HC Deb 13 April 1920 vol 127 cc1519-38

I beg to move to leave out from the word "That" to the end of the Question, and to add instead thereof the words "in the opinion of this House, the Government should, at the earliest possible moment, take all such steps as are within their power to restore the international exchange value of the pound sterling."

I do not apologise to the House for raising an exceedingly dry and uninteresting subject, because the question of foreign exchange is one of enormous importance. The House is aware that in normal times the rates of exchange between nations are fixed by bankers, bill brokers and their clients, and the possible variations are limited by the possibility of exporting gold and the cost of so doing. In normal times, at any rate, between nations which are solvent the variation of exchange, although governed by most complex causes, is relatively small, and does not materially affect the cost of commodities to the public. Between nations which are wholly or partly insolvent we know to our cost that the variation of exchange may be enormous, and that the possibility of exporting gold no longer exists, or, if it exists, it will be ineffective to control the market. The rate of exchange is the expression of the public opinion of the world as regards the ability of the country to meet its obligations, and no doubt the public opinion of the world to-day does not believe that we are in a position to meet our liabilities on our currency. This matter is so enormously important, because it affects the cost of living of every person in the country. It affects the price of our food, our clothing, and of everything that we consume, because with the present rate of the foreign exchanges and the present depreciation of our currency, we are paying from 20 to 30 per cent. more for everything we import than we should be paying if our exchanges were at or near par. This affects not only the price and the cost of living as regards those articles which we import, but it also affects the cost of those articles which are produced in this country, because we see from day to day that the increased cost of living causes the need for increases in wages, and as wages increase, so the cost of everything produced in this country is increased to the consumer. Therefore, both directly and indirectly, this great depreciation of our currency in the markets of the world is most important to everyone in this country.

Of course, this depreciation of our currency proceeds from many causes, and there is no one remedy that can be applied, no golden rule, no single step or combination of steps which the Government could take, which would put the matter completely right. But there is no doubt that the Government could do a great deal to help to restore the value of our currency in the markets of the world. At any rate, I think that they should do their share. In that respect, the action of the Government and their predecessors has had a great deal to say to the depreciation of the currency. I am not blaming the Government. They had to take those steps because of the apparent necessity caused by the War. It is all very well for the Government to preach, as they do with good reason, the necessity for increased production. That would be an enormously important factor in righting the exchange. It is all very well for them to preach, as they do with reason, the necessity for increasing our exports. That also would be a most important factor in restoring the exchange. But the increase of production and the increase of exports depend upon very various causes, most of which are quite outside the control of the Government. For instance, we shall not increase our production notably until we get good will on the part of the workers, and perhaps increased efficiency of management on the part of employers. Both those are things which are beyond Government control.

I for one am a little tired of hearing the Government exhort us to observe both publicly and privately greater economy, exhort the workers to produce more, and point out the necessity of greater saving while at the same time the Government themselves are not, in my humble opinion, taking those steps which they might reasonably and properly take to do their share towards restoring the exchange and so cheapening the cost of living. The Government it is quite true appointed a Committee. The Government always do appoint a Committee. The Report of the Committee—no doubt a very important document—recommended no action which could possibly be efficacious in any reasonable time in restoring our exchange. I was interested to see—I think it was in the "Times" of yesterday or the day before—a letter from a member of the Committee admitting that the process of deflation which the Committee had recommended would operate so slowly that he for one at any rate was anxious that that process should be speeded up. That is really what I am pleading for—that the process of deflation and the other steps which are necessary, and which it is within the power of the Government to take, should be speeded up.

