HC Deb 23 July 1918 vol 108 cc1700-38

Order for Second Reading read.

The PRESIDENT of the BOARD of TRADE (Sir A. Stanley)

I beg to move, "That the Bill be now read a second time."

The principal object of this Bill is to fulfil a promise which was made by the Home Secretary on the 11th inst. He made certain promises with respect to businesses under the control of enemies carried on in this country and also with respect to banks under enemy control. He said the Government proposed to introduce legislation dealing with certain businesses which were under the control of subjects of enemy States and which, under existing powers, we are not able to wind-up. He also said we proposed to take power to wind-up a company, as distinct from the business carried on by that company, where the business of the company has been wound-up, and without making application to the Courts for that purpose. He also said we proposed to take powers to prevent enemy controlled banks from reopening in this country after the close of hostilities. These are the principal provisions of the Bill, and they are contained in Clauses 1, 2, and 3. The remaining Clauses deal almost entirely with administrative matters. They are points of minor importance which our experience in dealing with the principal Act of 1916 has found to be inadequate for these purposes. Under existing legislation the Board of Trade is empowered to wind-up businesses carried on in the United Kingdom wholly or mainly for the benefit or under the control of enemy subjects. Where a business is carried on by a company incorporated in the United Kingdom, the Board of Trade has full power with respect to the winding-up of the business of that company, but we have not power to wind-up the company itself. It is necessary in those instances for the Board of Trade to make application to the Courts, and it is for the Courts to make an order winding up the company. I think it would be agreed that in those instances, where the Board of Trade makes an order winding-up a business carried on by a company, it would be desirable that we should at the same time have the power, and should in fact make an order winding-up the company so that the company, and the business carried on by it as well, should be permanently and finally brought to an end and completely dissolved. I think, in dealing with this aspect of the problem, we have gone a long way towards meeting the recommendations made by the group of Members of which the right hon. Gentleman (Sir H. Dalziel) was the chairman, which suggested that the Board of Trade should make every effort to wind-up these businesses and companies within a period of three months. It will be quite impossible for us to come under any such obligation as that.


Special reasons?


There will be exceptional cases, but on the whole it will be possible for us approximately to meet that particular recommendation, and having the power to wind-up the business and the company at the same time will, I think, remove what is to-day a constant source of irritation.

Clause 2 deals with enemy banks. Under it it will be impossible for any bank which is carried on, wholly or mainly for the benefit or under the control of subjects of present enemy countries, to be established in this country for a period of five years after the War. It would be a great mistake for us to allow these banks to be re-established after the War, after we have gone through the difficult process of winding them up. Banks in the business world occupy a very special position, and if they are carried on by those who are not friendly to the interests of this country, they would establish a real menace to those interests. For that reason, I think it very expedient and desirable that we should take steps to prevent these institu- tions from being re-established. The establishment of banks under the control of those who are not friendly to our interests obviously affords them exceptional facilities for acquiring information with respect to the businesses of this country, and, probably more important than that, it affords these institutions an opportunity of establishing businesses in this country not in the interest of British subjects, and not intended to take a fair and honourable part in the development of trade and industry of this country, but rather established in the interest of subjects of present enemy countries, and as part of a deliberate national policy of commercial and political penetration. Under this Clause it will be a misdemeanour for anyone to associate himself in the establishment of any banking enterprise in the United Kingdom which is carried on after the War wholly or mainly for the benefit or under the control of subjects of the present enemy countries. Under the Bill we are taking power to inflict very severe penalties, both by way of fine and imprisonment, for any breach of this prohibition. But having done that, it is of course necessary to go further. If by accident a banking institution should be established in this country which comes within the expression which I have indicated, the Bill not only empowers the Public Prosecutor, under the fiat of the Attorney-General, to take steps to punish these people by fine and imprisonment, but it is also necessary that we should have power to wind up these businesses, and in Sub-section (2) of this Clause power is given to the Board of Trade to wind them up. It may be there is a possibility of some misconception arising upon this Sub-section. It is not intended that the Board of Trade, or any advisory committee which may be set up, shall have any discretionary power on this question of winding-up. It is intended that it shall be the duty of the Board of Trade to wind up these banks, and I am quite willing at a later stage, if this point is not quite clear, to move an Amendment to make it perfectly clear that the Board of Trade is bound to wind up these businesses.


Could it not be done by inserting the word "shall" instead of "may"?


I think it may be necessary to do a little more than that, because under the Sub-clause as now drafted it is possible that the reference to the principal Act may make provision for discretion being exercised by the Board of Trade. That is necessary, and it has proved to be necessary in dealing with businesses under the principal Act, but, now that we are dealing with banks, I suggest that it is not necessary to have that discretion, and that it should be made perfectly clear that these banks are not in any circumstances to be established during the five years after the War. The point arises as to what is meant by the word "bank." There is not, so far as I know, any very clear definition of this word, but we certainly do not intend, in using this word, that it shall be interpreted as probably the general public understand it, as simply meaning a banking institution carrying on ordinary current accounts. We want a great deal more than that, and we intend far more than that by the word "bank." We intend to make it impossible for any financial undertaking to be established in the United Kingdom for the five years after the War, which is carried on mainly or wholly for the benefit of or under the control of subjects of present enemy countries. We are proposing to deal with this particular point by making rules which will define what we mean by "bank." These rules will be prepared in agreement with the Treasury.

Commander BELLAIRS

Will it cover insurance companies?


Not necessarily.


Discount companies?


Yes. Clause 3 is intended to deal with what is the greatest defect in the principal Act. There were in existence at the outbreak of war businesses carried on by partnerships, where the partners were naturalised enemy subjects, and also enemy subjects resident abroad or carrying on business abroad. Under the law as it stands to-day these partnerships are automatically dissolved by the outbreak of war—that is, so far as the business here is carried on. Our practice during the War has been to vest the enemy subject's interests in the business in the Public Trustee, but that leaves the business in this country to be carried on by the remaining partners. It does seem somewhat of an anomaly that a business which immediately before the War was carried on mainly or wholly for the benefit of or under the control of enemy subjects should be allowed to be carried on during the War, and it is, I think, desirable that the Board of Trade should take power, if it be deemed expedient, to wind up these businesses, as is done with other enemy controlled businesses where, the partners being resident here, there has been no bar to their coming within the provisions of the present Act. I agree that there are probably not many businesses which would come within this Clause; still there are some.

I think it would be true to say that it may not be desirable to wind up all these businesses. There are probably instances, perhaps numerous, where one of the partners is a British subject resident in this country, and carrying on the business in this country, whose partner or partners were subjects of and resident in enemy countries. As a partnership or business arrangement that was quite permissible before the outbreak of war. In so far as the enemy interests in that business are concerned they have been vested in the Public Trustee and the British subject has been allowed to carry on the business, and so long as the Board of Trade is completely satisfied that that business has been carried on not in the interests of enemy subjects, but in the interests of this country, there appears to be no reason why in a case of that kind the business should be wound up. But there are other instances where the facts are not the same. There are instances of businesses where one of the partners is a naturalised enemy alien—a naturalised German before the War—and the other partner or partners are subjects of an enemy State. There the interests of the enemy subjects have been vested in the Public Trustee and the business is allowed to be carried on by the other partner, who may be a naturalised German. I think there is a certain prejudice, and I think rightly, against that business being continued. The presumption is, and I suggest that it is a fair presumption, that that business having been carried on wholly or mainly in the interests or under the control of subjects of enemy countries would in all probability, if it were allowed to be continued, resume that relationship after the War. I think that where it can be shown that the business has not been carried on prior to the War in the interests of this country, unless there is very good reason to be shown to the contrary, this business should be wound up.

