HC Deb 31 May 1922 vol 154 cc2183-207

Question again proposed, "That this House no now adjourn."

Mr. CLYNES

I was saying that the friendship of the people of this country for France has deepened, and the working classes are not either last or least in their admiration for the French character, and in their desire for the maintenance of French friendships. But friendship with France need not rest upon pacts or treaties. Companionship with France is prized all the more highly because it did not grow out of any secret arrangement. Unhappily there have been questions of after-war policy and differences of opinion on matters of the highest importance, and it would be unwise any longer to conceal or underrate these difficulties. If friends disagree on some points of policy which cannot be reconciled, they can go their different ways without forfeiting their friendship. We must persevere in our effort to try not to disagree, but if there is real disagreement on points of substance and policy affecting the material well-being of this country, then we ought no longer to pretend to be at one with France on certain matters where there is no agreement at all.

There has been a very heavy strain put upon this country because of its serious economic and industrial difficulties in the past two and a half years. We have a very large population which, expressed in terms of families, must number about 6,000,000, directly and very seriously affected by unemployment—these existing not upon their own earnings but upon what they may be able to get in those ways of which we know. They have been so long unemployed that they have come to look, many of them, upon the thing as a permanent condition of their existence. It is true that our lands in this country were not devastated by War, but we made an immense contribution and sacrificed wealth and manhood in the joint struggle with France. Setting aside the devastation of France as a result of the War being fought there, it is clear that since the War ended this country has suffered, has indeed been a far greater sufferer, as a result of what followed the War. I understand from the statement of the French Prime Minister that all that France desires is the execution of the Peace Treaty. Well, it is clear that the Treaty terms have failed, and also the other measures, to reduce Germany to a state of military impotence. But that is not the beginning and end of the Treaty. What of the military preparations in France itself and other countries? The Treaty was not the last word on these questions, for, indeed, since it was signed volumes have been added to it by way of modification. The machinery of the League of Nations is in the forefront of the Peace Treaty. How far has France sought to have differences adjusted by the machinery of that League and how far are we making the fullest use of that which is in the forefront of the Treaty of Peace? If the Treaty of Peace, as it does, provides for the payment of reparation to France, let us not merely insist upon the fulfilment of that, part and ignore the other parts in regard to these international questions.

The spirit and method of the League of Nations have been almost ignored. My conviction is that safety for France can be found only in the practice of what is provided for in the Covenant of the League of Nations. We may be able to crush Germany financially, to dismember Germany by the division of her territories and by the allotment of her lands to ourselves and other countries. These things we have done, and are now doing them, and are thus making it less competent or possible for Germany to pay the amount of reparation demanded within the time we have laid down. We cannot succeed at one and the same time in economically crushing Germany and dismembering her as a family and at the same time making her pay according to the terms laid down. Nor can it be said that this country has been quite consistent in its attitude towards France in respect to the French attitude on many parts of the Treaty. In other words, we have created expectations in France, and fostered hopes, which now it is found quite impossible for us to fulfil.

The Government is largely to blame for these differences with France, for France was misled by the persistent pronouncements and extraordinary electoral declarations in this country in 1918. I am convinced that that election encouraged France in the pursuance of a mistaken policy. What was said in it was regarded as the official endorsement of our intentions. A late member of the Government, Lord Derby, speaking a day or two ago, went so far as to say that these election declarations amounted to official pledges which we must fulfil. Therefore, we have created in France expectations which now have produced for us difficulties in policy which we must try to remove. In other words, we must go far to unsay much of what we said in 1918. We have been astonished recently at the deepening of the division between France and ourselves, and complications, because of French threats to take a certain course to enforce from Germany payments which, clearly, Germany was unwilling to make. For how long is the question of invading the Ruhr to be postponed. For how long are these matters to be postponed by arrangement reached a day or two ago between Germany and France through the Reparation Commission. The threat of military force to exact reparations is a constant source of unsettlement and serious check to the economic revivval of this country. Employers say that they want security; that they want a sense of confidence. They want to know that the world is not to be further disturbed by military or other adventures, so as not to have, as indeed we have had constantly, threats of invasion during the last 18 months or so. These have created a state of great unsettlement and alarm amongst employers of labour and so prevented that economic settling clown which would help to remove our unemployment problem.

I ask, therefore, are we committed in any way to join in any such invasion or any such further occupation of German territory? I would indeed ask whether the occasion of the present settlement, or the present conditions of settlement, is not just the moment not further to invade Germany, but to negotiate and arrange, even for the withdrawal of our troops and the French troops from the occupation of parts of that country. If it did nothing else, the withdrawal would help to save enormous sums of money which are being wasted. I would add to my question the question on what ground of objection can there be to the international loan recently suggested within Germany as a means of enabling Germany to pay, if not all, certainly a large portion of the reparation demanded? An international loan is, to organised labour in this country, in relation to these matters, no new thing. It has been hinted at or advocated by a number of financiers and representatives of Governments. It was definitely put forward by Labour before the War came to a close, and repeatedly it was advocated by Labour before the Peace Treaty was signed as a means of enabling Germany to pay reparation without causing that serious disturbance of trade and finance which has followed from our present method. Is there any objection on the part of the Government to this?

