HC Deb 23 February 1915 vol 70 cc181-220

I rise to move, "That this House, having heard the Chancellor of the Exchequer's statement on 15th February, approves generally of the arrangements made by him with the Finance Ministers of France and Russia."

This Motion embodies what is perhaps one of the most, if not the most, far-reaching financial proposal ever submitted to this House. We and our Allies on the Continent are engaged in a life and death struggle, and each of the allies must do all that it can. It is absolutely vital that we should win in this fight, and it is probably more important to the United Kingdom than it is even either to France or to Russia. We have perhaps less to gain—but we are not out for gain. This is not a war of aggression or of conquest. But I think we have more to lose. Germany is more jealous of us, hates us most—would rather defeat us than any nation on earth. She regards us as the obstacle in her path, the barrier to her world-wide domination—a domination of scientific and philosophic tyranny and selfishness. I think we may esteem it an honour and treat it as a matter of pride that once again in our history we are called upon to champion the rights of smaller nations, to defend their freedom and independence, to uphold public justice and international law, to curb the ambition and destroy the power of military despotism in Europe. It is a mighty task. It is the biggest we have ever undertaken, and, having gone into it, we have more at stake than anyone. Defeat would mean the end of the British Empire as we know it and all that that means to us—in our freedom, our wealth, and our commerce, to the moral and social ideals we cherish, and to the cause of freedom and independence, specially amongst the small nationalities throughout the world. We must either win or go under. But if we went under wrong would triumph and brutality would be enthroned. Up till now the burden of the actual War has fallen more heavily on our Allies than on us. Belgium and Servia have suffered terribly. France is fighting almost entirely on her own territory: some of her richest and fairest lands and towns have been devastated. She is suffering all the horrors of invasion and war on her own soil. Russia is facing three-foes on her frontier—Germany, Austria, and Turkey. In Europe alone she is fighting on a frontier twice as long as the frontier on which we and France are fighting Germany in the Western sphere, and she is fighting splendidly, surprising the world. By holding up the great forces she is holding there she is largely saving France and ourselves from terrible times. As for ourselves, the world has not yet realised what we have done and what we are doing. We, none of us, should have thought it possible a year ago that we could have done what we have done. I sometimes think we have been a little too modest. Somewhere else in other parts of the world there has been a disposition to think we have not done our share, because they do not know what we are doing. All the Allies are straining every nerve. They are full of hope, full of confidence, grim, calm, and determined, and they are splendidly loyal to each other. We have one great advantage. Thanks to our splendid fleet, there is no invader on our soil. We are free from the horrors and losses which that involves. When we talk about the cost of the War to each country we must not omit to consider, that although it may be that on our forces we shall during this year spend more than the other countries, yet we shall not suffer the losses which they suffer through having war on their own soil.

The great needs are men and money. Without money the men cannot be adequately equipped, armed and fed. Our Allies have provided and can provide far more men than we can put into-the field on the Continent, although we are doing and shall do wonders in that respect. We can provide more money than any of the others, and we must do it. This War must be won on land as well as on sea. It may be, as the First Lord of the Admiralty told us the other day, that the Navy could and would, if needs be, alone ultimately decide the issue, but, if France and Russia were defeated on land, it would be a long and difficult job.

The greater and the more effective the forces we can bring to bear on Germany on land, the sooner will be the end. To hasten that end we must render to those of our Allies who need it such financial help as will enable them to put into the field and keep there the largest and most efficiently armed and equipped armies that are possible. From a purely financial point of view it would be cheaper for us to help Russia to raise and equip 3,000,000, 4,000,000, or 5,000,000 more men, than for us to provide and equip anything like that extra number ourselves. If Russia does not do it, we may have to. We are in a joint undertaking, and each nation must do its utmost. We must regard all the resources of the Allies—men, arms, equipment, food, money, and credit—as a whole, and use them when, where, and how they can be disposed of to the greatest advantage. If the War drags out much longer than it otherwise would because the Allies have not sufficient strength in the field to decisively defeat the enemy, it will be an exceedingly costly business; costly in life, costly in money, costly in the continued devastation of the country, costly in the continued dislocation and loss of business. If that failure to end the War early is due to lack of money to provide arms, ammunition, and food, and if that money could be found, it would be a frightful waste and great financial folly not to find it. The longer the War lasts the more uncertain it appears, and the more exhausted the nations become the more difficult and costly it will be to raise money. Every consideration of humanity, of financial interest—aye, and of our duty to our brave men in the field!—requires that no effort should be spared to bring all the forces and all the resources of the Allies to bear as speedily and as effectively as possible.

Is the arrangement which the Government has made, subject to the approval of Parliament, for doing that the best that could be devised as far as using the finance and credit of the Allies is concerned? Is it the best way of using the means available? Will it secure that each of the Allies will do its share according to its power and its means? It is an enormous responsibility. We used to talk about the Great War of 100 years and more ago, and what Pitt accomplished in the early years of the last century, but he never had to grapple with anything like this. The number of men, the cost, and everything is on a far greater scale than that.

With regard to this scheme our informa-is limited. It must be so. We cannot have all the details given to us without disclosing what should not be disclosed. In this Motion our approval is to be general, and we generally approve. It is not a detailed and not a specific approval, but it means that we must and we do leave much to the Government. With respect to the personnel of the matter, first, we have the Chancellor of the Exchequer. Whatever some people may have thought of him before—and some of us have had a good deal to say at times upon that and may have to say it again—we shall all agree that throughout this great struggle he has manifested a width of out look and of courage which have captured the admiration of the country. He has consulted the leading authorities in the City and taken advice wherever it was to be had, and the result has been a success which will do much to justify confidence in the future. I imagine that these arrangements will be made and carried through, not only in consultation with the Cabinet, but especially with the Prime Minister and the Secretary of State for Foreign Affairs, and in their hands I am content to leave the matter. Great Britain, France, and Russia are each to supply their own needs in their own markets so far as they can. Will they do it? Will they play fair? Will they, as we say in the North, be "jannock." We must be vigilant, but we must trust them, and we have no reason to doubt them, in a great struggle like this there must be mutual confidence and complete co-operation if we are to succeed. I presume that any help that they need will be a debt which ultimately they will have to pay. I am speaking of the two Great Powers. For outside purchases Russia has needed, and will need, help; but if she can sell her crops she will be able to pay a good deal.

Each country is to raise its own loans, and, as I understand it, to pay its own terms. I agree with the Chancellor of the Exchequer in thinking that is far better than a joint loan. They will get more out of each country and know more accurately what each country does provide. This country will have to raise a lot of money. That means that we must conserve our resources, we must stop lending abroad, our Colonies must curtail their demands, and we must stop avoidable expenditure. I would strongly urge that our Local Government Board and our Education Department should impress upon local authorities that this is not a time to go sinking money and incurring expenditure. We must economise in our local government as well as in our national government. Great schemes of development and extension, for housing, and anything else, that can be deferred must be delayed until after this War. We must have national economy. [An HON. MEMBER: "Business as usual."] Business as usual is quite right, but going in for extension and expenditure of that sort at this time is not business. The nation's purse is not bottomless. We are making demands upon it such as have never been made before. It will be a terrible strain, but if I understand the spirit of my countrymen we mean to see it through. The burden is heavy, and will be heavy, but it will be borne to smash militarism and all that follows in its train.


I beg to second the Motion.

One is quite alive to some of the criticisms which have been offered on the Government scheme. We were told that it is too vague in its character, but I think it is now generally accepted that quite as much information as was wise, in view of the present crisis was given at the time, and I feel sure, when the spirit in which the country at large is accepting many things from the Government without too much question, it is willing also to accept some of the proposals which have been made and to leave matters in the hands of those who know exactly what arrangements have been made without going too closely into the merits. It has been said that Britain has been generous to her Allies, but I do not know that that has by any means been proved, and here again we must leave matters of detail to those who are in command of the ship of State. After all, we have to judge of what we shall do and what we are able to do as much by our financial resources as by any other way, as was the case a century ago when we were in very much the same position. The financial position of Britain then did almost as much as her Navy and her Army to save her from militarism. In judging of these proposals one wonders what our enemies would think were they able to make such suggestions to any great financial country as we are able to do. If they could go into the commercial market and raise money as we are able to do and obtain those supplies which command of the sea and command of finances enable us to do they would indeed be in better spirits than they are at present.

