HC Deb 29 November 1920 vol 135 cc1042-67

Order read for resuming adjourned Debate on Question [10th November], "That the Bill be now read a Second time.

Question again proposed.


I beg to move to leave out the word now, and at the end of the question to add the words "upon this day three months.

I am opposing this Bill on many grounds, but principally because it is a very unsound measure, and because the commercial and financial community wish to get rid of control as soon as they possibly can. This measure intends to perpetuate the control of the export of gold and silver coin and bullion.


It is not to perpetuate, as I explained in my speech, but it is merely to give power to theGovernment, when it considers it desirable to issue licences.


I should like to read what the right hon. Gentleman said. These were his words: We propose to deal with it in this way: we make use of Section 8 of the Customs and Inland Revenue Act, 1879, and we add the Sub-sections that follow. The Government will then have power, at any time when the situation makes it necessary, to regulate by Order in Council the export of gold and silver bullion, and to make Regulations for controlling such exports as may be permitted by licence. I would call the attention of the House specifically to this point, that it is not making permanent this control of exports, it is only giving power to the Government to effect such a control, and at such a time as that control may be deemed necessary.—[OFFICIAL REPORT, 10th November, 1920; 1321, Vol. 134.] The Act of 1879, so far as I can make out, is a permanent Act. Therefore, if you include the Act of 1879, it becomes a part of the present Bill.


I am sorry to interrupt my hon. Friend and I promise not to do it again, but he refers to Section 8 which is referred to in the first Clause of this Bill to make it clear. Section 8 of the Customs and Inland Revenue Act, 1879, is the governing Clause; it is not quite as my hon. Friend describes.


I do not profess to know very much about the law, but it has been pointed out to me, though my right hon. Friend does not intend to make the thing permanent, he will, in perpetuity, have the right by the Bill—when it becomes an Act—to issue Orders in Council at any time whenever he may think fit.


That is right.


To stop export or to grant export with a licence. That licence is one of the most objectionable incidents that has arisen during the war. We know perfectly well that it means favoritism, that it is a great hindrance to trade, and is very injurious to the export trade of this country. Gold, we all admit, is at present a commodity that is very much lacking in this country, and it would be very inadvisable to export any quantity of gold. But this Regulation, or this Act, makes the position so uncertain that it is perfectly hopeless to look for any improvement in the exchanges if the matter is to be left entirely in the hands of the Government. There are so many different matters in connection with exchange that you must have a certain amount of liberty. First of all, we do not produce gold in this country. If you are going to put on a permanent prohibition in the matter of export, you naturally prohibit the import, because nobody is going to send gold they produce to this country for sale if they know perfectly well that on arrival in this country that gold is going to be seized by the Government—for it is virtually seized! They lose all control over it. Only certain people under certain conditions will be allowed to export it. The consequence will be that you will stop the inflow of gold into this country the moment the producers of gold know that they or anybody else are not to be allowed a free market in the commodity.

We would not, however, under proper conditions, object so much to control being put upon gold. It would be a very foolish and ill-advised measure, because you will never be able to regulate your exchanges in Western countries and with Europe if you have not a certain amount of freedom in the movement of gold. Exchange does not necessarily mean that you have always got to ship gold in payment for goods from America, Australia, or any other country. But for years and years the banks had been regulating the various exchanges in the different countries without a very great movement in gold. There has always, however, been the liberty in case of emergency to move a small amount of gold in any direction that may be necessary to regulate the position of the exchanges. Any restrictions that the Government place upon that eventually will necessarily tend to put the exchanges against this country in all gold coinage countries. If it had been a temporary measure I should not have opposed it at all. What I do object to is that, as we see it, this is to be a permanent measure.

The same considerations that would induce mc not to oppose gold exports from this country do not weigh in the case of silver. Silver is a purely commercial article. It is not necessarily connected with the finances of this country, and it is very essential for our great interests in the East that there should be freedom in the export of silver to those countries.From time to time we require a large amount of silver, and we have considerable interests all over the East which will be very greatly hampered by this restriction in the movement of silver and if the Government persist in what I call the prohibition of the export of silver. In various trade activities silver is an article upon which we rely entirely. The silver that is produced in this country is purely a byproduct, and we rely, therefore, on the importation of silver from all parts of the world. We have, too, in the course of our trade, and for the purposes of our commerce, to export silver to all countries, perhaps with the exception of America and Mexico. It is therefore essential that you should have a free inflow into this country of silver, and a free outlet from this country for silver. Our interests in the East are very great indeed. Especially in China, silver forms a great article of commerce. It there often happens that considerable contracts are dependent upon a merchant being able to make advances to the Chinese Government, or some provincial government, to enable him to secure the contracts for material which is to be shipped from this country.