Sub-clause (2) of Clause 3 deals with clubs, friendly societies, and kindred institutions of that kind. The object of introducing this Sub-section is because there is some doubt whether we can legally include institutions of this kind under the definition of businesses. Therefore, in order to make this point perfectly clear, it is provided that the Board of Trade shall have power to make a Winding-up Order where these clubs and institutions which may operate, not in the interests of this country, but for propaganda and for other improper purposes, have been carried on wholly or mainly for the benefit or under the control of enemy subjects. In those cases we desire to have the power to immediately wind up such institutions. There is only another point and that is with regard to paragraph (c) of Clause 5. Under the existing legislation when a business is wound up non-enemy creditors are dealt with in priority to enemy creditors, and it is suggested that when we wind up a company as well as wind up the business of the company the same procedure should apply, namely, that non-enemy creditors should have priority with respect to the assets of the company, just as they have priority with respect to the assets of the business of the company. The other points of the Bill are minor points of a rather technical character, and I think it might confuse the principal issues involved in the Bill if I attempted to give any description of these detailed points, but I shall be prepared to give any further explanation of any Clause which may be desired.


I have listened with pleasure to the interesting and clear statement which my right hon. Friend has given of the objects of this Bill. His speech had a ring of conviction about it. He seems to me to be a believer in the policy which he is recommending the House to adopt. He is not, if I may say so, a conscientious objector to the policy, neither is he a conscript to the policy. He is, I hope, in every sense of the word a volunteer. Therefore we shall look forward with interest to the manner in which—as I hope he may be in a position to do—he carries into force the powers which he asks the House to give him. Let me make one preliminary criticism of this Bill with respect to legislation by reference. I know the Bill has been drafted very quickly, and we are very grateful to the right hon. Gentleman for the prompt- ness with which the Bill has been produced, but I would suggest to him, and to all Ministers, that the time has come when it ought not to be necessary for Members of Parliament to go to the Library to rake through the shelves in order to understand a measure before the House. This is an old custom which has been complained about very often, and there is no change, so far as I can see, on the part of this or any other Ministry. Why cannot we do away with legislation by reference? If it is necessary to refer to a particular Act in the Bill, let that Act, if it is not very long, be printed in a separate Schedule at the end of the Bill, so that Members can see exactly what is meant by the references in the Bill.

6.0 P.M.

In regard to the first Clause, the chief importance with respect to the winding up of enemy businesses is that it will remove the rather cumbersome policy of having to go to Court in order to wind up an enemy concern. In future the Department will have the power, without the necessity of having to get the sanction of the Court to take the necessary proceeding in regard to enemy businesses when they are convinced that they are enemy businesses. That is all in favour of more expedition, and, so far as that is concerned, I am grateful to my right hon. Friend. One of the most important provisions of the Bill is the proposal in regard to enemy banks. That was one of the recommendations of the Committee with which I had the honour to be associated. I have seen it suggested in some quarters that the departure which is now being made in putting the enemy banks into the hands of a liquidator as distinct from the present position of being in the hands of a controller is not a matter of great importance, and that the position is very much the same. I hope that my right hon. Friend will disabuse the mind of the House of that idea, and that we shall understand clearly that handing the banks over to the liquidator means that in a comparatively short time their whole affairs will be wound up, that, in fact, the banks as separate entities will cease to exist from the day the liquidator is appointed. At the present time the banks are allowed, we know—though they have not been doing a big business of late—to continue to exist as banks, and to declare on their notepaper that they carry on certain businesses within a certain defined limited authority as inter- preted by the Controller, Sir William Plender. Once the liquidator is appointed I understand that there will be no delay in distributing the assets, and if he will be expeditious in the matter, as I am assured, if he is under the surveillance of my right hon. Friend, he will be, it ought to be possible within a very short time, measured by a few months, to bring the whole matter to an end. I hope that my right hon. Friend, if he takes any further part in the Debate, will tell us his estimate of the time when that state of affairs will be brought about, and will make it quite clear that no matter who the liquidator may be it is entirely out of his power to keep those banks alive.

I would like him to make quite clear whether the Bill is going to refer to the fullest extent to what are known as discount houses in this country. The mere fact that they may put a name over the door and declare themselves to be a bank—the word "bank," I think, very often is misleading—ought not to give them any special advantage over the other private houses, because the other private houses are doing in many cases exactly the same business as the banks are doing, though the larger part of their business probably deals with accepting bills and discounting them. As the right hon. Gentleman is providing that for five years after the War discount houses under enemy control shall be prohibited from carrying on business, I would like to ask him, does his Bill ensure that these houses cannot carry on business at the present time? If it is objectionable that these discount houses and banks should operate for five years after the War, it is equally objectionable that they should operate at the present time. I hope that my right hon. Friend will explain clearly his position on this matter. The Bill as it stands, in my opinion, will not deal with enemy aliens who purchase controlling interests through nominees in existing British banks. That is a matter perhaps more for the Committee. But, as I read the Bill, I do not think that that is so. I should be glad to have an assurance that that possibility will be entirely removed by the Bill, because in these days of bank amalgamations one hardly ever knows who may be the controlling persons in any of the interests which are being united. I am sorry that my right hon. Friend has made it necessary that the Rules should lie on the Table of the House of Commons for, I think he said, twenty days before being put into operation, and I would suggest that, if possible, the Rules should be embodied in the Bill before it leaves the House of Commons, because otherwise nothing can be done for a considerable time. If the Rules have to lie on the Table for twenty days after the House meets, that would mean, at the earliest, for twenty days after the 8th October. There are some minor points which I intend to raise in Committee, but for the moment I thank my right hon. Friend for the Bill. It is a much better one than I had really hoped for, and I trust that it may have a speedy passage into law.

Major PEEL

I have had the rather special experience during the War of liquidating a certain number of enemy firms in Egypt, including, as it happened, the Deutsche Orient Bank, one of the great instruments for Germanisation in the Near East, and it revealed a most complicated system of holdings, including the Dresdner Bank, one of whose branches is in question this afternoon. I shall be careful, in the course of my few remarks, to reveal nothing that I learned in the course of my official experience in Egypt, bat at the same time I may look at the matter from one or two angles that happened to have been mentioned in the course of the speeches of the two right hon. Gentlemen. It is very important to remember that this Bill is more far-reaching in one sense than at first sight appears, because throughout the whole Empire the legislation adopted by this House in these matters is generally imitated, and sometimes that legislation is put into operation by the Foreign Office, and sometimes, I suppose, by the Secretary of State for the Colonies, and sometimes on the initiative of local legislatures. I would like, therefore, to ask the right hon. Gentleman whether he has taken any steps in regard to uniformity in these matters? It would be extremely awkward if in some parts of the Empire they had not made an arrangement of the same nature for stopping enemy banks for five years after the War as is indicated in this Bill. Then I would ask whether uniform measures are being taken in this matter as between ourselves and the Allies? What is the exact business of these enemy banks which we are preventing from operating here for five years after the War? I suppose that if you were to state it in a sentence you would say that they were acceptors for value received, and they have come to this country for the business reason that this country is the main discount market of the world, the clearing house of the world. That is, I presume, owing to the fact that we have the gold standard that was established under the Statutes of 1819 and 1844. But who comes next in the running after us? I presume it is New York. Therefore, it might be likely, if these institutions are not allowed to operate here during five years after the War, they might transfer their business to New York, and pro tanto we should find our status diminished as the principal discount market of the world. I feel sure that our gallant Allies do not wish to take any such advantage of us, but it might be right to ask them if they will go a step with us in this matter, and whether, if we take this action in London, they will not take similar action in New York.

