange. I have been very much struck since I have been dealing with these transactions with how little even traders who form part of this great machinery know about the mechanism of which they are an essential part. I have many times met men who do their business by bills of exchange, and who concern themselves with that particular part of the machine which affects them, but who have never taken the trouble to see what are the ramifications of that gigantic machine. And what is true of men engaged in that kind of business is infinitely more true of the general public. I do not think that the general public—and I am putting myself amongst them—have ever realised the extent to which the business of the country, not merely of this country but of the whole world, depends upon this delicate and complicated paper machinery.

This is the first great War that has ever been fought under modern conditions. What do I mean by that? In the great French Napoleonic wars practically all the countries of the world were self-contained. Great Britain had one-third of its present population. It raised its own food, and not only that, but it raised its own raw materials with the exception of gold and sub-tropical products like cotton. Iron, coal, copper, and tin were all produced in this country. The total imports and exports of the country together came to about £86,000,000 in those days. Take last year, the imports and exports put together came to something like £1,400,000,000 or £1,500,000,000. That shows how different the conditions are with which we are confronted in this country now as compared with the conditions with which our forefathers were confronted during the great European wars at the end of the eighteenth and the beginning of the nineteenth centuries. The international trade of the world at the commencement of this War was valued at about £8,000,000,000. I suppose that at the time of the Napoleonic wars it would have been perhaps only about £200,000,000. But what is much more remarkable is the unique and commanding position of Great Britain in that international trade. It is something without parallel in the history of the commerce of the world. We had not merely our own business to run; we were an essential part of the machinery that ran the whole international trade of the world. We provided the capital to raise the produce; we carried half the produce, not merely of our own country, but of the whole world. More than that, we provided the capital that moved that produce from one part of the world to another, not merely for ourselves, but for other countries.

I ask anyone to pick up just one little bit of paper, one bill of exchange, to find out what we are doing. Take the cotton trade of the world. The cotton is moved first of all from the plantations, say, to the Mississippi, then it is moved down to New Orleans; then it is moved from there either to Germany or Great Britain or elsewhere. Every movement there is represented by a paper signed either here in London or Manchester or Liverpool; one signature practically is responsible for the whole of those transactions. Not merely that, but when the United States of America bought silk or tea in China the payment was made through London. By means of these documents accepted in London, New York paid for the tea that was bought from China. It shows how complicated the system became. We were transacting far more than the whole of our own business; we were transacting half the business of the world as well by means of these paper transactions. What is also important to establish is this: that the paper which was issued from London has become part of the currency of commerce throughout the world. The names were known. My hon. Friend talks about Schroëder. There is too much nonsense talked about that sort of thing. My hon. Friend lowers the currency by appeals to the gallery, and that sort of prejudice which is very easily aroused. Schroëder is purely a name which is known as the name of a great British firm throughout the whole world. It was established over a hundred years ago in this country. It is a great British firm. It is purely an accident that the present man happens to have been a German. The old Schroëders who established it became naturalised here, and became essentially English people. It happened that they died out, and that this man was the nearest relative, but it is a great British firm. It was known throughout the world as a British firm, and when Schroëder paper passed either to the Argentine or to any other part of the world it was not regarded as German paper, but it was regarded as British paper and British interest, and it is unfair and, if I may say so, not very intelligent, to appeal to this sort of prejudice against an individual when we are dealing with an institution and a British institution. In fact, I may also point out that Schroëder is not the only partner in the firm. The partner whom my hon. Friend thought fit to attack in referring to the Bank of England, is not merely an Englishman, but he started his career in the British Navy, and it is very unfair, grossly unfair, that because his partner happens to be a German this man, who inherited an interest in the firm, whose father was in it before him, who was in the British Navy, and has given his time to the service of his country, and is as good an Englishman as my hon. Friend, should have sought to be tarred as a kind of alien enemy, and one to whom great favours as an alien enemy were given, where good solid Britishers like Mr. Crisp were ruled out. I only say this by the way, because I think it necessary to sweep, away this sort of fabric of suspicion which my hon. Friend built upon the rather unfortunate name of Schroëder.

The whole of the business is done by paper. It is remarkable how the whole of this huge business is done with very little transfer of gold. London last year received £50,000,000 in gold, and paid out £45,000,000. All the rest was paper. What happened? All this fine, delicate paper machinery crashed into a great war affecting more than half, and very nearly two-thirds, of the whole population of the world. Confusion was inevitable, and undoubtedly there was very great confusion. It was just as if one gave a violent kick to an ant-hill. For a short time there was much bewildering consternation in all the marts and exchanges in the world. The top of the ant-hill was off, and for a moment there was great fright. All the material was there, but there was a very considerable panic, because war had never been waged by this country or any other country in such conditions before.

The first thing that I would like to say about it is that the deadlock which ensued was not due to any lack of credit in this country. It was due entirely to the fact that there was a failure of remittances from abroad. Take the whole of these bills of exchange. There were bills representing between £350,000,000 and £500,000,000. I do not know what it was between these two figures. I have been making some inquiries, but it was quite impossible to find out yet. But there was that amount of paper out with British signatures at that time. Most of that had been discounted. The cash had been found by British sources, and the failure was not due to the fact that Great Britain had not paid her creditors abroad. It was due entirely to the fact that those abroad did not pay Great Britain. I think that it is very important, from the point of view of British credit, to have that thoroughly understood, for when the Moratorium came, and there appeared something like a failure of British credit, it was not a British failure at all. It was because we could not get remittances from other countries. We had already paid, but it was vital to the credit and good name of this country that these bits of paper, which are circulated throughout the globe, with British names upon them, with names that have been associated with British trade and commerce—I do not care what those names were as long as we have accepted them as big British institutions—it was vital to the good name and credit of this country, to its continuity of trade and its character, that they should not be dishonoured. What really happened was that there was a complete cessation of credit, a breakdown of the exchanges. It was exactly as if a shell had broken an arch in an aqueduct, and there was a cessation of the flow that had been going on before, and what we had to do was temporarily to repair the arch so that the flow should continue.

The first thing that happened was, as I have pointed out, that the exchanges broke down, and there were most curious paradoxes and absurdities in the position. Take the Argentine Republic. The Argentine Republic owes Great Britain about £400,000,000 in fixed or fluid capital. We were creditors to the extent of £400,000,000. There was the debtor, and yet our credit system had broken down so completely that it did not allow us to buy a single cargo of frost-bitten meat.




Frozen, yes. The, Argentine would not allow us to buy a single cargo. For the moment we had to make special arrangements for that reason. I heard of the case of Valparaiso—I forget whether it was the corporation of Valparaiso who owed the money to this country but it was a considerable sum of money. They had the cash ready, but they could not pay. Why? Because there was no paper that was available. London paper, for the moment, was out of the market. On an ordinary occasion they would have bought paper on London, but they could not do it in that way, and they would have had to send twenty or thirty thousand sovereigns, or gold, and that was quite impossible. We could neither buy nor sell, although the whole world owed us money. Take the case of the United States of America, which is still more remarkable. America, I suppose, owes us nearly a thousand millions in fixed and floating capital, but we could not buy. It was impossible to do-any business. Why? The exchanges had broken down, this paper machine had crumpled and somehow got out of order, and the result was that no business was possible. I want my hon. Friends the Members of the Labour party, to remember that when we were entering upon the consideration of this problem, we were not merely considering how we could save a handful of rich people. I want them to understand what that meant. I think it is very important. When we were entering into these large transactions we were not saving Mr. So-and-So millionaire, or even Baron von Schroëder. What we had to consider was this: Supposing this machine had been left crumpled and broken for the moment—out of repair; if you had left it for a month like that what would have happened? What did happen? Mills were closed, factories were shut up, and thousands of people were thrown out of work. Look at the unemployment chart. Look at what happened in the United States of America in 1907, on the failure of one or two banks. Credit was shaken, hundreds of thousands of people were thrown out of work, and the distress was unutterable. It is really not fair to represent to those who are not capable of studying these complicated matters, or could not understand them three or four months ago, that we were doing something to save a few people, when what we were doing was to save British industry, British commerce, British labour, and British life.

What happened? We had no time, and there were two things to be dealt with. The exchanges had completely broken down. Business had come to an end, and the country that depended more on international trade than any other country in the world found international trade at a standstill. We were as completely isolated for the moment as if we had had an alien fleet round our shores, because the exchanges had come to an end, and ships were being kept in harbour. We had, first of all, to consider what to do, and here the Government invited the assistance of men of very great experience in every walk of life and every department. We considered it a very great national emergency, and that the consequences of a false step might be very serious for the trade of this country

We invited some of the leading manufacturers of the country, bankers of the country, and those concerned with the financial interests of the country, and we eventually set up a permanent Committee to assist the Government. I have already acknowledged in this House our indebtedness to the right hon. Gentleman the Member for West Birmingham (Mr. Chamberlain), who served on that Committee and loyally and patriotically assisted us throughout the whole of this great crisis. We have also had the advantage of the advice, not only of one of the most distinguished predecessors of the right hon. Gentleman and myself, Lord St. Aldwyn, to whom I cannot feel too grateful for the advice which he has given throughout the whole of this emergency, but we have had the assistance of Lord Revelstoke, a very able financier. We had also, of course, the Governor of the Bank of England and the Lord Chief Justice of England. The Prime Minister has already stated publicly how indebted we are to the Lord Chief Justice. He has practically given the whole of his time during the last three or four months to this work, acting, with our assistance, as a Court of Appeal from the banks. Acting upon their advice, we decided that something must be done, and done immediately, in order to avert a very serious run on the banks and a general disaster. We first of all declared a moratorium—at first a limited moratorium, so as to give us time to look round. Then we decided that some step should be taken in order to restore international exchange, and the Government agreed to advance to bankers at the bank rate Treasury Notes to the extent of 20 per cent. of their deposits, thereby placing a balance at their disposal a virgin fund to the value of £225,000,000 to be employed in financing any exceptional demands for accommodation in this difficult period. At first the bankers availed themselves of this currency facility to the amount of nearly £13,000,000, and I am glad to say that this has been reduced until it is now only £244,000. The mere knowledge of these currency facilities being available gave confidence. The total amount of the currency notes outstanding is £33,890,000; this consists of 25,696,000 £1 notes and 16,388,000 10s. notes.

That was the first step. The second step we took was this, to guarantee the due payment of all bills accepted by British houses, and to offer the accepting houses reasonable time in which to collect the debts due to them and to meet the bills. The Bank of England was empowered to discount at 2 per cent. over Bank Rate varying on all such bills of exchange as were customarily discounted by them, and also good trade bills, and the acceptances of such foreign and Colonial firms and agencies as were established in Great Britain. Out of that 7 per cent. 2½ goes to the Government as insurance for any possible loss, 4 per cent. goes to the bank as interest, and ½ per cent. for the part they took in carrying through the transaction. That is the way that has been divided. We felt here was Great Britain with four thousand millions of good foreign securities, the greater part of those securities in countries utterly unaffected by the War, and in addition to that I suppose, assets in this country—collieries, land, factories, and harbours, all the property created and developed by the trade and skill and energy of our people, would be worth another thirteen thousand millions. So that any estimate of our national assets would be eighteen thousand millions, and we felt that with assets of that amount to allow the credit of this country to be even in doubt for twenty-four hours in respect of £350,000,000, most of it owing to our own people, if not all, would be a criminal act of negligence on the part of the Government. We decided, therefore, that the time had come to hypothecate the public credit, the credit of the State, in order to restore those exchanges, with the restoration of which the trade and commerce and the industry of the country was concerned, and upon which all classes of the community, whether they were traders, whether they were financiers, whether they were workpeople, or artisans, depended for then daily life.

These are the three steps that we took. The first, was to prepare a moratorium; the second, was the issue of currency facilities, and the third, was to guarantee the due payment of those bills. By these steps the unimpeachable character of the British bill of exchange has been maintained, and a financial catastrophe, possibly the greatest the world had ever seen, has been entirely averted. We had two things to consider: The first was the practical consideration that one week's stoppage of business in this country would have entailed more loss to the country than any conceivable loss from pledging the credit of the State. The second consideration was that it was vital to the good name of this country—because we have to live after the War—that this type of British paper, which has been common currency throughout the world, should be unimpeached, and that in the future no one should be able to say, "Don't you trust that British paper, because if you remember, in the year 1914, in a day of crisis, it was dishonoured." We could not have allowed that. If we had done that we should have betrayed our trust as a Government, and I think we should have justified impeachment as a people who at the hour of the need of our country had not the courage to stand up for the public credit. That is really why we took that step at that time. We had to take the best agency we could at the moment, and I think we took the right agency. Were we to accept every bill that was dumped upon ns? That was one way of doing it. Were we to exercise any discretion at all? If so, it is perfectly clear the Treasury could not do it. We have not the machinery. We have not got the equipment. The Treasury officials have not got the training for the purpose of exercising discrimination of this kind. The Bank of England have been doing this business always, and these bills had been constantly passing there.


They do no accepting business.


My hon. Friend knows perfectly well what I mean. These bills are constantly passing across the counter of the Bank of England, and they know what the value of each bill is. There was a good deal in an answer given to me once when I asked "How do you know the difference between a good and a bad bill?" and a very very shrewd and sagacious man said, "By smelling it." There is a good deal in that, as every man of business knows. He cannot give the reason, but the man who has been in the business does know the difference instinctively between a good and a bad bill.


He is very often wrong.