What is it that the Government can do? For one thing the Government preach economy, particularly in the use of foreign imports which have to be paid for abroad. The Government might enforce that economy by either prohibiting or heavily taxing those luxury imports which are not necessary for the use of people in this country. I am sure that the Government realise that that would do a great deal to restore to a more healthy condition than exists at present the balance of exchange between us and foreign countries. I can see no reason for the Government not taking this step except that I know that a very considerable section of this House may object in principle to a tariff or to any restriction on imports. In normal times there is a good deal to be said for their views; at any rate, it is a defensible position they take up. But I am sure that section of Free Traders would recognise, as the previous Government, a Free Trade Government, recognised, that in cases of emergency, as in the case of the Paris resolutions, it was necessary to put aside for a time what were their general Free Trade principles, and to act as the necessity of the moment dictated. The necessity of the moment is not less grave now, in a financial sense is perhaps graver, than it was at any time during the progress of the War. If the Government restrict imports of unnecessary manufactures and of luxuries of all sorts, I do not think there will be any serious opposition in this House, and certainly there will be none in the country generally.

There is another matter which profoundly affects the exchange, and is wholly within the control of the Government. That is the inflation which has taken place in our currency and the steps for the deflation of the currency which ought to be taken as soon as possible. Acting on the Report of the Committee, the Government accepted the recommendation that there should be some limit to the issue of currency notes. Currency notes have been enormously over-issued. Not to the same extent, thank goodness, but in the same manner as our Allies and our enemies have used the printing press, we have used the printing press. Naturally, when we have prepared a vast amount of notes to be put into circulation, notes which are unsecured either by gold or by goods, our currency is depreciated. Now that the War is over, it is necessary to get back to sound finance. I suggest that it is the duty of the Government to take prompt and vigorous steps to reduce the amount of the currency. Of course, it can be done in only one way, and that is to have a margin between your revenue and your expenditure, and with that margin to withdraw notes from circulation and destroy them, so that you reduce the amount of currency in circulation until you have reached a stage when the currency is not larger than is actually required by the community for business purposes, and when your currency represents either gold or goods.

I was living in South America a good many years ago when we first knew, though on a smaller scale than to-day, all the troubles and difficulties of currency. Then the troubles were caused by overspending, if not by war, but the result on a small scale was more or less the same. All sorts of expedients were tried. The only efficient course was taken after many expedients had failed. The Government of the Argentine Republic withdrew monthly from circulation a certain number of notes, and for greater effect made a bonfire of them in the public places. It was a demonstration that the printing press was no longer to be used for the finance of the country. Until we make up our minds that we are going to have a vigorous measure of deflation we can hardly expect that the foreign exchanges will turn permanently, or remain permanently, in favour of this country. Another measure which rests entirely within the power of the Government is economy in expenditure We talk a good deal in this House about economy, and the Chancellor of the Exchequer informs the House that any extravagance which takes place is because of the will and the wish or the action of the House. I do not think it is altogether so. The Government have introduced Bill after Bill increasing expenditure They introduced a Bill the other day on national insurance involving considerably increased expenditure. The present would seem a more appropriate time for doing away with Government subsidies. Perhaps it would not be regretted by those who are insured, who do not wish, I believe, that with wages at their present level they should be to some extent pauperised. There is also an Unemployment Bill produced by the Government which will cost several millions a year. I think the working man in this country would have been quite willing, and possibly would have preferred, to pay for his own unemployment insurance rather than have a small subsidy from the State to help him. I do not doubt that members of the Government are as anxious as any Member of the House to cut down the ordinary expenditure of the country, because they must know better than the ordinary Member the seriousness of the financial situation and the extreme need for economy.