Whilst on this point I have a very serious complaint to make against the Government in connection with this silver question. It perhaps will surprise the House to hear that the Government have been instrumental in, or encouraged, the formation of a syndicate in this country to whom, it is understood, they have given the sole right of financing the Chinese Government. This syndicate has been trying to form a syndicate in China to work with it. The Chinese syndicate is composed almost entirely of Chinese merchants. If this Bill were to be carried through controlling the export of silver, you would have the British Government in the position of supporting a financial group in this country, and at the same time supporting a Chinese commercial group in China, eliminating the whole of the British merchants who are established in China. Some of those firms have been established for 100 years, and all those firms would be denied the assistance of the British Government. It would be impossible, with this control in silver over them, to carry out any large contracts in China, because you would have the syndicate under the direction of the Government, who would have the ear of the officials, asking the Government to curtail the operations of anybody outside so far as the export of silver to China was concerned. As to the right of the Government to create this monopoly, that is a question for the House of Commons, and I think the Press ought to be able to investigate this matter, and call the attention of the public to it.

9.0 P.M.

To the commercial community it is a very serious matter that a monopoly of this kind should be allowed and encouraged by the Government to eliminate the influence of British merchants and traders in China in favour of Chinese traders. The British traders have created the trade of this country with China, and they have foolishly relied on the assistance of the Government which they have never had. Instead of that they have now the interference of the Government in restricting their business operations, and no assistance from any of the Government Departments in the conduct of their business, or for the purpose of being able to follow the commercial enterprises which are now being thrown into the hands of our foreign competitors. As I understand that the Government are negotiating with a syndicate in America, Japan, and China to work for commercial orders, I want to know whether any arrangements have been made with the Governments of those countries to prohibit the export of silver from those countries to China except through this Chinese syndicate? Unless those countries take the same steps as our Government are taking, we are asking the Chinese to pass all their orders through our competitors instead of giving what the British merchant can command if he is given the assistance of the Government, or if he is given fair play and no favour. That is all they ask. The Government, in including silver in this Bill, is undoubtedly handicapping the British merchants in all parts of the world, especially in the Far East and in China. There is no possible reason for silver being restricted in any way. I hope that this House will insist upon the elimination at least of that part of the Bill which gives power to the Government to prohibit or restrict, except under licence, the export of silver. It is most harmful to our interests, and can do nobody any good. The Secretary to the Treasury said, in speaking the other day, after his attention had been called to what might probably happen: If any traders feel themselves aggrieved as to the manner in which the granting of licenses is administered, any complaint to me of their treatment, or anything of that kind, will always he examined and considered with care. I am only too grateful for any cases that may he brought to me in which traders feel that any preferential treatment or anything of that kind, is alleged in any quarter. I am afraid that the Secretary to the Treasury is rather unsophisticated in finance. Just picture a merchant going to the Secretary to the Treasury and asking the right hon. Gentleman to examine his case because he considers that he has been badly treated in his application for a licence I am afraid he would have very little chance of getting an interview with the Secretary to the Treasury. We all know what is the result of putting questions in this House in connection with any grievance which any of our constituents may have. I know that in 1918 I asked several questions, and one of them was in reference to licences for the exportation of pig iron. The Regulation was that you had to apply a month before for a licence. A firm in the City of London applied on the 1st of December, and for six consecutive months after that, for a licence to export pig iron to the Far East, and every time their application was returned. At the same time they saw month after month from 15,000 to 20,000 tons being shipped to the places they had applied for a licence, but they were never able to get any further than a question in this House, and their application was returned from the Licensing Department. The same thing applies in every direction. As regards the question of silver, which ought to be eliminated from this Bill, there is an enormous importance attached to the freedom of exporting that commodity. The whole commercial dealings in the Far East are based upon silver, and it is absolutely impossible for a firm negotiating cither for imports or exports to be told that they must get a licence first. You get offers for a reply in twenty-four hours, and from our experience of licences we know perfectly well that a licence generally takes two or three weeks before you get any answer to your application. Under these circumstances, the Government are driving trade away from this country if they persist in including silver in this Bill.

So far as Clause 2 of this measure goes, relating to the question of coinage, nobody could have any objection at all to that part of the Bill. Everybody was surprised to hear that it was not already the law that it was a criminal offence to in any way deface the coinage. I recollect not long age there were people imprisoned for melting down the coinage of this country, and it came as a great surprise to me that they were legally correct in doing so. If we are to take the statement of the Secretary to the Treasury, it is very evident that when they were prosecuted and convicted, they were not doing anything wrong.


That would be under the Defence of the Realm Act.


Nobody can have any objection to that part of the Bill. In view of the very grave position the commercial community, as well as the commerce of the country, will be in if silver is included in this Bill, I move that the measure be read a Second time this day three months.


I beg to second the Amendment. The speech which we have just listened to from the hon. Member (Mr. S. Samuel), speaking as he does with a wealth of business experience, indicates to us who have listened to him how very important this measure is, and I regret that, owing to the accident of Parliamentary business, it should come on at a time when so many Members of the House, in consequence of the demands of the inner man, are unable to be present. It is difficult to overestimate the importance of this matter. It is generally admitted that one of the main causes of high prices and the manner in which the exchanges have gone against us in so far as gold standard countries are concerned is the unsound nature of our currency at the present moment, and therefore nothing should be done which will tend in the least degree to retard that movement, which, I am glad to think, has already begun, of the development of the resources and finances of this country to such a position that we may once again get a free market for gold in London, and a bill on London may regain its former ascendancy in the money markets of the world. It is because I believe that the powers given under this Bill as framed will retard that progress that I am opposed to the Second Reading of the measure.