I dare say he is; but so are we all, even politicians. Let us be frank. I mean in our own business, and if we go outside we all make mistakes. Even in our own business we occasionally make mistakes, and financiers do the same. In the main it is better to trust to the sort of trained instinct of these men who know somehow a bad bill by the feel, just the way they feel bank notes at the Bank of England. I am told they go through a bundle of them and just by a mere touch know the note which is false and throw it out. You have the trained sense of the financier, who knows on the whole what is good business and what is bad business. Of course, that is the answer to a case like Crisp. It is very difficult always to give reasons why you reject a bill and reject a name, but I shall come to that in a moment. Let me first of all say this: When we gave those facilities to the banks, it was on the distinct understanding that they were to give facilities to the traders. At first we had some complaints. I am not criticising the banks, because I think there were very unusual conditions. They were trustees for their depositors. They were naturally apprehensive that if they launched out in that condition of affairs they might be doing injustice to the men who left their money in their charge. Let me say this, we had more complaints from England than Scotland. We had very few from Scotland. The Scottish banks showed very great courage right through. I know it is not merely in the field of finance that, the Scottish show courage, as we know very well by recent events. We had more complaints from England, but they have completely vanished, and confidence has been completely restored in the breast of the most timid bank manager. We do not hear complaints from any part of the Kingdom now. I do not know if the right hon. Gentleman has heard of any recent cases of complaints about the way the banks are dealing with traders?


I have heard none recently.


That is very satisfactory I am bound to say, because there has been some criticism of banks outside. I now come to the question raised by my hon. Friend. There was an appeal to me from the Bank of England in all cases where bills were refused. My hon. Friend complained of some delay. He must remember the prodigious number of these bills that were passing through, and they had to be examined. Who examined them? A committee of the Bank of England—Mr. Cole and Mr. Campbell, who have both, I think, been Governors of the Bank, and were respectively chairman and vice-chairman. I think Mr. Cole did the lion's share of the work. Mr. Cole, of course, was a member of the committee that advised the Treasury, and he took a chief part in selecting the bills that were to be discounted by the Bank of England. There was only one accepting house on that committee. I will give the reason why that was so. Lord Revelstoke has been unfairly mentioned. There has been a sort of suggestion that Lord Revelstoke was jealous of this formidable rival, Mr. Crisp, and that Lord Revelstoke somehow or other has been able to pull the wires and destroy this very formidable competitor. Lord Revelstoke was not on the committee at all. No bills were submitted to him. There was only one member of an accepting house on the committee that went through these bills, and he was put on because Mr. Cole said that he would like to have one man experienced in these matters. They chose a man with a moderate business, whose business was of a special kind, purely local in a neutral country, and therefore did not compete with any of these other people on whose cases he adjudicated. It was desirable to have one man of that character, and I think they acted very wisely in the particular man they chose, because there was no suggestion at all that he could have any sort of trade interest in adjudicating unfairly on the claims of most of these people who put in their bills.

Here was a committee which had no accepting house on it at all. The suggestion is that the Bank of England somehow or other has been packed by accepting houses—Schro ëder, Revelstoke and the rest—and that Mr. Crisp did not get fair play. None of these houses were represented at all on this committee. How did they choose? I have given the House an idea of the way in which these things are chosen. Bankers have to consider first of all the position and standing of the applicant. They consider the character of the transaction, and sometimes the securities that are offered. They do not ask for securities in the vast majority of cases. There were about 400 applications, and over 300, I think, of their bills were accepted. In some cases where bills were not approved security was tendered. Bankers have to consider not merely the security, but mainly the position and standing of the person who applies, the character of the transaction, and also, in the third place, the security offered. The Bank of England have been doing this business for generations. They were in the habit of transacting this business with some firms, and they knew their position. I venture to say now, after some inquiry into the matter, that whatever loss is incurred as the result of this transaction, not one penny of loss will be incurred as the result of accepting bills from these great accepting houses. The Bank exercise a wide discretion; they know their position; they know their assets; they know what they are capable of. Whatever bills are still unpaid they know perfectly well that they are infinitely more than covered by what these accepting houses can really pay.

With regard to Mr. Crisp, I would rather my hon. Friend had not raised the question in so intensely a personal form. If makes it very difficult for me to give the only answer that I am bound to give and that is, the reason why the Bank of England did not accept Mr. Crisp's bills as readily as they did the bills of others with whom they had been doing business for a great many years. There are some people who do not give as good an impression in business circles as others do. There was not a single transaction of this kind that was not inquired into by Mr. Cole and those who were acting with him. They made some inquiry as to the position and standing of the person who submitted the bill. I know nothing about Mr. Crisp; I have never seen him to my knowledge. They came to the conclusion that Mr. Crisp was not quite in the same position as the others whose bills they had accepted. It is a discretion which is exercised by every banker. It is a very difficult discretion to define; it is a much more difficult discretion to interfere with, when you hand it over to experienced bankers like these, whom you know to be absolutely impartial. What possible motive had Mr. Cole or Mr. Campbell to interfere with Mr. Crisp's business? They had no concern with Lord Revelstoke or any of these cases which have been mentioned. They were entrusted by the Government with a duty and a trust to investigate into these circumstances, and from the result of their inquiries about Mr. Crisp, from their investigation into the matter, and from what they knew, they came to the conclusion that Mr. Crisp's standing was not that which would have entitled them, acting as trustees, to place him in quite the same category as others whose bills they accepted.

My hon. Friend says that it is a question of the drawer. He knows perfectly well that the drawer's name is not the one the Bank of England accepts. The Bank of England looks at the acceptor, and it is to the acceptor that we look. The acceptors are still liable to the State. If at the end of the War, or twelve months after the War, we are unable to collect these bills, to whom shall we go? To the acceptors. We are not going to Russia, or Germany, or France, or the Argentine, or the United States, to start an action against people living in the remote ends of the earth. The men we have to deal with are the acceptors, and they are the men we shall force to pay. Therefore the Bank of England had to consider not who had drawn the bill, but who was the acceptor of the bill. They came to the conclusion, for which I accept full responsibility—and they know far more about the position than I do—that Mr. Crisp was not in that position which would justify them in treating him exactly in the same way as the 300 people whose bills they did accept. That is the answer which I have to give, and I am sorry to have to give it. I am not making an attack upon Mr. Crisp, but he has invited me to give a reason why they refused his bills. My hon. Friend said he offered security. In order to show how bonâ fide the Bank of England were in the matter, let me say that they discounted £57,000 of Mr. Crisp's bills—my hon. Friend said it was more—because they said he was sending in securities, and to that extent they could do it. That showed, at any rate, that they were not acting in any spirit of hostility towards Mr. Crisp. My hon. Friend said that for some reason they stopped. What was the reason? The solicitors to the bank examined these securities, and they came to the conclusion that they were not the sort of securities which would be of the slightest use to the bank. There are two classes of securities. There is the documentary security attached to a particular transaction. That is only the security for that transaction. Mr. Crisp could not take to the bank £267,000 worth of securities which were attached to the documents, and say, "I will give you £267,000 worth of securities for £200,000 worth of debt," which I think was the security for that particular transaction.

The first thing they had to do was not to examine the value of the security in itself, but to examine the value of the security in reference to the particular transaction. These were securities which no bank could accept. They said they were securities which they could not possibly accept without the closest investigation into the particular title of Mr. Crisp in reference to each transaction. There were banks in Denmark and in all parts of the world, in regard to the position of which, at the time, it would have taken a very long time to investigate. Under these circumstances they advised the bank that these were not the kind of securities they could accept for £200,000 worth of bills. Mr. Crisp was informed of this, and he came forward with other securities. It is no use saying that these were collateral securities. He produced securities which were worth £72,000 for a total liability of something over £200,000. This matter came before the Lord Chief Justice and Sir John Bradbury, who were good enough to undertake a rehearing, as it were, of the case. Mr. Crisp admits that the Lord Chief Justice treated him absolutely with perfect courtesy and gave him a most patient hearing. The Lord Chief Justice said that he had come to the conclusion that if the Bank of England would not accept Mr. Crisp as Mr. Crisp, he certainly would not advise them to accept Mr. Crisp merely on the security of £72,000 for an indebtedness of over £200,000.


The Lord Chief Justice had not seen the securities attached to the documents.


In that letter which my hon. Friend read he asks Mr. Crisp to give the whole of the securities which he was prepared to tender to the Treasury. Mr. Crisp, in answer to that, said, "I have other securities as well, and the Lord Chief Justice may investigate them." He never put anything else before him.


The trustees had all the other securities.


My hon. Friend is mistaken.


Oh, no!


These documents had been returned to Mr. Crisp. I ask my hon. Friend to again read that letter he read to the House. The Lord Chief Justice asked him to give a full list of the securities that he was tendering to the Treasury. In response to that letter the only securities which he tendered to the Treasury were these securities for £72,000. Seventy-two thousand pounds, let me point out, upon their value on 29th July, not upon their present value.


The right hon. Gentleman said a good deal of the security was copper, timber, and goods.


Hear, hear!


These, surely, were available, and it was not a question of going into the title of Mr. Crisp in regard to these securities?


These were purely in respect of two or three bills.


No, they were not. They were for £50,000.


My hon. Friend admits that the bank had discounted £118,000. If he puts the copper, timber, and all the rest together it is not as much as the bank have already discounted. I agree with the hon. Member; those I assume were perfectly good securities. At any rate they could have been investigated in respect to this particular transaction, but they had already discounted £118,000 worth of bills.


Do I understand the Chancellor of the Exchequer to say that the £57,000 which was discounted was upon the security of goods like copper, timber, and so on?

2.0 P.M.


No; what I said I shall repeat to the hon. Gentleman: What I said was that Mr. Crisp said that he sent in securities to the Bank of England, and they went on discounting them to the extent of £57,000. Then came this letter from Messrs. Freshfield, Williams, and Company. They said, "These securities are no good." Then the bank stopped.


Was there any surplus?


No surplus. I assure the hon. Member that Lord Revelstoke never interfered either directly or indirectly in the matter, and I need hardly say the same of Baron von Schroëder. I am sure he would be wise enough not to interfere, and if he had interfered it would not have made the slightest difference one way or the other. I think I have informed the House why in this particular case the bank drew a distinction. It is a very serious thing to interfere with the discretion of banks in a matter of this sort, unless there is an overwhelming case made for showing that this gentleman had not received fair play. Lord Heading, in his letter, asked Mr. Crisp what security he was prepared to offer, and Mr. Crisp replied, "What more do you want?" But it was for him to say what security he was prepared to offer. The £72,000 on 29th July was not adequate. That is perfectly clear. Unless Mr. Crisp's credit is good enough the securities are not enough. Therefore it was for Mr. Crisp to say what securities he would tender to the bank. He may depend upon it that whatever securities he submits to the Treasury or to the bank, we will consider them without any question of prejudice at all. We shall certainly not consider the question as to whether he is a rival to Lord Revelstoke or Baron Schroëder or anyone else. That is not a matter which concerns us or the Bank of England. We try to consider the case upon its merits, and it is on its merits that a decision will be given, and not because Mr. Crisp has rivals in the Bank of England, and not either because he makes attacks which are absolutely unwarranted upon the fairness of the directors or governors of the Bank of England.

The hon. Member has asked me what security we asked in other cases. I have to tell him that no securities were asked for. Where bills were not approved securities were sometimes tendered, and bills were taken after they had not been approved, because securities were offered.

The total amount of bills discounted on the Government guarantee has been £120,000,000. That shows that of the £350,000,000 to £500,000,000 worth of bills which were out at the outbreak of the War most have been disposed of in the ordinary course. That is very, very satisfactory. There are £12,500,000 still running. The total amount which has been advanced by the Bank of England to acceptors of pre-moratorium bills to enable them to pay their acceptances at maturity comes to £60,386,000. It is estimated that by the end of the War there will be about £50,000,000 worth of bills in what I may call cold storage.


Of all classes?


Yes, about one-seventh to one-ninth of the totals of the bills which would be due after the duration of the War. Only £50,000,000 will have to be put on one side either for dealing with belligerent countries or for other reasons of that kind—I think about one-ninth of the total. My hon. Friend the Member for Mansfield has asked me for an estimate of the loss. I will answer that if he will answer me two questions. How long will the War last?


I did not ask about the loss.


Somebody did. But whoever did, the first question I would ask is, How long is the War going to last? The second is, What will be the issue? We are owed money. A good deal of this money is owed by Russia, and my hon. Friend rather suggested—it was a mischievous suggestion if he will allow me to say so—that the Bank of England favoured bills initiated in Germany as against bills of Russia. That is a statement absolutely unwarranted.


The right hon. Gentleman will pardon me; it is not fair to make that statement. He knows that only about 2,000 bills originated in Germany and all the rest in Russia.


I do not know what my hon. Friend was referring to. I only know his words, and his words were—and they were very dangerous if quoted in Russia—the words he used were: "That bills that were drawn in Germany"—as a matter of fact, they are not drawn in Germany—"were favoured as against bills drawn in Russia."


That is not what I said. I was referring to a particular case.


Will the hon. Gentleman read the words?


I may say I never correct any of my speeches in the OFFICIAL REPORT, because the reports are always so inaccurate. What I said was The bills originated in many cases in Germany, and the Bank of England seems to have given a preference to bills originating in Germany over those originating in France and Russia. That applies to this case of £2,000.