On the other side of the national balance-sheet, when you cut down expenditure to the limit, you can increase taxation. Under two conditions I believe that the taxpayers of this country would not grumble even at an increase in taxation. One of those conditions is, if they could be assured that the money was not going to be wasted, but that it was going to be used to cheapen the cost of living, and that it was going to be economically spent on really urgent national objects. With those conditions fulfilled, I do not think you would have great difficulty in getting even the concurrence of the taxpayers of this country to bearing even heavier burdens than the great burdens which they are bearing to-day. Let me mention one other matter. It is not wise, with taxation at its present limits, even to talk about robbing hen-roosts. I think the taxpayer, if he were convinced that the money is wanted imperatively for the service of the country, would not grudge to the Chancellor of the Exchequer what was necessary. There has been a considerable improvement latterly in the exchanges, but there are signs that that improvement is only of a temporary nature, and we are quite likely to see the international exchange as bad, or possibly worse, than it has been. The Government have been shipping gold to the States, but they must know as well as I do that that is purely a temporary measure of alleviation. There is not enough gold in the whole of the country to begin to meet our obligations. In the Argentine Republic, at the time of which I spoke just now, there was a man who thought that he could put the exchanges right and restore the value of national currency by shipping gold out of the country. He did so. He shipped all the gold which belonged to the Government and to the National Bank, and for a few months the exchange moved in favour of the country and the dollar appreciated. After that gold had gone the crisis became worse than it had ever been before. It is perfectly futile to think that the shipment of gold out of this country can produce anything but a purely temporary effect, and if carried too far the after-effects would be worse than they were before the shipment took place. The Government cannot remedy the situation entirely, but they can do their share, and I think they ought to put right those things which are within their power. If the Government will seriously take in hand the improvement of the balance of our trade by limiting or taxing unnecessary imports, and if they will seriously apply themselves to the deflation of our over inflated currency and if they will practise the economy which they preach, I believe that the Chancellor of the Exchequer and the Government may not gain at the moment popularity, but I do believe that they will be doing what is infinitely more important. They will be doing the right thing for all those who live and work in this country by reducing the cost of living and getting back as quickly as possible to that condition of solvency which has been and is the pride of this country.


I beg to second the Amendment.


I had no intention of inflicting what I have to say upon the House when this Debate opened, but having listened to what the hon. Gentleman (Mr. Hopkins) has just said, I feel myself opposed to his Amendment. The Amendment which he has proposed declares That in the opinion of this House the Government should at the earliest possible moment take all such steps as are within their power to restore the international exchange value of the pound sterling. 4.0 P.M.

I ask, what is the hon. Member driving at? As far as I have studied the exchanges they are not, with the exception of a few, against this country. I think the hon. Gentleman has overstated his case. In Europe only the Dutch, Swiss and Spanish and some of the Scandinavian States are against great Britain in the exchange. Our trade with the Scandinavian States and with Switzerland and Spain is not of paramount importance. I must therefore conclude that the hon. Gentleman overlooked the fact that it would have been better to put the Motion in the terms "of the exchange between Great Britain and America." If we carry on discussion as to the position of the exchange between America and Great Britain, that is another matter. The hon. Gentleman talked of restoring the international exchange. I am going to make use of the American exchange rather than the international exchange for the purpose of my remarks. Does he expect that we should export all the gold we possess to put right our debt to America? We had last year an import trade with America amounting to between three and four hundred millions and an export trade with America of about a tenth of that sum. What is the good of all the gold we have to put that adverse balance right? If my hon. Friend, the Financial Secretary to the Treasury, could go back to the Treasury in Whitehall, and find in a hidden cupboard in the cellars of that office sovereigns amounting to £320,000,000, which is the total of the fiduciary issue of currency notes, and if he could go into every bank and say, "Give me your currency notes; I will destroy them, and substitute gold, which it has cost the country nothing to provide," does the House think for a moment that would put the exchange right, so long as there is no free market for the export of gold? If there were a free market for the export of gold, every sovereign would go out of the country in a few months, and our last state, as in the case of Argentina in 1890 to 1893, would be worse than it is at the present time. The hon. Member also talks about "deflation." How are we going to deflate this currency? There is no redundancy such as he thinks there is. He says that we must withdraw the currency until it represents the needs of the population. The currency notes at the present time do represent the needs of the population; otherwise, they would not be in issue. As a matter of fact, only last week more currency notes were issued, which shows that the needs of the population have to be met by the issue of these notes. Sup posing you did withdraw these notes, what would happen? You would find that people would be thrown out of employment, and manufacturers, like those with whom I am connected, would have no paper tokens with which to pay the wages of their workpeople on Fridays and Saturdays. You would certainly have a higher bank rate and a tremendous fall in prices, because you would not be able to produce goods without tokens or cash for wages. Down would come the price of goods, as the population could not buy, as people would be thrown out of work, and it would end in bloodshed, a glut of goods, no wages to buy them with, starvation and riot.