The proposals which my right hon. Friend indicated in his speech seemed as he left them to be of a quite harmless character. I wish, however, to emphasise what has been said about them by the hon. Member who has just spoken—I agree that no matter what my right hon. Friend has said they are far from being harmless. My right hon. Friend may try to soften or water them down, but I do not hesitate to repeat what has already been said on that point. It is stated that the powers are to be temporary only. What really is sought by this Bill is to carry on the present conditions, for fear that the Peace Treaties should be ratified and the Treasury find itself without the power to deal with the difficult question which it now possesses. What fear is there that during the next few months the Peace Treaties will be ratified 2 There is not the remotest chance of that for months to come, and yet the Government are seeking to take advantage of the present position to get put on the Statute Book an Act which is essentially permanent in its character! The powers sought are very wide. If at any time the Treasury think it necessary they can, by Order in Council, clothe themselves with authority to at once restrict exports of gold and silver except under licences issued by them. How can a business man go about his manifold world wide activities with this thing hanging over his head all the time? My right hon. Friend said he was quite sure that the powers would be exercised always with great care and that all applications would be fairly considered. He also said that if anybody complains of preferential treatment, he himself will certainly see that justice is done. As far as my right hon. Friend is concerned, I am sure no man would go further or do more to fully implement that undertaking, but he is not always going to be at the Treasury. I shall be very sorry, indeed, when he leaves there. Still there is not the slightest use depending on personal assurances in matters of this kind. You must be certain, when carrying out legislation, that the machinery with which it is going to be carried out shall suffer no change in heart before you entrust it with the powers you desire to give it.

We have had remarkable experience of what licences are and how they work during the War. If you want a real exhibition of unmitigated fury from a man in business you have only to talk to him about licences and how they are obtained. You could not have a more unfortunate method of dealing with a business most sensitive to all happenings in the world than the chance that somebody in the Treasury may suddenly make an Order in Council which at once puts an embargo on the whole business and starts this wretched licensing once again. It may or may not be at the present moment necessary. I am not emphasising that point. I suppose that at the present moment it is necessary for gold. I do not deny that for a moment. But why not limit the operation of this Bill to six months—till the end of next June? That is as far as I think the House should go in giving the powers which the Treasury seeks, and then if such powers are still! wanted the Treasury can come to the House again. We shall by that time know what the world position is, and I am quite sure the Government will find no vexatious opposition on a matter of this kind, but a very earnest desire to do all we can to assist the business community and the Government to get a free market in gold once again. I would most strongly urge that upon my right hon. Friend Once Acts get on the Statute Book in a permanent form, no matter how good or benevolent the intention may be, there they stand, and it is extraordinarily difficult to get them off again. I urge upon my right hon. Friend, with all the influence that I may possess, that he should accept in Committee an Amendment limiting the operation of this measure to the 30th June, 1921. That will give him ample time to come to the House again for fresh powers. I am certain that it is a subject which is well worthy of the most careful consideration, especially after what happened recently at the Brussels Conference, where 39 nations were represented. They came to the unanimous conclusion that one of the most desirable things that could happen was the restoration of the gold standard, and if a measure of this kind goes in this permanent form on to our Statute Book they will regard it as a most reactionary and backward measure, giving them a lead in a totally wrong direction. The lead of this country in financial matters is looked upon as one of real authority, and I am convinced that if one of the first fruits of our Treasury's consideration of this great conference at Brussels appears to be this restriction in the export of gold and silver, they will be very much disappointed at the action of His Majesty's Government. I should like to ask my right hon. Friend one other question, and I ask it without any knowledge. I should have liked to consult others on the matter, but have not been able to do so. Has he taken an opportunity of discussing this with the bankers?


The bankers of the City of London are unanimous in their desire for this Bill. It has been examined by them and approved by them.


What bankers?


All the leading banks.


Oh no.


I take my right hon. Friend's answer. I would now draw his attention to another rather minor point, namely, Sub-section (3) of Clause 1. There used to be, and is still, a large export trade in jewels. I suppose that the result of the passage of that Subsection as it stands will be that no jewellery can be exported without careful examination to see to what extent it contains gold or silver, or, in the words of the Bill, Gold or silver partly manufactured and any mixture or alloy containing gold or silver. I presume that that is a necessary part of the Bill, but I do not know what Birmingham will think of this proposal of one of its most distinguished Members. I suppose it has been carefully thought out, but I certainly hope that, if this measure is to go upon the Statute Book, it will be as what I understand my right hon. Friend really intends, namely, a temporary measure. If that is so, make it so. I repeat that this House will at all times be most ready, when a case is duly made out, to give what assistance His Majesty's Government and the business community require to meet and successfully to overcome financial crises as they arise.