Several business men have said to me that they have found no precedent during the last seven months to guide them in the conduct of their commercial ventures. That is very true, and we hope it will be many generations before those who follow them will find it necessary to turn up these precedents which we are now making for guidance in future. We hope that never again will the Empire be called upon to make such financial sacrifices as she is now making. The Government is acting and has acted since the War began in the way of looking about to consider what can best be done for the Empire under the very special circumstances in which we find ourselves. Perhaps one of the most important and valuable considerations which these financial proposals put forward is that which deals with the purchase of different material and war supplies by agreement between our Allies in such a way that we shall not be treading upon one anothers heels and all in pursuit of the same goods. That is a most important suggestion which will undoubtedly tend, certainly not to increase unduly the price of commodities which the different parts of the nation will require. In the speech of the Chancellor of the Exchequer a week ago he spoke of certain arrangements which were being made which might enable Russia to export some of those valuable commodities, especially food-stuffs, which are at present held up in the Black Sea. We begin to wonder, owing to the events of the last few days, whether we shall not be able to force the passage of the Dardanelles and so release not only the ships which are necessary for trading but those vast stores of food-stuffs which the Allies so much require. Such a venture as this shows us how closely interwoven the Admiralty, the War Office and the Treasury are, and how closely they work together.

The whole Government of the country works together as one department in a way it has never done before. By these arrangements and by a closer financial understanding with Russia I think we shall be building up for the future a trade with that great Empire which will go on in a different way for generations. Her resources are so vast as to be absolutely illimitable. When peace reigns once more in this land another enemy may cross our threshold, neither through the air nor under the water. Unemployment will, we fear, visit us, and want will stalk through the land, and if at that time those foes have to be combated we must prepare now to meet them, and I believe the financial steps which have already been taken and foreshadowed in this agreement are the most potent that we can employ to defeat those foes by securing to ourselves those ample supplies of raw material and foodstuffs without which we perish.


One observation made by each of the hon. Members who have preceded me has struck me. We are all a little inclined to make the wish father to the thought. I notice the hon. Member who spoke last said that one satisfactory feature, one success of the present situation, was that all the Government Departments were acting as one. That is a consummation devoutly to be wished, but I should not like Ministers to think that the consummation has already been obtained. That much has already been done I do not doubt, but I am quite certain it will well repay them to give further attention and greater care to that particular object. The right hon. Gentleman who moved the Resolution travelled over a good deal of ground. If I may say so, I admire nothing more than the skill with which he conveyed, and will not say rebuke, but suggestions to the Chancellor of the Exchequer under the guise of compliments. He congratulated the Chancellor of the Exchequer on the success which had attended his new departure in consulting financial authorities upon financial matters. We all join in our congratulations to the Chancellor on the success of this new departure. We hope that though new, it will be continued; we hope that though it be a new precedent, the precedent once made will be continued.

Let me say in regard to the Resolution, what indeed anybody in this House will not doubt, that I myself am ready to give a cordial support to the Motion which has been moved. It is a Motion which we must discuss with discretion. I hope that nothing that I say or that any other Member says in the course of this Debate will in any way embarrass the Chancellor of the Exchequer or create any feeling of doubt or hesitation among our Allies. It would be very far from the desire of any of us to pursue such a course, and we shall all speak with the responsibility which the circumstances impose and with the knowledge ever present to our minds that we are considering not merely the financial arrangements of this country, but the financial arrangements of three great Allied Powers amongst whom there must be a certain give and take of ideas, and no one of whom can expect to have everything settled exactly as that one would most prefer to see it done.

The hon. Gentlemen who have already spoken have said that our information is not perfect. It could not be perfect. It is obvious that it is impossible for the Chancellor in such circumstances as I have described to tell the House all that is in his mind, or to answer questions, as to the future, which may have to be discussed again with our Allies, and which, even if decisions are already taken, concern not only us but also those Allies. Not only the decision must be made in common, but the announcement with regard to it must be agreed in common both as to its phraseology and as to the time at which it is to be made. Therefore I say that if at any point of my speech I appear to put a question to the Chancellor of the Exchequer, I am quite ready that he should postpone his answer to it to his own good time. I shall try to avoid putting questions to him, though I shall make suggestions. But I am quite ready to wait for a reply until he, in the public interest, with the knowledge he possesses, and in communication with our Allies, feels that the subject may be fully dealt with. Subject to the limitations of the information which is at our disposal, I say that I give a ready support to the Motion which has been moved—a Motion which expresses not a total approbation of every step that has been or may be taken, but a general approval of the principle the Chancellor of the Exchequer has laid down in the scheme of, if I may so call it, international and national finance which he has sketched to the House. The principle is one to which every one in this country will desire to live up, not merely in the letter but in the spirit.

We are allied to France and Russia in a struggle which is a matter of life and death for us as a nation and as an Empire to at least as great an extent as it is for France or Russia. We are solidaire with them in the struggle which is going on, and we desire that our resources should be used to the utmost in the common struggle, just as we are confident that each of our Allies will use their own resources without hesitation and without calculation to the best advantage for the promotion of the cause which is common to us all. That the military alliance which has been signed should be extended to the realm of finance was a natural corollary to the outbreak of War. It could not be done too soon, and I am glad that the Finance Ministers of our Allies and of our own country have met and in a conference face to face have discussed and have settled so many of the financial difficulties which have arisen. I think the decisions the Conference came to were in the main wise decisions, and in the main decisions such as any British Minister with the traditions of British finance behind him might well have commended.

The Chancellor of the Exchequer very properly dwelt upon the financial resources of the three great Allied Powers. They are enormous. They are enormous almost beyond the capacity of the mind to conceive them. But, however big they be, full use cannot be made of them unless it is an organised use. You cannot leave things to chance. If I may be allowed an expression of opinion, I think the greatest strength of Germany—and it is a strength which is naturally inherent in a very autocratic Government—is the extent to which in every sphere her resources, whatever they are, are, and not only are, but have long been, organised for such a contingency as has now occurred; and the weakness of our country, such as it is, a weakness largely temporary and finding its remedy, day by day, as the War proceeds, consists largely, as you might expect in a democratic country, in that our resources have not been organised in the same scientific manner, but are scattered and are not readily all brought to bear on the immediate object that now lies before us. I am very glad that in communication with our Allies the Government have set themselves to work to organise, for the purposes of the War, the resources of the three countries. As I say, those resources are enormous. Take the statement which the Chancellor of the Exchequer made; the single figure which he gave, that we could carry on the expenses, the huge expenses, of this War for five years out of our foreign investments; that France could carry on in the same way, could pay her expenses, for two or three years from the same source; while if you turn to Russia, though her resources are not in the same form, the wealth of that country, the inherent natural resources which are only just beginning to be developed, are so great that they in themselves ensure to Russia the future credit, the future wealth, which justifies her in undertaking, and enables her to undertake, and gives her the credit for undertaking what aver expenditure she may have to bear in the present crisis.

I am very glad that the three Allies decided against any large joint loan. I know from reading foreign papers and other sources that such an idea found favour in some quarters. I think it found favour, not solely on financial grounds, but partly on what I may call moral grounds, grounds, as it were, drawn from the psychology of the peoples concerned; and that one reason, and perhaps the main reason, why this proposal was supported in some quarters was that it made the partnership between the three countries, for the purpose of the War, more solid, and that it emphasised the closeness of our alliance and the community of our interests. I do not say that that is an idea which we can afford altogether to neglect, but I say confidently on behalf of our people that we do not need any joint loan to secure that in common with our Allies we will wage this War until it is brought to a successful end. We do not need any financial ties to bind us to them. Ties of affection, of regard, of blood shed in common efforts already made in common, the interests which we guard in common, and for which we fight in common, are quite sufficient to bind us firmly to them without any artificial bond forged in the form of a particular loan; and, though I do not profess to speak for others, I say confidently for our own that the effect, not merely on our own, but the effect on the credit of our Allies in the market of a huge joint loan would have been bad, and, indeed, I doubt whether anything could have been worse.

The Chancellor of the Exchequer raised some of the obvious objections. Whose credit do you take as a test of the price at which you issue the loan? Is it A's, or B's, or C's, or what combination of the three? I am quite certain that in any scheme of the kind, if it had been attempted to float a loan of the kind in our market, or any other market, the result would have been, not to raise the credit of all the partners, or of any of the partners, but to pull down the individual credit of each one of the Allies. I am glad that such a proposal was not approved of at the Conference between the Allies. Of all the proposals which were approved of there is but one on which I have any criticism to offer. I approve heartily of the arrangement come to for improving the exchange between Russia and this country. No doubt the best way of improving the exchange is to free the course of trade between Russia and the rest of the world. Do not let it be thought that nothing is being done in that respect. The route viâ Archangel has been kept open longer than anybody dared suppose that it could have been when the War broke out. It has become known for the first time during the War how long it can be kept open, and we have good reason to hope that just as it has been kept open much longer than was expected, so it may be reopened earlier than would have been expected.