The words used are:— The Bank of England seem to have given a preference to bills originating in Germany over those originating in France and Russia. That may create a great impression, but it is not true. My hon. Friend realises that that is not the case. He only meant Mr. Crisp's bills, and that is an infinitesimal part. As a matter of fact, a very considerable number of these bills are Russian; of the £50,000,000 worth of bills which I said will be in cold storage, a very large number are Russian.


Russian drawn and accepted here.


Accepted here against produce either bought in this country or produce bought abroad and paid for by bills on London. The same had occurred with regard to produce bought by Germany. Produce is often bought in foreign countries and paid for in London, because we must remember that the credit of one of those accepting houses was more valuable than that of big German banks in foreign countries, and therefore bills drawn in Germany, Russia, and France are accepted in this country.


Can the Chancellor of the Exchequer give me any idea of the proportion of bills accepted by the three big German banks—the Dresdner, the Deutsche, and the Disconto-Gesellschaft?


I cannot say at the moment. At any rate, all I know is that all these bills have gone to the various creditors. We liquidate them. One of our own men liquidates the whole amounts. Russia and Germany, I think, are countries which on the whole are represented in the largest proportion in the £50,000,000 which will be still uncollected at the end of the War. How much of that will be uncollected depends upon the length of the War and the issue. The more devastation the greater the loss we shall sustain. But this much I will say, there will not be a penny loss in respect of the great accepting houses employed. The second thing I should like to say is this, that the total losses upon the whole of these transactions will not be equal to the cost of a single week of carrying on the War, and it saves British industry and commerce from one of the worst panics. I have to say one or two things more to explain these items in the Schedule.

Before we brought the moratorium to an end—there was great anxiety to bring it to an end and there was also great apprehension—there were three things we had to consider. The first was the people whose business was especially affected by the War, and practically ruined by the War. They cannot re-establish their business until the War is over. There was a case the other day brought to the notice of the Prime Minister and myself in connection with the fishing trade in Scotland with Norway. Until the War is over that industry cannot be re-established. That was the first thing we had to consider. The next was the restoration of the foreign exchange. There was still trouble in spite of what we had done. And the third thing we had to consider was the position of the Stock Exchange. With regard to the first—that is, business affected by the War—we thought the best way to meet that was by the passing of the Bill which enacted that no man could put any legal process into operation without first of all seeking the sanction of the Courts; and if the debtor were able to establish the fact that his inability to meet his debts was due to circumstances arising out of the War, then relief was to be given to him during the period of the War and for six months after. I think the fishermen of Scotland will find that that affords complete protection in their case. The second was the restoration of the exchange. In spite of our having undertaken the discounting of bills there was still trouble in foreign exchanges: for this reason, that so long as the drawers and endorsers of the bills were still held responsible they did not care to undertake any fresh liabilities, and those who were trusting to their credit were a little apprehensive of doing so as long as this huge liability hung over their heads until after the War. Foreign banks, foreign drawers, foreign endorsers, and endorsers and drawers in this country and discounters were very chary of incurring fresh liability unless other liabilities could be liquidated. We found that was rather interfering with the action of the exchanges, and that they were not being restored as speedily as we hoped.

There were two alternatives before us, and I will put them before the House. The first one was that the State should become an international banker and should guarantee all British acceptances against produce after the commencement of the War. The difficulty was that there was no machinery, and we should have had to act with the same old machinery. The accepting houses have their representatives and agents in every part of the world, and they know who they are dealing with, but the Treasury does not, neither does the Bank of England. The Bank of England has not this machinery, but the accepting houses know exactly what is happening in the particular countries where these transactions take place, and therefore even if State credit had been hypothecated it would have been pledged through the same agencies as before, and we should have practically been in the position of guarantors in respect of those bankers and accepting houses. The next alternative is practically the restoration of the old machinery. You could only do that by releasing the endorsers and the drawers and simply retaining the liability of the acceptors. The moment you did that the endorsers and the drawers were free, and there was no further liability and they could undertake fresh business. Legal difficulties might have arisen in retaining the liability of the endorser and the drawer unless the bill was duly presented. By the very nature of the transaction we were postponing payment of these debts until twelve months after the War, and I am not at all sure that by that transaction we were not really releasing foreign endorsers and drawers when you take that into account. The second alternative was to attempt to restore the old machinery of business by releasing the drawer and the endorser and maintaining the liability of the acceptor. My hon. Friend will be glad to know that the liability of Baron Schroëder has not been released at all, and he is still liable for every penny. We have not really undertaken great liabilities to release this alien enemy, and he is still liable.

I now come to the Stock Exchange. What is the difficulty about the Stock Exchange? It is not the character of the transaction, but the fact that you had £70,000,000 or £80,000,000 of securities hypothecated in respect of debts incurred before the War began. If the banks had pressed for these debts what would have happened? The securities would have been placed on the market and nothing could have been worse for the trade and commerce of this country than that you should dump £70,000,000 or £80,000,000 worth of securities on the market because the value of those securities would have been reduced to a perfectly deplorable position, and the Government, who are really the only borrowers in the market at the present time, would be placed in a position in which we could not raise money only at incredible rates of interest. We have to consider not merely trade, because if the value of securities went down the whole position of the banks is undermined, and all great financial agents are in the same position, and so are the insurance companies, bankers, and traders, who have hypothecated their securities in the bank to carry on their business. My hon. Friend knows very well that if you put a considerable number of securities on the market, although they may not appear considerable in proportion to the whole, still if it is more than the market can digest at a given time, it would reduce the value of those securities out of proportion, and the market would be absolutely destroyed for borrowing purposes. We have to consider that.

Therefore we were asked whether, if they would guarantee that these securities would not be put on to the market until twelve, months after the War, we would be prepared to advance money for the purpose of enabling some of those who had advanced to get some of the cash to enable them to carry on until the War was over. There was money advanced by the banks, private institutions, and corporations. Companies, for instance, had advanced money which they would otherwise want for dividends. That is a very easy way of making a short loan and getting a good rate of interest. Out of a total of about £70,000,000 or £80,000,000, £50,000,000 or £60,000,000 has been advanced by the bankers, and only £20,000,000 as against securities by the other firms and institutions and corporations. With reference to the banks, we have said that we would not advance them a single penny because we have assisted them with bills of exchange and currency facilities and they have to make their own arrangements with the Stock Exchange, but we said that we would advance 60 per cent. of the value of the securities on the 29th of July against the rest, on the express condition that the banks undertook not to put their securities on the market until twelve months after the War. It was a good bargain for the Government, because without hypothecating a single penny of Government credit we got a guarantee that £50,000,000 worth of securities would be withheld until six months after the War, and the market would not be depressed by that amount. In order to show what a good bargain it is for the Government take one of these things which will help to restore confidence. Settlement day had been regarded with considerable apprehension. The mere fact of this being done by everybody allayed apprehension on the Stock Exchange. No one knew what was going to happen, and there were all sorts of rumours which would have shaken public credit, but it passed so quietly that it did not interfere with the huge loan which was being put upon the market at the same time.

In addition to that there is not a single application for Government credit. I do not say there will not be in the future, but up to the present it has not been necessary for the Government to advance a single £5 note for that purpose. I think, as a matter of business, it was worth our while because we are practically the greatest borrowers as long as this War lasts, and we must have a market in which we can borrow. This is vital to the War and to the taxpayer. It is vital to us to prevent the market, if I may use the phrase, having the bottom knocked out of it because borrowing under those conditions would be very disastrous to us. I think what we have done is good business for the taxpayers. We have saved money by it, and we have not up to the present advanced a single penny. I will tell the hon. Member more than that. It was very important for us for the reason which the hon. Member indicated that we should have some control over the Stock Exchange during the War, and we made it a condition of coming to their assistance at all that they should not open until they had the sanction of the Treasury, and that they should not open then except on conditions imposed by the Treasury. Under this bargain with the Stock Exchange the Treasury can impose any condition which we regard as essential. I quite sympathise with some of the points put by my hon. Friend. They can impose any condition as to the kind of business they are to do and as to the conditions under which they can transact their business. They can do that before the Stock Exchange opens. I think, therefore, my hon. Friend will admit that it was a very useful piece of business for us to transact with the Stock Exchange. We incur no risks, but get tremendous advantages in return, which it was absolutely necessary in the public interest that we should consider.

The other transaction was with regard to the Cotton Exchange in Liverpool. That is a matter for the Board of Trade, and, if my hon. Friend wants answers to any further questions, I would ask my right hon. Friend the President of the Board of Trade to come in. He need not, however, worry about it, because there, by practically the same transaction as with the London Stock Exchange, we have been able to open the Liverpool Cotton Exchange, and he knows the difficulties there were experienced there in buying cotton for the purposes of the Lancashire business. We have been able by a guarantee of the same kind which we were prepared to give, to open the Cotton Exchange in Liverpool, and not a penny has been asked from the Government in respect of that guarantee. I think my right hon. Friend the President of the Board of Trade has again done a good stroke of business there. There are a good many traders who have been selling goods to the Continent without any bills of exchange. There was a good deal of business done with Germany, and I think with Russia with no bills of exchange at all. It was just a direct open transaction, the sort of transaction you would have as between one trader in this country and another. What we did with respect to bills of exchange did not cover those cases. My hon. Friend put to me the case of Bolton. Bolton, I believe, has a very large trade with Germany. They sell an enormous quantity of cotton goods to Germany. They have no bills of exchange. They debit their German debtor with the amount, send in their bill, and get their cheque in return. When the War was declared there were hundreds of thousands of pounds, I am not sure it did not reach millions, duo from Germany to Bolton. This was a very serious thing for the Bolton mills. I have no doubt the Bolton mills got credit from their banks in respect of that transaction. But when you come to the next transaction you do not get credit unless you raise the money in respect of the other transaction. That is how the machine works, and that was the trouble in this case. They could not get their money, and there was no credit in their banks in consequence. That not only applies to Bolton; it applies also to Bradford very largely; to the border boroughs, and also to other industries as well. I am not sure that it does not apply to the North of Scotland.

The difficulty we were in here was that we were not re-establishing a currency as in the case of bills of exchange. We decided that it would be desirable for us to give assistance to the extent of 50 per cent. of the face value of the debt on the condition that the local banks undertook 25 per cent. of the ultimate loss. It was suggested that we ought to have made all the advance. The difficulty there was that we knew nothing about these debts; we had no means of ascertaining anything at all about them. We could have set up committees locally, but I do not know what sort of committees we could have had. We could not have had the local chambers of commerce, because they were all more or less involved. We could not have had the banks, because they also were involved. But if the banks were prepared to undertake 25 per cent. of the liability that was quite good enough for us. They knew their men; they undoubtedly knew the kind of business they were transacting, and, if they were prepared to advance to that extent, we felt we were perfectly safe in shouldering the rest. That is why we persisted, in spite of some pressure from the banks, upon making them liable for 25 per cent. of the debts before we advanced a penny. Applications have already come in in respect of this transaction to the extent of £16,000. At present they have not been adjudicated upon, but we hope to be able to do something at the earliest possible moment.

I think I have now shown what happened. I have shown what has happened with bills of exchange. Out of £300,000,000 or £400,000,000 or £500,000,000 of bills of exchange which were based upon British credit at the beginning of the War, all the money has been paid, and no foreigner can point to any bill of any established house which has been dishonoured. In future they know that they can conduct business with the assured knowledge that they are safe. That means something which is invaluable to British trade in future. What is still more is that there are only £50,000,000 left of that. The machinery or exchange has been re-established. I have a letter to-day from some gentleman in the discount market to say that the condition of things was absolutely satisfactory in the discount market. In spite of this great world War we are still supreme in international trade and commerce. The British money market is in a better position than any other market in the world. Although we are engaged in this huge war, they are coming here to borrow at the present time. We are conducting a War which is costing us £300,000,000, £400,000,000, or £500,000,000 a year, and still other countries are coming here to borrow from us. The first day the Bank reopened after the outbreak of War, the bullion at the Bank of England was £26,000,000. We have suspended no Bank Acts. We have suspended no payments. We have just maintained exactly the same conditions as we did before. The Bank rate, which is always put up to prevent gold leaving the country, was put down to 5 per cent., and the gold in the Bank of England at the present moment amounts to £85,500,000. That is very satisfactory.

Here we have to raise the largest loan ever raised in the history of the world for any purpose. We did it, and the success of the loan is a full justification for the steps we have taken. What are the circumstances? It was the largest loan ever raised. We had already raised £90,000,000 for the same purpose, and, practically, we were raising £440,000,000 of money in the same market for the same purpose and under the same conditions We had just got through the most serious financial crisis that this country had ever seen. A moratorium in which we protected debtors against their debts, if called upon, had only just come to an end, and, what was still more serious, as anyone knows who has had to deal with transactions of that kind, the machinery which had always played an important part in the system of floating loans—the Stock Exchange—was closed at the time, and those who remember the loans raised during the late war know the part the Stock Exchange takes in helping operations of that kind. I am not referring merely to speculation on the Stock Exchange on any Government issue. I am referring to the purely legitimate part they take. The small investor is not a very ready man. If you tell him he has to make up his mind to apply within a week he does not do it. He only does it through the agency of people who give him expert advice, and the Stock Exchange is useful, because they take what they call large lumps of great loans like this, and afterwards gradually distribute them amongst their customers. They call their attention to the investment, and they are able in time to thus absorb the whole amount allotted to them, no doubt on terms favourable to themselves, but also equally helpful to those who go in for these loans. The absence of machinery of that kind at this moment was a serious detriment. If the Stock Exchange had been open we would have had the loan applied for several times over. They would have made enormous applications, and taken time for distribution of the allotment.