My hon. Friend the Member for Putney (Mr. Samuel) put many points before the House with regard to the difficulties that will arise if this Bill becomes law. I am pleased that the matter has been discussed in such a businesslike and open way, and I should like to support one or two of the points that have been raised by the right hon. Gentleman the Member for Peebles (Sir D. Maclean). I agree that according to the ordinary reading of this Bill, while it is not permanent, it will be almost impossible to get it rescinded if we once pass it into law. Therefore, I would appeal to my right hon. Friend the Financial Secretary to give us, on behalf of the Government, a promise of a definite time limit with regard to it. I think that the date suggested, namely, 30th June, is, perhaps, rather short, but at the same time it is better to have a date than to leave it open. All of us who have studied the gold question, the export of gold and the gold currency of this country, must admit that at the moment we see no possibility of restoring free trade in gold. It would be unthinkable if any country in the world that had a balance against us had the right to present bank notes to the Bank of England for an unlimited amount and to ship that gold abroad. Our gold reserves would fall to such a point that the consequent enfeeblement of the banking power of this country would be a national danger. Therefore, I agree with my hon. Friend the Member for Putney that there is a reason why the Government should introduce a Bill temporarily controlling the export of gold.

The right hon. Gentleman the Member for Peebles mentioned what has transpired at Brussels, and the devout hope that the gold standard may be once more aimed at and legislated for. I would suggest to the Secretary to the Treasury whether it would be possible for him to organise in the British Empire a federal banking system such as they have in the United States. I am informed by those who have studied this question deeply that the amount of gold now in the British Empire, while insufficient to restore the gold standard, would, under the federal system of banking, enable us to re-issue on a basis which would be absolutely safe for depositors and for the banking world. Under the American federal banking system the percentage of gold actually lodged is greatly widened, under the system of mutual guarantee of bank with bank. If we had a federal banking system between London and Montreal, and Cape Town, and Sydney, and other parts of the Empire, we should so strengthen our reserves that the actual amount of gold in London or one of the other subsidiary banking centres would enable us much more quickly to get back to the gold standard. We admit, however, now that D.O.R.A. is passing away, that a Bill must be passed in this House to enable the Government to have some control over gold. We most strongly object to the word silver being included in this Bill. The reason why I object is almost a reducto ad absurdum, because only a few weeks ago the Chancellor of the Exchequer, speaking here, said that silver was only a token in this country, and no longer possessed any monetary value whatever; it might as well be tin, or any other metal. If silver has no monetary value whatever, and is only a token, and as we have passed a Bill giving power to the Mint to reduce the purity of silver in the British coinage by a half, is it not ridiculous and absurd to bring in a Bill prohibiting the export of silver? We shall be no poorer if all the silver goes out of the country; we shall use these base coins which are now in the Mint—I have not seen them, but I believe they are already stamped and ready for issue. What is the difference to the Treasury, therefore, if silver does become an article of free export? The hon. Member for Putney pointed out the great danger of having silver a controlled article, because there is a uncertainty in the mind of every man making a contract with the Eastern parts of the world if he is not a free agent in regard to the question of silver. I trust that the Treasury will take most earnest thought and care so that the business of the British merchant is not impeded in this direction. The House was at a loss to understand why the British Government were backing some syndicate in this country which was working in China. If I understood aright, it is working not with a syndicate of British merchants, but with a syndicate of Chinese merchants in China, absolutely putting out of action the old Chinese houses which have worked for 100 years in building up trade. If what is necessary in the way of the building of railways, the putting up of factories or other work in China is to be practically forced into the hands of this syndicate, then we have a right to demand from my right hon. Friend some explanation of the action of the Treasury in supporting it. While I am not a free trader, I am a man who believes in control for revenue purposes; but there is no revenue to be obtained by this prohibition or control. So far as my business judgment goes, this Bill is necessary for the control of the export of gold; it is absolutely unnecessary for the control of the export of silver.

I should like to strengthen what the right hon. Member for Peebles said in regard to Sub-section (3) of Clause 1. It passes my comprehension why every man who makes jewellery, whether silver or gold, or any mixture or alloy containing gold or silver, must go to the Government for a licence to export that jewellery or silver, or whatever it be which may contain some of these metals. That is a great loss of time and inconvenience, especially if the manufacturer has made quotations and has issued beautifully got-up circulars and price lists all over the world, as is the custom with these great business houses. From a business point of view it is insufferable, and it is contrary to all our British ideas of reasonable control. I agree that all control should be brought to a conclusion as rapidly as possible. This Bill will certainly continue control for an indefinite time. I would emphasise, most emphatically, the necessity for putting a date in the Bill, and I hope my hon. Friend, who has said that it is a temporary measure, will make it one by inserting the date of termination. If he will do that, and if he will strike out the word silver I will withdraw my opposition. If, however, the Bill goes to a Division as it stands at present I shall certainly refuse to vote for the Second Reading.