We all of us hope, too, that the other measures which are in process of being taken may succeed in setting free the course of trade into and out of Russia. But meantime it is of the utmost importance that the exchange with Russia should be improved, and I heartily commend, if I may say so, the steps which the Allied Governments have agreed upon for that purpose. Equally commendable and equally urgent is the agreement which they came to as to purchasing in neutral countries. We know how difficult it is to prevent overlapping in our own country, and to prevent one Government Department, or one semiofficial representative of the Government bidding against another. It is equally important that we should not raise prices against one another in the markets of the world, and that in buying, as in all other fields of finance, we should co-operate, we should exchange confidences with the greatest freedom, and we should act together, not merely on broad lines, but also in detail.

4.0 P.M.

As I said, there is only one thing to which I wish to refer. That is the one exception which the Ministers of the Allied Powers have made at the conference to the decision not to have a general loan. I do not know that the Chancellor of the Exchequer would be in a position to tell us anything more on that subject. I do not press him if he does not wish to, and particularly I do not wish to press for information which it might not be In the interest of the country, or which it might not be within the amenities which we owe to our Allies, to give at this moment. But if the Chancellor of the Exchequer is prevented from saying more, I do not think that I can do any harm by making a suggestion across the floor of the House. It must be obvious that if the objections to a joint loan on a grand scale are such as the Chancellor of the Exchequer evidently felt them to be, and such as I have myself endeavoured to state them to be to-day, the objections to a joint loan on a small scale are not to be overlooked. They are the same in kind; they are only different in degree. Though I do not want to underrate the difference in degree, still, I say for myself, that I think that a joint loan is a thing to be avoided if it can be, in the interests of our Allies quite as much as in our own. The joint loan which the Allied Powers contemplated was a loan for the benefit of the minor Allies like Belgium or Servia. I would not have it thought that anyone here grudges the assistance which it may be found necessary or desirable to give to the Belgian Government. We grudge no assistance to the Belgian Government, or the Belgian people, the benefits of which go to them and not to the German Army of occupation, and that is the only limit which I put on the readiness which we should have to come to the assistance of the Belgian Government, or the Belgian people. I can see that it is an important limitation, but, observing that, I can see that there will be again, as there has been in the past, a clear necessity to give financial assistance to the Belgian Government, and that that must be given in one form or another with the aid of the Allied Powers. The suggestion that I want to make to the Chancellor of the Exchequer, if it is not too late, is that instead of the Allied Powers raising a joint loan, the proceeds of which are to be handed over to the Belgians, the Belgians should raise the loan under the joint guarantee of the Powers. I may say that if it can take that form, we shall avoid the disadvantages which attend upon a loan being raised direct on the general credit of the Allies. I will not argue the question further with the Chancellor of the Exchequer now; I think it is sufficient to make the suggestion, and he, I am quite certain, will consider it. I do not ask him to say at the present moment whether it will be acceptable or not. One further point I wish to touch upon. I am sorry to say that I was not present at the discussion raised by the hon. Member for Coventry (Mr. D. Mason) last night, which, though not directly raised in relation to this Motion, is the same kind of subject as that we are discussing. I have read the report of the discussion which the hon. Member raised in regard to the Treasury notes which are now in circulation. He urged upon the Government that they should withdraw those notes, but I differ from the hon. Gentleman on the view's which he expressed with regard to their effect on prices, and I do not think that would be a wise course. I do not attribute to the existence of these notes the whole of the rise in prices, or indeed, that they have such an influence on the rise in prices as the hon. Member for Coventry thinks.

I have held for a long time, and I may say that my view is confirmed by the attention I have had to give to the subject of currency, and by the evidence which I received when I sat as Chairman of the Royal Commission on Indian finance and currency last year. I have held for a long time that gold in the pockets of our people, what Lord Goschen called "the vaistcoat-pocket," is not a very useful reserve for any national purpose. But, as a matter of fact, we carry about the same amount of gold whether in time of crisis or not, and that gold is not readily made available for international currency when the need for it in that capacity arises. Therefore I hold that the internal circulation of gold is a wholly wasteful use of it; on the whole it is an out of date use of it, and the greatest development of our financial system has been the substitution of paper for gold. The largest substitution has been in the form of the cheque. We do not readily realise how small a part of the currency is in gold or silver, or even bank notes, and how very large a proportion of it is in the form of the cheque; and provided that the issue of notes is not an artificial inflation of the currency, but responds to a real need for currency, the more you can substitute notes in internal use for gold the better I think, the more economical, the more, shall I say, civilising, the more advanced your currency becomes. I do not care about seeing a great deal of gold in in the pockets of the people; I care about seeing a large reserve of gold centralised for use in emergency. If you have secured your reserve of gold and the emergency arises, then I hold that the most foolish thing you can do is to fail to use your gold. You get your gold together in order to use it when the emergency arises. You get it together in order that when the exchanges go against you, you may correct the adverse balance of exchange by using your gold, and unless it is so used at that time it seems pure waste of gold to board it in reserve.

That is not a doctrine which is popular in any foreign country that I know, but it is a sound doctrine, and I hope that the whole of the influence that we can bring to bear through the Chancellor of the Exchequer on the counsels of the Allies will be directed to make them use their gold reserves freely when those gold reserves are required. We might all learn a lesson from these large international Powers from our own domestic experience in the early days of the War. When the banks reopened after the August Bank Holiday there was a queue, if I remember rightly, at the Bank of England for two or three days. On the first day there was a considerable queue at the Bank of England of people desirous of changing notes into gold. I think the Chancellor of the Exchequer did indicate to the House that some of these gentlemen who came in ultra-British costume, spoke with a slightly foreign accent, but, at any rate, they were there—there was a crowd. If the Bank of England had refused to give, out gold the crowd would have gone on growing; but the Bank of England paid out the gold; they not only afforded opportunities to the people to get gold, but gave additional facilities, and the result was that on the second day the queue was not nearly so big as on the first day, and in three or four days there was no queue at all. You have got to study the psychology of people under circumstances of this kind. If the Government show their confidence, if they use their gold freely they very soon restore confidence in the public mind, and the demand which lack of confidence brought dies away.

Again I say—and I do not think I am talking a doctrine which is repellent to the Chancellor of the Exchequer—that I hope our interests will be used to persuade our Allies that in this matter the boldest course, the safest course, is that it is as unwise for States to hoard gold as it is for individuals within the States. I have said all I wanted to say. I hope I have said nothing which can possibly make the Chancellor of the Exchequer's task more difficult, or that will be resented or objected to, as an expression of opinion coming from an unofficial Member of this House, by the Foreign Ministers mostly concerned I have had the honour of being acquainted with M. Ribot for thirty years; I have had the honour of being presented to M. Bark, when he was in this country the other day. I am quite certain that those Ministers, at any rate, are with our Chancellor of the Exchequer in desiring to make the best use possible of all the resources of the Allies, to secure our common end, and I say on behalf of the Opposition that we are equally united with the Government in their purposes, and we will give them every assistance in our power in order to secure that end.

The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George)

I am sorry to say that I do not think I have anything useful to add to what has fallen from my right hon. and hon. Friends and from the right hon. Gentleman the Member for West Birmingham, who has stated with very great discretion the British view of this transaction. But it will be thoroughly realised that I am not as much at liberty as he is to enter upon the whole of these I transactions as if they only affected I British finance. They affect the position of Russia and of France as well. Their difficulties are not ours, and ours are not theirs. Therefore I should be very sorry to say anything in the course of the Debate which, though it might not matter so far as this country is concerned, might be a cause of considerable embarrassment to them, because of their particular difficulties being affected. I think I have told the House of Commons every liability which we have incurred, and I think the House is entitled to know. Considerations were urged in the course of the Conference which I do not think it would be wise for me to enter into in the course of a discussion in the House of Commons under present conditions of publicity. But as far as our liabilities are concerned, there is no liability which I need not state to the House. The limit of our liability is the sums of money, credits, which Russia would need and would wish to establish for purchases abroad. That is only a trifling or small proportion of the total liability of Russia for war purposes, and therefore the House can figure out for itself the limit of the liabilities we have incurred in respect of Russia and the smaller Powers With regard to the question of the joint loan, I am in entire agreement with the right hon. Gentleman, and I do not mind saying so. It is a point of view which I have raised. The idea of joint loans is in much greater favour on the Continent than it is on this side, but when you enter into a Conference of this kind you must do so with the idea that you do not get all your own way, and perhaps the House will allow me to leave it just there. The matter is not finally settled, and there will be another Conference in London when the occasion admits. For the moment there is no idea of a joint loan being given even in the case of the smaller States. Therefore there is no immediate need of discussing the question of joint loans, and I have no doubt that before the matter is decided upon there will be another Conference. The objection put forward by the right hon. Gentleman the Member for West Birmingham is a very practical one. I am glad to think, and I have no doubt, that it will be one of the suggestions which the Conference will take into account when the time arrives. There is a good deal to be said for it. It may be the best method of hypothecating our joint credit for these joint purposes, if it be found that on the whole the Powers would prefer that the experiment of a joint loan to this limited extent should be tried.