What was the result of our appeal to the public, and to the great financial interests of the country? We have not merely raised the whole of the loan, but it has been over-subscribed, and the most remarkable thing about it is not merely that the great financial interests came in—and I very gladly acknowledge that they did step in with spirit and give us every assistance—that is not the remarkable thing, for it has always happened in the past—the feature of this loan is the enormous number of small applicants who came forward. On the occasion of the last loan for the Boer war, these small applicants numbered about 21,000. Now in this case, they number nearly 100,000, and we have been glad to give the first chance of co-operation to the small capitalist. The first allotments will be made to the small applicants, and I think that is generally agreed to be the right course. It is undoubtedly a good investment, but the feature of the case is that the small investor has shown his patriotism by the readiness with which he has responded. He has not waited to see how the thing will go on the market. He has just stepped in, and we have been able, not merely to carry this great financial transaction through, but, by the ready response of the small investor, we have raised the hugest sum of money ever raised in any country, without any of the expedients to which Germany had to resort in order to raise a much smaller loan at a higher rate of interest. In addition to that trade is improving. Unemployment is going down. Confidence has undoubtedly been restored. British credit has stood the enormous strain placed upon it, and the market has been less affected than any market in the world. I do not know what further stress and strain may be placed upon the resources of this country, but that which it has already resisted, and the way in which it has resisted, fills me with the conviction that British credit is built on solid foundations which no foreseeable contingency can destroy.


I do not intend to attempt to traverse the grounds which the Chancellor of the Exchequer has covered in his interesting and necessarily lengthy speech. I think we all feel some satisfaction at the way in which our country has come through a crisis of which no one had experience before, the extent of which no one could accurately measure beforehand, and for dealing with which there was no precedent. The right hon. Gentleman has referred to such assistance as I and others were able to render him at the different conferences at which we were present. He has described to the House to-day the measures taken by the Government, some of which I had an opportunity of considering with him and with other people called to his councils, and some of which I now hear of, except for the news in the Press, for the first time. I am not complaining of that. But I wish to say in that connection that, in regard to the place I and others, not Members of the Government, who were called into these conferences, hold, I think it would be very difficult for us, or for anyone, to define exactly our own measure of responsibility for the steps that were taken. It must not be supposed that necessarily, if, say, Lord St. Aldwyn had been Chancellor of the Exchequer, he would have taken exactly the same steps in all respects which the present Chancellor of the Exchequer has thought it wise to take.

I do not doubt that it was necessary—it was undoubtedly necessary, in the novel circumstances, to act with courage and with quick decision. I do not doubt that in the course of the decisions which have been taken some mistakes have been made, whether on the part of the Government or those who have acted for them. Some mistakes were unavoidable. If I express a personal opinion on a matter which cannot be rightly summed up and judged until after the War is over, when there is time for calm reflection and inquiry into what has been done and what might have been done—if I express in anticipation a personal view, it would be that the Chancellor of the Exchequer and the Government will ultimately be found to have done too much rather than have done too little. I might, perhaps, add that if the country could have been consulted at the moment of the crisis, they would certainly have preferred that the Chancellor of the Exchequer should err by giving too much assistance than run any risk of having our credit system break down by giving too little.

Many of the matters with which the Chancellor's speech was filled are matters which, no doubt, can be so used as to give rise to prejudice. It is very easy to say to the Chancellor of the Exchequer, "Oh, you helped the big men; you did not think of the little men." The Chancellor of the Exchequer had already spoken of how little traders, or people intimately associated with business, habitually follow out the whole workings of the exchange, banking and credit systems on which their business is dependent, and that the smaller the man probably the less he knows of the working of those vast and complicated systems. He, therefore, is perhaps slow to realise how his interests are bound up with the great financial interests of which the Chancellor of the Exchequer has been speaking. But the Chancellor of the Exchequer is perfectly right in saying that the object of all the measures taken—the sole object in the mind of the Government or their advisers—was to protect national credit, preserve national trade, and to avert national disaster, and that the Government did not come to the assistance of any specific interest except under the belief, and, as he thought, on good proof, that it was in the interests of the community as a whole—and, indeed, a necessity for the community as a whole—that that interest should have support at this particular moment.

I purposely refrain, for many reasons, from entering into the personal issue that was raised in respect of the transactions of a particular house. I am sorry that it should have been thought necessary to bring them on to the floor of the House of Commons at all, and, in any case, for private as well as for public reasons, I am not going to discuss them here. But this I do desire to say, as one who has been a Chancellor of the Exchequer in the past and who has seen something of what is going on in the present, that without the assistance of the Governor of the Bank of England the Chancellor of the Exchequer could not have carried the country through this crisis. He has had recourse to the assistance of the Governor, and, let me add, of the late Governor, Mr. Cole. I hope I am not debarred from saying that by the fact that he is a rather remote connection by marriage of myself. Let me say that in carrying out his work, the assistance which the Governor and Mr. Cole have given him has been invaluable. I rejoice that the Government marked their sense of the services rendered by the Bank of England by recommending His Majesty to confer a distinguished honour upon the Governor. It was necessary to leave to the Governor and those whom he called in to help him wide discretion. I am quite certain, without expressing and without attempting to express or to form any opinion on any particular transaction, that it would have been quite impossible for the Treasury to exercise any efficient control or check except through agents chosen by them, and I know of no agents whom they could have chosen who would have done the work more disinterestedly or with less liability to error than the Governor and his colleagues on the board of the bank. Since Lord Revelstoke's name has been brought into the discussion. I desire to say, as an old Chancellor of the Exchequer, that I know no one in the City whose opinion I would sooner have on such great issues as the Chancellor of the Exchequer has had to consider. I know no one whose opinion would be more honestly given with a single eye to the public welfare, and I believe and I hope that I was the person who suggested to the Chancellor of the Exchequer that he should call him to consultation.


I desire to associate myself with everything my right hon. Friend has said. Too much praise cannot be given to the Governor of the Bank of England. I am sure he has given great effort to the tremendous crisis with which he was confronted. The Chancellor of the Exchequer has also been praised on all sides, and I would like to add my voice to the chorus. But I have some criticism to make of the proposals he has brought forward in the last four months. I heard with a great deal of interest his assurance to the House that he thought the great London accepting houses would not default on any of their acceptances, and that no loss would consequently be sustained by the Government. I am sure that he is quite justified in that statement. The great accepting houses stand in splendid credit. They have not exceeded their functions in the past, consequently they were able to meet the stress and storm in this time of trouble. The Chancellor of the Exchequer, in his arrangements to meet the crisis, provided, in the first instance, for the discount of bills of exchange. Undoubtedly that was very necessary. Bills of exchange could find no market in the City. The discount of bills of exchange had entirely disappeared, and unless the Chancellor of the Exchequer had stepped in, the results would have been terrible. In my opinion, however, the Chancellor of the Exchequer went too far. He not only provided a discount market, but he relieved the last endorser on each bill that was brought to the bank. I listened to the speech of the Chancellor of the Exchequer, but I did not hear any explanation of his reason for relieving the last endorser of the bills that were brought to the bank when the Government's bill market, if I may so call it, was set up. I am sure the explanation he would give us is that the discount houses, apart from the accepting houses, were loaded up with liabilities, and that unless he relieved discount houses from their endorsements, they would not have been in a position to resume business when the Bank Holiday was over and in the following week, and consequently he readily released them from their endorsements in order to set their machinery going again.

Clearly that was necessary. The discount houses are as necessary to the bill market as the accepting houses. Discount houses bring the paper of the accepting houses to the bank. They are the medium through which the business is transacted. Their profits are very small. They are represented by a very small commission, and notwithstanding that small commission the discount house on every occasion has to put its name on the back of the piece of paper. That is a very big liability that the discount house takes. Probably previous to the War it did not realise how serious that liability might become, and it was only when the bill market ceased entirely that the discount houses found themselves in the position of being called upon to carry out liabilities which they were quite unable to shoulder. But the Chancellor's relief of the last endorser went further than to relieve the discount houses. The provision was such that every last endorser was relieved. There were a great many bankers who had their bill cases at that time full of bills of the Deutsche Bank and the Dresdner Bank. These great merchant houses and banking houses immediately got their bills to the bank. It was the inevitable result of the release of the last endorser. They wanted to escape any liability on the bills that they held on the Dresdner and Deutsche Banks. Consequently the amount of bills was enormously increased by reason of the release of the last endorser.

3.0 P.M.

Instead of only those bills being brought to the bank which were necessary to carry on financial transactions in the City, there were plenty of bills brought for the sole reason that the endorser wanted to get rid of his liability and be relieved of his endorsement, and there are many financial houses of German origin, and the Dresdner and Deutsche Banks naturally took those bills previous to the War in preference to other bills, and consequently when the War came their bill cases were full of the bills of these German banks, and by the fact that their last endorsement was relieved by the regulations that the Chancellor had set up, they were able to hurry their bills over to the bank and convert them into very large sums of money and relieve themselves from any liability on them whatsoever. Just at that time the exchange rate with New York was very favourable. The sovereign was worth 5 dollars 15 cents. Two or three days before it was worth 6 dollars, perhaps 6 dollars 50 cents, but certainly as the banks resumed operations again and the market was resumed it was worth 5 dollars 15 cents. Many of these international houses, some of them of German origin, have New York houses and New York relations, and they naturally seized this opportunity in all probability, as every person did in the City who had money, to remit large sums of money to New York. The profit was tremendous. You could afford to pay almost any rate of interest, far greater than the banks were asking, for the discount of any bills at that time in order to get ready money which you could remit to New York at very high rates. Consequently houses and firms with international relations of German origin found themselves with large sums of cash which they naturally remitted to New York at very advantageous rates and high profits. I have in my mind one particular house presided over by the head of the firm, a very eminent gentleman, a man of great ability and great courage, a man who has carried on great business operations in the past. He was also a partner in the New York branch of his firm, and shortly after the War broke out he retired from the firm with the announcement that after the War was over he would resume his partnership again. I do not know whether he took his money out of the New York house or not. I do not know whether his firm took any bills to the bank or not. Very likely they did. I do not know if they remitted any money or not at the time sovereigns were selling for 5 dollars 15 cents. But I know that the New York partner in that firm has contributed to the German War Loan.

In all probability the New York partner of that firm was able to contribute to the loan by reason of the arrangements for the resumption of the bill market in the City of London. Not only that, but another firm in New York whose bills frequently circulate in this market. Mueller, Schall and Co., have contributed to the German War Loan. I do not know whether their bills were handed into the bank when the right hon. Gentleman's arrangements for the resumption of the bill market were set up, but I think very likely they were. They received direct benefit from the resumption of the bill market, and were able to use the proceeds for the purpose of subscribing to the German War Loan. That could easily have been guarded against if the right hon. Gentleman, instead of setting up the general bill market and releasing endorsers generally, had restricted his release of endorsers to the discount houses apart from the accepting houses—the houses through which the bills pass to the market—also if, instead of taking the bill cases of merchant houses, he had said first of all, "I shall have to ascertain and be satisfied that it is necessary for you to come to this market." At present there are only £50,000,000 of bills left. Naturally the price of them has gone up. The best disappear first and the bad bills remain to the very last. But there are £50,000,000 of them left yet. The Chancellor of the Exchequer hopes that the loss will not be more than £7,000,000. I think it will be a great deal more than £7,000,000; but it is quite sure that in that £50,000,000 of bills he has accumulated a great many of the Dresdner and Deutsche banks, and the German discount houses. It must not be forgotten in this discussion that the machinery which the right hon. Gentleman set up was not machinery solely for the benefit of London accepting houses. It was also machinery which, while it safeguarded the acceptances of the London houses, safeguarded the acceptances of the German banks in London.

Then, again, the next provision that the right hon. Gentleman asks now to protect himself against by means of this Bill is advances to acceptors of bills of exchange. In that case I have heard his explanation of the bills that the bank rejected, and I thought it was a very convincing explanation. But he was asked some question which I did not hear him answer. He was asked if the Government had taken the collateral security from the London accepting houses which those accepting houses had received from the drawers of the bills. I do not know whether that is so or not. I think it was the duty of the right hon. Gentleman to have asked the London accepting houses to deposit with the bank the collateral which the drawer himself had lodged with the accepting houses. I do not think it is of the greatest importance in the case of the London accepting houses, because they are solvent and strong institutions. I believe they were that before the War and are now. We owe a debt of gratitude to the Chancellor of the Exchequer. In criticising his arrangements I do so with a certain amount of reserve and hesitation, because on the whole the worst that can be said about them is that they have gone too far. Then I see that in some cases the accepting houses are unable to meet the obligations for which the Government assumed great responsibility. They might in the meantime liquidate collateral in other directions to pay off the obligations. Some portion of these assets which should now be in the custody of the bank may in some way find its way to Germany. I have no objection to the arrangements which the Chancellor of the Exchequer has made for advances to members of the Stock Exchange. I was not at all surprised when he said no advantage had been taken of the provision. I say that the restrictions are such that very little advantage will be taken of the arrangements. After all, he has only offered some assistance if his services are necessary. We are all very pleased that in this respect they are not necessary.