I certainly agree that the control of the exportation of bullion, at any rate as far as gold is concerned, is still necessary. The Financial Secretary to the Treasury told us that the leading banks all want this Bill. I should like him to explain whether it is only now that they want it, or whether they want it as a permanent measure in this country? The Bill may be necessary now to prohibit the exportation of gold, but it is very undesirable to make it a permanent measure on the Statute Book. Although the Bill is not actually a permanent measure, it does appear to be, owing to the way it is worded, and it will be accepted outside this House as such. It is really suggesting a permanent inconvertible paper currency, and that must have a bad effect on our credit. I would ask the Financial Secretary what steps the Treasury propose to take to restore the gold standard? At the International Financial Conference, recently held at Brussels, a resolution was unanimously adopted by the delegates of 39 nations. The resolution read as follows: It is highly desirable that the countries which have lapsed from an effective gold standard should return thereto. That was supported by our own representative at Brussels, and I hope the Financial Secretary will be able to tell us that something is in the minds of the Treasury towards carrying that resolution into effect, so far as this country is concerned. The Financial Secretary explained, when moving the Second Reading of the Bill, that the time—as I think we shall all agree—has not yet come for a free market in gold. He gave us as reasons for the delay the state of the exchanges and the condition of our currency. There is no doubt whatever that our currency has seriously depreciated. Might I ask the House to apply the test of Ricardo? He said: The price of the gold bullion can never exceed the Mint price unless the currency in which it is paid is depreciated below the value of gold. The Mint price is £3 17s. 10xd. per oz. of standard fineness, and the present market price of gold is about £5 4s. per oz. The difference between these two prices is approximately the measure of the depreciation of the currency which now exists. That depreciation has taken place because of the excessive issue of inconvertible paper money. At the time of the War our paper money amounted to £44,000,000; to-day it amounts to about £350,000,000. The currency notes are nominally convertible into gold, but, as the export of gold is prohibited, and as the notes are legal tender, there is nothing to be gained by converting them. But the effect of this depreciation of the currency is reflected in the foreign exchanges.

It is true there are many reasons why the foreign exchanges have fluctuated one way or the other. There is the question of imports and exports.

According as a country imports more than it exports', so the exchange goes against it. But that is not the only reason why foreign exchanges are affected. The depreciation of currency has had a considerable effect so for as we are concerned. One of the reasons why the exchange with America is against us is that we have issued more paper money than America has, and one of the reasons on the Continent why the exchange against France, Germany and Italy is in our favour is that we have issued less paper money than those three countries. Then one may always support this contention by saying that the issue of paper money causes a rise in prices, and prices have risen higher in the countries which have issued the most paper money. They have risen higher in Germany, France and Italy than here, for one reason, because they have issued more paper money than we have. In the same way as the rise in prices has not been wholly caused by depreciated currency, so a fall in prices to the pre-War level will not, I admit, be alone accomplished by the restoration of a gold standard. But while the question of imports and exports is of the greatest possible importance in restoring the exchanges, one must have noticed during the past month or two that while our exports were slowly creeping up to our imports as compared with a year or two years ago, and while the invisible exports plus the actual exports nearly enable us at present to balance, yet our position with America, so far as exchange is concerned, has not improved. That must surely be due to another cause except importation and exportation of goods, and I suggest that it is due to this depreciated currency, and if the Financial Secretary wants to assist in putting our exchange right with America, the sooner he gets back to the gold standard the better. I want to take advantage of the Second Reading of the Bill to ask him, in view of the resolution unanimously passed by 39 nations at the Conference at Brussels, what steps the Government has it in mind to take in order to restore to us the gold standard, so that London may remain the monetary centre of the world.

Lieut.-Commander KENWORTHY

I support the rejection of the Bill. The necessity of as soon as possible restoring the market for gold in this country has been put very ably by various hon. Mem- bers, including the hon. Member (Mr. S. Samuel), and although the right hon. Gentleman (Mr. Baldwin) has told us that the whole of the leading bankers are in favour of this Bill, I know at least one important banker, whom I have consulted on the matter, who is not in favour of it, and I think the officials at the Treasury have slightly misled him in that respect. I do not think he will find that the bankers of the City are absolutely unanimous, although certain leading ones whom it may be customary for the Treasury officials to confer with, may possibly agree.


There is seldom unanimity.

Lieut. - Commander KENWORTHY

There are some bankers who are not in favour of this Bill, and they give very good reasons for it. It consists of two Clauses. The first refers to the perfectly legitimate trade in bullion which has been carried on for centuries. I believe over a thousand years ago we were the great mart for bullion in London. This Government is wonderful in one respect, and that is in creating new offences. It creates the new offence of exporting bullion, and it mixes up this technical and venal offence with the petty thieves' trick of breaking up the King's coinage and selling it at a profit. The great objection we have to the Bill apart from those in connection with silver given by the hon. Member (Mr. S. Samuel) is that it continues the autocratic control of Government Departments. That is objected to by every business man in the country. With regard to the bullion trade I think the amount of uncertainty is especially objectionable. We are referred to the Customs and Inland Revenue Act, 1879, Section 8. That Section has been misused in very many directions already under War conditions. It refers to the export of arms and gunpowder and similar articles, and here you are putting bullion on the same basis as that and you are able, in time of what some Government official considers an emergency, to prevent legitimate trade in bullion.