Germany can only pay reparation through the agency of the wealth which it provides for that purpose. In Germany, as in other countries, the level of national resources is the level of the national production. The wealth of Germany is expressed in the production of her employed population as in any other country. That is why the measure of the force we have applied to Germany for the purpose of reparation has, to a great extent, been reflected in our own state of economic breakdown and extensive unemployment. I do not mean that the payment of reparation is altogether the cause of unemployment in Great Britain, but I allege that our trade dislocation and economic breakdown which has produced unemployment has been due to the degree and form of the reparation payments which we have sought to enforce in the case of Germany. I ask whether in the opinion of the Government it is not better that we should get reparations from Germany by agreement or arbitration than by the application of force or the threats of force. An arrangement that Germany should pay within her willingness to pay would be the best for all countries. The cost of the present method takes away a very large part of whatever Germany has been able to provide so far.

The fact of national economic interdependence has been so often emphasised that I will not now dwell upon it. In some of these countries, the political and military systems have been separated from the economic laws and needs of those particular countries. Economic laws should link up military and political systems. Russia is a special example of this. What has happened there within the last few years affords a special example of the fact which I am endeavouring to state. Russia at Genoa showed her political independence above all other nations, but her economic dependence was shown by her appeal to capitalist nations for goods, loans and materials. Whatever be the political system or the military might of a country, there is economic inter-dependence which compels us to recognise that we have something in common which we cannot afford to trifle with.

I would suggest that the Prime Minister should pursue his work of seeking that community of interest amongst European nations, particularly with the object of vanishing the spirit which led to the War of 1914. I know it is impossible to deal with questions of French relationships or reparation without some appearance, if not actual intention, of severe criticism of the Government. My justification is that the Government is responsible; if they are improving their policy all the better, but we cannot refrain from pointing out the- consequence of the policy which has 6o far be-en pursued. I said what I thought the other day of the Prime Minister's action at Genoa, and I take this opportunity of correcting just one misapprehension under which the right hon. Gentleman laboured when he made some reference to what I had said. The Prime Minister appeared to be under the impression that I viewed Genoa as an end. I expressly said that I viewed it, not as an end, but as something like a beginning, and that we should go from Genoa to The Hague, and perhaps from The Hague elsewhere, promoting better relations and greater goodwill amongst the nations of the world.

Lieut.-Commander KENWORTHY

I know that the right hon. Gentleman who has just sat down, and many other hon. Members, thought very seriously before raising this subject. I daresay my right hon. Friend was thinking of the millions of persons who are unemployed and their dependants, who look to us in this House to ask the Government for some statement of policy, and invite them to hold out some hope to the workers of this country and to the whole trading community in the present plight in which they are placed. The news from Paris is better, and apparently the German Government has agreed to the majority of the proposals made by the Reparation Commission. If there had been a breakdown, and military action had been taken, this Debate might have been different; but as it is I wish to say nothing that will in any way hinder the negotiations which are now going on. I would like to say, however, that I think it, is no use the Prime Minister and his advisers putting forward efforts, as I know they have done, to bring Russia hack into the commercial unity of nations if we are going to press reparation upon Germany in such a measure that that country will become more and more feeble and finally bankrupt. It is no good bringing Russia into the world's market again if Germany is going to fall, weighted down by a reparation demand which her people cannot meet.

I wish now to refer to a matter of detail that is affecting our merchants very seriously indeed in connection with the Government policy. I invite the Prime Minister to address himself to the actual working of the Reparation (Recovery) Act which was to be applied by all our Allies and Associated Powers in the same way as we were to apply our levy on all German goods. In point of fact, we are the only country which is annoying its merchants and importers by charging this levy on German goods. The other countries are getting block payments from the German Government, and I invite the Prime Minister to reconsider the whole position and see whether on this matter we cannot follow the example of our Allies. I know the present method commends itself to high protectionists because it is a form of protection, although we were told that was not the intention of the Act. What makes the working of the Act all the more extraordinary is that German goods coming from Belgium to this country are not taxed, but if they come direct from Germany they are taxed. The. Customs allow these German goods to come into Belgium free. I wish to say a few words on the general question, and no doubt my views will be put down to party bias. I shall be told that I am using any stick with which to beat the Government. I shall be told I am a pro-German and all that sort of thing. So I am going to quote the words of a very eminent financier, Mr. Edgar Crammond, and quote a few lines from a report of his speech delivered to the Institute of Bankers on 28th June, 1921. I will not quote Mr. McKenna because, although he is the head of a great bank and carries a great deal of weight in the City, he is also a member of the party to which have the honour to belong, and he would be called suspect. Mr. Crammond said he agreed with a great. deal that Mr. McKenna had said and added: Germany must, of course, be compelled to pay such an indemnity as can be safely exacted without disturbing the economic balance of the world,"— We quite agree there— and I believe that she is willing to do so, but I am convinced that it must be a very much smaller amount than that laid down by the London Conference. He went on—and I quote this in order to be perfectly fair— France may fairly claim that she cannot reopen this question unless it is considered in connection with her own external War Debts, which, on 31st March, 1921, were as follows. Then he gives a list of countries to which France owes money, the total sum being 32 milliards of gold francs. That is the statement of a very responsible financial authority, but in order to give the Prime Minister some further opportunities for making his devastating form of reply, may I invite him also to reply to the statement of another unbiased person, namely, Mr. Paul Warburg, of the Federal Reserve Board, in an address to the American Acceptance Council. This, also, was last year. I have purposely picked out statements made some time ago, because the position is more fully recognised now by commercial men in all countries, including France. I quote from the "Times" of 3rd December last: Referring to the wide gap between the dollar and other currencies, Mr. Warburg said that it was not within the power of the United States to bridge it unaided. Europe's credit would not be repaired as long as political and economic strife continued in the Old World. Europe would have to remove these obstructions before America could do her full share of the work of reconstruction, without which peace and prosperity in the United States could not be assured. He then says that The European creditors of Germany must readjust Reparations to a point of manifest practicality. That is Mr. Paul Warburg. He is not a member of the Independent Liberal party, and he is not using a stick with which to beat the Government. He may be looked upon as an impartial financier speaking to financiers in the United States. Words of that sort carry much more weight than any I could use in a month of Sundays.