The Chancellor of the Exchequer did not deal at all with the question of sugar. I am told that he bought a very great quantity of sugar, and, of course, this Bill gives authority for the purchase already made. It was, I expect, a very wise provision. I have heard a great deal of criticism of it, and I have heard many favourable comments. I will not attempt, without the necessary facts, any criticism of this arrangement whatsoever. I do not know whether the Treasury is going to undertake any further large purchases of commodities. Sometimes we hear of very large purchases which the Government has made or is undertaking. In that connection I venture to ask if there is any truth in the statement or whether this Bill covers everything? Clause 1 refers to obligations incurred before the passing of this Act. I would like to know if all the obligations are dealt with by the Bill, including the Schedule, and by the speech of the Chancellor of the Exchequer, or if there are further obligations to come forward later on, and if we are to be presented with another Bill to cover larger obligations yet to be undertaken? There is this to be said: A great many of us believe that the Chancellor of the Exchequer's arrangements, which are covered by this Bill, will result in heavy loss to the Treasury. I am one of those who believe that the loss will be very heavy. It is possible that some of the proposals which the Chancellor has undertaken will be too extensive and that money will be lost by these operations which might be spent to greater advantage in meeting the enemy in the field, or in some other direction than in giving relief which is unnecessary or which will not give the desired results. I would like to say that I associate myself with everything my right hon. Friend said, and I think the Chancellor is to be particularly congratulated on the magnificent result of his War Loan. I think we can all take a great deal of satisfaction in the results, and we must not be entirely blind to the fact that his own efforts have contributed somewhat to the results.


I wish very briefly to thank the Chancellor of the Exchequer for the statement he has made. It will, I am sure, be appreciated throughout the country. I think it is very important that the country should realise that what has been done has not been done in the interest of any individual firm. It was not done for the benefit of any individual firm that happens to have a branch in New York. This action has been undertaken by the Government for the benefit of the community and for the purpose of establishing and maintaining our national credit. I venture to suggest that it was essential for the maintenance of our national credit, good name, and business connection in these enormous financial transactions, that even those houses which have a connection to some extent with the enemy should, so far as their business is done here, be sustained in this emergency. It was not done for the credit of the big man, while leaving the little man out of account. What has been done has been in regard to matters affecting the interests of the community as a whole. With regard to the incident raised by my hon. Friend the Member for the Mansfield Division (Sir A. Markham), I cannot help feeling regret that the incident was raised in the House at all. As it has been raised I think one ought to say that, so far as the Bank of England is concerned, we are under a deep debt of gratitude for what they have done. The Chancellor of the Exchequer was bound to select somebody to advise him and act for him. The Treasury knows nothing about these bills of exchange, and he was bound to select somebody. I defy anyone to name an institution, or group of institutions, that could have done the work so satisfactorily as the Bank of England. When you select people to discharge a somewhat invidious duty, you must largely accept their decision. In this particular case the work has been reviewed by able experts on behalf of the Treasury, and I do not think any good purpose has been served by raising the question here.

As regards the Loan, the result is unquestionably satisfactory. The mass of people in the country have no idea of what is meant by £350,000,000. You may take it that this is genuine money subscribed, and that it is available for the Loan. The Stock Exchange is not open, and there is no opportunity for speculation on the part of people who apply for ten times as much as they want. The people who have applied want to subscribe the amounts they offer. It is an enormous thing, and it would have been thought almost impossible to have the money raised. It has been raised on terms which are in my judgment extremely advantageous to the country. It has been said that it is an attractive investment. It is anything but an attractive investment to those who have considerable sums of money to deal with. The Chancellor of the Exchequer is to be congratulated upon being able to raise such a large sum of money at 3½ per cent., and the investors of this country are to be congratulated on the fact that the money can be raised at a time when the country is engaged in the most serious war it has ever been engaged in. The Loan floated at 3½ per cent. means a yield to the investor of 4 per cent. in the long run. That is one of the strongest testimonies that could be given of the stability of the country and of the determination of our people to see this War through. There is one Clause at the end of this Bill with regard to the proposal to engage in trading. I do not wish to discuss it, but I should like to suggest a note of warning to the Government with regard to the rumours which are about as to their entering into the dyeing business. I regard that suggestion with the greatest misgiving. In my judgment it would be a serious mistake and I hope that nothing of the kind will be done.


In very few words I would like to discuss the point which the right hon. Gentleman the Member for Spen Valley referred to in his closing remark. Though I had proposed to raise the matter on the adjournment of the House. I understand it is probably more convenient to raise it at this particular point. I think that the announcement, which was issued, as I understand with the authority of the Board of Trade some ten or twelve days ago, with respect to the proposal of the Government to assist financially and otherwise the organisation of the great chemical combines for the manufacture and supply of synthetic dyes and colours, was an announcement which must have taken the average Member of the House by surprise, especially as it related to a question which, except most indirectly in the month of August last when my hon. Friend the Member for Limehouse asked one or two questions on the subject, was utterly new to the Members of this House. On Monday last I asked the President of the Board of Trade whether the House would be given an opportunity of considering and discussing this project before the Government finally committed themselves to definite conditions and agreements in the matter. I understand from the reply of the right hon. Gentleman that there are certain urgent conditions which, in the estimation of the Board of Trade, make it inconvenient to have the project delayed until the House has had the opportunity of fully discussing it. It is somewhat difficult to outline the proposal, because the public statements which have been made with regard to it are extremely vague and one can only supplement the answer of the President of the Board of Trade by such discussions of the question as have taken place in connection with the various Chambers of Commerce of the country. But so far as one understands the proposal, and I speak subject to any correction which the President of the Board of Trade may make, it is that the Government should assist the manufacturers of synthetic dyes and colours in this country to form a combination or syndicate which shall guarantee the textile industries of this country a constant and sufficient supply of synthetic dyes and colours and stuffs.

So far as I understand the commitments of the Government, the greater part of the capital required to form this syndicate is to be contributed by the members of the trade itself, but I understand that the Government has committed itself to this proposal. It is willing to provide some part of the capital required, and it is further prepared to guarantee for some considerable period the debenture interest for that company. In approaching this question I have no abstract or a priori objections to the proposal. Any misgivings which I, and probably other hon. Members, may have had are not founded at all on any merely academic or theoretic objection. I fully recognise that at a time of commercial crisis such as this mere novelty of procedure is not necessarily an indictment of the wisdom or experience of a particular measure. I recognise fully that these are matters which must be governed solely by practical consideration. This project, of which we have heard so little, is obviously to be justified or condemned solely by reference to matters of fact. I desire in what I have to say to use the interrogative method rather than to make any indefinite indictment. I ask, first: What are the grounds on which the Government is prepared to justify this wholly new and very far-reaching proposal? As I understand it, from the announcement of the Board of Trade and the answer which the right hon. Gentleman gave me on Monday last, the ostensible ground on which the proposal is founded is that the textile industries of this country are face to face with a very real shortage of dye stuff and colours; that hitherto we have been dependent solely upon one source, the German manufacturer; that owing to the War that particular source is closed against us; and that the position is so critical that the Government has cause to fear that unless this project be carried through the country very soon may be faced with a complete stoppage of our great textile industries.

The first question which I would ask the President of the Board of Trade is: Is this fear not exaggerated? Has the Government complete and decisive evidence that we are actually face to face with so complete a shortage as is suggested in the proposal of the Government. There are others present on these Benches who from practical experience are more competent to speak authoritatively on this point than I can profess to be able to do, but I am bound to say that so far as my information goes there is no immediate prospect of that immediate stoppage in the supply of dye stuffs which is given to us as the primary motive of this particular project. Of course the danger of stoppage must depend entirely upon the period of probable duration of the present war. If the present war should be prolonged to a period not contemplated, I believe, by the highest military authorities, then there might be some reasonable danger of a shortage in this particular supply, but I would like to ask the President of the Board of Trade and others is he convinced that during the period about to be covered by the War, there is likely to be any demand in the country or in our export trade for that particular class of goods which require the particular dye stuffs that the Government have directly in mind. As everybody is aware, there is in the country at the present time a practically unlimited stock of what I may call the secondary colours and secondary dyes. Is there any reasonable prospect that the normal conditions of demand will prevail during this War period or the period which is immediately to succeed it?

I believe it is a fact that, so far as the woollen and worsted industries are concerned, there is already a plan formed, to be carried out, which is based upon the anticipation of a demand for plain goods, as they are understood in the trade. It is that demand, which, as I believe is confidently anticipated in the textile trade during the period of weakness succeeding the War, the demand for what are known as plain goods, which makes me still further sceptical as to the imminent danger of a big stoppage or shortage in the supply. There is a further point more important. I ask the right hon. Gentleman this question. Is he convinced, granting the emergency which he contemplates, that the particular step he has in view will suffice to meet it? Does he anticipate, and is it reasonably probable that if this proposed syndicate be formed it will be able to begin its operations in an efficiently successful way in sufficient time, to meet the needs of this emergency question? Anyone of any practical experience, or any business or particular knowledge of this industry, knows that to carry out this scheme there must be ample provision in respect of buildings, plant, and preparations for such an industry. Most of all, no scheme of this kind has any reasonable prospect of success unless the Government or the trades concerned are able, and know themselves to be able, to place their hands immediately on the services of properly qualified chemical engineers. I submit to the Board of Trade, from this practical point of view, that it cannot hope to get this new syndicate, however well organised, into a condition of full working operation within the narrow period which will be covered by this War.

I know what his answer will be to that point; he suggested it in his reply to my question on Monday last. He will tell us that the Board of Trade has reminded the country, in the preliminary announcement, that it was looking to something greater than the special emergency created by this War. He is looking to release the country's textile industry from exclusive dependence upon a single source of supply in regard to this particular commodity. That, after all, is the real object of this new project of the Government. I think every man will be prepared to sympathise to a very large extent with the Government in their object, but the very fact that the Governmen are looking to this larger issue opens up the very wide question of policy, which I do respectfully submit demands not merely the careful consideration of the Government and its advisers, but requires full study, consideration, and discussion in Parliament. I wonder whether the Board of Trade fully recognises—I hope I am not presumptuous in asking a question of this kind—to what extent they are committing themselves in regard to this particular venture. As I understand they are only committing themselves to a guarantee of some part of the capital and a guarantee of debenture interest for, I presume, some period—I do not know the period—which must be practically approximate to something like twenty or twenty-five years. It must in any case be a long guarantee, if it is to be effective for the purpose the Government has in mind. The Government has committed itself to this new industry; but, suppose, at the close of the War, a representation is made to them that the debenture interest cannot be assured unless the industry receives some measure of protection against German competition; for it is idle to assume that the German chemical industry, which represents something like £100,000,000 a year, is going to be paralysed or crushed in the course of this War. I cannot help thinking that a great deal of exaggeration and a great deal of nonsense is talked in the country about the prospective destruction of German competition and German trade. The chemical industry of Germany is certain of resurrection, if it needs resurrection, immediately after the close of the War.

Will this syndicate be so far established as to be able to withstand successfully the competition of the long established and scientifically based industry in Germany, without some measure of protection? The Government, I quite believe, are perfectly sincere in regard to this, and have not the remotest intention of setting up, even in-; formally, any protective tariff in connection with this new departure, which is purely an emergency one. But supposing the industry is not in a position to assure the interest unless some protection be afforded to it. This is not only an imaginary objection. I have been closely watching discussions by certain chambers of commerce in the country, particularly in the North of England, in regard to these matters. I find already the claim put forward that if this industry is to be successful it must be protected in some way by a tariff as against German competition at the end of the War. What guarantee have we against the artificial inflation of prices, assuming this syndicate to be successfully established? Are the manufacturers in our textile industry to have no sort of guarantee that owing to the State subsidised competition, or trust, the prices in regard to these dyestuffs are not to be artificially raised or inflated? Is the importation of German stuffs to be prohibited after the War? That is a very important question and one which the Government probably are being asked with great insistency by important chambers of commerce in the North of England at the present time.

There is one point to which I should like to revert. I referred a minute or two ago to the difficulty of proving that a new syndicate of this kind can, in the period represented by the War emergency, successfully establish buildings and plant adequate to carry on the syndicate. It may be replied that it is intended to use existing buildings and plant and machinery. If that be so the whole of the machinery and accommodation, vats and other plant, will be diverted and concentrated upon the manufacture of these particular dye substances. If that is to tide the Government over this emergency period, does it require a State subsidy, and of what character and to what extent have the Government that in view, in connection with this dye industry? If the President of the Board of Trade says that the concentration of existing vats and plant upon the manufacture of these dye-stuffs is to be mainly during the War period, I would far rather that he would ask Parliament for half a million, or for any other definite Grant, to meet the purpose, than adopt a procedure which inevitably would land us in sight of some form of Protection. The whole proposal is of so novel a character, and is likely to be so far-reaching in its effects, that I think it demands very careful consideration, not merely of the Government but of this House, before coming to a definite decision. The very novelty of the project to my mind makes it all the more urgent that it should be fully and satisfactorily considered before a final decision is reached. Parliament should be given more information than it has hitherto been afforded, and I hope the President of the Board of Trade in his reply will be able to give some satisfaction.