Our own banks, I suppose, have some considerable advantage from the fact that their rivals will be excluded here during five years after the War, and I would ask whether in furnishing that advantage to our banks we cannot make some stipulation or agreement with them as regards any action which they may adopt in financing German businesses after the War. What I mean to say—and I draw it from my own experience—is this. I have liquidated in Egypt several German export or import houses. Those houses would export goods to, or import them from, Germany or other parts of the world. They were financed in a great measure by English banks. Therefore, it seems to me that some stipulation might be obtained from these banks, if we give them the great advantage which we are conferring under this Bill. And that is not all. Side by side with these German institutions in Egypt are English institutions and English import or export firms, and those English firms deal quite indiscriminately with Germany or with England. But again, who finances those English firms? English banks. Therefore, again English banking is used as a direct medium of English firms abroad financing and helping trade in so far as those firms are conducted by Germans. Therefore, it seems to me that after granting to our banks this advantage relations should be established with them on these important matters, all the more since we see that they are amalgamating at a very rapid rate, and are to have the advantage of these amalgamations. There is another question which has not been mentioned before, nor in the speech of the right hon. Gentleman, on which I should very much like to have an answer. I know that the right hon. Gentleman the President of the Board of Trade does not attach much value to the Report of the Committee over which Lord Balfour of Burleigh presided. That Committee investigated this question in great detail and with great care. In paragraph 165 of that Report they state that they had paid particular attention to this question of the banks, and they proceed to say: In view of the importance of maintaining the financial position of London and the complicated nature of international trade, it would have been impracticable and inexpedient to impose any restriction and discrimination as regards the use of London credit. The plan the Committee propose as alternative to the plan now submitted to the House—and whether this alternative is wise or not I would like to hear what the right hon. Gentleman has to say about it—is that, instead of stopping these banks here for a period of five years after the War, there should be a system of licensing, the licences to be issued annually to banks, and should any of these businesses or banks show that they were in any way under enemy control, then the licence should be extinguished. The Committee adduced the further argument in favour of their proposal that by this means we should be able to bargain for reciprocal facilities. A further question I should like to have answered, before we assent to this measure, is as to what view the Government take of the subject, and what arguments have induced them to adopt this limit of five years after the War. These are the three or four questions I should like to have answered: first, as regards uniformity in this matter throughout the Empire; next, a uniform policy as between ourselves and the Allies; and, third, whether we could not bargain a little with our banks in this matter of enemy trade and enforce the alternative system of licensing?


I have listened with interest to the well-informed speech of the hon. Gentleman who has just spoken. I think some of his suggestions are well worthy of consideration when we come to the Committee stage, more especially his suggestion which would limit the utilisation of British capital through the banks of this country for financing German industries in the manner in which they have been financed in the past. As regards the Bill itself, I think the country will be very grateful to the right hon. Gentleman for having brought it forward. I think it will be a valuable measure, and perhaps all the more valuable when it has been discussed in Committee and possibly amended. I hope my right hon. Friend will not consider it ungracious of me if I say that I greatly regret that it was not produced a very long time ago. As regards some of the main recommendations in the Bill, they were brought before the notice of my right hon. Friend by a Committee of this House over which my hon. Friend the Member for Chester presided. The Report of that Committee was produced as long ago as February of last year, but perhaps we ought to be grateful for what we have got in the general provisions of this Bill for winding up German banks and businesses and bringing them to an end. As regards the provisions for dealing with the German banks, they seem to be satisfactory. In the first place, they not only make the Winding-up Order, but they bring the business to a close. Up to now they have been under German managers, under the control of Sir William Plender, but Sir William had no power to make the German managers do anything he desired. In future the liquidator will have power to do what is right, and I hope as quickly as possible, in the way of winding up these businesses.

But to wind them up and bring them to an end for the time being obviously is not sufficient in itself, and therefore I think the right hon. Gentleman is very well advised in the provision which makes it impossible for them, so far as legislation can make it impossible, to be revived for at least five years after the War. For my own part, I hope that after those five years have elapsed we shall reconsider very carefully the extension of that period of five years, unless in the meantime the German people and their military governors have very materially altered their character and their methods. A question I should like to ask my right hon. Friend is this: Up to now there have been a good many creditors of these German agencies and banks who have not been paid, and there has been some reluctance in the administration to pay these German debts, because it was said they could not obtain from Germany sufficiently good evidence of the existence of the debts. I gather that Clause 7 of the Bill will remove that difficulty, and that the High Court will be in future prepared, on satisfactory evidence, to pay neutral, Allied, and British traders. This is not an unimportant matter, because, as my right hon. Friend knows, there is something like £5,000,000 of German debts.

As regards the point raised by my hon. Friend who has just spoken, I do not know how far it may be possible to control the operations of English banks or English discount houses. I can see difficulties myself, but the position is one for which possibly a remedy could be found. What has happened is this: The British joint stock banks have materially financed German industries, both in this country and abroad, by discounting bills drawn in Germany and by British credit supplying the raw material—namely, money—to carry on these German industries. This was done through the agency of the German banks; bills were discounted by these German banks in London and discounted by our joint stock banks. That operation will not go on any more, but the question is, Will these bills, drawn for financing German industry, be discounted in future by British joint stock banks? I hope not. If the right hon. Gentleman can discover any method by which that can be impeded, if not completely arrested, he will be conferring a benefit on British industry. There are two other provisions of the Bill to which I wish to refer—namely, the power given to the Board of Trade to wind up a company as well as close the business. That was one of the recommendations of the Committee over which my hon. Friend the Member for Chester presided. I think it a most valuable provision, because under it not only do we wind up the business, but we bring it to an end and pay the creditors. You get these companies dissolved after all the assets have been dealt with, and the businesses are ended. In Clause 3 there is a provision which is also based on the recommendation of the Committee, and the case I put to my right hon. Friend is a very simple one. It is that of two partners in a business, one an unnaturalised German, who is the predominant partner, and the lesser partner a naturalised German. On the outbreak of the War the partnership was dissolved, and what has been done up to now is that the remaining partner was allowed to carry on the business during the War, and no doubt the unnaturalised German partner, living in Berlin, had the benefit of the profit made in that way. I am glad to think that the provision of Clause 3 will ensure that such a business will be wound up in future, and that there will be an end of it.

There are only two other points to which I wish very shortly to draw attention, and on which I think the Bill will require strengthening. The House knows that the Board of Trade when they wound up a business under the Act of 1916 got the report of an Advisory Committee as to whether it came within the scope of the Act. In order to ascertain that, the Advisory Committee had to ascertain a certain number of facts, and they have had difficulties up to now in getting the necessary facts, because they had no power to compel witnesses to give them. Persons who were carrying on a business which it was sought to wind up were not likely voluntarily to give evidence in support of that object. It is, I think, essential, in order to effectuate these windings up more easily and speedily, that there should be power on the application of the Board of Trade given to the Court to compel witnesses to appear before the Board of Trade or its Advisory Committee to give evidence on oath and to produce documents. That is a power which will hurt no one, and will only make the provisions of the original Bill and of this Bill more effective.

There is one other point which I think will have to be dealt with in Committee. There have been a good many cases since the War where this sort of thing has happened. They happened largely before the Act of 1916 was passed, and I think they have happened since. What was done was this: There were, say, two enemy subjects or more carrying on business here. They foresaw that it might be made unpleasant for them when the country woke up to what they were really doing and that their businesses might be wound up, so they entered into contracts, more or less fraudulent, to transfer their businesses to some compliant gentleman with either an English nationality or an English or a neutral name, or it may be a neutral nationality, who would quietly carry on these businesses, ostensibly for his own purposes, but really under some secret agreement by which he should hand the profits made during the War and the businesses themselves back to the original Germans after the War was over. I believe that has occurred in a good many cases. How many it is, perhaps, hard to Bay, because we have not had the power hitherto of examining these people on oath to find out what really did happen. Under the Act of 1916 the Board of Trade has the power to cancel agreements made with enemy subjects for the transfer of businesses, "but only where it appears to them that the contract is injurious to the public interest." It is very difficult to say always that for a German to sell his business to some one who will carry it on during the War and hand it back to the German afterwards is against the public interest. There is no great international question concerned, but it is a very fraudulent thing all the same, and a mode of evading the Act, and I suggest to my right hon. Friend that he should provide in this Bill that all agreements for the transfer of these enemy businesses made since the War should be void unless they are made bonâ fide and for valuable consideration and are consistent with public policy. I would go a step further in order to tighten it up, because I think in these matters you do not want any loophole for fraudulent gentlemen, and I should suggest that the onus of proof of a business being bonâ-fide transferred should be placed upon the man who has transferred it during the War. These are suggestions which I trust my right hon. Friend will consider, but I wish to thank him very heartily for the Bill as it stands. I think it is a most valuable Bill, and with a few necessary Amendments I think it will carry out the objects which the country desires.