With regard to the other question put by the right hon. Gentleman, I agree with him that there is no difference in principle between floating a joint loan for the whole of our expenditure and floating a joint loan merely for making advances to the smaller States. It is a question of degree, but the degree matters very much here. For instance, there is a vast difference between going to the City of London for a loan for, say, eight hundred million of pounds, and going to the City of London for a joint loan of fifty million pounds. There is a vast difference. Therefore the degree counts here almost as much as the principle. The latter is not a very important, transaction, and if it fails it simply means that each of the countries will have to shoulder its share of the liability, whereas in the other case it might mean a serious financial disaster. That is why, up to the present, we have resisted very strongly any notion of having a big joint loan. All the arguments advanced by the right hon. Gentleman against that loan and by my hon. Friend behind are arguments which I think are absolutely irresistible, but the matter, I have no doubt, will be considered when we get our fresh Conference. The other point which the right hon. Gentleman put to me was as to the question of currency. There I am completely in accord with him, and he put the position so very lucidly that there is nothing I can possibly add. I agree absolutely with him. I think it is desirable that you should have a considerable reserve of gold here at the Bank of England or in the Treasury. I think it is equally desirable that it should be freely used whenever the emergency arises. Unfortunately, I had not the opportunity of listening to my hon. Friend the Member for Coventry (Mr. D. Mason) last night. I missed that pleasure but I have read what he said, and I need hardly tell him I could not possibly find myself in agreement with him. I think it would be a very great misfortune if we accepted the views which he has taken as to paper currency. I think it would be a very great mistake. I take quite the contrary view, as expressed by the right hon. Gentleman, that we are on the road to a much more efficient use of our credit when we use paper currency within safe limits.


What are safe limits?


I think we are certainly well within the mark, and there is no country in the world which compares with this country in the matter. I do not want to go into the question, because it might involve criticism of other countries. My hon. Friend has only got to look at the gold basis of the paper currency in any other country to compare it with ours, and there is absolutely no comparison between what happens in this country and in others. I also agree with the right hon. Gentleman that the most important thing of all is that you should give confidence by being perfectly prepared to use your gold. It is very largely a question of psychology and that is one reason why I think foreign countries are very nervous about using their gold. I do not want to express an opinion as to whether they are too nervous, but the fact that we use it freely shows that it is not our view. I always thought they were miserly in using their gold, and that there is too much disposition even to-day to worship the golden calf. Here you have 150, 160, or 180 millions of gold, and there it remains merely as an idol, not for use in currency, but purely in order to worship and to give that sort of strength which conies from an implicit belief in your idol. We have never proceeded on that assumption. Here we have always-gone on the principle that our gold is here to be used whenever there is a demand for it, and it has never failed us up to the present. It is true we never had such a strain upon it as during the last few months, and very likely it will be considerably increased during the course of the next six or twelve months, when our purchases abroad are very much heavier than they ever were before, and when our sales to other countries are considerably less.

Therefore the strain will be greater. I do not like prophesying too much, but I do not mind saying that the reserves of gold we have got at our command will carry us through any emergency which we can possibly forsee. That is my firm conviction, not merely from my own observation, but from enquiries which I have very carefully made in the City of London and elsewhere outside. Therefore, there is no fear at all so far as that is concerned. I agree here again with the right hon. Gentleman. I do not think there is any special pleasure in paying your debts in gold where a piece of paper will do equally well. I think it is wasteful and burdensome and not particularly useful. In this matter, speaking generally, it is most important that we should be prepared to utilise our resources, the whole resources of this country, which are very great. Here we have had six months of war—very nearly seven or tight months of war—of the most expensive war ever waged—as I pointed out the other day. To-day we have to raise twenty millions in the City of London by six months' Bills and twelve months' Bills. They were considerably over-subscribed. For the twelve months' Bills we have got to pay an average interest of £2 17s., and for the six months' Bills—subscribed three or four times over—we will have to pay £1 12s. 3d.

That does not look as if the resources of this country were involved in the terrible consequences referred to by the hon. Member last night. Our resources are being very well contained. I agree with the right hon. Gentleman that the resources of this country and the joint resources of our Allies are enormous, and in this struggle that is what almost primarily matters. This will be a war not merely of men, but even more of equipment. That is where the Allies have fallen short of their great enemy, because of the preparation which he had undertaken, and which he had carried out from year to year; but in this matter, time counts. As to the resources of the various countries, in men our resources are greater, and in money our resources are greater. Time and a full application of these resources is all that is necessary. A bold, courageous, resolute application of all our strength, that is all that is necessary, and if we do that, we will win.


I am not going to attempt either a eulogy or criticism of these great financial arrangements. I happen to have the good fortune to follow the Chancellor of the Exchequer, and may I be allowed to express the pleasure with which I listened to the statement he made on this subject seven or eight days ago, and that which he has made to-day. In his commencing statement he said he had not perhaps the extraordinary facility of the Prime Minister of compression, but it appears to mo that the bigger the subject the Chancellor of the Exchequer has to deal with, the more brief and lucid have been his statements. The point I wish to refer to is a comparatively small one. I refer to the question where our smaller Allies come in, and how the liability is to be dealt with. Whether there is to be a joint loan or otherwise I do not concern myself, for I am not competent to give any opinion. There is, however, in these schemes of the Allies not only the definite principle that it is the duty of the Allies not only to put all their resources jointly into this great struggle but that the obligation rests on the larger and wealthier nations to assist our smaller Allies who have fought so well in the common cause. The Chancellor of the Exchequer expressed that on the 15th instant, these words:— There is Servia, with the population of Ireland, a people of peasants maintaining an Array of 300,000 and fighting her third great war within two years, and fighting that with great resource and great courage and bravery, but with no reserves of wealth and now no exports with which she can purchase munitions of war outside, and she has hardly any manufactures of her own. That is the position as far as the small States are concerned."—[OFFICIAL REPORT, 15th February, cols. 912 and 913.] I welcome that statement and the proof that it is now recognised so far as the Allies are concerned that it is a national obligation to do something to assist financially and in other ways those of the smaller states which are in this Alliance. My object in rising is to call the attention of the Chancellor of the Exchequer and of the House to the fact that that has not been fully recognised even as lately as last month. Last month an appeal to private benevolence was issued through the Press, and it was signed by Lord Curzon, the Bishop of London, the Bishop of Oxford, and fourthly, by the Chancellor of the Exchequer himself. That appeal dealt not only with question of the wounded and the provision of Red Cross resources, but went on to say:— That is not all. The Servian Relief Fund has made itself the medium of assistance in every form, whether for Rod Cross purposes or for starving refugees. The need could not be more urgent. What, is aimed at is simply the preservation of human life, and the funds we have in hand are already exhausted by our commitments, and unless more money, and that on an adequate scale, is immediately forthcoming we shudder to think of the consequences. That is a very big undertaking to leave to private benevolence, even in this country. I welcome the fact that now the support of the civilian population, left in that state of penury and indigence so ably expressed in that appeal, has been recognised to be a national concern. I am particularly glad of that because of this statement which follows the sentence I have just read: "Several of those who have already given once are giving again." That is the effect of trying to carry out what is, I venture to say, a national obligation by an appeal to private resources. Those resources probably prove to be wholly inadequate, because you will only get subscriptions from a limited number of generous people. I think that in this question of pooling the resources of the Allies we should also consider that the great expenses of the War ought to be distributed through the means of taxation equitably over the whole of the people. There will still be good reason for every benevolently disposed person to assist in one way or another what may be considered real and proper objects of charity.