Sir J. D. REES

I wish to ask the right hon. Gentleman will he consider the proprietary of appointing out of some of the proceeds of this loan, some officer to make an examination of lace which is imported into this country from Switzerland. In answer to a question of mine pointing out that lace jobbers were purchasing lace from Germany and importing it through Switzerland he gave me an answer, a satisfactory answer, of which I do not complain at all. He said that the importation has to be accompanied by a certificate of origin issued by one of His Majesty's Consular officers, who is required to satisfy himself by means of invoices or other document that the goods have not been manufactured in enemy territory. I submit that the Consul in Switzerland would perhaps not be very capable of conducting that examination. He would probably be a mercantile Consul with very little time, and probably unpaid, and this duty, which is of considerable importance to Nottingham lace manufacturers, may not, under existing circumstances, and I think will not, be very satisfactorily performed. As he is about to reply, I should like to know if he will take into consideration the propriety of appointing an officer or of paying some subsidy to the commercial Consul there who is entrusted with this duty, so that we may be assured in Nottingham that lace does not come into this country in the guise of neutral Swiss lace. Something might be done also in the way of buying out the controlling interests of foreigners in companies operating in this country, about which I addressed a question to him the other day, and to which he was not able to give a satisfactory reply. There are, to my knowledge, a good many of those companies in this country, and there is nobody to investigate the matter. This official, whose appointment I suggest, might be able to take it in hand.

The PRESIDENT of the BOARD Of TRADE (Mr. Runciman)

Our Consul in Switzerland looks into these matters, and, although it is true he is not a professional expert in lace, I understand he obtains such advice as he can in order to ensure that the certificates of origin are not bogus or that they are not put forward on deceptive grounds. I cannot undertake, as the hon. Gentleman has suggested, that we should invest any public moneys or do anything in the way of transferring investments in companies where foreigners now hold a very large portion of the share capital. That matter has been fully thrashed out more than once in our Debates on the Trading with the Enemy Bill, and I fear that we cannot go further than has been suggested in those Debates on that Bill, which is now about to receive the Royal Assent. I may say that there are constant suspicions about all certificates of origin, and that we do what we can under the circumstances. I come to the very important question which my hon. Friend (Mr. Sherwell) raised, and if I am not able to meet him on every detail of his long series of questions, of which I do not in the least complain, it is because of the circumstances under which large matters of this kind must of necessity be dealt. There are considerable numbers of manufacturers who are concerned. It is impossible to discuss in full detail their business affairs on the floor of this House, and any strong statement from the Board of Trade as to the probable future supplies of any commodity nowadays, has a very disturbing effect on market prices. So that if I am not able to fully answer every question that my hon. Friend has put to me, I hope he will regard that as being the only reason why I do not attempt to do so. I will do what I can to clear up the misgivings which my hon. Friend has and which may possibly be shared by others.

In the first place, I need hardly say that the Government would have no intention whatever of dealing with a matter of this kind if there were not an urgent need. My hon. Friend asks me how can we tell that there is an urgent need. There are many ways of ascertaining that. Hardly a single day passes without my receiving letters, either officially or privately, from users of dyes all over the country, complaining bitterly either of the fact that they cannot get dyes, or, if they can, that prices have reached an abnormally high figure. I am informed by representatives of the textile industries, by some of them, that the shortage is imminent, and by others that it will only be postponed for a few months—four, five, or six months. The longest period that I heard mentioned by anybody who was speaking seriously on the subject has been, with our present stocks and with any that can be manufactured in Great Britain or obtained elsewhere, is six months, and that at the end of six months we certainly will be feeling the full brunt of the absence of these manufactures from this country, and the efforts which have been successfully made to prevent this country getting the supplies required. Others believe that the shortage is to be felt very much sooner than that. I can point out the instance of synthetic indigo, which is made to a very small extent in South Lancashire, and which will not be available for use from that factory after the middle of next month. There are some fortunate manufacturers in the textile trade who have some stocks of indigo, but who will not be able to replenish them from English works, or works in England, which are now under control under the Trading of the Enemy Act, after next month.

From what other sources can the shortage be supplied? It is true that in this country we can make some of these dyes. I think it would be a great pity if either hon. Gentlemen in this House or others outside were of the impression that it is impossible to manufacture dye stuffs here profitably. In my hon. Friend's own constituency there is a most successful firm which, as we now know to our own knowledge and with the assistance of the best chartered accountants, have been making a very large and very satisfactory income and paying a very good dividend, which he and I, or anybody else here, would have the greatest satisfaction in sharing. They have done so for a very long period, and they have done it in competition with very large chemical concerns in Germany. But even with two or three other concerns, which are comparatively small, it is very doubtful whether more than 7½ per cent. of the total aniline dye consumption of this country is now being made in this country. I hope it is possible that that figure will be rapidly expanded, and that it may by arrangements and reorganisation be raised to as much as 12½ per cent. That is a considerable increase, but when we have raised it even to 12½ per cent. the shortage is very pronounced, and will remain pronounced. I do not think I have ever been responsible for saying, as my hon. Friend has suggested, that if we ran short of dye stuffs it would bring about the immediate stoppage of the textile trade. I do not believe it would do anything of the kind. There is a certain amount of the textile trade which does not require aniline dyes.


A large amount.


But by far and away the largest amount is absolutely dependent on aniline dyes. I think my hon. Friend suggested an alteration in taste during the War.


I asked, was it not true that textile manufacturers were already laying their plans for that change of taste?


My information is, not that they were deliberately doing that because there is a change, but that the very high price of the commodities may induce people to go in for a much plainer form in pattern and colour than would otherwise be the case. My hon. Friend asked me definitely whether there was an attempt to increase the demand for those plainer cloths, and whether, after the War was over, it was likely that the very highly dye stuffs—which, to a large extent, are the backbone of the Lancashire industry—would be or would not be demanded. I must confess that in this matter I am bound to depend on information which I get elsewhere, as I am not a manufacturer of dyes, nor am I a calico manufacturer. But my information is that in many parts of the world the demand for highly-coloured goods is likely to go on. For instance, the Indian and China demand may be diminished, as all demands may be because of the War, but it will go on. I am also told that in the Balkans there will certainly be an increasing demand for highly-coloured goods over and above what we have known during the last twelve months, if the Balkan States remain out of the War. In other parts of the world it is certain that they will not alter their tases to suit our convenience, and if we do not supply them with these highly-coloured goods, they will be supplied to some extent from elsewhere. It is more than likely, the state of the control of the dye trade being what it is, that this market can and would be supplied from America.

Let me describe to the House the kind of operation that has been conducted by German syndicates and the German Government with the object of deliberately injuring our textile trade. Not only did we get the bulk of our dyes and the bases for our dyes from Germany, but we got a certain amount from Switzerland. Since the War broke out Germany has entirely stopped, not only the sale of dyes to this country—which sales would have been impossible under the Trading with the Enemy Act and their own laws—but they have prevented the sale to neutral countries of any dye stuffs which could find their way here. I believe that some manufacturers who attempted to buy from neutral countries dye stuffs which were held, there succeeded for a short time in buying some of the stocks in those countries. But all new dye stuffs which come from Germany to Holland, Switzerland, the Scandinavian countries, and even America, are sold now under definite bond and guarantee that they shall not be resold to English consumers. So effective is that prohibition that I do not think that since the War broke out any purchases have been made of German dye stuffs exported from Germany after the 3rd August. In Switzerland the German syndicates and the German Government have between them succeeded in carrying their prohibition still further. They will not allow even the sale of intermediate bases, such as beta-naphthal and tolnol, to the manufacturers of dye stuffs in Switzerland, if they have any ground for believing that the dye stuffs thus manufactured will find their way to England. The only condition on which beta-naphthal and tolnol have been sold to Switzerland since the 3rd August has been that Swiss manufacturers will not sell the dye stuffs manufactured from those materials to people on this side.

My hon. Friend has asked, Will steps be taken to meet the emergency? Certainly they will, and we are already taking some of them. In the first place—and I agree that the immediate emergency ought to have our first consideration—we have attempted to divert the interest of English manufacturers of dyes from those dyes which they make for export and to turn the whole attention of their staffs and plant to the dyes necessary for our own textile industry. That makes a little difference, but not much. I think that that, together with other causes, will probably tend to raise the produce of dyes in this country from the smaller figure which I named, 7½ per cent. to 12½ per cent. We are not dependent here, for example, on German produce for the intermediate bases on which dye stuffs were manufactured. We have had experience of some of these commodities, not only in respect of the manufacture of dye stuffs, but other necessary substances. We have taken steps already to incite, not by financial means, but by methods of persuasion, some great concerns whose works are used for the distillation of coal and coal-tar to produce these intermediate bases. Already beta-naphthal and tolnol are being produced in larger quantities in this country than ever before. That will to some extent enable our dye manufacturers to proceed with their manufactures without closing down merely because the German supply has been stopped. Further, with regard to some of the factories already here, I believe, if we can give them the necessary encouragement and work them into the scheme which is now being threshed out bit by bit, we shall induce them to double their plant. They can double their plant and double their output without experiencing any of that shortage to which my hon. Friend referred.

In these directions we can certainly help to some extent to provide a larger supply of dye stuffs for the textile industry. But when all is said and done, the widest and largest supplies that we can work out under these emergency and temporary arrangements will not, I am told, give us one-third of the total annual consumption of aniline dyes in this country. That represents an enormous shortage. It may lead to a change of fashion; it may also lead to a drop in the demand. But I do not believe that the shortage will be counterbalanced in that way. We have a much better index than that of mere opinion as to whether there is or likely to be a shortage of dye stuffs and that is the price. Manufacturers are not likely to pay high prices for dyes which they do not require. Already manufacturers write to me complaining of the rise of prices, rises varying from 100 per cent. to as much as 700 per cent. Opinions, of course, may be discounted, but I am afraid that you cannot discount prices. If manufacturers could discount prices, they would be glad to have advice in regard to that. When we find that even natural indigo has been beaten out of the market by synthetic indigo, and that prices have risen from 2s. 6d. to well over 12s. during a period of three months, there we have some indication, which we cannot ignore, that dyes have become so precious that it is essential for the prosperity of a great portion of our textile industry, if not the whole, that the supply of dye should be increased.

I do not know whether I have covered the whole ground of the emergency need. I have made my statement as condensed as possible. I can assure my hon. Friend that we should certainly have been failing in our duty if we had not inquired into this subject immediately. I took steps to get the best advice possible. We collected, under the chairmanship of the Lord Chancellor, some of the best chemists available for the purpose. We have been in constant conference, not once or twice, but four or five times every week for the last few weeks, with those concerned in the trade, and I cannot ignore the information which we have received. The future is, I admit, much more problematic. No one can tell exactly what will be the position after the War is over. Of this I am certain: if we go on being dependent in a large portion of our textile trade, whether cotton or wool, upon supplies which Germany has the power to cut off whenever she pleases, we leave those cotton and wool industries in a state of peril. We certainly should be lacking in foresight if we were not prepared to take such steps as are necessary within the four corners of the principles to which we, my hon. Friend and I, intend to adhere, to put a stop to the entire dependence of what is, after all, the greatest of our manufacturing industries on commodities which are entirely under foreign, and may be hostile, control. My hon. Friend says that we have not given him much information as to the larger scheme. I hope ultimately that this will absorb the whole of these smaller proposals. It is impossible to give him more information. The schema itself is only in an embryonic state. I can tell him the conditions, and the only conditions, on which I shall be a party to it, and I hope that with that he will be satisfied. In the first place, we must be assured that those who act as a national organisation for the production of dye stuffs shall themselves give the deepest pledge that they mean the thing to succeed. There are two ways of doing that. The one is that the whole of the ordinary capital of this concern shall be put up by them.


The Board of Trade statement, of course, contemplated that part of the capital will be supplied by the Government.


The Board of Trade statement was drawn in very wide terms. I am telling the hon. Gentleman exactly the limitations within which I shall consent to this matter going through—that is the whole of the ordinary capital to be put up by the consumers of dye stuffs, or by those who act for them or with them. In the second place, I think it should be clearly understood that those who expect to get national assistance in a matter of this kind should give an undertaking that they are going to buy their dye stuffs from this co-operative concern. It is not a new idea in this country to have co-operative production; indeed one of the largest, and probably the most prosperous, mercantile concern in the whole world is the Wholesale Co-operative Society, the principle of which, though not identical, is not altogether different from this. If the consumers themselves will put up—I scarcely like to give figures—but if they will themselves subscribe £3,000,000 I should be prepared, provided we had the necessary amount of Government control—and I will say a word on that in a moment—to ask my colleagues to guarantee the debenture interest on another million and a half. I should regard the £3,000,000 as being a good pledge from the consumers that they themselves were bonâ fide interested in the success of this great undertaking. They should supplement that by undertaking that they will buy their dye stuffs over a long period from this concern in which they will be financially interested. My hon. Friend asks, can it pay? I can only say that in his own constituency there is a concern which pays, and pays well at the present time.


My point was that, supposing representations were made by this subsidised trust that they could not assure the debenture interest without some form of protection against German competition, was the Government prepared to contemplate such assurance?


My hon. Friend, I think, is leaving out of account the £3,000,000. If they are going deliberately to default their debenture interest in order to fall back upon the Government guarantee, they must deliberately give up their dividends on the whole of their £3,000,000.


I am somewhat suspicious.