I yield to no one in this House in my detestation of Germany, and I should like to see them all cleared out, but I am a business man, and I know something of banking, and I know that this Bill will achieve no good so far as the banks are concerned. I do not think that hon. Members who have been so excited about these banks really understand what has been done by them. In the first place, these are branches. They are not the Dresdner Bank, nor the Disconto-Gesellschaft, nor the Deutsche Bank. They are only branches, and how are you going to wind up a branch? It is quite true that by this Bill you may go to the Court, which hitherto you could not do, because the Court had no jurisdiction over a foreign bank or one of its branches. The Court could not make an order, but they can now, that these branch businesses, whatever they are, shall be wound up. Why this haste to close them? My right hon. Friend spoke of dissolving them, but does he know what the danger is? Suppose there are any outstanding assets which you want to recover to pay to the Scottish, English, Welsh, or Allied creditors in a general clearing up of all these assets. You destroy your title, and anybody that owes money in Germany will snap his fingers at you. The company is dissolved and has no entity. Let me point out that there is a difference between an English company and a private bankruptcy. In the case of an English company, when it is dissolved, anybody who owes it any money can escape and any assets cease to belong to the creditors altogether. It is different altogether with a private bankruptcy, where an official assignee continues trustee ad infinitum. Let me give a case in point. A German merchant has an agency in South America, and he comes to the German banks in London and says, "Give me credit, so that I may draw bills against it." The banks say, "Very good; we will accept the bills when they come here, but you must put up securities." What security does he put up? German securities, of course, and very likely German bank shares. These bills come forward. The Disconto and the Dresdner have accepted them and paid them; but what about the securities they have got to get from their debtor in Germany? They cannot realise them. I hold in my safe now German bank shares which were very valuable at one time, but I cannot sell one of them, and never shall until after the War; and if you appoint a liquidator he could do no more. He has a tremendous lot of German securities which he cannot realise until after the War, and the fact of your dissolving a business destroys all the value of these assets. The German people will simply laugh at you. So wild were some of my hon. Friends that they said, "Destroy the papers and the books and records—burn them." That is not the way to deal with a question of this kind. Do you want to wipe away all these assets and to destroy them? It is most absurd.


In answer to my hon. Friend, I have never suggested that any company or firm should be dissolved until it is wound up; that is to say, until the assets are got in and the debts paid.


Very well, then; but you must wait until after the War. I say that you will never be able to fulfil my hon. and learned Friend's proposition that when all the assets are got in you can dissolve it. I tell you that you cannot in any of these cases where there are German or Austrian securities dissolve them before the end of the War, and it should be noted that there are also a lot of Scandinavian securities which you cannot realise at present A great many of our Allies are so mixed up in them that they cannot be realised until after the War. So that to talk about dissolving them before the War is over, to a man who knows anything about it, is silly and stupid. Then, what about this five years' business? I have no objection, but are you not sitting here in judgment on the economic situation which may be settled at the Peace Conference? Are you going to the Peace Conference with this tied round your neck, that nobody is to be allowed to carry on and discount German bills after the War? Look at it as business men. Our trade with Germany alone was almost £70,000,000, and are you going to drop all that? Is the Peace Conference going to drop it?


It is dropped now.


Yes, but are you going to wipe it out after the War? Is the Peace Conference going to say that the Allies shall never have anything to do with Germany? If they do, well and good, but are you not prejudging the case? You cannot stop it even then. My right hon. Friend must know that the ramifications of business are so subtle that what you cannot do direct with Germany you will have to do through Switzerland, through Danish, Swedish, or Norwegian merchants, and even through American merchants. When the War broke out we would not use German sugar when it was offered in the market, any quantity of it. But we did buy it ultimately, mostly through America. People imagine that you can cut business in that way, but any man who knows anything about it knows how subtle its ramifications are and how they permeate in all directions. This five years' business is a deliberate attempt to prejudge the conditions of peace. When you get to deal with a question of this kind, to say that you are not going to have anything, for five years after the War, to do with Germany simply means that you are not to allow any trade to go on between us and Germany. Will the Allies agree to that? Will America agree to that? If France does not agree to it, or Italy, or America, where are we? We are tied up while these people are doing the business which we in this country might be doing, and of course the whole idea is absurd. We shall have to buy the commodities which we want in Germany through America or through Norway, because if we want them we must have them, and if we have to do it in that way are we not rather foolish, is it not silly, and what will your hankers say? You cannot shut them out, and neither can you shut out the trading of a discount nature. You cannot do it. Bills are offered to a man, and if he takes them are you going to prosecute him? If an ordinary merchant, a broker in Mincing Lane, accepts a bill against goods shipped to Hamburg, are you going to prosecute him? What nonsense!

The Bill may do some good. I do not think that the German banks will ever put branches here again themselves, because I think the feeling will be so strong against them that they will not want to come here. My hon. Friend suggested that an unnaturalised person might sell his shares to an Englishman or a Scotchman. How is he going to stop a thing like that? Besides, what is the value of stopping it, unless it is buying or selling German goods? Would you stop a German from buying or selling English or Scottish goods? Let the House be sensible. You cannot dissolve these branches until you have realised all the assets that those branches have, to meet the general fund that has got to be distributed. You cannot dissolve them without danger and loss, unless you are perfectly certain you have realised every possible asset you can, and I say with knowledge you cannot do that until securities, which are tied up by the War, become soluble and realisable after the War. My hon. Friend here speaks of the public interest. What public interest is being served by forcing assets which cannot be realised? That is not business, and I am prefectly certain that this Bill must be, to a large extent, a dead letter. It is not a fact that any fresh business has been done. Not a particle of fresh business has been done since the War, except for the purpose of realising the assets. That being so, there is no earthly object in hurrying a dissolution. If you can get liquidation going on steadily, you can preserve your assets, and not squander them. Therefore, I do not think that this Bill is really going to do very much good. It is a sentiment, which is really unworthy of Englishmen, that has got abroad.


Not at all!


That is just the sentiment that is pleasing and amusing the Germans at the present time. They say Englishmen are rattled. Why should we do this? You have the assets in your own hands. You have the grip of the men. What more do you want?


I have listened to the speech of the hon. Member for West Aberdeenshire (Mr. Henderson) with sadness. He twits the Government after four years of war with showing great haste to close the enemy banks and wind-up and realise their assets. He tells us he has special knowledge of business and banking. He is not the only Member of this House who has special knowledge of business, or even special knowledge of banking, and, even with the knowledge he has, I can assure him it is quite possible to wind-up companies, and to wind them up quickly without losing any of the assets. I do not think it comes well from a Member of this House, who informs us he is hoping to realise his shares in the German banks after the War, to be the one to urge the Government—


The shares are not mine; they are my clients'.


At any rate, the hon. Member told us they were in his safe, and we were not unfair in assuming that they were his shares. Anyhow, I withdraw that. He says that five years after the War is no use, or is too long. In my opinion, it might be made longer, and I hope before the Bill leaves the House my right hon. Friend will agree to increase the period to seven or ten years. I welcome the Bill. I believe the Bill is an honest attempt to bring the legislation on this subject up to date, and to enable the Board of Trade to deal promptly with the many difficult problems they have had to deal with, and in dealing with which there are legal difficulties at present. I believe it is speeches like the speech of the hon. Member for West Aberdeenshire which show that not only is it necessary to dissolve companies quickly, but which show the necessity of bringing this House more in touch with the feeling of the whole country. Therefore, I hope the Government will lose no time, when the new Registration Bill comes into force, in appealing to the country, and in giving the country an opportunity of expressing its opinion on a speech like the speech we have had from the hon. Member for West Aberdeenshire. I hope no Member will return to the House and stand up here after the next General Election, and make a speech such as that to which we have just listened. I have very much pleasure in supporting the Bill.


I did not share the hon. and gallant Gentleman's sadness in listening to the speech of my hon. Friend (Mr. J. M. Henderson), for I listened to it with delight. I think it was the first speech of sanity I have heard from that side for some considerable time. The hon. and gallant Gentleman was quite entitled to express his regret at the speech of my hon. Friend, but he did not show us in what way it was unsound or inapplicable. I thought the speech was, if I may say so, sound and conclusive. It was not rhetorical. My hon. Friend gave us most admirable and business reasons for his criticism, and it has not yet been shown that he was wrong with regard to what he said about not being able to wind up these institutions as such. You can stop a branch from doing business, and I certainly entirely agree with the hon. and learned Member for York (Sir J. Butcher) that everything in time of war should be done to eliminate all trading with the enemy, and to wind up or close those branches, and that it should be done quickly. At the same time, we should pause before invalidating the claims of British creditors by doing anything to prevent them from getting these assets or being repaid after the War. Anyone conversant with the City knows these concerns are really being carried on for the benefit of the British creditors. Anything that will tend to allay suspicion, which I quite agree may exist, certainly will have my hearty support. Anything that can be done in this Bill to stop trading with the enemy, or having any communication with the enemy, will certainly have the unanimous support of this House.