There is nothing more serious in discussing this currency question than that we should think for a moment that a hasty, or even not quite a hasty, deflation of currency would be good for the economic policy of this country. I am totally against anything which would savour of the slightest haste in the deflation of currency. In fact, I dislike the policy of deflating it by merely withdrawing it. The best way is to increase by production the value of goods and to make them, as assets, balance the amount of fiduciary currency. I do not think that the inflation of currency is the basic cause of the high cost of living. Nothing will induce me to believe that an inflation in the domestic tokens or symbols of values called currency notes passing between man and man, amounting to no more than £4 or £5 per head in excess of what was existing as currency in gold and bank notes before the War, notwithstanding the figures published and discussed by a Noble Lord in the other House just about two months ago, has brought about the high price in the cost of living. It is only a subsidiary cause. The trouble lies in the inflation of Government credit, which is shown in the bank deposit returns now amounting to over £2,000,000,000, as against £700,000,000 before the War. That is where the inflation is causing trouble. These currency notes are nothing more than tokens of bank deposits and credits operated by cheques. You might as well say that the cost of living is put up because you issue a great many more debased shillings and half-crowns as tokens of your pound sterling. The demands of the miners and others for millions more in wages compelled the Government, in order to pay those wages, directly or indirectly, to get more credit, and therefore to find more tokens. This allows those people who demanded more wages, in face of a declining production, to go into the market with those tokens and put prices up against every other person in the country. We ought to keep off the idea of the inflation in currency notes being the cause, because I do not think that it has the effect on the high cost of living that some people would have us believe.

The hon. Gentleman who proposed this Amendment referred to a letter lately written by a man who bears a very honoured name, Professor Pigou, but I pin my faith to Professor Cannan. Here are the two great authorities on currency. Two years ago or more I was called before the Commission on currency, and I formed my own opinion then that, if we followed the views on inflation now put forward by Professor Pigou, they would bring this country to nothing but disaster. We should hesitate long and carefully before we run into any of the expedients to which the hon. Member would have us resort in his views upon withdrawing these currency notes. If he wants, as I presume he does, to rehabilitate the exchange between this country and America, to what price would he like it to go? I know nothing of the matter from the bankers' point of view; I only regard these things from the point of view of a manufacturer. In the old days when the American dollar was 4.86 to the pound, I do not think, though it may seem curious to say so, that it was ever a healthy or normal exchange. I believe it was brought about by the converse from that which which exists at present between England and America. I believe that before the War we were getting more per pound sterling than our export trade was entitled to get, taking the parity of values in their strict sense. America owed us interest on the money which we had lent her for her railway system, and those remittances allowed us to get as much as $4.80 for the pound sterling. I do not believe that it was a normal level, and in my lifetime I never expect to see, under the most favourable circumstances and seeing how things have changed with regard to the credit and debtor side of international money, the American exchange go back to much over $4.50. It was at $4.80 or thereabouts, because the balance of remittance was always against United States and in favour of London. Otherwise the dollar would have been worth more nearly 5s. than 4s. 2d. It is worth over 5s. now. It will probably stabilize itself in a year or two at about 4s. 6d. or, say, $4.30 to $4.50 to the £1.