4.0 P.M.


I am not suspicious of my hon. Friend. I think that those who have come into this discussion have given a pledge of their good faith. I think if they are likely to throw away their £3,000,000 with the object of getting Protection, they will throw away their £3,000,000 and they will not get Protection. I have much too good an opinion of the sound fiscal doctrine of the United Kingdom to believe that even a scheme of this kind would not tempt it into a protective tariff. I am sure hon. Members opposite will not think I am saying anything antagonistic when I express my own faith so emphatically. But my hon. Friend says, "Would not they default with their debenture interest and appeal for Protection?" We are always running the risk of appeals for Protection. It is only two or three years ago that the representatives of nearly every trade were appealing for Protection. You cannot name a single trade—hosiery, shipping, iron, the textile industry—everywhere they were appealing for it. Dye stuffs are no exception. The hon. Member does surely not think that merely because in some chambers of commerce they have passed a resolution in favour of this scheme and then, in proposing that resolution said nothing about protection, or made an overt reference to it, that we are going to be frightened? I do not believe any proposal for any new manufacture in this country could ever be mentioned in some Chambers of Commerce without somebody putting in a protectionist appeal. There is nothing new in that. The only way is to safeguard against it, and the only means in our power to maintain the best safeguard, is that the debenture interest should have itself well buttressed by a large ordinary issue at least double the size of the debenture interest; that that large ordinary issue should be put up by the big consumers who are mainly interested; and that they should give an undertaking that they will get their dye stuffs from this concern and not boycott. Then, I think, we might also depend upon the good sense of the community to avoid protection.


Will the right hon. Gentleman explain to the House how he proposes to deal with the small consumers outside this great combination, and protect them with regard to prices?


I am afraid I have been rather a long time on this one point; but I gladly reply to the hon. Baronet. If we are to do this it is obvious that we must have a certain amount of Government control. As an old business man I should certainly deplore Government control in the manufacture of these commodities. I think we should give a good deal of assistance and get the best men to come into the trade, and I should certainly urge my right hon. Friend the President of the Board of Education to do what he can to develop a chemical side, especially in dye stuffs, in modern universities in order that we may have a larger ground from which to draw our chemists. But Government control must provide for three things. First of all, if we are to give a guarantee of this debenture issue, we must have two Government nominees on the Board. These two must have the right of veto on three points. The first is that the concern shall remain permanently under British control—that is to say, that the majority of its shares shall never pass under foreign control; secondly, that no arrangement shall be made with any foreign producers as to keeping up prices, or delimitation of the area of activity; and thirdly, that they shall have the right of veto over all contracts made so that no large consumer shall be given any advantage in price over any small consumer. I think that is a sufficient reply to the point raised by the hon. Baronet opposite. I do not know that I can say more than I have already said upon this subject. I hope I have answered the questions addressed to me. I need hardly say I do not come into this merely because I love a scheme, but I feel the urgency is so great that we cannot ignore it. Though it is perfectly true that the whole of the textile industry is not dependent upon dye stuffs, we do know that the combined capital of such operations of textile and other industries which require aniline dyes comes to no less than £200,000,000. I do not know how many employés that covers. I am informed by those who are well qualified to speak, and who have no ulterior object in giving me the information, that certainly about 1,000,000 of our employés are either directly or indirectly interested in the adequate supply of dye stuffs for their main industries.


I am very glad that the President of the Board of Trade is taking such active steps to overcome the difficulties which this shortage of dyes places us in at the present. I am very glad to hear that he has undertaken to deal with these temporary difficulties, and I think that the House will be very pleased with having heard all this. But I am bound to say that I am thoroughly in disagreement with him as to the larger scheme. I say that this is not the time for this large scheme. You cannot get it to go under two years, and I hope my right hon. Friend does not believe that the War is going to last for two years. Let me tell him what is to be done if we are to spend £4,500,000. You have to acquire one site or probably more. You must have rail and water communication, and you must have a plentiful water supply and a means of carrying off the effluent which does not lead to litigation. These things are not so easily done in our crowded manufacturing districts. When you have settled on your land you have to approach the landlord, and if you are in a hurry the price will go up enormously. Then you have to design your plant. I am told the plans have been drawn. I do not believe that the plans which involve the spending of £4,500,000 have been drawn. When you have devised your plans you have to start building, and during the War you will find the contractors are very short of men. Meantime you may be going on with your foundations, but there are no navvies to be had. In the course of a great many months you may begin the erection if men can be gathered together, and they will be a scratch lot, for the purpose of building these works. I have been told that you could get this £4,500,000 building erected in two years. Those who think so are a great deal cleverer than those who have spent their lives in chemical manufactures.


I think the Government will regret that they did not listen to my advice in August and appoint two or three members of Parliament on this Committee. They were deaf to my plea. They refused to give information and they refused to appoint any Member of the House on the Committee. Still I do not want to upbraid or blame the President of the Board of Trade because he has a very difficult problem to confront. It is pointed out that only 7½ per cent. of the dye stuffs used in this country are made here. If we can recover a large portion of that trade it is a consummation that every Member of this House will be only too delighted to see realised. I think also his statement clearly proves that the price of dye stuffs has gone up very much in this country. I will give one instance. In the matter of natural indigo dyes which are largely in demand the price before the war was 2s. per lb.; to-day it is 11s., and I think a rise of price like that clearly shows that there is great need for extra dyes in this country. I have all my life had to face part of the problem he is facing, and I am obsessed with the great difficulties of the scheme he has indicated. The position of this country to-day with regard to the manufacture of dyes is this. You are making 7½ per cent. There are a few works in this country, one or two of which especially in the constituency of my hon. Friend have been highly successful. There are besides two other factories established in Lancashire owned by two great German syndicates engaged in the production of dyes. In Germany this industry has been developed almost with the same method and determination as they have prepared for war. It has been one of the things that has taken hold of the German imagination, and into it they have put a great deal of ability and a great deal of science. I do not think the Board of Trade quite realises the sort of organisation that they are up against. There are quite a number of very large dye manufacturers in Germany, but they are largely grouped into two sets, each set consists of two or three units, and only this week I heard what are the resources of one unit of these two sets. The company I am referring to employs 360 chemists and chemical engineers, and I am not talking of workmen. It has a capital of £2,000,000, and before the War it was at 500 or 600 per cent. premium. There are two German groups, and each of them has a factory in Lancashire to-day. At the end of the War, if this new venture has to meet the opposition of these two powerful groups with factories already established in this country, it is evident that they are not going to have an easy time of it, and my object is to make sure that the Board of Trade realise the position they have to face.

I have reason to think that in this state of war the Government have been able to make some arrangement by which they are likely to get control of these two German factories in the north of England. I understand that in both these factories there is a considerable plant and also a large quantity of vacant land which could be very easily developed. If I am right in this, then the fears of the last speaker may not be altogether justified, because it is evident that if you have in being the nucleus of two great works already in this country it will not take so long to develop them as if you had to begin anew altogether. The Board of Trade have to face this problem. Are they going to work with these two German works as their principal asset or are they going to use as their nucleus the British works which they are thinking of obtaining? I think it is quite evident that this problem will need very great generalship to decide what to do, and to carry out a scheme involving £5,000,000 of capital to a successful conclusion. It is a bold venture. If it succeeds it will be to the interests of this country, but it wants to be most carefully engineered. To begin with, a hybrid body partly carrying Government money and partly commercial money does not always tend to success. What is needed is that some great general should take charge and organise all these forces who knows what he is about, and I have some reason to think that there are people in this country who have been connected with these successful works, both British and German, who might be secured. If such a scheme as that could be got together there seems some possibility of success.

I am obsessed with the difficulties, but, on the other hand, if the Government are able to make a success of it, it will remedy a reproach, because it has long been a reproach to this country that such a large industry should be so entirely removed from England. The first apostle of this industry was Professor Hoffmann. Aniline dyes were first discovered by an Englishman, but sometime ago Professor Hoffmann was tempted away from London, and he went to Berlin, and many scientific men said that when he left London he took the colourings with him to Berlin. It is a big problem, and it will be difficult to acquire this industry, but it is worth doing. All I say is that the Government should not lose sight of the very great care they will have to use, and the enormous difficulties they will have to surmount.


The right hon. Gentleman was quite right in saying that there has been a very considerable shortage of these colours, but I think the position has been somewhat exaggerated. I do not quite agree with him that the price is altogether a complete indication of the shortage, because at a time like this, when war commences, every user of colours immediately tries to get all the colours he can so as to last him over the period of the war. The fact is that a very large number have got very considerable stocks on their premises so that they will be safeguarded against the continuation of the war for a very long time. I do not think there will be any objection to the Government spending money or anything being done to avert a crisis, and the cotton mills and dyeing works having to be closed in Manchester, but there is a great difference between that and going in for the great scheme which he has foreshadowed. I understand the right hon. Gentleman to say that he has approached certain manufacturers in this country with a view to them all working for the English market, and I presume, therefore, that they cannot turn out any more, or very little more, than they are doing at present. The only thing which could be done would be to increase their premises and their plant. I have no objection to giving them, if necessary, financial aid for the purpose, but I understand these manufacturers to say: "We should be prepared to increase our works and enlarge our plant to make a good many of these colours that are wanted, but what would happen to us after the War? After the War we should have to contend with these great manufacturers, and they would run us up in certain cases as they have done before. We are not, therefore, going to make a large capital outlay for profits that we may never see, because we may not have our works going before the War ends, and even if we had a short run of good profits before the War ended, it would not compensate us for the outlay."

I should be quite prepared for the right hon. Gentleman to meet this emergency in the best way he can, and I think those firms who are already colour manufacturers ought, from patriotic motives, to put themselves in as good a form as they can for helping the country consistent with a fair profit. But that does not seem enough. The right hon. Gentleman went very much further. He said, "We are going at this time of crisis to go in for a large business at a large outlay so as to compete with these great German manufacturers." I do not think a time of stress is a time when people can look at a great scheme of that sort in the most impartial manner. To begin with, it would take millions upon millions of pounds to go into a great scheme which would secure the German trade, and you would have to pay at least ½ per cent. more for the money required. I believe the Government even are paying ¾ to 1 per cent. more for money than they did a year ago. When this emergency arose a Committee was formed, but on that Committee there is not a single Member of Parliament, and no one in this House knows what evidence was brought before it. I know of two Members of Parliament who asked to be appointed on the Committee but were refused. There is no evidence before us on which we can consider this scheme, and I do say the House ought not to allow the right hon. Gentleman to go into a great scheme of this sort, involving the spending of millions of money, at, I think, an inopportune time, for any purpose of immediate relief, without having sufficient data before it to show whether it is a feasible scheme and one likely to be profitable.

It seems to me that to rush into a great scheme of this sort at a time of panic, when people are not quite able to take the same level-headed view that they do at ordinary times, would be very dangerous. Of course we would all like to see this great trade brought back to England. In my opinion if our patent laws had been a little different during the last twenty years we should have had a good number of these works established in this country, and if only the Patent Act, which the Chancellor of the Exchequer passed two or three years ago, had been in operation for twenty years, I do not think we should have been in the same plight as regards this trade as we are to-day in this country. We know that that Act did result in bringing some great works into this country, but, owing to the decision of Mr. Justice Parker, that extension of works has not gone on. There is another point to be considered. The German manufacturer, when the War is over, will want to do business again, and he is not going to see his trade taken away without a struggle. It would not surprise me, if the Government established large aniline colour works involving a capital of from three to five million pounds, that it might not prove that the money would not even make the debenture interest for a number of years. The Germans, with their splendid organisation, are not going to see their trade taken away, and they would, undoubtedly, sell at cost price, or even less, in order to prevent the new works in this country from making a profit. Therefore it is extremely likely, if the Government advanced money for debentures, they would have to take the works over for their debentures. For my part I object strongly to a time of crisis and panic like this being made use of for the large Napoleonic scheme which the right hon. Gentleman contemplates, and I hope he will confine himself and his efforts to meeting the immediate crisis.


I am very sorry I did not know that the President of the Board of Trade was going to speak, and it was not until I came into the House that I was told the nature of the speech, which leads me to say a few words upon what I gather was the declaration made by the right hon. Gentleman. Before doing so, however, I should like to say a word or two upon another subject. My right hon. Friend the Member for West Birmingham (Mr. Chamberlain) has expressed the views of the whole of us in regard to the general statement made by the Chancellor of the Exchequer. I have personally followed what he has done in all these financial matters with the closest possible attention. There are some subjects in regard to which I think he is open to criticism, and when the proper time comes—politics being what they are—he may expect to be criticised. I should like to say this, in justification of the views which I hold on this matter: I would not think it reasonable that the criticism should depend altogether on the results afterwards. It would not be fair to go back long afterwards and say, "You have lost so much money by this, as the event has proved." The only fair criticism is to make it as the thing strikes one with the knowledge at the time, and it is only in connection with these matters that I would, when the time is ripe for political criticism, find any fault with what the right hon. Gentleman has done. In this connection I should like to say something more. I am sorry the Chancellor of the Exchequer is not present, for I do not think he would object to what I am going to say. I am not one of his most ardent admirers, but when the War broke out I did feel, and I said it to more than one of my Friends, that the conditions were so abnormal that they required to be dealt with so entirely free from anything approaching red-tape, that, personally, I should prefer to see at the Treasury a man with courage, even though it is often combined with rashness, and that I would rather see a man there who would take risks by doing too much than a man who was afraid to do anything.

The other subject I wish to refer to before leaving this question is that of sugar. I knew what was done by the Government in regard to that matter, and I think I understood what were the motives that influenced it. I supposed that they thought there was likely to be a famine in sugar and that it was necessary to secure a supply at all costs for the country. There, again, we must not judge by results. It was a reasonable supposition, though if I had had to decide the matter I should not have done it. I should have come to the conclusion that, since the sugar existed in the world, and since the stocks were there, in one way or other they would find access to the markets where they were needed. I do not think I should have made this purchase. But it was merely a question of judgment, and I am not going to say that I condemn the right hon. Gentleman and the Government for having done it. I do think that they should give more consideration than I am afraid they have given to the last step which they have taken, which is to prohibit the import of sugar from abroad except in very special circumstances. I do not quite see what is the object of taking that course. I quite understand that it may be right to take every step to prevent the importation of German sugar. I can understand that, and I can also see that it may be necessary to take some extreme step to make sure that German sugar does not come through some other country, the Government having decided that it is against our interests that Germans should sell sugar to us.