7.0 P.M.

This Bill may be divided into two parts. The part which relates to trading with the enemy, or having connection with the enemy in a business or financial sense, certainly ought to receive the unanimous support of the House. But I venture to say that where many Members will join issue with the promoters of this Bill is when you come to deal with post-war legislation. We are entitled to assume that the War will not be brought to a close until we have obtained a satisfactory and an honourable peace, and we have to project our minds forward to the resumption of the arts of peace and the building up of the structure of world commerce, which has for the moment been largely destroyed. Yet we are met here with a provision which is to prevent all enemy institutions, discount banks, trading and finance concerns of any character, from having any connection, trade, or commerce with this country. It does seem almost incredible really, as my hon. Friend pointed out, that we should do that now. In the first place, we probably should do it very much better if we were to delay it until that peace, which we all hope to attain, has become an assured fact. We are doing this blindly. If you eliminate all financial connection with the Central Powers, and with the Balkan Peninsular, and all our enemies, how can you carry on trade? What, after all, constitutes the money market? Do not these foreign institutions, with the capital they bring, add to the strength of that market? If we could discriminate between desirable and undesirable aliens, and if we could keep out the undesirable aliens, it would no doubt be a good thing. But before we legislate in the way now proposed we ought to look at the advantages we have derived from throwing our ports open and from having brought within our shores many of these foreign institutions. I have had some experience in the City of London, and I wish to pay my tribute to what the great British houses have done, but anyone who has the slightest knowledge of the City of London must know that some of the greatest finance houses there have been of foreign extraction. The Rothschilds and the Speyers both came from Frankfurt, and when you remember what has been done by those houses, when you bear in mind how they helped to reorganise the American railways and how the very tubes on which we enjoy travelling in London, and which are such a great improvement on the old underground smoky atmosphere, were organised by Speyers, we should pause before passing legislation of this kind. We talk of the "menace of peaceful penetration." I have often wondered where the "menace" comes in.

Of course, these financiers and discount brokers do not come here for the benefit of their health; they come here to derive profits, but they also bring with them enormous profits and skill, without the aid of which many operations could not be carried through by British firms. We are bound to look at the enormous business which they bring to London. These foreign exchanges have houses in Berlin, Vienna, Paris, and Frankfurt. Do hon. Members remember what all that means? Is it desirous to cut them all off? I notice an hon. Member says, "Hear, hear!" Has he any knowledge of the business of the City of London? Let me put this to him: You have these large houses in these different centres; think of the aggregate population they represent, think of the population alone of the Central Powers. The hon. Member cheered the idea of cutting them out. He apparently would cut off all the commercial trading and financial connections of this country. Will anyone get up in this House and suggest, always assuming that we have obtained a satisfactory and honourable peace, that it is sane to say that the British people should have nothing to do with these people in any shape or form in trade, commerce, or finance? If you cut off all your finance you will not have any trade or commerce, and I am sure that the hon. Member who last spoke (Sir Owen Philipps) will agree that banks exist for the purpose of facilitating the carrying on of trade and commerce. A demand has been made that these German banks should be immediately wound up because after peace has been declared they will be ready to "pounce" on British trade and industry. But banks do not do such things as pounce on business or trade; they exist for the purpose of facilitating trade and of discounting traders' bills, and it shows ignorance of the ordinary A B C of trade to suggest otherwise. Do not let us, in our indignation against the Germans, lose our wits and make ourselves ludicrous in the eyes of the world. Do not let people say that the great British nation, which has in the past held the primary position in the money market of the world, are cutting off their noses to spite their faces. From the very first I have been foremost in my detestation of the atrocities in Belgium. I am in full sympathy with those who have given expression to that detestation; but still, my detestation of those atrocities is not going to affect my thinking powers to the extent of making me do something foolish.

We are here to legislate. We are not dealing with the enemy just now. Everyone is agreed, of course, that now there must be no trading in any shape or form with the enemy. But we have to consider what will be the position after the War, and I do ask the Government to pause before agreeing to a measure of this kind, which may only be the forerunner of many similar measures, taking us on the downward plane as far as this country is concerned. Let us not forget what these foreign banks have done for British trade in the past. If one of these houses has obtained a concession it has come with it to the London money market, to which all the nations of the world bring their capital, thereby swelling the short loan money market as it is to-day. These finance houses, whether they have their headquarters in Russia, Austria, Germany, France, or Italy, if they get a concession for a South American railway or mine, bring it to the London money market. It is said that trade follows the flag. I would suggest that trade follows the loan, and if the loan is brought out here by foreign bankers the proceeds of that loan go out to South America in the form of locomotives and steel rails and other commodities which are of benefit to this country, and the more you attract to the London money market these foreign firms the more you induce them to do their financial business in London, the better it is for British trade. It is quite a delusion to imagine that you can cut out a large section like the Central Powers; they would have to do their financial business somewhere, and they would do it either in Switzerland or New York, and that would militate against us. It is necessary we should proceed with care in this matter. I have no doubt the President of the Board of Trade is animated by a desire to benefit British trade. But this Bill would not have that effect. It may benefit a few individuals, it will perhaps give them a larger share of discount business, but it will not benefit Great Britain in the aggregate, and it is the general interest of Great Britain that we have to study. I therefore urge the Government to pause before they proceed with that section of the Bill which deals with post war finance.


The hon. Member who has just sat down (Mr. D. Mason) began by saying that he had listened to the speech of the hon. Member for West Aberdeenshire (Mr. Henderson) with delight. That is exactly what I would expect from him. I, however, listened to it, like my hon. Friend beside me (Sir Owen Philipps), with a great deal of sadness, and the reason why I think we take such very diverse views is this: the hon. Member for Coventry and the hon. Member for West Aberdeenshire speak, as it were, in a different language to that which many of us use in approaching these questions. The hon. Member for West Aberdeenshire spoke of the silliness and absurdity of this Bill. I am not surprised. From his point of view it is absurd that we should approach this question in the way we do. I hope the hon. Member for Coventry will not take it in an offensive sense when I say that he and my hon. Friend the Member for West Aberdeenshire remind me very much of the description I once heard given of a business man. I heard it said of him, "He is such a good business man that he would sell his mother's grave for a sovereign." That is indicative of the difference that exists between the views of the hon. Members and of those who agree with me. No doubt what I am going to say will sound to the hon. Member for West Aberdeenshire foolish and silly in the extreme. He spoke as an expert in banking, and that is, of course, his business point of view. But I do not regard this as a business proposition at all, and consequently the speech of the hon. Member opposite (Mr. Mason), however able the arguments it contained, could not make any impression on my mind, simply because I do not regard this as a business proposition. I look on it as a moral and spiritual question. I suppose it is inconceivable to the hon. Members to talk about foregoing profits or foregoing money for an ideal. The whole of his argument, and that of the hon. Member for West Aberdeenshire, was that under this Bill or under the policy which some of us recommend you might not secure the last farthing of the assets of these banks, and you might in the end possibly find there were some unsatisfied creditors. I dare say it is possible, but I do not care if it is. This proposition, I say, is to us a moral and a spiritual proposition. Apropos the provision that these banks are only to be closed for five years after the War, I say, Why that limitation? When you are building a house you do not build the house to be waterproof for five years. You do not construct your sewer system to keep out foul gases for live years; you try to keep them out for ever—at all events until some new invention is found which removes the noxious character of the gas. That is the way in which I look upon this Hun influence. It is not that I am able to contest the proposition that has been made by the hon. Gentleman the Member for West Aberdeen, for it may be that we shall lose money. If we do, I say we shall lose money in a very good cause and get very good consideration for it. We want to keep out, so far as we can keep out from our midst, and from our dealings, a race who have proved themselves not merely barbarians but a degraded race, contact with whom is contamination.