What does the hon. Gentleman say will happen now that the exchange is so low? He says that we are paying a great deal of money for our food. That is quite true, but within the next year we shall not get very much wheat from America. They will have very little to export. The effect of the high dollar value has been to discourage people from buying cotton and wheat and meat in the United States, and I am glad to say that British subjects in various parts of His Majesty's Dominions—Nigeria and Australasia, for instance—are producing those commodities and tobacco in greater volume than before. I believe that the high price of cotton in America has more than doubled the output of cotton in India, which is so much the better for us. We ought to grow sufficient cotton to free us from complete dependence upon foreign supplies. Freights are falling on the East China trade route, and we are able also to put more ships in the water for trips to Australasia, and thus bring home grain and foodstuffs which otherwise we should have to obtain from the United States and Argentina, where the exchange is against us. Similarly, we are now getting tobacco from Rhodesia and Nyassaland. The great reason that we wish to see the American exchange rehabilitated is not with regard either to foodstuffs or to ordinary merchandise. Foodstuffs will come, we hope, soon from His Majesty's Dominions in sufficient quantities to permit us to buy all that we require without going to America. Other merchandise which we get from America has a clog put upon it by the heavy price being paid for dollars, and to that extent a bounty is put on British exports, as the English ex porter will be able to send goods abroad to buyers who might buy of America if payment were easier. The merchant can do what he likes; but it is not so with the buyer of food, and meantime the price of food is kept high. That fact, however, will be swept aside by food being obtained from His Majesty's Dominions and free of the dollar penalty. The buyer of merchandise, if America will not give us more than 400 cents. for our pound, can take his pound note where people will give him more. Therefore, it matters not at all to our merchant and manufacturer what the American exchange may be so long as he can take the pound note and buy goods elsewhere.

We must, however, get our national debt back from America somehow, either by raising money here or buying bills abroad and sending them to America to repay the remaining £1,000,000,000 which we owe to America for credits that they have given us or by shipping goods by increased export trades. I am delighted to hear that the Chancellor of the Exchequer has been able to send a large sum, whether by securities, bills, or goods, or gold—anyway, values suitable to the American market—to enable us to get back that Anglo-French Loan. That is a step of a splendid kind in the right direction. We now owe America £1,000,000,000 more debt. It is not composed of loans in issue on the market. It is, I believe, credit from the United States Government. When once, by hook or by crook, within the next few years we can pay off that loan, I then really shall not care—I am speaking broadly—whether I see the exchange three dollars or five dollars to the pound. So long as we have repaid our national debt to America, we need not care, I do not think that the country need care, what is the American exchange, and as for putting up the value of the £ in terms of dollars by supporting exchange at the cost of millions, why that is merely a form of dope, and in these days will not bear serious argument. For these reasons, I do not think that I can support the proposition of the hon. Member opposite, and I would ask him to withdraw his Amendment unless he can, in more definite and convincing terms, tell us how we can put right the matter to which he has drawn attention.


I should first apologise to the House for the absence of the Chancellor of the Exchequer, who certainly desired very much to be in his place to-day to reply to the speeches on this Amendment. He is engaged closely on questions relating to his Budget, which he has to introduce next Monday, and he felt that it would be impossible for him to break off this afternoon. He therefore asked me if I would do my best to deal with any arguments which might be adduced. Of course, an Under-Secretary is at a disadvantage in speaking on an occasion like this, because he is in no position to speak authoritatively on Government policy or on high matters of that kind. At the same time, it is open to me to make a few remarks on the subject and to say what I believe is the commonsense way of looking at this subject. I propose to speak in non-technical language. There is no subject more than that of the exchanges which can be obscured or clouded by the use of technical language, which I purpose to avoid altogether.

Before coming to the speech of the hon. Member who proposed the Amendment, I would say that the financial situation of the world and the malady from which we are suffering is not peculiar to ourselves. It is a malady from which the whole world is suffering, some parts of it in less degree and some in more. It is like a high fever that came on very suddenly in the crisis of 1914, and prostrated the patient before it had run its course. The patient now is only in the early stages of his convalescence, and it is no good expecting that we or any other country can take up our financial bed and walk at the bidding of a Government or of anyone else. Convalescence is bound to be long, it is bound to be slow, and it is bound to be painful. What suggestions did the hon. Member (Mr. Hopkins) make? Four, as I understood him. He thought that the Government might help him in the matter of the exchanges by taxing luxury imports and unnecessary manufactured goods; he thought that the Government might take steps to check inflation, or to promote deflation, and limit the amount of currency to that which is necessary for the requirements of the country; his third point was economy in expenditure; and his fourth was increased taxation. In regard to the last point, I find myself in complete agreement with him. I have always been, for myself, an advocate of high taxation, and it may be that later in the Session we may have some opportunities of returning to this subject. With regard to the third point, economy of expenditure, I do not think anyone would be found to differ from him, and I propose, therefore, to make a few remarks on the first two points on which he touched.