It seems to me that the country has a right to feel satisfied that the funds which will be available for this purpose will be adequate. I am certain that the country recognises the magnificent fight that Servia has put up. None of the Allies has borne the strain of war more bravely, and none, not even Belgium, has suffered more terribly from the War. Therefore, I believe that no part of this national scheme will be more welcomed than the fact that we have now undertaken to find, by one means or another, whatever money is necessary to prevent a state of starvation among the population as well as to assist in the equipment for war. There is an old saying that you cannot earmark money. There is no doubt that even Red Cross activities form a part, and a very important part, of the necessary expenses of war. It has been held to be so in the past. In the Russo-Turkish War, when we found money in this country for Red Cross purposes in Turkey, it was very properly pointed out by Russia that money subscribed for that purpose was a general assistance to one of the belligerents and liberated money for other purposes. You cannot separate these things entirely. I notice that the hon. Member for Blackburn, who has taken so much interest in Red Cross matters, stated in the "Westminister Gazette," on the 31st December, that this Government recognised that principle in connection with the Calais hospital and the Belgian wounded as long ago as last year. Therefore I am the more glad that we have now fully recognised that it is the duty of the stronger and larger of the Allies to assist in all these matters in a national manner. I sincerely hope that the Chancellor of the Exchequer will give us some assurance that this question of the support of Servia and Belgium is now raised altogether above the level of any question of private charity.

Mr. DAVID MASON (indistinctly heard)

I agree with the hon. Member opposite as to the help we ought to give to our weaker Allies. That this matter has not been lost sight of is shown by the fact that loans have already been advanced to Belgium and Servia. The right hon. Gentleman for West Birmingham (Mr. Chamberlain) and the Chancellor of the Exchequer—who, I am sorry, is again prevented from being present—were good enough to refer to some views of mine on the question of Treasury Notes, and to my suggestion that those notes should be gradually withdrawn. I have spoken twice on this subject, and I hope I shall not be wearying Members if I again refer, though very briefly, to the point of view which I have endeavoured to bring before the House. The right hon. Member for West Birmingham expressed the view that this paper money had no effect whatever on prices. I think he made that sweeping assertion. I never stated that it was the sole cause of the rise in prices, but I am rather astonished that the right hon. Gentleman should have given expression to so sweeping a view that it had had no effect. It is, however, a very difficult matter to argue, and last night when I submitted my argument I backed it up by quotations from economists whose views would carry greater weight in this House than my own. If those authorities did not convince the right hon. Gentleman, I am afraid I cannot add much to the argument that I have already put forward.


Perhaps the hon. Gentleman will show the applicability of the argument to the present stale of affairs.


Then the right hon. Gentleman does not deny that there is an effect from inflation; I see now his point of view. That, I think, simplifies my task. I will refer him to the same figures as before. I confine myself to our own country, where we have direct control, although there has been even greater inflation in Russia and France. I think I am right in saying that a year ago the Bank of England notes outstanding were something like £38,500,000. To-day the total paper currency outstanding is about £71,000,000. Let me prove my contention that this is in excess of the needs of the country. The right hon. Gentleman will agree that our trade has very considerably shrunk during the past year. The general aggregate of imports has been very great indeed, but the bank clearing, which is a very good test of trade and commerce, shows a decrease on the whole of from 30 to 60 per cent. There is, in consequence, a decrease in the demand for circulating medium. It might be argued that this issue of Treasury Notes has to some extent taken the place of the sovereigns which formerly circulated. But even allowing for that, we know that there has been since July of last year a very large decrease in the general volume of trade. As an illustration, I might remind Members that the operations of the Stock Exchange have almost ceased. I am glad to observe that the right hon. Gentleman admits the principle which I enunciated, namely, that such an excess does have some effect. In further proof of my contention, I might refer to the effect of gold on prices. The right hon. Gentleman knows that a great increase in the production of gold affects prices. We know that the production of gold has not fallen off, but during the last few months there has been an immense destruction of commodities throughout the world. That is one result of a great war. You still have the same production of gold as you had last July, but with a decreased amount of commodities as against that gold. That, I submit, must also have, some effect on prices.

I pass to the view of the Chancellor of the Exchequer. My right hon. Friend expressed entire sympathy with the right hon. Member for West Birmingham, but I do not think he quite followed my contention. I have no objection whatever to paper money as such. But I submit that there is a distinct difference between paper money issued by banks and paper money issued by Governments. The superior advantage of paper money issued by banks consists in the fact that banks are human institutions—if I may put it in that way—while Governments are net. A bank is more susceptible to various influences; its credit contracts and expands more readily than that of a Government. Banking is a science, and banks are well qualified to know what reserves to keep against outstanding issues—knowledge which is acquired only by long experience. When notes become redundant people automatically present them to the bank, and that brings about a contraction in the currency. The essential feature is to make the notes payable in gold on demand. But what paper money such as Treasury Notes gains in security it loses in elasticity, because it would be a very long time before the Chancellor of the Exchequer or myself, or any other Member of the House, had any doubt as to the security of the British Government. Hence the result of an issue of Government paper is that it lies like so much dead weight currency, and, as the people have no fear as to the stability of the Government, it does not readily contract. I do not for a moment contend that there has been an excessively abnormal abuse of this privilege by the present Government. But when this issue was first proposed in August last I asked the right hon. Gentleman if provision had been made for its redemption, and he gave me to understand that it was a temporary measure. We know that he acted with great courage in the steps that he took to prevent greater evils falling upon us in the shape of panics, and that the issue was in itself, as many assumed it to be, an urgency measure to tide over the crisis which had then come upon the City of London. He gave us to understand that he is in favour of paper as a substitute for gold. But the advantages of paper money are a subject entirely apart from the issue of paper money by the Government. The two are distinct. I ask the House to remember the distinction between paper money issued by the Government and bank notes, which in the nature of things affect one way or the other the credit of the particular institution issuing them. Therefore I think the Chancellor of the Exchequer has not quite understood the argument which I was endeavouring to submit to the House. That argument is, as I again say, the unquestionable fact that this £37,000,000 of currency issued by the Government is affecting prices. There has been a vast expansion of the currency in other parts of the world—in Russia, in France, and in America.

I was very interested to hear the other day from someone who rather contended against my view that bread was dearer in America than here; that there has been a considerable inflation there. On 9th January there was an emergency circulation of something like 126,000,000 dollars. That has since, I believe, been considerably reduced. There again there is a measure, a bank act, at present in operation which unquestionably is leading to a considerable inflation. It is a measure which is well worth the attention of those interested in prices, because it tends to affect prices there. My contention is that when what I have been describing takes place, it unquestionably is a very large contributory factor in raising prices. If you raise prices as we have been raising them here, commodities all rise in price, and fall very hard on the suffering poor, on those in receipt of small wages, and it also tends to tempt the merchant here to purchase because he is inclined to purchase on a rising market. This has tempted America, with large supplies of grain to sell, to flood this market with considerable commodities, and our merchants have been tempted, as a result of these rising prices, to become competitive and keen buyers. I admit there are other causes. There is labour, the railways, and transport. All these have had their effect upon prices, but it is acknowledged, and unquestionably confirmed by actual facts, that the large rise which has taken place has undoubtedly stimulated this enormous import from America to this country. Owing to the War we have had a considerable decrease in our exports, with the result that you have this adverse New York exchange upon London.

There are an enormous number of sellers of bills in New York anxious to sell their bills and getting rather timid as to whether they will get clear of them, with the result, owing to our falling off of exports, that there are no people in America anxious to remit. The result is that the exchange rate continually drops, with the consequence that it gets below gold specie point. This must inevitably lead to the export of the metal from his side. There was another point raised by the Chancellor of the Exchequer. The right hon. Gentleman seemed to think that in the maintenance of these currency notes he was protecting his gold. There, again, his conclusion is based upon a fallacy. He contends that in issuing these, and maintaining the outstanding issue of Treasury Notes, he is protecting his gold reserves. At the same time he enlarged at considerable length—and quite properly—on the proud position of the London Money Market as a free market for gold—which it unquestionably is—perhaps the only free market. That has built up as a financial centre the City of London. That has enabled us to make—and the right hon. Baronet the Member for the City of London will bear me out—a bill upon London a popular instrument of exchange throughout the whole world. The reason of that is because, as the Chancellor of the Exchequer said, of the confidence, and because of our practice of always meeting our obligations upon the market in gold. The right hon. Gentleman argued that by maintaining this currency—which I have asked should be gradually redeemed—in maintaining it, as it were in circulation he protects his gold reserve. He forgets that practically we are a great free market for gold, and that if any one, say, the right hon. Gentleman, or myself, was sufficiently well off to go to-morrow with notes and draw ten millions in gold, there is nothing in the world to prevent us. These notes, as the House is well aware, are payable in gold on demand.