The Government may fairly ask what we on this side of the House propose. I should like to say, with regard to that, that we have been kept very much in the dark as to what has been going on lately in respect of Reparation. We have had very little information. There have been contradictory statements in the newspapers, and very intricate and interesting publications by the Reparation Commission. What we should really like to know is what has been going on in Paris, and in particular whether we are represented on the Committee of Bankers which is considering the International Loan. We are in the dark in the House of Commons. We have not had a Debate on this matter, nor have we had the benefit of the views of the Prime Minister. It is perfectly fair for us to ask for information. I will throw this out as a suggestion. If we really want to improve matters in Europe, and if an agreement is finally come to, as it looks on the facts as if it would he during the next few days, we should use all our endeavours to get our Armies of Occupation withdrawn from German territory. I suggest that, for two reasons. In the first place, they have not been a really efficient means of coercing Germany, and we are always having threats of occupying still further portions of German territory. These armies are not sufficient. to put it vulgarly, to bring Germany up to scratch. It would be very much better to withdraw them, and you would then have the threat of reoccupation of Germany proved obstinate.

Secondly, the cost of these Armies of Occupation has swallowed up all, and more than all, the payments we have received from Germany. They are considerable, though it is very difficult to get precise information on the point. The German Government claim to have paid £600,000,000; the British Government and the Reparation Commission dispute that, and say that £400,000,000 has been paid. Even so, that is a very substantial sum, but it has not even paid for these Armies of Occupation. Everyone who has seen the devastated areas in France must long for the day when those ruins will be covered over with teeming and active towns, when the factories and mines will again be producing wealth, and the people will have settled down in peace and prosperity. We all want to see that, but how much of that work would have been done if that money, which has been swallowed up in maintaining the Armies of Occupation on German soil, had been spent in reconstructing the devastated areas! There is a definite proposal, which I think is constructive, and of which I make a present to the Government. Let me ask the Prime Minister to bear in mind, the next time he is talking to M. Poincare, two sums of money. From the beginning of this year, every 11 days, Germany has paid £1,550,000. Every seven days we, in this country, pay out in unemployment relief—that is, the Government and the local authorities, apart from the special assistance given—£1,347,000. The Germans pay out that sum of money, of which we get 22 per cent. for the whole of the British Empire. We, in the meantime, are keeping these unemployed at a tremendous cost, which cannot go on without grave financial injury to this country.

I do not want to say anything which will imperil our relations with and annoy our good friends on the Continent, but I must ask what has happened about the Pact with France, and what are its terms going to be? Is that still waiting to be discussed? What are the real reasons for it? I believe that the people of this country will be hard to convince of its necessity before a real effort has been made to improve and extend the League of Nations. The Prime Minister goes to Conferences, but he has not yet been to the great. Parliament of the Peoples at Geneva. If he were to go there, I believe he would focus the attention of the world on it to an even greater degree than was the case during the first year of its meeting. I have had occasion to criticise one or two findings of the League of Nations already. It may be said it is ineffective at present, but it is the promise of something. If it can be made a really efficient implement of peace, and a really efficient system for warning off aggressive Powers, it will be a much more valuable defence for France in her difficult position, in her present poverty, and with her falling population than any pact or any military alliance which, unless it gets the backing of the democracy of this people, will only be a device of the statesman who for the moment may be guiding the destinies of our country. It will not have a lasting value unless it has popular support behind it. I really believe popular opinion would prefer to see a greater effort made to make the League of Nations a real defence of the weak and a champion of the right. The day the League of Nations comes into existence all ideas of alliances, pacts, agreements, and military arraegements should be put on one side. You maintain these artificial pacts on paper, but when the armies begin to tramp and threats are in the air, we want a really popular backing behind the support which we may have premised to other countries.