He may not remember, as he was not then a Member of the House, that the taxation of luxury imports was a subject which was examined at great length by a Committee of this House prior to the Budget of either 1917 or 1918 (I think the former), and although that Committee examined the subject at great length and with great skill and patience, it was found to be impracticable to come to any agreement on what articles should be taxed and how they should be taxed; and just as that was the result of the investigations of that Committee, so I feel certain would it be the result of any investigations into what are called unnecessary manufactures, because as sure as you schedule any manufacture as unnecessary there will arise some man or some body of men who will prove conclusively that it is the one manufacture on which their whole welfare in this world and the next depends. I regard that as impracticable in the first place, and in the second place I would remind my hon. Friend that while, if such legislation were practicable, it might be followed to a limited degree by desirable results, yet you would have no guarantee that the money that people saved by not spending it on these particular imports they would not waste equally either by purchasing luxuries in this country or by squandering their means in riotous living. We want to go further back than my right hon. Friend indicated. We want to see people not only saving their money, but putting the result of those savings into the production of articles that are of use and of service to the community, and for exchange in the world at large. My hon. Friend who immediately preceded me (Mr. A. M. Samuel) spoke words with which I find myself very much in agreement on the subject of the possibility of Government interference with regard to inflation.

Speaking for myself, and unless it be within certain very well-defined limits, I am very nervous about a Government interfering in matters of currency. A Government that may at one moment try and force deflation on a people may, in changed circumstances, reverse the process and lend encouragement to inflation. The less such interference takes place, in my opinion, the better. But I said "within well-defined limits," and I think at this point it might be well to pause for a few moments on what the Government have done and are doing in this matter. I think I am presenting their point of view if I put it in this way. Each country in the world to-day, linked as we all are together in the troubles that nearly overwhelmed the world, must ultimately rely on itself in these matters, and it is only by self-help and by putting their own house in order that they can contribute to the double purpose of making their own foundations secure, and helping to make secure the foundations of any other country with whom they deal. These objects can only be attained by the complete cessation of Government borrowing, which creates fresh Government credit, and it is having regard to that point of view that I look with dread—and I am sure the financial experts in all the countries in the world look with dread—on any scheme that might be brought out for granting large Government loans in the way of creating credits as between one country and another at the present time. With the cessation of the creation of credits by Government borrowing must come in each country sufficient taxation and sufficient curtailment of expenditure to make the annual revenue balance the annual expenditure. To that point we are working, and in the coming year the Chancellor of the Exchequer has, I think, on more than one occasion stated that he intends to achieve that result. Until the various countries in the world will tackle this question, make that resolve, and give effect to it, no other efforts that they can make will be of the slightest use in regulating their own finances, in restoring stability to their own currency, or in improving the state of their own exchanges with those countries which are in a better financial condition.