The Financial Secretary on the adjourned Debate met one fear I had and told us it was not aimed at crabbing a commercial agreement with Russia. The words he used, however, were just a little ambiguous, and I will quote two lines on what he said. One or two newspapers in this country which are particularly interested in the settlement of a commercial agreement between this country and Russia have expressed some alarm lost it may be more difficult to make this agreement with Russia if this Regulation in regard to the export of gold were made. A little further on he said it was not aimed at the agreement. What he meant by one or two newspapers particularly interested in a settlement," I do not know. A certain number of leading newspapers point out the great necessity of the Government allowing British subjects to trade with Russia. But that is not the same thing as being interested in a settlement. I am glad, at any rate, that this is not aimed at the agreement. Is it intended that the Bill can be used to hamper legitimate trade with Russia or any other country, the political colour of which is not tasteful to the present Government? May I point to another example in the last few days—the case of Greece. I entirely agree with what I gather is the Government's attitude on the question, but I see it stated in the papers that the French Government very properly have cut off financial credits to the Greek Government. Can this Bill be used in this way, by a stroke of the pen, to prevent the export of gold, which will hit trade with certain countries? In Greece at present the financial situation is naturally shaky. Greek securities are down, and it may be necessary, in purchasing goods from Greece at present, owing to the high cost of bills of exchange, and the like, to be able to export gold to Greek banks as a sort of starting engine of trade. It may be possible by misusing powers of this sort to penalise British merchants while attempting to penalise some foreign government which is acting contrary to the wishes of the gentlemen who temporarily hold power in this country. That is an example of our objection. We object strongly on this side of the House, and I think we have support on the other side, to the Government having power by a simple Order in Council, a bureaucratic instrument, to be able to put a monkey-wrench into the wheels of trade in this way. Once this Bill is on the Statute Book it will be there for good and all, and the persons who are engaged in the export trade of bullion will always have the uncertainty hanging over them of an Order in Coun- cil issued for some reason not honestly connected with the exchanges. We have sympathy with the Government's endeavour to deal with the question of the exchange. We do not want to hamper them in regard to that; but there are cases where, if they get the power which this Bill gives, it may be used for extremely objectionable political objects. I should like a further assurance from the Financial Secretary to the Treasury, if he is able to give it, that there is no reason of that sort behind this Bill. Action of an economic nature against any government should be taken by one course only, and that is the League of Nations, and it should not be left to the whim of one or two of His Majesty's Ministers.

Lieut.-Commander HILTON YOUNG

There appears to be no difference of opinion that some measure of this sort is necessary in order to complete the water-tightness of our financial structure in regard to gold at the present time. The question is whether it should be a power taken temporarily or a power taken permanently. I am not able to attain that degree of optimism which is attained by the right hon. Member for Peebles and others as to the period for which such a measure as this will be necessary. The necessity will continue, at any rate, so long as the American exchange continues to be adverse, and that will continue as long as prices in this country continue to be at a different level from prices in America. It will continue so long as inflation continues, and the period during which there will be a measure of inflation is scarcely to be measured by six months or a year. However long it may continue, it surely is not an unreasonable power that the Government should be endowed with under the circumstances. If you assume that the Government which is to exercise this power is always going to act with complete unwisdom, you would be inclined to deny it all other powers, including this. This is a power which it is desirable for the Government to possess. Bitter experience of the last six years has shown how circumstances, violent extraordinary circumstances, may turn up in which the exercise of such a power is necessary. Such circumstances may occur again. Such a power, dormant, no doubt, through long years of a normal state of affairs, is one which might be a natural and useful weapon in the financial armoury of any Government. Before we give a Second Reading to the Bill it would not be illegitimate, indeed I think it is necessary, to make some inquiry as to the policy of the Government under such powers as are taken in this Bill, not as regards the old gold, but the new gold coming in from South Africa and other places. Are any difficulties to be put in the way of the use of London as the free clearing house and mart for the receipt and re-export of new-gold from South Africa and other places? Obviously, if you put any difficulties in the way it would be idle, because the only result would be that the gold would be bought direct in South Africa, and that might cost London a valuable trade which brings grist to the mill. An expression of something in the nature of the intentions of the Government would be welcome before the Bill is passed.

Major-General Sir N. MOORE

I am afraid that this Bill, instead of encouraging the import of gold, will have the effect of discouraging the import of gold. During the War the Government took very drastic powers, so far as gold was concerned. The whole of the gold from Australia and South Africa was sent to this country and taken possession of by the Government at £3 17s. 10½d. per ounce, notwithstanding the fact that it cost £5 to win. The unfortunate gold producer was in this position, that while the man on a neighbouring plant of copper or tin was probably getting double the pre-War value for his product, the gold-miner, notwithstanding that he had to pay enhanced wages, increased cost for mining timber, explosives, freight, insurance, etc., and notwithstanding that others would have been prepared to pay him £5 or £6 an ounce for his gold, had to sell it to the Government for £3 17s. 10½d. There, was every possibility of our gold production, which stood at £58,000,000. being increased. It was increasing very rapidly, but the Committee of gold producers, on which I had the honour to serve, pointed out to the Government that there was a possibility that unless some encouragement was given to the gold producers in the way of bonus, within the next year the gold production would drop from £58,000,000 to £51,000,000. That prophecy proved to be correct. If the Government had accepted the offer that was then made the whole of the gold produced in the British Empire would have been handed over to the Government at an increase of 12s. 6d., with the result that they would have had that gold for 10 years. At the present time, if they had accepted that offer, the exchanges between America and this country would have been very different, and the Government would have been making £7,000,000 or £8,000,000 per annum as a result.