Mr. WISE

There are one or two special points I should like to put before the Prime Minister with regard to France. There are two main things which France requires. One is money and the other is security. France is unable to balance her Budget, and there is a deficit of about four milliards of francs, largely owing to her hope that she will get her reparation payments. I think France should be in some ways more tactful. It is hardly tactful for her to employ black troops on the Rhine. I realise she has not been tactful with regard to certain German property in Lorraine. I happen to know three brothers, Germans, all educated at Oxford, who own property in Lorraine. France insisted that if that property was to continue to belong to those three brothers one should become a Frenchman. The three brothers drew lots and one has become a Frenchman, but is it to be thought he will ever be a Frenchman? This is not tactful, and I do not think France should insist on these propositions with other nations. I am all in favour of Great Britain and France keeping together and working amicably. It is these small points which irritate the Germans and possibly prevents France getting that security which she requires.

With regard to Germany, there are two main points with respect to reparations. One has already been mentioned at Genoa, although it was not mentioned in the Genoa Debate in this House the other night. It is the question of the flight of the mark. That was mentioned in Resolution 13 of the Genoa Conference, but it was merely stated that the point would be studied. I think we ought to do something definite with regard to it. I find, on looking at the register of foreign shareholding in the United States Steel Corporation, that whereas France and Italy have considerably reduced their holdings in two classes of shares, the common shares and preferred shares, in the last twelve months, Germany and Austria have almost doubled their holdings. Surely something should be done to stop what is called the flight of the mark. The hon. and gallant Member for Central Hull (Lieut.-Commander Kenworthy) said he was pleased that Germany had paid the last reparations demand. But how have they paid it? They are paying it by increasing their currency. Only ten days ago they increased their currency by 2 milliards of marks, making a total of 144 milliards of marks, compared with 2 milliards in 1914, which was backed up by 75 per cent. of gold. That is a detriment to ourselves, because she has this immense amount—144 milliards of marks—on which she is paying no interest at all. There is to be a Committee of Bankers to consider the position. I welcome it. I am indeed pleased that Mr. Morgan comes over with full sanction of the United States Government. I would also welcome an international loan which it is said they are going to discuss. If this is agreed to, I suggest half or three-quarters of this international loan is subscribed by the Germans who have an immense amount of money in this country, in the United States and elsewhere. Anyhow, let us be certain that if an international loan is agreed to, the Germans become one of the chief subscribers to it. These are the only points with which I will bother the House.

5.0 P.M.

Mr. HASLAM

I am very glad to have heard the remarks of the last speaker. I should like to point out the different effect which the depreciation of currency has had in Germany as compared with the effect it has had in Russia. In Germany the depreciation of the mark has led to an enormous increase in that nation's wealth and in its business and production. German wealth is increasing rapidly day by day. In Russia, on the other hand, the depreciation of the currency in that country has had an opposite effect. It has made money virtually worthless. The means of production in Russia have grown less and less day by day, while in Germany they are increasing greatly every day. Compare the German position with that of this country. Here we have some 1,500,000 people unemployed. In Germany there is virtually no unemployment. Consider what that means in the production of national wealth. Take the case of coal. If you look at the production of coal and lignite in Germany, you will find according to last year's returns, that that production for domestic and industrial purposes is 100,000,000 tons more than the production in this country. This all shows, to my mind, that Germany is increasing in wealth day by day. I am not one of those who wish to be hard on Germany, but I do want to get at the truth, and I believe they are hiding the truth from us. The right hon. Gentleman the Member for Platting (Mr. Clynes) seems to think that the Germans are very poor and unable to pay, but I do not think for a moment that that is the case. I feel convinced that Germany is hiding her resources. She is deliberately preventing the balancing of her Budget by having very low railway freights on her State railways, by giving subsidies on food and other articles to help industry, and in every way possible preventing her Budget from balancing. Then she comes before us and tells us she is too poor to pay the reparations due to France and other countries. I do not, as I have said, desire to be hard on Germany, but I do hope that the Prime Minister and others who are taking an active part in endeavouring to bring peace and prosperity to the world will bring Germany to tell the truth about her financial affairs and make her pay what she is able to pay as soon as possible.

The PRIME MINISTER (Mr. Lloyd George)

When a discussion was anticipated, some week or fortnight ago on the subject of reparation, the situation appeared to be somewhat critical. I am glad to be able to say that the strain has passed, and matters seem to be in a fair way to accommodation. There have been negotiations proceeding between the Reparation Commission and the German Government. "Negotiations" is not the right word. The Reparation Commission has been, under the Treaty of Versailles, in communication with the representatives of the German Government. There have been proposals and counter-proposals. The German Government have sent in a reply to the final suggestions of the Reparation Commission, and the Reparation Commission are considering that reply. I am not in a position to say at the present moment what their definite answer will be. They hold a judicial position under the Treaty of Versailles, and it is not for me, speaking on behalf of the British Government, to make any suggestion to them as to the course they ought to pursue. They have not yet given their decision, but I think it may be assumed that the critical aspect which the case of reparation presented some weeks ago has for the moment passed away. From that point of view, it is very difficult for me to enter into any discussion upon the subject. Anything that I might say could hardly be helpful at the present moment, and might very easily be harmful. I should have been content to sit down, having made that very short statement, had it not been that my right hon. Friend the Member for Platting (Mr. Clynes) was not satisfied with asking a few questions, and expressing a few opinions, but was prepared to attribute the whole of the present difficulty, or, at least, a great part of it, to certain declarations made by us in 1918. We were supposed to have raised expectations in France which we could not fulfil. As a matter of fact, if any expectations were raised in France at all, they were attributable to nothing that we said on that occasion. I could quote the statement which I made. I made it quite clear, in the only speech which I delivered on the subject, that Germany, although morally responsible for paying the whole cost of the War, and of the damage inflicted by her in the course of the War, could only be expected to pay according to her capacity.