As the hon. Member who has last spoken has said, there has been a marked improvement recently, and a progressive improvement, in the foreign exchanges which had been most against us. This was acknowledged by my hon. Friend who moved the Amendment before the House, but he seemed to think this improvement would only be of short duration. I was interested in what he said a little later on, because he said how tired he was to hear the insistence in many speeches on the necessity for production, and yet he spoke of the passing and temporary effect of gold on the ground that there was not gold enough to go round the world to pay for the goods that were imported. That, of course, is perfectly true, but what other means of payment are there? There are only two—securities and goods. Securities, as we all know, are limited, and unless we can see payment made for goods ultimately, no payment is possible, and the exchanges will go away all to pieces. What caused this improvement that has taken place markedly in the American Exchange and, following that, in the other exchanges in Europe that had been most against us? I myself attribute it to two particular causes. I attribute it to what I think plays a very large part in these matters, and that is the psychological effect of the readiness with which this country grappled with the first outstanding loan in America, the Anglo-French loan, and made arrangements for its redemption in the course of the year. I attribute it also to the very real contraction of credits that is now slowly taking place, and to the remarkable way in which the revenue of this country is coming in, which foreshadows what I have already said the Chancellor of the Exchequer has undertaken to do in the forthcoming financial year, namely, make the revenue and expenditure in this country meet. We have also the Board of Trade returns, which show that if we have not yet got to the point where imports and exports balance, we are at any rate so close to that point that we may feel much more confident in looking into the future than we could have done some months ago.

I would like to remind my hon. Friend, who moved this Amendment with much knowledge but not in any optimistic spirit, as it seemed to me, that there is no royal road to financial stability, that the ruin which has been wrought in the world throughout the past five years can only be made good in time, and with toil, and with tears. We shall find that when once we have turned the corner to the extent of making our revenue and expenditure meet—now that we have closed, I hope for good, Government borrowing by way of creating credits, as had to be done during the War and in the immediate period after the Armistice—we shall find then that of itself the necessary check will be given to the issue of the currency notes. The peak load of currency notes, as far as we can sec—and it is always rash to prophesy in these matters—has been passed, and we have to remember that there is nothing else before this country to do but two things that have been insisted on with wearisome iteration, but which are absolutely and wholely true—we must work, and we must save. As I said, we must put our savings into productive industry for the manufacture of such goods as are needed both by ourselves and by other people, by people for purposes of exchange throughout the world, and not for such goods as really minister to luxury and to wantonness.

My hon. Friend may have realised this long ago, so that he is aware of this truism; but many people in this country do not realise it yet, although the light is penetrating, and I do not think I have seen any more remarkable proof of the way in which it is becoming borne in on the people of this country that production is the only way that leads to cheaper goods than has been furnished by a late distinguished Member of this House, Mr. Philip Snowden, with whom so many of us were in disagreement, but whose speeches were listened to with a conviction of their honesty and with admiration of his power of expression. Mr. Philip Snowden has been writing only within the last two weeks on the necessity of production, and saying that increased production is an immediate necessity if Central Europe is to be saved from starvation. He acknowledges that increased output may benefit the capitalists, but the only way to save Europe is by bringing food and raw material and machinery to the famine countries. That is an absolute truth. I believe that in time the whole country will realise that, and that many men who to-day "cannot see the wood for the trees," will realise the existence of the wood as well as the trees, and will understand that by curtailing, if only for a brief time, any production of essential commodities in this country causes loss which may last for a long time to poor people in every country in Europe. The world has survived an earthquake, and this country has survived the cataclysm better, with more chance of recovering itself, than any other country; and, to my mind, one of the most astounding facts of the present day is that, after all the financial shocks from which we have suffered, after we carried, as we did, the heat and burden of the financial day on our shoulders throughout the war, to-day the bill on London occupies exactly the same position of pre-eminence in the commerce of the world that it occupied for generations before the War, and I believe that, as it stands to-day, so every day now will strengthen its position and postpone to an indefinite future the day when any other city in the world will rob us of that proud pre-eminence.