But my point is that the gradual redemption of these notes will be more effectual to protect our gold than leaving them outstanding as at present, because by leaving them outstanding and circulating you have created cheap money. The right hon. Baronet the Member for the City of London (Sir F. Banbury) will bear mo out when I say that money is almost unlendable to-day. I was told, for example, the other day where a merchant had gone to a bank and offered a deposit of £20,000, which the bank refused, saying they did not know what to do with it. There is no commensurate demand, be cause of the shrinkage of general trade. There is no demand on the Stock Exchange. There is no demand for capital which formerly was lent out in Stock Exchange operations, which might be lent out for discounting bills for large exporters in trade, for these exporters are exporting less, as the right hon. Gentleman knows well. You have this excessive or redundant currency, which to any one who has given any study at all to the question of notes creates a situation referred to in Gresham's "Law of Currency"—"When you have a redundant currency"—that is to say when you have a surplus currency—"where there are two currencies current, that which is of the lesser value becomes current, and gold is either hoarded or exported." The cheap ness of money brings about or accentuates the unfavourable exchange against you. It is quite true that the mere fact that the issue of these notes—the actual issue—does not create an unfavourable exchange, as I endeavoured to show last night, but the extra and abnormal issue of these notes tends to raise prices, and that in turn creates excessive importation, and excessive importation with less exportation is the cause of this unfavourable exchange. But the root of it all—and I hope I am not wearying the House—


I would remind the hon. Member what we are discussing now is the statement on 15th February of the Chancellor of the Exchequer, and there is nothing in that about currency notes. That subject was discussed last night.


I am sorry, Mr. Speaker, that I got from the point, but in my zeal for my subject I have been drawn away. I shall leave that matter. I would just like to make one or two observations on the question before the House, namely, the speech of the Chancellor of the Exchequer. I would like also again to refer to what the right hon. Gentleman the Member for West Birmingham said with regard to a guarantee. I should like to ask him whether he meant a guarantee severally or jointly, or whether he meant that each Power that guaranteed the loan should be liable for the whole of the loan in the event of necessity, or else that it would only be guaranteed, say, for the one-third of it? Certainly a guarantee is not to the same extent the same as a joint loan. I should like to call attention to what the Chancellor said himself with regard to a joint loan. There I am entirely in agreement that a joint loan would be most undesirable. I do hope that even for a small amount, if the Chancellor of the Exchequer has not yet finally decided—I think he was kind enough to tell us that there is to be another conference—that he will not yet commit this Government or this country to a joint loan, because it follows—without in any way wishing to reflect either upon France or Russia—for it is a well-known fact that British credit is the best—that to enter into a joint operation would not do much good for us, and would bring us rather down to their level of credit than to bring their credit up to ours. That would tend to create a depreciation in British credit which it is essential we should do our utmost to maintain. If our credit is maintained we shall be better able to help our Allies.

5.0 P.M.

I for one would certainly subscribe to the sentiment, which was so eloquently expressed by the Mover of the Resolution and ably seconded, that we should do everything possible to support our Allies in the great undertaking in which we are engaged. I hope that nothing will be done further with regard to a joint loan. If we have to make advances to our Allies let us make them, and then we shall know exactly what our liability is. Do not let us, if I may say so, enter into a joint loan which even for a small amount would be establishing a precedent, and all the evils of it would be equally there, because the principle involved would be equally involved as in the larger operation. Just one word as to the statement of the Chancellor as to the £50,000,000 loan which has already been agreed upon. I do not know whether that commits this country to that amount, or whether it includes the £40,000,000 already advanced to Russia. Perhaps some representative of the. Government will be kind enough, if he is in a position to do so, to tell the House what exactly is our liability. I understood that the total liability was £40,000,000 to Russia, £32,000,000 lent and the other £8,000,000 for gold. Does that mean, with- reference to the £50,000,000, the proposal which is a conclusion of the joint loan? In conclusion, I desire to say how heartily I am in sympathy with the remarks of the right hon. Gentleman the Member for West Birmingham (Mr. Chamberlain) and the Chancellor of the Exchequer, and in general agreement with the Resolution before the House.

Sir J. D. REES

I will not attempt to follow the hon. Gentleman who has just addressed the House on currency questions. There is only one, observation I would make, which I trust is relevant, and that would be in support of the official view expressed on both Front Benches, that the other Continental nations, who had far larger reserves of gold, do not seem to have done better in this crisis than we have, if they have done so well. This is due, I suppose, to the fact that their reserves were hoarded as war chest and not for circulation. For my part I would only express my gratitude, as one interested in the production of gold, for the arrangements made by the Exchequer and the Bank of England for making available at home gold won in South Africa and India in the most efficient and ready manner during the crisis of last August and September. The only reason that I got up was to express my great satisfaction at any arrangement being made which brings this country into closer and more friendly, financial and other relations with the Russian Empire, and I hope the good old rule will be followed that partners should not speak ill of one another, and that in future those who have been inclined to criticise the Government of Russia will remember we are now more closely than ever connected, and will refrain from what may be considered, under present circumstances, at least an untactful procedure. Those who are acquainted with the Russians know their many merits, and those acquainted with the Russian Government know the exaggeration of its demerits, and I hope in any case, now we shall be so closely connected, that those who feel called upon on all occasions to criticise that country and that Government may for these obvious reasons refrain in future. I should like to add my humble plea to what was said in regard to economy. I do not see the slightest sign anywhere that local bodies feel that this is a time for economy and not a time for adding anything to the rates. Before the War, rates were raised to war rates. It does not matter whether a man pays rates or taxes, they come out of the same pocket. I should like to put it to the Financial Secretary to the Treasury whether it would be contrary to precedent, contrary to propriety, or in any way improper or inadvisable, to issue one of those circulars, which seem to be issued continually without any very strong reason, advising local bodies to be economical and not incur fresh expenditure, and, in any case, to avoid increasing the rates. Similar advice is being given to the public elsewhere in regard to, let us say, waste of food. Why should not the same thing be done with regard to expenditure by local bodies? I believe it is urgently wanted. Will the hon. Gentleman kindly consider that? If he does I shall be extremely grateful to him, and so will many other miserable ratepayers who do not realise what money is being taken out of their pocket. I believe on the adjournment to-day an objection is going to be raised to some measure to save them in some respects. I add my appeal to that already made, that expenditure on education, so enormous that if one child lacks one-hundred-thousandth part of a cubic inch of atmosphere it does not get in its own house—


Is it in order, Mr. Speaker, to discuss local government and the educational systems of our country on this Motion?


It is about as disorderly as to discuss currency.

Sir J. D. REES

The hon. Gentleman interrupted me readily, but I have really done my sole reference to local government, and a longer one had already been made by a right hon. Gentleman. At any rate, my few remarks are finished, and I will not trouble the hon. Gentleman any more.


I should like to make one or two observations in regard to what the hon. Member (Mr. D. Mason) has said. He stated that our paper currency was now £71,000,000, but he omitted to say that our gold reserve has increased by nearly the same amount, so that, although our paper currency has increased, we hold gold in reserve to almost the same percentage as formerly. He also said the amount of gold had led to increased prices, and there I am in agreement with him. I believe that the deluge of gold to-day has lowered the purchasing power of the metal, and so, by that means, you have increased the price of commodities the wide world over. The first conference of the Finance Ministers of the Allies revealed the dominating influence of finance in this War. Few conferences have so touched the imagination as the meeting of the Finance Ministers of the Allies at Paris. The public are accustomed to see and hear of Generals conferring together but this conference revealed the modern conditions of warfare which exist to-day. In July last, no doubt the German Government anticipated that their heavy financial obligations in the past, and which will arise through this War, would be repaid with compound interest by their beaten foes at the end of the War, but to-day the German currency, the German Exchange and German credit are at a heavy discount, and, as the commercial instinct of the Teutonic race asserts itself and finds its true and proper level, I believe a reaction will inevitably set in, and that the desire and demand for peace will grow in strength. One of the proposals which the Finance Ministers agreed to was to centralise the buying of the Allies in the neutral markets of the world. This undoubtedly is a very wise proposal, but I believe a large economy would be effected if, in addition, it were possible for the buyer to conceal his intention and so stop sellers putting up the price against the Government buyer.