I received the other day letters from people who shipped sugar from South America. I can see no reason whatever why under proper care sugar should not come from countries like that. I do not know what the view of the Government is. Perhaps it is this. They may say, "We wish to injure Germany by destroying the sugar market on which they depend, and by closing Great Britain we injure them in that way." That is perhaps true for a short time, but it can only be for a short time, for in the long run you can only injure the means of selling sugar by stopping the consumption of sugar in this country. I quite admit that you may injure it for a short time, and in that way may injure Germany, but I am greatly afraid that the injury we inflict on our enemy may not be as great as we inflict upon ourselves by an arrangement of this kind. I wish to have it clearly understood that I am not speaking dogmatically about this, but it is a thing we are all interested in, and I am sure the Government will not feel that I am in any way injuring them or the cause which we all wish to promote by saying that on this question I take a different view from that which has been adopted by the Government. But one thing I am quite sure of. If the Government have been influenced in this last decision—I do not know whether they have or not—by the fact that they have big stocks of sugar and they wish to get them sold, that would be a vital mistake. It would be infinitely better to suffer the loss, whatever it may be, than to interfere with trade. That is all I wish to say, and I hope hon. Members opposite will not feel that I have made any criticism which is not fair under the circumstances.

I am sorry I did not hear the speech of the right hon. Gentleman about aniline dyes. Hon. Members opposite may think I am taking this opportunity to press what they call my Protectionist views, but I can assure them they are mistaken. I feel that this War is altering the perspective of everything of this kind, and what will happen after it must be left to the circumstances of the time, and the last thing I should desire to do would be to use this War now as a means of raising questions on which there will be any party discussion, or of trying to enforce my own political views. As I understand it, the hon. Member who has just sat down has laid down this principle. I do not disagree with it. He does not object to any sum of money in reason being spent to get the material we want now during the War. He is quite willing to do anything of that kind. I agree entirely with that. But does he not think, and does the House not think, that this War has shown that some other considerations should be taken into account too? Has it not shown us that it is a distinct drawback to us as a nation to have an industry like this entirely outside the country, and to be dependent upon foreign sources for something which is necessary for us? I think the House will agree that there is something in that, and that apparently is the view of the President of the Board of Trade, that the need which is shown to us is a reason for trying to secure this trade for this country. I think that is a reasonable thing, apart altogether from any economic consideration. The hon. Member made a remark condemning the action of the Government, which I do not share. He said the prospect was that the Government would be left with the whole of this industry on their hands.


I said, possibly.


I have not heard the scheme, but in any question of this kind I should be influenced by precisely the same considerations which influenced the Chancellor of the Exchequer in regard to giving advances to foreign traders on bills. He said that if the banks, who know the circumstances, are willing to take a serious risk, it is right for the State to step in and help them. I say the same. If the President of the Board of Trade can get business men to risk their own money on the chance of this being a success on the terms that they are going to lose all their money before the Government loses a penny—if that is the scheme I think it has some prospect of success, for people will not throw away their money, and I for one am certainly not going to say anything to discourage the Government in carrying a scheme of that kind if they can find business men who are willing to risk their money in it. But I must, before I sit down, say this further. Surely if it is worth doing that at all, it is reasonable to consider what is the most effective way of doing it. If you do not like the idea of duties—I do not ask you to adopt anything of that kind—put it in any other way you like. Prohibit it for a certain number of years. You cannot expect an industry to be really successful which, so far as I can see, cannot possibly get into operation before the War is over, unless the War lasts a much longer time than I expect it to last. You cannot really expect that unless there is ground for thinking that it will be successful. What is the prospect? I have myself taken as much interest in the talk about the capture of German trade as, looking to my past experience and my general inclination, I might be expected to take, for this reason: There are particular kinds of trade where connection counts for a great deal, and the War will make our enemy lose that connection. Therefore, it is well worth while to try to secure that trade. But when you come to the big staple industries it is price, and price alone, that tells, and in my view the House ought to bear this constantly in mind, that to whatever extent Germany is producing now—and we know that she is producing largely—she is probably accumulating stocks, and when peace comes—I know enough of my countrymen to be sure that, though they would not trade, nor dream of trading, now with the enemy, when the War is over, especially if we have won, there will be no bitterness left, no feeling of hatred that will prevent us from dealing with Germany. I say this, if the Government mean to do anything of this kind—and I think it is wise to do it in reason—do not let them consider economic questions at all. Whether Protection or not Protection, if it is worth doing, do it in the most effective way, and I think anyone knows that in doing it in these exceptional circumstances you are committing yourselves to no change of economic policy.


I think the general principles laid down by the right hon. Gentleman would receive acceptance in every quarter of this House, and I should not have risen to say anything now were it not that I understood him to ask for an assurance that in the prohibition of the import of sugar into this country the Government have been actuated by a desire to prevent, directly or indirectly, trading with the enemy, and did not desire really to maintain the price of sugar which the Government had already bought. I can give him on behalf of the Government that assurance in the most absolute terms. In discussing the question no other consideration was ever brought before the Government except that of preventing trading with the enemy, directly or indirectly, in sugar. Perhaps I may be allowed to remind the right hon. Gentleman who observed that these transactions should not be judged by their results that, so far as the results in the purchase of sugar go, we should be quite prepared that they should be so judged. At the outbreak of War Germany and Austria prohibited the export of sugar. For many weeks the price of sugar in America, which is the only big market comparable to our own, was vastly higher than the price at which sugar was sold in this country. It is quite true that at this moment, though I think it will be only for a short time, the price of sugar is lower in America than in London. But what has happened in the interval? So long as Germany and Austria continued their prohibition of the export of sugar, the price in the world outside was higher than in England. When Germany learned that the British Government had purchased enough sugar to last this country for months, their prohibition of the export of sugar from Germany and Austria was removed. It is quite true that the law forbids our merchants to buy German or Austrian sugar, but it does not and cannot forbid the British merchant buying Cuban or South American, or Italian, or Spanish sugar, and the seller of the Cuban or South American or Spanish or Italian sugar replacing the sugar which he has sold with German and Austrian sugar. That is precisely what has been done, and the fall in the price of sugar occurred only after Germany and Austria had taken off the prohibition on export. No man can say that it is a case of cause and effect, but it was, at any rate, a very remarkable coincidence.

If you look at the chart which shows the fluctuations of the German Exchange in relation to the United States, it will be seen that immediately upon the prohibition of sugar into this country, the German Exchange in the United States had the heaviest drop which it has had. Our prohibition of the import of sugar into this country immediately put a stop to the possibility of the export of German or Austrian sugar, and, as the House knows, if Germany and Austria cannot export goods there is bound to be a drop in German export. That has happened. Owing to the stoppage of German and Austrian exports, German and Austrian Exchanges are steadily declining, and there is no business man inside or outside this House who does not know that the end of a steadily declining exchange is ruin to the country. At the moment, but only as I think at the moment, the price of sugar is lower outside than it is in England. But if you take the whole period since the War began and adjust the price in this country and in the United States, it will be found that sugar has been cheaper here in consequence of the purchases than it has been elsewhere.

That is judging of the purchases by results. In an article like sugar, which fluctuates monthly, weekly, and, perhaps, daily, very materially in price, transactions cannot be judged of at the moment when the article happens to be sold at a lower price somewhere else. You must take the general price over a long period. If that is done so far it will be seen that the British consumer has bought sugar cheaper than he could have bought it but for the purchases. That is not all. What happened on the outbreak of War in this country? Sugar which had been selling at 15s. a hundredweight was sold freely at 45s. a hundredweight. And with the prohibition existing on the export of sugar from Germany and Austria, there is no question that sugar would have continued, if not quite at such abnormal prices as that, at a very high price, certainly higher than it is to-day. It is only by our purchases that it was reduced to its present figure, and this is the only means of assuring to this country a constant supply of sugar so long as we are dependent for the bulk of our supplies upon the exports from Germany and Austria.

When the right hon. Gentleman said, "After all the sugar is there, and sooner or later it must come out," it is true that it is there, provided you qualify the "there" by saying that it means Germany and Austria. The surplus of sugar produced in Europe, of which we are the great consumers, comes from those two countries, and if that surplus be cut off, as we are bound to cut it off, not only for ourselves but, if we can, for the rest of the world, there are no means of doing it except by prohibiting the import when they are willing to export. That is the reason of our action, and I think that, judged by the test of four months, that action has been successful. I shall be perfectly willing a year hence to allow the whole subject to be tested by the pure and simple test of the balance-sheet, taking the price of sugar in the outside world and comparing it with the average price at Which it has been sold in this country. Enormous losses and enormous destruction are bound to occur in the beet-growing districts, where the War has taken place, and in the coming year there is bound to be a fall far below the average. The consumption of sugar, it should be remembered, is as large in time of war as in time of peace. The demand of the Army for sugar in time of war is enormous, and it must not be overlooked that the manufacturer takes a big proportion, though the consumption by the manufacturer is not so great a factor as is usually supposed. The great consumer of sugar is the person who buys it over the grocer's counter, to be consumed in domestic households. When all these facts are taken into account, I do not think I shall be a false prophet when I say that over a long period, not having regard to momentary fluctuations up and down, the transaction will be found to have resulted in profit and not loss to the community. But whether that be so or not, this I can say, and repeat most carefully, that our object has been neither to make money nor to make a success of the transaction, but to ensure, under all circumstances, the supply of an absolute necessity of life in sufficient quantities to our people, and, secondly, so far as we can, to injure the trade of the enemy.


With regard to what the Leader of the Opposition said in reply to the Home Secretary as to his purchases of sugar, I quite agree with the right hon. Gentleman that the whole question depends upon whether we hurt ourselves more than we hurt the enemy by such purchases. While we sympathise with the effect by the War upon the textile and other industries, we recognise that the inconveniences of war are endless, and are bound to be endless. I heard the other day of the case of certain Australian ores, which used to be sent to Germany to be treated, and, of course, cannot now, and the wool trade with Australia is also affected. We are all agreed that this is a just and necessary War, and that it must be pursued as vigorously as possible, but it is absurd to delude ourselves into the belief that things can be as they were. The Leader of the Opposition spoke of the question of capturing Germany's trade, and of the interest he might be disposed to take in it. There again we are apt to live in a fool's paradise. We are all anxious to capture all the trade we can, but I think that may be very much exaggerated. Australia had been in the habit of buying hosiery from Saxony, where it is a great industry. It has been suggested that we ought to try and capture that trade, but if manufacturers here try to do so the question is how long is the War likely to continue, and what position would they be in after the War? If Australia is prevented from sending her ores and wool, the probability is she may not be in the position to purchase as much hosiery as formerly, so that the Will-o'-the-wisp of capturing Germany's trade, as the attempt may be described, disappears in mist or thin air. To delude ourselves that we can subsidise the aniline industry, or some other industry formerly the monopoly of Germany, is really not to appreciate the position in which we are. The Chancellor of the Exchequer in his most interesting and great speech to-day has surveyed the whole field, and I think has impressed on us the fact that we are incurring enormous liabilities, and that we have practically all become partners as members of the State, and bankers and financiers for great industries, and with advances to the Stock Exchange and traders, and the discounting of bills. We all agree that he acted wisely, and the Leader of the Opposition, with the handsome tribute which he paid to the Chancellor of the Exchequer, said that he was faced with an unusual emergency, and had shown courage in facing it.

We on this side appreciate the patriotic and loyal assistance which he has received from the right hon. Gentleman the Member for West Birmingham and other Members on that side, and I for one would like to congratulate the Chancellor of the Exchequer on the way in which he has invited all Members, irrespective of party, to meet him at the Treasury and to take part in the conferences in which he has sought the expert advice of men distinguished in the law, banking, and other professions, to help him in this present emergency. But we cannot deny the enormous contingent liabilities that we have incurred. If we try to assess that liability and to grasp what it means, we are driven to the conclusion that it depends on the duration of the War. That brings us to the conclusion that we wish the War to be pursued in the most vigorous fashion, so that it may be brought to a satisfactory conclusion as soon as possible and an honourable peace procured. If we appreciate the enormous contingent liability that we have incurred and realise that these advances may not be liquidated without considerable loss, we are stimulated to use every effort in recruiting, and in the carrying on of the War, in the hope of a conclusion being the more speedily arrived at.

I do not know whether any Member on the Treasury Bench can give me an answer, but I should like to ask a question in reference to the fourth item in the Schedule. The Chancellor of the Exchequer made no reference whatever to it. It has reference to obligations incurred in respect of 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 Dominions or any British Possession or Protectorate. We should like to know whether there are any obligations in that respect, whether we have made any advances to any of our Allies, and what they amount to? [HON. MEMBERS: "No!"] Hon. Members say "No!" but I think it would be very interesting and valuable if we could be informed on that point. In conclusion, I would press the supreme importance of the Government being alive to the fact that, while these liabilities may have been necessarily incurred, we recognise their extent, and hope therefore that no possible effort will be spared in order that the War may be brought to as speedy a conclusion as possible.


I beg leave to withdraw my Motion.

Motion, by leave, withdrawn.

Motion made, and Question, "That the Bill be now read a third time," put, and agreed to.

Bill read the third time, and passed.