From that point of view, I say it is worth making a loss if we do, and to the extent we do, if we can preserve our people in the future from contact with such a people. I do not suppose that the hon. Member would speak as he does if, instead of looking at the thing from a national policy point of view, he were to think of it as a matter of personal policy. I do not suppose that the hon. Member would continue in business or social relations with a man who had murdered a good many of his relations, who had possibly raped two or three of his sisters, and had been guilty of every abomination of which social life is capable! I do not suppose the hon. Member would be willing after a short interval to go and shake hands with such a gentleman, ask him to his house, propose to do business with him, and sit down and dine at the same table. He would not do it. That is the point of view which we take as regards these two nations. We say, so far as it is possible to avoid it—I do not say it is possible in every respect—our object is to treat this German nation after the War, and after the revelation of their character, in the way which the hon. Member would. I think, treat an individual who has acted after the manner I have described.


May I interrupt to say that the point I desired to make was that you do not get at the individual in the way suggested, and you cannot frame an indictment against a nation? You do not get at the persons who committed the crimes.


I was only trying to bring the parallel of the individual into the national life. I do not care whether you can get at the individual or not. What I say is that the nation as a nation, and in every way in which a nation can express itself, by its Government, Press, professors, and preachers, the German nation, in this War, and certainly before this War—though that knowledge is now coming to us for the first time—has proved itself to be a degraded unit in the same sense in which I say an individual by shameful acts can prove himself to be unfit for decent society. It is from that point of view, and not from the purely business point of view, that we look at this Bill. Therefore I say that it is not surprising that those of us who take that attitude towards the whole question find ourselves at great divergence from the hon. Members who represent West Aberdeen and Coventry and who approach this matter entirely from the point of view of the balance-sheet. We approach it from a totally different standpoint. After a careful consideration of the Bill, I congratulate my right hon. Friend the President of the Board of Trade on having brought it in. I trust that it will become law with as little delay as possible.

Sir J. D. REES

I cannot agree with the hon. Gentleman who last addressed the House that this is not a business proposition. I think it is a business proposition, and a very good business proposition, and such as I should expect to come from the eminent man of business who occupies the post of President of the Board of Trade.


I did not in the least mean to imply that the Bill was not also a very good business proposition. I agree with my hon. Friend there. I only meant that that was not the point of view from which I personally approached it and which seemed to me to be the more appropriate point of view.

Sir J. D. REES

I think I understand my hon. Friend. Hon. Members will remember how, when the War broke out, it was found that the strangle-hold of Germany upon Russia and upon Italy was evident, and that it had made great strides in this country, so that what was described as peaceful penetration really meant absolute bonds. The businesses of the countries in which Germany had obtained a foothold no longer belonged to those countries to which they nominally belonged. We have lately seen the result of the German business of penetration amongst our Allies. Is it possible that anyone can doubt that this Bill is not only business, but exceedingly good business? The House heard two speeches from different points of view. There is one from that eminent man of business the Member for Chester. He followed the hon. Member for West Aberdeen. I will undertake to say, as one who spends a part of every day in the City of London, and represents a Division of a great business city, that, while the speech of my hon. Friend the Member for Chester would have been well received and applauded in any business company or business meeting in London or Nottingham, the speech of the hon. Member for West Aberdeen would have been wholly out of keeping with the spirit of the whole of his audience. I think it is desirable to say this, because the hon. Members who have addressed the House, those representing West Aberdeen and Coventry, have rather spoken as if they were the only business men in the House, or at any rate if not that, business men of such weight that what they said was especially entitled to the consideration of the House.


No, no!

Sir J. D. REES

I venture to say that their speeches have been wholly at variance with the business spirit of the City of London. I firmly believe that to be the case. I was greatly disappointed to hear the hon. Member for Coventry again repeat those arguments which were put forward here when the Non-Ferrous Metals Bill was before the House. That Bill was hailed in business circles as a sign that the spirit of the country was being expressed by the Board of Trade. We had the old heresies trotted out about the advantages we derived from Free Trade, from free dumping, and all these other theories, the adoption of which has actually enabled our bitter enemies, the Prussians, to build up their armies and navies for our destruction. It is out of these very principles, by their adaptation and by their adoption, that we have enabled our enemies to wax fat so as to be able to meet us in a great superiority on the land, and even with something like equality at sea. I am bitterly disappointed to hear to-day, at this the fourth year of the War, the same worn-out shibboleths repeated to the House of Commons. My hon. Friend spoke as if this Bill was going to lead to the ejection of the Rothschilds from England. He actually mentioned their name. What in the world has this Bill, which is a business proposition, got to do in the way of interfering with a great business built up by generations and by families who have proved their citizenship. They have thrown in their part and lot with this country.

It was a very lucky thing on the part of the hon. Member the Member for Coventry that he addressed the empty seat of my tight hon. and learned Friend the Member for Dublin University. If my right hon. and learned Friend who fills it had been here I think he would have had something to say when he was described as one wholly ignorant of the beggarly elements of business. And this a man to whom the greatest business men in the City of London go when they are in trouble to put them right, one whose voice is heard with admiration by business judges on the Bench! The hon. Gentleman's attitude towards these questions is, as it were, to say, "I am Sir Oracle; when I ope my mouth let no little business man bark!" It will not do. I believe it is totally at variance with the spirit of the City of London, which was admirably expressed by my hon. Friend the Member for Chester. I think the hon. Member for West Aberdeen was rather betrayed into a sidetrack. He admitted that he was dealing with certain estates that he was administering. We do not want to be dealing with the administration of particular estates or the recovery of a particular debt. My hon. Friend who last addressed the House said we had to deal with the matter from a somewhat more lofty platform, though he did not dispute that the Bill is in itself a good business proposition that may be adopted by business men on business grounds.

I cannot understand the hon. Member for West Aberdeen when he urged that it is quite impossible to wind up the banks during the War without losing the greater part of the assets. I do not really think, so far as I can understand, that is true. Nor could I make cut what positive proof he gave of his statement, which, if it were true, would really prevent this country from getting rid of the incubus of the German banks at all. There is always in every liquidation some individual asset which we know is refractory and will not come into line with the others, like the ducks which will not come to be killed. There is always some item of that sort in every liquidation. But does the hon. Member for West Aberdeen really mean to say that the existence of some few accounts, or, if you like, many accounts, which cannot be settled during the War, is a sufficient ground for maintaining in being these hostile institutions which are assuredly designed to govern our trade? It is true that the ramifications of trade are subtle. They are not only subtle, but they are desperately dangerous. The ramifications of trade on the part of the Germans tends to the strangling of British enterprise all over the world. For my part, I think that the President of the Board of Trade has well expressed the feeling which exists all over this country in great volume, and in daily-increasing volume, in bringing forward this measure. I think that the post-war provision of five years is little enough, but it will be hailed with great satisfaction throughout the country. For my part—for what it is worth—I wish to bless the Bill, and to thank its author.


I do not propose to say anything on the general policy of the Bill, and certainly I do not propose to follow the hon. Gentleman the Member for St. Augustine's into some of his animadversions on the Members for West Aberdeen and Coventry. The House is now dealing with a business proposition of the greatest importance, and although it may have for the Member for St. Augustine's purely moral and spiritual advantages, it has for very large numbers of business men considerations which are not entirely governed by those two categories. It is not, however, with individual business men that I am concerned this evening. I am much more concerned with the effectiveness of whatever policy is pursued by His Majesty's Government. It is by no means an easy matter to eliminate the financial influence of foreign houses from the international trade of the British Empire. We may attempt to stop one hole, and we may find we have only done something to divert the channel of trade without bringing to an end the enemy influences which have been used for the grossest purposes, not only in Italy and Russia, but to some extent in England. None of us can shut our eyes to the fact that the German banks which had important branches in London existed for other than purely financial purposes. They used their financial strength and knowledge for the main purpose of organisation in Germany in the years previous to the War, and for increasing their belligerent strength. Therefore it is no use viewing this matter as being purely one of economics, because it had something of the War quality about it even in times of peace which cannot be ignored. If we were to allow the spread of that sort of organisation in channels in England somewhat similar to the successful efforts made in the North of Italy, we might find ourselves at a great disadvantage if ever our present peril recurred. The Government should be sure that their policy is likely to be effective and complete, and at the same time they should see that it will not diminish the great value of London as the centre not only of our intern, but also of our foreign trade.