Lieut.-Commander KENWORTHY

What about the Armistice terms?

The PRIME MINISTER

That is not the point. The suggestion is that declarations were made at the election, but the only declaration I made was at Bristol, where I said that Germany should pay to the utmost of her capacity. Then I went on to say: Why have I always said, 'Up to the limit of her capacity'? I will tell you why at once. It is not right for the Government to raise any false hopes in the community, and least of all is it right to do so on the eve of an election. Then I went on to say that the official advisers of the Government were not of opinion that Germany could pay the full compensation. I also said that other people took a more favourable view of Germany's capacity, but so far as we were concerned, we could not express any opinion until there had been an investigation of the circumstances by the whole of the Allies. That was our position. On the following day, my right hon. Friend the Member for Paisley (Mr. Asquith) said in answer to a question put to him, "Would you make the Germans pay for the War?" Yes, I am in agreement on that matter with what the Prime Minister said yesterday. The only statement that I made in the whole course of the election was made at Bristol. A question was put to the right hon. Gentleman the Member for Paisley as to what was his view, and he stated that he was in complete agreement with what. I said in the course of that speech. But that is not all. My right hon. Friend is the last person in the world who is in a position to complain that we raised false hopes. He has got a very prominent colleague, who is not present here at the moment, but who had more to do with organising the Labour election campaign than he had. I refer to the right hon. Gentleman the Member for Widnes (Mr. A. Henderson), who was their chief organiser—their chief of staff. This is what he said on the 9th December, 1918—a critical moment on the eve of the election: Full indemnity he would support, exacting from Germany the fullest possible restitution for devastation and wrongdoing outside legal warfare …How the Germans should be taxed to meet the indemnity it was not our business to dictate and ho was quite prepared to trust the German Socialists to see to it that those responsible for getting them into the War paid the overwhelming proportion of the indemnity. That is the position held by the chief organiser of the Labour party—full indemnity and restitution for damage. But my right hon. Friend himself is not free from a certain responsibility. He made a speech at Ilkeston—it is true not at the election. He had not even the excuse of electioneering exigencies; it was in the calm waters that followed after the devastating deluge of the General Election of 1918. This is what he said, after we had published our first draft terms to the world. We modified the reparation terms afterwards in very vital respects. He said plainly that he could not see how the Allies could have done less than impose those terms on Germany and her Allies. The date was 9th May, 1919. This was after the publication of our first draft terms, which we subsequently softened. The hard heart of my right hon. Friend would not have altered a single comma, but we took a more tender view. M. Clemenceau, President Wilson and myself were a little more tender to our enemies than the right hon. Gentleman, who would have exacted the last penny. If we were wrong, let us say we were all wrong. It is no use for my right hon. Friend to stand on a high pinnacle and say, "There you were in 1918. You made election speeches. I did not. You have said you were going to exact the last penny the Germans could possibly pay. I did not." He cannot say so. We all took the same line, and the position which we took then we stand by now at this moment.

I am bound, having regard to the criticisms which have been passed, to make it clear what were the proposals of the Treaty of Versailles. It is assumed that the Treaty imposed upon Germany burdens which she could not hear, and that all we provided for was that the Reparation Commission should ascertain the total amount of the damage inflicted by Germany, and send in the bill. And if she did not pay, we were to march to Frankfort, Berlin, or anywhere else and extort it. That is not the Treaty. It is very important certainly for the House of Commons, because it has a direct responsibility as well as the Government. But it is very important for the public here and elsewhere to realise what were the exact words of the Treaty. These are some of the words in Annex 2, Article 9: The Commission shall he required, if the German Government so desire, to hear, within a period which it will fix from time to time, evidence and arguments on the part of Germany on any question connected with her capacity to pay. Then, in Article 12: In periodically estimating Germany's capacity to pay, the Commission shall examine the German system of taxation. Later on it makes it clear that the Reparation Commission has the right to reduce the payment of interest, or to postpone the payment of interest, and in the very last Sub-section of Clause 12 it shows that the Commission has the right either totally or partially to cancel the capital or interest. To hear the Germans, to estimate the capacity of Germany to pay, not to-day, but from time to time—that is the position and the power of the Reparation Commission. We set up a body which was to act judicially, first of all to ascertain the damage inflicted by Germany within the categories set out in the Treaty, and afterwards to decide, not for 20 or 30 years, but from time to time, what Germany's capacity to pay was at any given moment. So supposing at any given moment we say that Germany under the original demand is supposed to pay £200,000,000 or £300,000,000 sterling per annum, she is entitled to go to the Reparation Commission and say, "For such and such reasons we cannot pay £200,000,000 or £300,000,000. This is all we can pay." The Reparation Commission hear the evidence, and adjudicate upon it. That is the machinery of the Reparation Commission. The Treaty is denounced as if it were very harsh, as if it had no reference to conditions in Germany, and no reference in the least to the German capacity to pay. That is not the case. All these conditions were provided for in the Treaty of Versailles and all I ask is that whenever there be denunciations of the Treaty of Versailles, that fact should be fairly stated to the public.