We have listened to a very dry subject, but, at the same time, it is a most important one, and I am sorry that there were no Cabinet Ministers and no prominent Members of the Government present to listen to the very excellent speech which has just been made by my hon. Friend. He has laid down certain maxims, which, I think, are admirable. He has said two things. First of all, he has said that there is no royal road for putting right the exchanges—which, I agree with the hon. Member opposite, probably mean the exchanges here and in America—except by increased production. That is an absolute fact. It is a very simple thing, and all simple things are regarded as rather foolish. People expect you to give some elaborate plan which will work wonders. That you cannot do. You can only do it one way, and that is by increased production. Is that the reason why the Government are going to bring in a Bill to prevent people working more than forty-eight hours a week? What they ought to do, if the speech of my hon. Friend is to be followed, is to bring in a Bill to compel people to work sixty hours. I am not in favour of that, because I am a lover of freedom, but, if we are going to interfere with the hours of labour, it should be in the direction of extending them, and not of diminishing them, that is, if we want to follow the excellent principle laid down by my hon. Friend that, in order to save the country, we must increase production. Then there comes the question of inflation of currency, and, if I may say so, I do not quite agree with the hon. Gentleman opposite. I agree so far that the inflation of currency is only one of the causes, and perhaps not the major cause, of the increased cost of living, and when the hon. Member opposite says it is the inflation of credit and not the inflation of the currency, I beg to say I do not see the difference.


I am afraid I explained myself badly. What I meant by the inflation of currency was the inflation of the currency note. I know the real domestic currency of this country is more properly the bank cheque, so when I said the inflation of currency I did not mean the increased currency of cheques. I confined myself to the currency note. For I do believe that there is in the inflation of bank credits, bank current deposits, and bank cheque-currency the source of high prices—caused mainly by Government borrowing.


I accept that explanation. I think it is quite clear that borrowing on Ways and Means, which means the Bank of England put a certain sum to their credit, necessitating currency to meet their credit, often leads to the printing press being used and notes being issued. That is inflation pure and simple, and until that is stopped we shall never get into a sound position. I quite admit that any increase of currency notes is going to cause a very bad time, while it is going on—probably a rise in the Bank Rate and further depreciation in all securities. But we have to face it sooner or later, and I can only see two ways of meeting it. The first is economy. If both ends of the Budget are made to meet by expenditure being cut down, that is all right, but if they are to meet by an increase of taxation, then I do not think that is all right. It is a bad principle to spend when we have not got the money to spend. We have not got the money to go in for all these schemes, whether they are good or bad, which the present Government have been constantly putting forth, and this House and the country must realise it. It is said, "Oh, it is very excellent for the people," and all that kind of thing. It may be, but we cannot do it. I only wish my hon. Friend were Prime Minister and would carry out what he said. I certainly hope he will send a copy of his speech to San Remo, with a statement that it is to be read by the Prime Minister himself and not by his private secretary. If my hon. Friend will do that, I am sure it will have a very considerable effect upon the finances of the country. Alhough there has been a very small House, I am very glad we have had this discussion, because I am sure we cannot go on in this way. It is never a popular thing to do, to go to a man and say, "You must cut down your expenditure, deny yourself so much tobacco, and deny yourself so much beer." You have to meet it, not by asking the people to give you more money, but by cutting down your own expenditure. I am very glad Mr. Philip Snowden has expressed the view he has, although I do not attach so much importance to his statements as my hon. Friend does, because they are apt to vary at different times. But until we do realise that we have got to do the unpleasant thing—and the sooner we do it the better—I do not think we shall live to see this country in the position in which it was.

I do not quite agree with the last remarks of my hon. Friend, if he will excuse me, that the Bill on London is the same now as it was, certainly in New York; and, further, I do not like the argument—the only one I do not agree with—that because other countries are suffering we are to suffer too. We have nothing whatever to do with other countries. We have got to put ourselves right. If we have anything to do with other countries it should only be to show them the way they should go. I did not intend to speak at any length, but the subject is so important, and my hon. Friend's speech was so good, that I think someone ought to get up to say so, and express regret that prominent Members of the Government were not present to hear it. At the beginning of his speech my hon. Friend said an Under-Secretary had not much authority. Are we to understand that that excellent speech was made without any authority from the Chancellor of the Exchequer, and was merely his own opinion; or are we to understand it is the considered opinion of the Government? Perhaps he will say, "It is rather an important question."

Amendment negatived.

Original Question again proposed.