I rise to ask the Government if they will give us further information on the points raised by my hon. Friend the Member for Spalding in the course of a speech based on knowledge and experience derived in one of the outposts of the Empire. The first question is whether, before bringing forward this scheme, the Government took the advantage of the presence in London of the Dominion Ministers to enter into an arrangement with them which will provide for dealing with these matters on a uniform basis throughout the Empire? I cannot imgaine that Australia is likely to take what the hon. Member for St. Augustine's (Mr. R. McNeill) called a weaker course than will be taken by our own Government, but, whatever steps may be taken by this country, they ought to be in uniformity with the other portions of the Empire. That will cover not only the Dominions, but it must also affect the Governments of Egypt and of India, for it would be absurd for us to imagine that we were completely dealing with the task which lies before us if we were to leave Egypt and India out of our consideration. When I ask that, I have not by any means completed the range of uniformity which will be necessary if the policy of the Government is to be effective, and I must press my right hon. Friend, who is going to close this Debate, to tell us how far this policy is based upon arrangements made with our Allies.

The hon. Member for Spalding pointed out that the financial centres of the world are extremely delicate, and it might be possible for us, by making a mistake now to do a good deal by the diversion from London of an immense amount of financial business which is, of course, of deep interest in the City, and to every industry in the country which requires credit finance. I would not accuse the French or the American people of wishing to filch from us the position we have held as a financial centre of the world, but there are shrewd French and American business houses who, after the War, will be quite prepared to do their best naturally to retain within their own centres the facilities which used to be possessed by London alone. Paris and New York will be competitors of ours. We must not shut our eyes to the fact that with the tendency of the low value of money during the last few years and the immense burdens we have been under here in this country, and the fact that too many people are blind to the fact that we have long since parted with the gold standard, has led to the predominant position of London as the financial centre of the world being severely shaken.

It may be that we shall be so wholly indebted to America after the War that we shall be paying a great tribute to America year by year, and if we are to avoid making an error which will only become apparent when the War is over, I submit that it is necessary, before proceeding further with their scheme, that the Government should make sure that the arrangements with the Allies will not tighten things up in London and leave them comparatively slack in Paris and New York which might tend, in the case of New York, to that country capturing the financial business which has been the main characteristic of London for practically the whole of the nineteenth century. I am not saying this in the interests of the financial houses, but I would suggest, in the interests of business as a whole and in the interests of our manufacturing and exporting businesses it is essential that we should do nothing to injure London as the great finance centre of the world. The fact is that London paper is currency now everywhere. London is really the clearing house for all bills of exchange and for matters of large extent the London cheque was accepted everywhere. Every merchant has realised that from his own experience, for he has had London cheques coming back after long periods, with perhaps the signatures of forty or fifty different houses upon them. When that happened there was a great deal of money here, and this tended to produce a cheaper money market than you would find anywhere else. A cheap money market is not only of importance to our merchants, but also to our manufacturers, who require cheap money for the promotion of their businesses, otherwise they would not have been able to compete with their competitors abroad.

London in the past has been the financial centre of the world, and we made up in this way for certain disadvantages in our banking system which was provided for by the German bankers, who supplied many of their merchants in business houses. It is incumbent upon right hon. Gentlemen opposite who are responsible for our industry and commerce—and I would suggest particularly to my right hon. Friend who is now the head of the Department charged with foreign trade after the War—that they should make sure that no step is taken now which might tend to the financial facilities of London becoming less advantageous to our people, and the danger of the financial centre passing to America being accelerated by our own legislation. I press for an answer to the point raised by the hon. Member for Spalding—namely, have arrangements been made now, or will they be made before this Bill becomes law, with the Allies for the uniform treatment of enemy financial houses? That is a pertinent question to which I hope my right hon. Friend will be able to give us a reply.

There is only one other point I wish to mention. There were some business houses which used the German banks for their own purposes in the days before the War. I think they were foolish in using the German banks, for I believe they could no doubt have got equally good facilities from English bankers, but they used them because the German banks had more ramifications abroad, or else because they could get their money more cheaply than from some of the English houses. I think those who have had dealings with the German banks have bitterly regretted that they ever dabbled in their affairs at all, but if you are to close the London markets against these three or four or five or more enemy banks, is it incumbent upon the Government to see to it that in these days when banking amalgamations are going ahead and when there is a great agglomeration of capital under the control of a small number of groups of banks that they should do something to make sure that while they are cutting off such facilities as were given in the past they are going to use this opportunity for extending facilities or asking for the ex- tension of facilities from these very groups of banks which will now have control of practically the bulk of the deposits of this country, and by their influence over industry and commerce may have a deciding voice upon many industries in the future. These are practical business questions apart from the spirituality or the morality points which are so dear to the heart of the Member for St. Augustine's, but they have a practical bearing upon the commercial affairs of our people and upon the future which we must all look forward to with great interest. I ask my right hon. Friend to clear up some of these important points before the Bill passes through its further stages.

Sir ARTHUR STEEL-MAITLAND (Department of Overseas Trade)

I am sure the House will agree with me when I say that a number of very interesting points have been raised with regard to the Bill now before the House, but broadly speaking the discussion has centred around the question of the German banks and around financial questions connected with them. One or two speakers, the hon. Member for York, for example, have referred to some of the other provisions of the Bill which are of course an important part of it, and which were concerned with the Amendment of a former Trading With the Enemy Act. Perhaps I may be allowed to refer to these points in the first instance. The hon. Member for York made one or two suggestions with regard to the Bill as to some additional powers which he would like to see given to the Government and some additional provisions which he would like to see inserted in the Bill. One, I think, was that there should be power to compel witnesses to appear before the Advisory Committee to give evidence on oath. Another was that power should be taken to deal with colourable contracts for the sale of businesses. I can only say to my right hon. Friend that as regards the first I do not see any very great objection, but perhaps it will be sufficient if we consider those points when we come to the Committee stage, because they are really much more suitable to that stage where we can deal with them in detail than on the occasion of the Second Reading.

The greater part of the discussion has centred round this question of the German banks. I would like to clear away one or two of the more detailed points before I deal with the most interesting and important question raised first of all by the hon. Member for Spalding and then by my right hon. Friend opposite (Mr. Runciman). The question raised is as to whether, if this Bill is passed, it will not be still possible for German financial institutions, whether it be the Deutsche Bank or the Dresdner Bank, or any other German bank, to still pursue their policy of penetration in London under a cloak by means of purchasing shares in a British institution or some similar method. The answer to that question is really quite plain. It is that there is every power of investigation given us, and it can be ascertained whether there is such colourable use of British institutions by the purchase of their shares. The hon. Member will also realise that anyone who is found guilty of such a practice is subject to very severe penalties which are provided for in the first Sub-section of Clause 2. Therefore, I think that particular point, which he quite rightly raised, is fully covered. I am sorry that I was not in the House when he made an allusion to the undesirability of legislation by reference. I do not think that it is a very serious point. He referred to defining enemy controlled companies as those within the definition contained in the Non-Ferrous Metal Industry Act, 1918. If it is necessary, probably on the Committee stage, the actual definition can be given. It consists of the four main points in the Schedule to that Act which can quite easily be inserted in this Bill to make the meaning quite clear, if, in the opinion of the Committee, it is better to insert it. Lastly, if it is possible by the Committee stage, I am sure that there will be no hesitation whatever in producing the Rules and letting the Committee see them, even if they are not actually inserted in the Bill. It is really a question of time. The hon. Member will realise that such definitions are not very easy to draw, and it is all a question as to the period of grace before which they can be produced. There is, however, every wish to lay them, so that every Member of the House can see them with the greatest freedom.