This Conference was notable not only for the arrangements which have been announced. The Conference will undoubtedly mean a large number of capital commitments in the future. I can conceive a large Russian loan of, perhaps, £100,000,000, and perhaps a loan of an equal amount to the smaller States, being launched and floated in this country. I am quite sure the money will be forthcoming, but I only mention this point—and this is my sole object in rising—to urge the Chancellor of the Exchequer to-husband the financial resources of this country as much as possible. In this scuffle no one desires to interfere with the sacrifices which this country is making in comparson with our Allies. The Chancellor of the Exchequer himself has stated that this country's financial obligations are heavier and larger than any one of our Allies. Our financial strength is our sheet anchor, and is to our Allies what the German military organisation is to our enemies, so that I trust the Chancellor of the Exchequer will husband our resources as much as possible. To give a little instance, we had a scheme before this House yesterday which did not find favour in practically any quarter of this House. In conclusion, I should like to say that the Chancellor of the Exchequer in conducting the financial policy arising out of this War has shown not only courage, but imagination, combined with a grasp of detail, which has prevented disaster overtaking the commercial and wage-earning classes of the community.


The Chancellor of the Exchequer, in his statement yesterday week, made one very interesting announcement, and that was that he had made arrangements whereby France should have access to our markets for Treasury Bills issued in francs. Now that raises the large question of the establishment of a sound basis of exchange. It will be quite impossible to get bills taken in this market, which would be very desirable from many ponts of view, unless he could show means by which, when the money has to be remitted again, it could be done without a loss. The question bears also on what he said to-day about the re-establishment of the Russian Exchange. Business is hampered all round the world by the fact of the irregularity of the Exchanges. The French Exchange has risen lately, and it it likely to rise a great deal further in the future. The Russian Exchange, after coming down to something like 107 about a fortnight ago, has again gone up to 112, so that it is quite impossible for business to be done with Russia at present. The means which have been adopted for improving the export facilities of Russia by doubling the existing single line of railway to Archangel will not really deal with the question, because there will never be any possibility of any very large amount of Russian produce coming through that channel. The Dardanelles must be opened in order to effect a change by way of permitting any considerable body of Russian exports. There is another way, of course, in which it could be done—the way the Chancellor of the Exchequer has really adopted to a certain extent by providing credits for Russia in England—but that cannot go on indefinitely unless Russia will provide a larger amount of gold. Russia has an enormous amount of gold stored up of which she does not make any use, and it might just as well be here as in Petrograd for all the good it is doing. In the same way the French will not pay gold against their bills, and their gold might just as well be here. It would rehabilitate the French Exchange, and if Russian gold were here, in any quantity it would tend to make possible business between Russia and this country. There is a matter which has been alluded to by the hon. Member for Greenock (Mr. Godfrey Collins), and in which the hon. Baronet the Member for the City of London (Sir F. Banbury) is interested, that of the economy of our own resources by not permitting the issue of flotations for foreign countries. I think myself that the Treasury Committee is acting in rather a doubtful way at present on that question. It is excessively difficult now to get permission for the advancing of money on foreign enterprises, and it must be borne in mind that, if that is carried to any considerable extent, it will affect this country in a great number of different ways.


I am sorry, but will the hon. Member say that over again?


I was only referring to the Committee which has to pass the applications for further issues of capital either in this country or abroad. I think what I have complained of is going to damage business in Great Britain in many ways. It is going to prevent orders coming to this country, and if we do not lend money to foreign countries to the same extent we shall certainly interfere with our exports. I agree that it is highly desirable that we should reserve our resources for the immediate necessities of the War, but instructions may be interpreted too strictly.


I wish to put a question to the Financial Secretary to the Treasury. I understood that the arrangement made between the Foreign Finance Ministers was that so far as possible no country would make new issues of stock. To my astonishment last week a letter was received from Sir John Bradbury, written to a co-director of mine, stating that no country could renew debentures in existing concerns without Treasury sanction. That is really a very serious matter. There are concerns carried on in this country from day to day and month by month which have large debentures and renew them week by week and month by month. I am myself the chairman of a company which has debenture issues of £1,000,000 spread over small amounts, and they are continually falling due. I know there is great astonishment among business men in regard to this matter. I wrote to the Treasury nearly a fortnight ago on behalf of one company, and I got a formal acknowledgment of my letter, but I am no more forward than I was then. This company would take between £10,000 and £40,000 in renewal of debentures, and we cannot do this because they are hung up by the Treasury. We all want to strengthen the hands of the Government and see that no issues should be made which would prevent the Government getting money for the prosecution of the War. But where you have old-established companies or any company carrying on business before the War, that such companies should have to reorganise all their financial arrangements every time a debenture falls due is absolutely ridiculous. I hope, therefore, that the Financial Secretary to the Treasury will give this matter his attention, because I am quite certain that, a great majority of the business men in this country have no idea that the Government have taken up this attitude. I think it is just as well that the trading community should know that the Treasury do require to consent to the renewal of all debentures in existing concerns.


I desire to express my dissatisfaction with the remarks which have been made by some hon. Members implying that in the War we are not bearing our full share of the common obligations of the Allies. I do not think it is a wise thing for sentiments such as those to go forward, because they are likely to create difficulties in the future. I believe that by enrolling millions of men and making arrangements for the financing of the War, this country is fully maintaining its obligations. I wish to point out the danger of that view being taken in this House and in the country, and I would like to refer on this point to the speech which the British Ambassador at Petrograd has recently found it necessary to make. He had to make a speech justifying England's position, declaring that we were doing this and that and meeting charges contained in a propaganda which is going on in Russia, and which I believe is being directed against the United Kingdom and in favour more or less of Germany. That propaganda is being pressed forward by a powerful Conservative party in Russia, and that party before the War broke out had for its object what was called the ending of "the unnatural alliance between France and Russia," and also the unnatural alliance which has since come about between Great Britain and Russia. I find that a leading organiser of this propaganda (A. Socoloff), writing on the position of Belgium, says:— If some of the disorderly and anarchically organised commonwealths of the west (meaning Belgium and a part of France) are replaced by the iron rule of the Emperor William, we shall have no reason to be grieved. The world at large will only gain by the change. That appeared in the "Globe" newspaper. In the same way we find the position of Great Britain being belittled, and this has been said in regard to the exportation of gold to this country by Russia, in order to re-establish her trade connection. The Russian Government exported £8,000,000 of gold to London, and the Bank of England undertook the issue of £12,000,000 Treasury bills. Here is the view expressed in the "Novoe Vremya" on 12th Xovember:— In tins difficult position a comparatively modest amount of gold was obtained by us only on the English market, and even that on terms very insulting to us, viz., credit was open to us for £12,000,000 on the stipulation that we remit to London £8,000,000 in gold from our reserve fund. The article goes on to say:— Many bitter complaints were uttered already in our Press, in connection with this loan, against the English. Then again I find that a most important paper edited by Professor Migulin takes this view:— The credit for the said £12,000,000 was given on condition that bullion is sent abroad. In fact, it is not England that is supporting Russia with money, but it, is Russia that is supporting England, supplying the latter with gold in order to maintain the regular gold circulation there, whereas we are obliged to return to a paper circulation. From the point of view of national pride, the fact that Russia plays, in the present war, the leading rôle, not only in a military sense but also financially, supplying her allies with money, is very gratifying and raises the importance of our country to an unprecedented height. … It is beyond any doubt that in the present War Russia plays the leading rôle. We are not in need of others, but others are in need of us. Such a statement and the tone adopted by the mover of the Resolution does not help us in a matter of finance, and does not assist us in providing the great Army which is going to save the British Empire. I entirely dissent from those sentiments belittling our efforts on behalf of the Allies, because we have been pledging our credit and doing everything which our trade and national stability enable us to do. If we turn to America and consider the condition of things in the Argentine we find that they are turning to America for money. That means money will not go from America to the Argentine in the form of gold. It will go in the form of goods, and the interest payments will go back in the form of goods. It will mean employment for American working men in place of employment for British working men. I say, therefore, that in this matter of the organisation of our finance and the control of finance we are doing a vast amount. The country was astonished the other day to find from the statement of the Chancellor of the Exchequer that it has been already left or will be left in the course of this year to the United Kingdom to find a greater sum of money for this War than either of our Allies who are more immediately concerned with it.