However, the Treasury Committee, presided over by Lord Inchcape, recommended otherwise, and stated that the alternative was to go and prospect for new gold mines. Anyone who knows anything about gold, and what a difficult proposition it is to open up and develop mines at the present time, must realise that it would pay much better when you have a shaft down, if it was giving five pennyweights, if 12s. 6d. would allow you to take in another ounce and any other overhead charges: but you say that yon should endeavour to prospect for new mines and to open up and develop new mining townships, with the additional cost of transport, civil government, and all the necessary adjuncts of a mining community, one must realise the unwisdom of that recommendation. I was interested to learn from the Financial Secretary that the various banking authorities are in favour of this Bill. I could quite understand the Bank of England, but I was not aware that the other banks viewed this measure with any degree of confidence. I object to this sort of legislation. I could only support it if the Government is prepared to put in a Clause which would allow a licence for re-export to be granted in respect of the gold which is being imported. Otherwise, what encouragement is there to bring the gold here, and to make London the gold market of the world? They will sell it direct in South Africa or any other place. Australia at present is sending most of her gold to China, India, and other places. South Africa is sending a lot of her gold to America. What we have got to do is to encourage gold to come here and then let it take its chance as to whether it gets away again. As regards new gold you must give a licence to export it or you will not get it here. It has been pointed out to me by people who know something about this game that this Bill would be instrumental in setting back the exchange so far as South Africa is concerned. The Government should make every possible inquiry before committing themselves to this measure.

10.0 P.M.


It is a matter of surprise to learn from the Financial Secretary to the Treasury that the great bankers of this country are prepared to give to all Governments for all time the power under Order in Council to interfere with the export of gold. That, certainly, is very different from what would be generally done by people who have control of any commodity. There seems to be general agreement that something has got to be done to meet the present emergency with regard to gold. Our complaint is that the necessary powers might have been taken under some temporary measure. That has been done in respect to a great many powers which the Government have sought to continue beyond the period of the termination of the War. We have the Expiring Laws Continuance Bill, which will continue for the year a number of powers under the Defence of the Realm Act. It would have been a simple thing for the Government to get all the powers they wanted with regard to gold in such a measure and not have made them a part of the permanent law of the country. The speech of the hon. Member for Putney is one which needs some reply. There is general agreement with regard to gold, but nothing has been said by any supporter of the Bill in favour of including silver and silver bullion in the Bill, as they have no relation to the currency of the country. The hon. Member objected to the provisions of the Bill with regard to licences, that licences lead to favouritism. That is a strong statement, but it is made from experience by many Members of the House. The hon. Member went on to say that the Government of this country have encouraged the formation of syndicates and are endeavouring to direct trade of this country with China into the hands of a syndicate of this country which is in correspondence with the Chinese syndicate in China. When you put those things together, you have the substance of a very serious statement of which the Financial Secretary to the Treasury is bound to take notice. I have read his speech carefully.It deals almost entirely with gold, as to which there is very little controversy, but nothing was said about silver or silver bullion. Then there was some statement with regard to Subsection (3) of Section 1. Why not only gold and silver bullion, but also gold or silver partly manufactured? Has the Financial Secretary to the Treasury consulted the manufacturers of Birmingham? Are they as enthusiastic for this part of the Section as the bankers of London are for the rest? Under this Section no article of jewellery can be exported, and you are going to have a considerable multiplication of officials and a great increase of expense at the ports. If this Bill had been a temporary Bill, there would have been no objection; but if we are not met on this point, very probably we shall go to a Division.


I have no complaint to make of the speeches which have been made on this Bill. It is a Bill which deserves examination, which I expected would be subjected to examination, and I think that the criticism which has been made on it has been perfectly fair and reasonable. I will try to explain—I may not be successful—as briefly as I can why we adhere to the terms of the Bill as it stands now. In the first place exception has been taken to the Bill being of a permanent nature. If I may say so, the Bill confers a permanent dormant power, and I could not help being pleas 2d to hear my hon. Friend the Member for Norwich because he appreciated the point which is so present in the minds of the Government, that we consider these powers essential for the financial armoury of the country, and from that point of view we are anxious, and the bankers as trustee of the gold supplies of this country are anxious, too, to see this made part of the permanent financial equipment of the country. That does not in the least mean, if I may repeat what I said when introducing this Bill, that we do not desire as much as anyone else to see once more in London the free market for which it has been renowned for so 'many years. But I quite agree with my hon. Friend the Member for Norwich that even if my hon. Friend opposite (Major Barnes) were sitting on this Bench, and wish to bring in a temporary Bill to give effect to our desires, as far as Regulation goes he would always be faced with the difficulty of the time timit, and I believe it is impossible to-day to put any time limit on it. My right hon. Friend the Member for Peebles made a complaint that we still have in his view some months before us before it might be necessary to legislate, and that at the expiration of that time all need for legislation might have disappeared. But he forgot for a moment that the powers under which the prohibition exists to-day come to an end with the ratification of the last Peace Treaty, and we are all hopeful that that ratification may take place at an early date. If we were to rely on the ratification of the last Peace Treaty being postponed for some months, I think and believe we should be disappointed.