There is no doubt at all that there is one fact which has upset the balance of the Reparation Commissioners. It is a fact which has upset the balance of the League of Nations, and that is the absence of America. When that Treaty was signed, it was assumed that the United States of America would be represented on the Reparation Commission and on the League of Nations. That was a very important element. The United States of America was the only country which had no claims in respect of reparations. There was no adjudication which would affect her interests, and, therefore, she was strictly impartial. She was friendly to France, friendly to Italy, and friendly to Great Britain and the countries which had claims in respect of compensation, but she was also a country with great international trade, and therefore concerned in seeing that reparations should not be driven to such extremes as would upset the balance of trade throughout the world. That was an element that we relied upon to secure a fair and an impartial adjudication. The United States, having signed the Treaty, has not ratified it, and that very vital element is absent from the composition of this judicial body which has to adjudicate upon all the facts. That is a very important matter. The same thing applies to the League of Nations, and one day I shall have to say something about that, but I do not want to have a discussion upon circumstances outside the purview of the matter which has been raised by my right hon. Friend. But there is no doubt that the absence of America from the machinery of the Treaty of Versailles has disturbed its equipoise, has made the machine less effective, and made it work with less precision—I will not say with more injustice, but it has created an amount of friction which I am sure would not have existed had the United States been present at the deliberations either of the League of Nations or of the Reparation Commission. For the moment all I will say about it is that there is no cause of disagreement between France and ourselves. The matter has been submitted to the consideration of the Reparation Commission, and all the reports I have are very hopeful that an arrangement will be arrived at which will be acceptable, not merely to the creditor, but to the debtor country as well.

The question of the remission of War debts has been raised. I rather regret that proposals which have been put forward outside the House have not been brought to the Table of the House for examination. It is a matter of the most vital importance to the interests of this country. The hon. and gallant Member for Central Hull (Lieut.-Commander Kenworthy) is the only member of his party who has brought it to the notice of the House to-day, although these proposals have been ventilated outside. What is the proposal? The proposal is, as far as I can see, that Great Britain should forgo the whole of her claims against the Allies, and the whole of her claims against Germany, in order to ease the international situation.

Lieut.-Commander KENWORTHY

No.

The PRIME MINISTER

If that is not the case, I want to know what it is.

Lieut.-Commander KENWORTHY

I dare say the right hon. Gentleman hopes that I will provide him with a very good opening.

The PRIME MINISTER

No.

Lieut.-Commander KENWORTHY

The proposal is that we should help France by forgiving her debt to this country, on condition that France will not do certain things which the right hon. Gentleman knows perfectly well are injurious to this country. The terms we suggest are that our debt to France and France's debt to us should be forgiven in the interests of France herself.

The PRIME MINISTER

That is not the proposal. The hon. and gallant Gentleman is not in complete conformity with his leader in that respect. He is putting forward a proposal of his own. The proposal definitely put forward the other day was that England should forgive all those who owe her money, without obtaining forgiveness of the debts which she owes. That is a proposal which we really cannot contemplate. If our share of the German reparation be added to the amount of the debts which are due from other countries to us, over £3,000,000,000 is due to this country. This country owes something like £1,000,000,000. We are a debtor country to that extent, and a creditor country for over £3,000,000,000. The proposal is that we should forgive the whole of this £3,000,000,000 without receiving any recognition of the £1,000,000,000 which we owe. No Government could possibly contemplate that. We are perfectly prepared to enter into any international discussion with a view to obliterating the whole of these war debts, provided we receive a benefit which is not unequal to that which we are pre- pared to confer. Our interest goes beyond that of a mere creditor. We have an interest as a great international trader. We realise that it is an advantage to us to forgive the very great amount of money due to us, providing there is a clean slate; but we cannot possibly contemplate entering into a transaction by which we should forgive all the debts due to us, while we are liable for every penny which is owing by us. We want fair play and justice, and I am very surprised to find that in all the proposals which have been made up to the present that aspect of the matter has not been stated. It is all very well for Mr. Warborg to deliver those lectures to Europe. He is a very important financial expert in the United States of America, but he might start his lecture at home.

Lieut.-Commander KENWORTHY

It was given in America.