I would also like to enter my protest in another matter. The Treasury, through the control of the Stock Exchange established by them, have been able to place this embargo on the issue of capital and to get control over commerce in this country. Yet no statement as to the methods to be adopted or as to the Committee appointed has been, so far as I know, made to this House by the Chancellor of the Exchequer. This autocratic method now adopted by the Government is treating the House with absolute contempt in a matter of absolutely the greatest importance to our national interest. I say no more except to hope that tone of deference or humility as regards our endeavours and the fulfilment of our obligations in this matter will no longer be adopted. It has largely risen from the fact that at the outset we did not straightway say we were entering into this War in support of France who had got involved in support of Russia. Our position would have been much clearer, and what we have done would have been much more appreciated, if we had said that we had no material interest whatever but that, in support of obligations which we had incurred, we were placing our millions of men and our hundreds of millions of finance at the disposal of either country.


The House ought to congratulate the hon. Member for Hanley (Mr. Outhwaite) on his very courageous speech. He has had the courage to say things which I am afraid I would not have had the courage to say, and, personally. I offer him my admiration. I hope that the hon. Member for East Nottingham (Sir J. D. Rees), who, after he had fallen foul of other Members in the speech which he delivered, immediately went out as usual, will read the speech of my hon. Friend. He will be then, perhaps, less cantankerous towards his own countrymen, and more able to appreciate the position. I wish to support this Motion. I am entirely in agreement with the wording of the Resolution on the Paper. We, as a country, at the outset of the War, were immediately able to largely increase our taxation, and to obtain a large increase of revenue. Our two great Allies, France and Germany—[HON. MEMBERS: "Oh!"]—I mean Russia. Germany have carried on business just in the old, old way. They have neither increased nor diminished their Imperial taxation. Local taxation is different. I may also point out that they are the only country which did not find it necessary to impose a moratorium. The Germans, let it be said to their credit—they have very little to be placed to their credit at the present time—are carrying on business as usual in a way in which other countries are not. My point is that some notice ought to be taken of the fact that while we increased our taxation at the beginning of the War our great Allies reduced their taxation. Russia, for instance, did away with one tax which brought in something like £90,000,000 clear. If that is not reducing taxation, what is it? France, in the same way, took off a number of Import Duties. While we are increasing our taxation for the sake of our Allies, our Allies are reducing their taxation for the sake of themselves.

I do not state this fact to in any way reproach or to doubt the ardour of myself or Ministers or anybody else for the cause of the Allies, but I think it is a question which ought to receive some notice in the reply of the Financial Secretary to the Treasury. I know that he is new to the office, but he is an extremely able man, and with the confidence of youth I am sure that he can address himself to this point. There is another point worthy of consideration. It was suggested to me by the remarks of the Chancellor of the Exchequer upon the total abolition of the sale of vodka in Russia. The Chancellor of the Exchequer, in a speech which I noticed was not in his usual rhapsodical style, but entirely written out on paper, and therefore carefully thought out, appeared to have come to the view that the abolition of the sale of vodka had doubled the efficiency and working power of the Russian people. I wish he had given us some more details and had enlarged upon that idea, because I do not see why we should not increase our efficiency at the present time. I am not quite sure whether we can do it by abolishing the sale of whisky and beer, but I am quite sure it is true of a certain number of people that their efficiency could be greatly increased if the consumption of alcohol was entirely abolished. I believe I am expressing the view of the country generally when I say that we are prepared now to have stringent social legislation if it can be direct and instantaneous in its effect.


The hon. Member having preached to others, has himself become a castaway.


I will try to find myself. I am not quite sure how I am a castaway. You have very kindly allowed the widest limits in this Debate.


I stopped it as soon as the hon. Member called my attention to it. I restricted hon. Members. Now he is violating the canons which he himself laid down.


I am extremely obliged to you for that ruling. I intend, of course, to follow it at once. If I may respectfully justify myself, I would remind you that the Chancellor of the Exchequer in his speech yesterday week did refer to this vodka prohibition. There is another point of view in connection with this Debate upon which I desire very respectfully and tentatively to touch. At a time like this, when you develop the financial policy of the Allies as a whole, you cannot help also affecting their political objects. I know that there is a school of politicians at the present time who say we have nothing but one great military object. Let us leave everything else aside and concentrate upon the defeat of our foes. That is very true, and, if you will show me how we can defeat our foes more quickly, and save the life, and the terrible devastation and loss of material, as well as moral riches which we are daily suffering, I will join with you entirely to attain the military end which we all desire. A great War like this cannot be dissociated from its political objects any more than from its financial connection. If this is largely a question of finance, and if the financial sources of the Allies must be concentrated in one great harmonious endeavour, it is equally true that the policy of the Allies ought to be clear, harmonious and tend towards the one object of obtaining a victory for their great cause, a victory which will be recognised and welcomed in all the neutral countries of the world.

This view has been unfortunately lost sight of both in the actual arrangements made by this financial deal between the three Finance Ministers and also in the speeches which we have heard upon the subject. Let me point to the well-known axiom of the great writer Clausewitz, who declared that "War is a continuation of Policy." You can never forget in time of war, if you are going to carry the war through successfully, the aim you have at the beginning. I hope that one of the great objects of the Allies is to continue to have the neutral countries of the world in their favour. It is of inestimable value and strength to the Allies to have the feeing in favour of their cause which on the whole is predominant in all the neutral countries of the world, though much more in some than in others, and much more at one time than at another. I regard it as of the greatest importance that we should have that neutral body of opinion increasingly in our favour. I believe that much might be done in connection with these financial provisions and proposals than have teen made. Let me just illustrate what I mean by the case of the United States. The opinion of the United States, both at the present time and in the future, is of extraordinary importance to us for many reasons. Surely it is of absolute prime importance how this new development which began on 18th February strikes the United States and how the United States will act. The United States policy is always dictated by the feeling of the people.


Is the hon. Member entitled to enter into the policy of the United States?


The hon. Member is allowing himself very wide licence, and I think it would be better if he confined himself more closely to the question be Fore the House.


I expect I do not know much more about America than the hon. Member who has just interrupted, but I think he does not realise, as I do, the extraordinary importance and seriousness of the position. A great deal of latitude has been allowed in connection with this Debate. I do not think, when a Member approaches this subject in a serious strain, as I have done, he ought to be called to order.


I have twice pointed out to the hon. Member that he has gone a considerable distance from the Motion before the House. On another occasion he found fault with an hon. Member on the same ground, and he should, therefore, be the last to complain.


I have never found fault with the hon. Member.


The hon. Member raised the point that the hon. Member for Nottingham was proceeding beyond the strict limits of the Motion.


I shall not trouble the House further; I will only say this, which I think I am entitled to say, that in discussing these various, serious and important issues I have spoken with a sincere and earnest desire for the victory of right and of our cause. I am as sincerely desirous of that as any other Member, and if I have said a few words which I believe to be necessary—


Is the hon. Member in order in taking this opportunity to withdraw a pro-German speech which he made at the beginning of the War?


I will ask the hon. Member to resume his seat.


I thought the discussion would confine itself more closely to the Motion on the Paper, and, therefore, I am not able to reply to some of those quite important matters to which attention has been called, but which recede perhaps a little bit from the subject which we are debating. But I would like to say very briefly with regard to the point made by the hon. Baronet the Member for Mansfield (Sir A. Markham), that it is most obviously a point of great seriousness and importance; it is not one of which I have personal knowledge, but I will make it my business to at once inquire into it, as I was asked by the hon. Member to do. I will see what answer can be returned to him and, of course, if he is not satisfied with that answer he will be able to raise the matter again in the House. There is only one other thing I have to say. It is this: The hon. Member for Inverness (Mr. Bryce) seemed to me to make some remarks and suggestions that were of importance and value, and I will draw the attention of my right hon. Friend the Chancellor of the Exchequer to the points which he made, so that they may have immediate attention.


I gave notice to the Chancellor of the Exchequer this morning, in writing, that I would raise the question of the support of our minor Allies, and ask whether, in future, they were to be left to public charity, or whether their position was to be dealt with as a national question?


I should assume, from the fact that the Chancellor of the Exchequer did not refer to that matter in his speech, that is an indication he thought it better not to refer to it.

Question put, and agreed to.

Resolved, "That this House, having heard the Chancellor of the Exchequer's statement on 15th February, approves generally of the arrangements made by him with the Finance Ministers of France and Russia."