I now come to some of the criticisms of the Bill itself. There was one which was raised by the hon. Member for West Aberdeenshire (Mr. Henderson), which perhaps I ought to mention, even though the hon. Member is not here, because he dis- covered, I think, a mare's nest. In the hon. Member's opinion, under the system of winding-up which will be enacted in the Bill if it passes into law, the assets of a company will be lost. I can assure him and the House that there is really no foundation for any such apprehension. If the assets to which he refers are assets belonging to the German banks, well, the Deutsche Bank is not wound up by this Bill, nor are the other great German banks. Those assets are still there. If, on the other hand, they are assets belonging to British companies incorporated in this country which are wound up under the Bill, there is an express Sub-section which deals with the point, and in which it is said, if not only the business, but the company is wound up, that the Official Receiver, who, ex officio, becomes Liquidator, may take proceedings in his official name for the recovery of debts and property, notwithstanding the dissolution of the company, and he can deal with such assets when he has got them in such manner as the Board of Trade may direct. Consequently, that fear on which the hon. Member laid so much stress is really groundless.

I turn now to the main financial problem, which was raised in his most interesting speech by the hon. Member for Spalding (Major Peel) and by the right hon. Gentleman opposite (Mr. Runciman). First of all, as regards actual uniformity of practice with the Dominions and with foreign countries: I am sure that the right hon. Gentleman himself will agree, when he comes to examine the question, as, of course, he has known in his experience before, that it is not possible to get textual uniformity of measures even with our own Dominions. What really happens is this: We communicate to them the text of a measure, and, although no one can claim that Australia, Canada, and the other Dominions should precisely follow it without any alteration; yet, as a matter of fact, legislation in the Dominions does practically take parallel lines to that in this country. That is not what I call textual uniformity, but it is practical uniformity, making some allowances for differences of conditions in the different Dominions. Therefore, as regards that matter there is no reason for any apprehension.

Of course, the really important point is that which concerns the position of London as a financial centre and the relation of London to the other great centres of the world. May I assure my right hon. Friend that before this measure was brought in we consulted the leading bankers in the City, and it has been brought in—the same is true with regard to the question of prohibition instead of licences—with their approval as being suited to the case and as not prejudicing the financial position of London. Of course, the problem that we have got to face, and the problem that the right hon. Gentleman had to face in his time at the Board of Trade, is really this: There is no question whatever that the whole object of Germany in peace time was by their methods of finance to penetrate foreign countries and to subordinate them not only for purely commercial purposes, but for other ulterior purposes as well to their own policy, and its great instruments of penetration were the banks. In this country they no doubt pursued them through the branches of the Deutsche and other banks. In Italy, as the right hon. Gentleman knows full well, they pursued them through other institutions than their own national banks. In the first place, it is quite impossible at the present moment to expect that all the Allies should take precisely similar steps. I do not think the right hon. Gentleman requires that. The problem before Italy, for example, though similar in some ways, is different in others from the problem before this country. If I may say so, it is being dealt with in a very remarkable manner, which I am sure commands the admiration of this House, by the Italian Finance Minister, who is here in London at the present time. The position, however, differs from that in this country, and the methods taken differ accordingly. Let me again come to the question of whether the position of London as a financial centre is likely to be hurt. We have two things to consider. Before the War there was no question that, besides their penetration generally, the Germans exploited London as a financal centre in a systematic manner attempted by no other country.


What is penetration? What did they do? What was the method adopted?


Of course, they borrowed money.


They paid interest.


Of course, they paid interest. Everyone knows that. They borrowed money on the London market. The London market was open to anyone to borrow money cheaply, and the hospitality of the London market was offered to the Germans as to everybody else, but, as far as I can ascertain, after a good deal of inquiry, they systematically exploited the London money market in order to use our own capital to undercut British enterprise and to beat us in foreign markets. They did that quite systematically, and that is exactly what has to be guarded against.


We do the same in other foreign countries.


Perhaps I may be excused arguing this case sentence by sentence with the hon. Gentleman who interrupts. As a matter of fact, before the War British industry and British finance were never systematically organised for this purpose in the way that German industry and finance were organised. We did not deal with affairs in the same way as the Germans. To return, however, to my main point, no one wants the London money market to lose its position. At the same time, consistently with that, after the War, especially when capital will be very scarce, no one wants the London money market to be exploited against us in the way that it was before. Therefore, the whole question is whether a measure of this kind will be any danger to the London money market? The closing of the German banks will not endanger the London money market in the very least. The real question is whether this measure in itself will be sufficient to attain its object? In itself it can do no harm. The more serious question is whether it will achieve the whole result necessary. If you are going to achieve the whole result required, and if there are to be any further measures, then I quite agree with my right hon. Friend that the most extreme care must be taken to see that the very valuable position of London is not endangered. I can assure him quite categorically that before any measures are taken which might conceivably injure the position of the London money market every possible care will be taken and all circumspection will be used. The whole of that question has been and is still subject to very careful investigation indeed.

I do not wish to detain the House longer, except to mention one or two points which were raised. We were told that a measure like this is a symptom that the British are getting rattled. To my mind, precisely the opposite is the case. We were told that we ought not to prejudge the terms of peace in a measure of this kind. I would ask the House to consider what it would mean if such advice as the hon. Member for West Aberdeenshire gave us were followed. It would mean that we must take no measure for going forward, because other terms might be agreed upon when peace was settled. If we were to hang back in every case of this kind, surely the obvious inference to the Germans would be that we were apprehensive of the result! The best way to deal with all these cases is the way in which the matter is dealt with in the present Bill, namely, to go quite steadily on—it is no sign of being rattled; quite the contrary—tightening up wherever we can, so that our enemies may know that we are going forward with our object and that the longer the struggle the tighter will the strings be drawn against them. That seems to me to be the plain moral, and not that which was drawn by the hon. Member. He further said what practically amounted to this, "Do not do anything for fear that the business previously done with you by the Germans may go to your Allies." That is quite a different exhortation from the one which bids us beware not to prejudice the position of London. That type of exhortation of the hon. Member for West Aberdeenshire really presupposes that the Allies are to be jealous of one another. On the contrary, there is growing, I trust, complete co-operation for all these matters, and the real answer to my mind is for each of the Allies, communicating with one another, so that if there is not exact uniformity there may be similar action suited to the circumstances of each country, to go forward with measures of this kind, so that the Germans may know perfectly well that the longer the struggle is continued the more steadily will their influence be utterly rooted out.

8.0 P.M.


I desire to thank the President of the Board of Trade for this Bill. The right hon. Gentleman the Member for Dewsbury (Mr. Runciman) hit the mark when he said that the Germans used their banks in this country not for trade purposes only. I can bear testimony to the use they made of the London market in financing loans and railway operations in China. They very nearly dragged us in to supplying the money to build the Bagdad railway. We all know for what purpose that railway was meant. As to the doubts in the mind of the hon. Member for Coventry (Mr. D. Mason), whether the German banks followed this practice for their own convenience and not for ours, I would point out that they discounted bills given by their traders in Germany in London, where money was cheaper, and they used that money to build up their industries and to cut out our manufacturers in this country. The hon. Member need not be alarmed that, if we curtail the transactions of the Germans, we are likely to lose any of our profits. I should like to back the Bill up, because I was a member of a Committee appointed by the right hon. Gentleman the Member for Dewsbury to go into the question of German penetration. That Committee is still in existence. When one realises the way in which the Germans put their tentacles round us, it is highly desirable that we should use what powers we can to prevent a recurrence of similar treatment. There is no doubt that they began the penetration of this country and an economic war against us in 1879. They carried it on with great skill and judgment, using our elastic and easy-going laws most successfully. I do not want to enter into the contention between the hon. Member for the St. Augustine's Division (Mr. R. McNeill) and the hon. Member for Coventry about there being a moral side to trade. I think the hon. Member for Coventry will admit that trade is not pure materialism, but that it also has a moral side, and that the Germans have violated it in every way. The essence of business is credit. The Germans have by their actions done more to destroy law and custom than anybody has ever done. They did it with their treaties, and I have no doubt they will do it with their contracts. I would thank the right hon. Gentleman for taking the precautions proposed by this Bill to cleanse us from the German influence, from which we have suffered for so many years.

Question put, and agreed to.

Bill accordingly read a second time, and committed to a Committee of the Whole House for To-morrow.—[Sir A. Steel-Maitland.]