The PRIME MINISTER

It was given in America but addressed to Europe. I think I have said all that I can usefully say upon that subject, but I should like to add one word. I am very glad that the German Government have made a real effort' to meet the requirements of the Reparation Commission. The Reparation Commission have given very careful consideration to the difficulties of Germany. I know how difficult it is for a Government like that to impose heavy taxation upon their country in order to pay a foreign debt. I know how difficult it must be for them, having regard to the very unpleasant experiences they have had in the last two or three years of revolutions and counter-revolutions, to cut off their substance. That is part of the arrangements which they have accepted. Having regard to the whole of the circumstances—to the fact that they have a foreign army occupying some of their most important towns, that they have foreign commissions controlling some of their affairs, the fact that they have to submit even to a certain extent to restrictions and control of their finance, and that they have to accept the dismemberment of their country—it requires considerable courage on the part of any German Goverment to face the elements in their own country who resent these things, and to counsel wisdom and moderation to their people. The present German Government are there as a Government for the fulfilment of the their best to comply with it, and I believe they are honestly doing so; but they have considerable political difficulties. When they face these difficulties, as they are doing now, I believe they are shedding a certain number of their supporters even in accepting this last demand of the Reparations Commission. When they do so, I think they are entitled to every consideration and every respect which we can afford them.

I believe that what they are doing is in the interests of Germany itself. A policy of non-fulfilment would be a policy of immediate disaster for Germany. It would not be a question of France acting alone if there was a defiance of the Treaty of Versailles. We are the signatories to the Treaty of Versailles. It has been ratified by the House of Commons, and we are committed to it. There are provisions there which enable relaxations and modifications to be extended to Germany when her conditions would not allow her to pay the full amount of the demand. Every time she has made out a case, the Reparations Commission have considered it, and have been prepared to meet it. If there were a Government there that came in to resist the Treaty, to refuse to carry out its provisions, it is not France that would be left alone to execute those provisions. We should act together.

We have stood for a policy of moderation and of restraint. We have stood for the policy of considering the difficulties of Germany, and in doing so we have rendered ourselves liable to a good deal of misrepresentation between France and ourselves. Nevertheless, we are pursuing the old traditional policy in this country—of moderation. It was the policy we pursued after Waterloo towards France, when we were being urged by Prussia and the other victorious armies to trample upon France. The Government of the day absolutely refused to countenance that policy. We are pursuing the same traditional policy at the present moment, but if there were any defiance, if Germany were to say "We decline to carry out this Treaty" then it would be a different matter. In spite of misrepresentation, we shall stand still to the policy of moderation, but we shall also stand for the policy of fulfilment. We stand for the fulfilment of the Treaty of Versailles, with the reasonable interpretation which we put upon it, and which I think is incorporated in the very essence of the Treaty itself. That is our policy, and the circumstances which have arisen have rendered it unnecessary for me to refer to any of the discussions which have occurred during the last fortnight. I hope that it will not be necessary to resume those discussions, and to enter into questions as to what the effect of isolated action would he. I agree with my right hon. Friend the. Member for Glasgow that any isolated action on the part of any one of the Allies would be disastrous to theentente cordiale.

Lord R. CECIL

The Prime Minister concluded his observation by some rather curious veiled threats against Germany. I do not understand what was the purpose of those threats. However, I will refer to that in a moment. Before I say anything about reparation I want to say one word about the earlier portion of our Debate which had reference to Ireland. I regret very much that the Prime Minister was not able to be present to hear that Debate. It was one of the most interesting and important Debates which have taken place since I have been a Member of this House.

The PRIME MINISTER

I could not be here for the whole of it, but I heard the first hour and a half.

Lord R. CECIL

What followed was even more important in the striking unanimity with which Member after Member rose from those benches, and expressed grave disquietude about the present situation in Ireland.

The PRIME MINISTER

Hear, hear!

Lord R. CECIL

I am not going on such an occasion to make any lengthy comment on the subject. There is no doubt that the situation is very serious and specially serious in view of the fact that at the time this very difficult experiment was made the condition of Ireland was such as to make the success of such an experiment extremely doubtful. The point which I wish to express upon the Government is the very great claim which the so-called loyalists in the South and West have upon the Government. There are three or four hundred thousand of these people, and, whether you agree or disagree with their policy, they have done nothing, so far as I know, which can do otherwise than merit the gratitude and sympathy of this House. They are in the gravest danger—so everybody has said. It is all very well for the Colonial Secretary to say we can afford to wait. Can these people afford to wait? What is going to be done to protect them? I feel this very strongly, as an obligation of honour on this country, quite apart from any political question, or any question of Home Rule or non-Home Rule, of Treaty or non-Treaty. Here are people who have the strongest claim on the protection and defence of this country, and I should have been glad, I must say, to have heard a more specific statement from the Government as to how they propose, if there is any necessity, to come to the assistance of these people. I am not going to discuss the question of what ought or ought not to be done, supposing that the Treaty breaks down. I want just to add this caution—do let us remember that our first obligation of honour is in my judgment before anything else—even before our obligation to Ulster, because these people are more defenceless—is to these people. Let us be very careful not to forget, in whatever steps we may take, to do our utmost to secure their safety, and that whatever steps may be in contemplation, as to which I know nothing I trust, these people will have the first claim upon our assistance.