Complaint has been made—it is a common complaint in measures of this kind—that too much power is put into the hands of the Treasury, or, translated in terms used so often by Members of this House, into the hands of the bureaucrats. I would remind the House that, after all, the Treasury means the Chancellor of the Exchequer. The Chancellor of the Exchequer is a Member of the Cabinet, and more than that, he is a great officer in this House, who is always here to be shied at, and not only here for that purpose, but is very accessible in his office to complaints from the commercial or banking community. There is no Minister who, from the very nature of his duties, is in closer touch with the financial and commercial community, and if he takes any step which they think unwarranted or foolish, he hears of it very soon. I am sure the House realises that it would be quite impossible for the Chancellor of the Exchequer to put into force legislation of this kind if there were no need for it. If he did so, the opposition would be so great that we would have to yield. I do not believe there is the slightest risk in that connection. As to the subjects included in the Bill, I am very glad to find there is a consensus of opinion that for the present the export restrictions on gold must be maintained, but I was surprised to hear the remarks that fell from the hon. Member for Putney (Mr. S. Samuel) and others with regard to silver.

Let me say at once that with regard to silver the position is entirely different from that with regard to gold. I am quite hopeful that when the time comes to frame the Orders in Council it will not be necessary to include any regulations against the export of silver bullion, but I wish to point out that the position of the silver coinage to-day is different, and that there is or may be a real risk with regard to silver coinage when, as hon. Members know, a new coinage of a different fineness is being introduced into this country. Unrestricted export at the moment might easily lead to a drainage of the more valuable coin, and might leave us with a shortage that would be dangerous to our silver coinage. That, of course, does not apply to bullion. From the outlook to-day, I am quite hopeful that it may not be necessary to put into effect the powers given to us in this Bill with regard to silver bullion, but with silver as with gold, we feel that, although the importance of it is far less great, the two metals should be included together in the Bill. We are far from entering yet into a settled condition of monetary affairs, and in times like these we believe it to be necessary to have the two-fold power, although it seems very unlikely that one of those powers will have to be exercised.

I must say a word or two about bullion manufacture. It is very difficult to put into a Bill words that will cover exactly what you want. I may tell my hon. Friend (Major Barnes) that these, words give effect, as nearly as we can, to what is the effect of the existing Regulations. There will be no difference in the future administration from the administration which has existed during the time that the present Orders in Council have been in force, so that the trade—I am the last man in the House to interfere, with any pleasure, with the ordinary course of trade—are perfectly familiar with the conditions under which they work. The reason why the manufactured article is to be taken into consideration is that if you did not do so, and merely had a prohibition in the case of bullion, nothing would be easier than to get the bullion converted, at comparatively small expense, into sheets or some other form like that, which might be called manufactured, and then it could be exported without difficulty. The Board of Trade are in control of these Regulations, and the trade at all times can consult the Board of Trade as to the working of the restrictions. It is only fair to say that complaints have not reached my office on this matter. When the Committee stage of the Bill is reached I have no doubt that, if there be any cases where hardship is felt, the people concerned will make themselves verbal in this House.

I do not know whether the hon. Member for Central Hull (Lieut.-Commander Kenworthy) expects me to say anything in addition to what I said the other day. The reason I said what I did is that I happened to notice a paragraph on this Bill in the Manchester Guardian. It had not occurred to me until I saw that paragraph that anyone could have supposed there was any connection between the introduction of this Bill and the resumption of trade with Russia. This Bill merely continues a state of things which came into being before M. Krassin had ever been heard of. Nothing in this Bill in any way shuts the door to any arrangement that may be come to, either for trading with that country or dealing with any other country. Under the Bill every country stands on exactly the same footing. There is no prejudice against any country, and there is no favour shown to any country. With regard to the point which has been pressed by the hon. Member for Norwich and the hon. Member for Islington North (Sir N. Moore), it is one which has been present to the mind of the Government.

It is common knowledge to those familar with this matter that an arrangement has been in force for some time by which gold from South Africa comes into this country to be refined, and is exported. There is a special system of licence which permits this gold being sent here, and permits its export. I forget the exact terms, but they are, as far as I know, perfectly satisfactory to the South African Government. I am very pleased to offer the assurance that I will suggest words on the Committee stage which will give statutory power to that arrangement which has been in force for some time. I think that will probably meet what is in the mind of my hon. Friend, and no doubt we shall have an opportunity of referring to it on the Committee stage. I hope my hon. Friend for N.E. Derbyshire (Mr. Holmes) will forgive me if I do not accept his very tempting offer to make a long speech on the subject of currency. May I say my endeavour will be to do what I can in the direction of improving our currency by reducing our expenditure. That is, I think, the surest and swiftest method to give effect to what he desires. What success I may achieve in that direction perhaps can hardly be shown at this moment. I hope hon. Members will not persist in a Division, and will give the Bill a Second Reading.

Bill committed to a Committee of the WholeHouseforTo-morrow.—[Mr. Baldwin.]