I pass now to the other question which has been discussed later on. The Prime Minister took great exception to the suggestion that the French had their expectations raised by what passed at the General Election of 1918. I know that they do make that a grievance because Frenchmen have said that to me. They say: "Not only had we to deal with our chauvinists who wanted to make extravagant demands, but they were always quoting to us what had been said in England, and England, being a great financial country, the effect was to raise the expectation of a certain section of the French people." I agree that if you read carefully the Bristol speech there were undoubtedly safeguarding phrases in it, but the point is that m that speech very large sums indeed were contemplated as possible. They were quoted as coming from one of the Commissions. It is quite true that the Prime Minister did not pledge himself to those figures, but they were put forward as possible in conceivable circumstances. The reply made to all this is that other people were just as bad, that the right hon. the Member for Widnes (Mr. Henderson) and the right hon. Member for Platting (Mr. Clynes) and many others had said the same. I do not want to go back on all the quotations, but it was all the more important for the Prime Minister and those who represented the Government, with their full official information, to correct and modify those statements so as to avaid raising false hopes.

It is true that the Treaty does not provide a definite sum to be paid by Germany. Personally, I always thought that the greatest blot in its provisions was that it, did not, and I have often said so in this House. But it provided clearly that Germany should pay the full cost, of certain items of reparation, and that the amounts to be paid should be stated by the Reparation Commission. There is an estimate of the damage, and the Commission estimate, I think, came to £6,000,000,000. In any case I doubt whether anyone believes that the Germans can pay anything like that sum. That sum is a financial cloud over the whole of Europe, and I am not at all sure that it has not been worse financially for the French than for the Germans. I am satisfied it was a bad plan. When the Prime Minister talked of standing for the fulfilment of the Treaty, I must say that I heard his utterance with some anxiety. I agree that we have signed the Treaty and ratified it, and that except by agreement we cannot modify its terms. That is true whether we regret it or not. Personally, I do not think it will be in the event possible to arrive at any real fulfilment of that Treaty, if by fulfilment you mean what the French understand you to mean, namely, payment sooner or later of the sum which has been awarded by the Reparation Commission. The Prime Minister says all this is quite simple, because the Reparation Commission has the right to cancel and postpone, and all the rest of it. That is true. But they must act unanimously in cancelling or postponing, certainly in cancelling. Therefore, in effect, you cannot do anything without the consent of every n ember of the Reparation Commission. The right hon. Gentleman referred to the absence of the United States as the explanation of all the faulty working of the Treaty. No one regrets more than I do the fact that it became impossible for the United States to ratify the Treaty or any part of it. But I do not think it is true to say that the absence of the United States made all the difference. There would still be the root fault in this part of the Treaty, namely, the fastening upon the debtor nation of a burden which everyone admits cannot be discharged, and allowing only a modification of that burden by the unanimous consent of all the parties to the reparation I would say very respectfully that we should do much better as a matter of policy and as a matter of national dignity if we were to say that we have arrived at the conclusion that we do not want to chop logic as to what the Treaty of Versailles may be made or may not, but that we think the economic terms put upon Germany have turned out to be heavier than she can discharge; that we think, therefore, they ought to be modified. We ask that they should be modified, not from pity of Germany or because we think they are unjust terms, but because in point of fact it is to the interest of everyone that this reparation question should be definitely closed. It is a great evil in the financial system of Europe and the world, and you will never get a solution of the economic position until you settle this reparation question. It would be better to say frankly that we desire to settle the question and that we are satisfied that it can be settled only on the basis of foregoing so much of the claim as would make it possible for Germany to pay. I was a little sorry to hear the Prime Minister put aside with such vigour and decision all suggestions that we should remit our war debts.

The PRIME MINISTER

I hope the whole question of war debts will be considered, and considered very carefully. The only point is that it was unfair to ask that we should remit all debts due to us when we are liable for debts for a very considerable amount of money.

Lord R. CECIL

I can conceive the great effect with which the Prime Minister can develop that argument on the public platform for discussion. I will ask him, none the less, to consider carefully, before he plunges into such a campaign, whether that is a sound way of looking at the proposition. If the debts are to be remitted it is because it is in the interests of this country to remit, not because there is any claim of justice or generosity in the matter. This is a matter of business, and if it suits us to remit upon the terms that the reparation question shall be finally and definitely settled in a reasonable manner, I am prepared to go very far in that direction in order to obtain a settlement of the reparation question. It would be much better for the Government to make up their minds definitely what their policy in the matter is and to go quite freely and candidly to the French and to say, "We have arrived at the conclusion that we did try to get too much out of Germany, and that we shall not succeed in obtaining a settlement of the economic position of the world if we insist on that. Let us agree to a more moderate policy, not because Germany is entitled to mercy or pity, but because it is essential that these economic difficulties should be ended." If you do not agree as to what Germany can pay, if you think that the British take too lenient a view as to what Germany can pay, I agree that you have no right to impose that view on the French. But, surely, that is a matter which can be settled by expert arbitration between us. It is purely a question, what can Germany pay without destroying her economically or seriously injuring her economic life so as to be a danger to the rest of Europe?

I would rather the Prime Minister had announced that policy than the proposal that we are to carry out the Treaty of Versailles and fulfil it, all the time giving the impression to the French, who insist passionately and almost universally that we are trying to take them in and pretending to support them when we are not really supporting them. That is the frame of mind which produces bad blood between countries. Frankness and openness will restore, much more rapidly than any skilled wizardry, good relations between the two countries.

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