HC Deb 17 July 1923 vol 166 cc2073-115

It shall be lawful for the Secretary of State at any time or times to raise in Great Britain, as and when necessary, by the creation and issue of capital stock, bonds, debentures, or bills, or partly by one of such modes and partly by another or others, any sum or sums of money not exceeding in the whole fifty million pounds sterling, to be applied to—

  1. (1) The construction, extension, equipment and improvement of railways in India by State agency, or through the agency of a company or companies under engagement with the Secretary of State;
  2. (2) The repayment of the principal of any bonds, debentures, or debenture stock issued by any such company under the guarantee of the Secretary of State;
  3. (3) The discharge of any obligations incurred or arising by reason of the purchase by the Secretary of State of any railway constructed or worked in India by any such company, or on the determination of the contract of any such company with the Secretary of State;
  4. (4) The construction, extension, equipment, and improvement of irrigation works in India.

Major-General Sir R. HUTCHISON

I beg to move, after the word "sterling" ["fifty million pounds sterling"] to insert the words, provided that at least seventy-five per cent. of any such sum, or sums, so raised shall be expended in Great Britain and. It seems to me that if we empower India to come and raise money in the best money market in the world, in view of our trade and our large number of unemployed, we should have some safeguard that the money is, in part at least, spent in this country. In view of the German and Belgian exchange it is quite reasonable and possible that the Indian Gov- ernment, having borrowed this £50,000,000 or £55,000,000, should try to get better value than they can in this country by going to them for material and it would be disastrous to our locomotive and rail works that this money should be spent other than in this country. When we borrow money from America they attach a Clause insisting that we should spend a considerable part of it in that country. France imposes similar conditions and I fail to see why in allowing India to borrow this money we should not attach some condition to the spending of it in this country. The right hon. Baronet the Member for the City of London (Sir F. Banbury) pointed out on the Second Reading that 95 per cent. of the money, in fact, is spent in this country. But at that time the money markets in Europe were not in the state in which they are to-day, and it is only fair and reasonable that we should add this governing Clause to the Bill and so ensure that our industries shall have a share of this capital that we are putting up.

4.0 P.M.


I regret that I cannot agree with the hon. and gallant Gentleman. He may be putting this Amendment forward in all good faith, but I fear if a stipulation of this sort were put into a prospectus the country which is getting the money would not benefit by being able to buy the goods in the cheapest market. Supposing a country like India gets a loan, through a prospectus, of £10,000,000. This Amendment would be that £7,500,000 should be spent in this country. Where is the other £2,500,000 to be spent? Here or in a foreign country? If the hon. and gallant Gentleman looks at it from a practical business point of view, I think he will realise that practically the full amount will be spent in this country, whether the order is given in England or to a foreign country. Supposing India makes this loan and £7,500,000 is spent in locomotives and wagons, that amount goes to the builders of those locomotives and wagons. Supposing the balance of £2,500,000 is spent in France? The £2,500,000 goes from the credit of India to the credit of France and, eventually, through triangular finance, France comes to this country and orders goods. No gold goes to France but goods. Take another instance of how triangular finance is worked. Take the position of Norway. Supposing Norway gets a loan here for £3,000,000 to buy coffee in Brazil. Norway floats the loan here through a prospectus, and people subscribe through the prospectus. That loan stands to the credit of Norway. Norway buys the coffee from Brazil, but the money does not leave this country. The actual position is, that Norway gets the coffee from Brazil to her country. The £3,000,000 is transferred from the credit of Norway to the credit of Brazil. Brazil orders machinery in this country, and the £3,000,000 leaves this country not as cash but as goods. I feel confident that if the hon. and gallant Member looks at it from that point of view, he will see that it would be to the detriment of this country to agree to his Amendment. I think he will also realise that we are the financial centre of the world, and the money market of the world; that benefits our trade to an enormous extent. It helps us by being able to keep the credit of the country sound, and it enables us to have cheap money. If you have any stipulation like this in a prospectus, I believe it would be a detriment to our country and to the country that borrowed money.


It illustrates, I think, the topsy-turveydom of politics when we listen to a Protectionist speech from the benches below me and to a Free Trade speech from the benches opposite. I only trust we may welcome the hon. Member for Ilford (Mr. Wise) at a Free Trade meeting in Committee Room 14 this afternoon. The hon. Member for Ilford has taken the words out of my mouth, but, as he has already pointed out, this Amendment is totally unnecessary as things are at present. In the past 95 per cent. of the goods that are required have been bought in this country, because India can get them better and cheaper and there is, therefore, no necessity for the Amendment. Apart altogether from that, is it not our duty to leave this question to India? Let India buy where she wants to buy, and do not let us in this House seek to regulate or tie her down in this way.


My Noble Friend the Under-Secretary will not be surprised at my intervention, because he knows that when in office he and I had some conversations about a similar Bill, and I was considerably shocked to find that pledges had been given by the India Office, which could not of course be reopened at that moment, but which tied the hands of the Government in respect to that particular loan. He will, I think, recollect that I said that so long as I was Leader of the House he would find much difficulty in getting a Bill for another Last India loan without some kind of assurance from the Government of India that, as far as they could, they would spend the money which is not required in India itself in this country under present circumstances. My Noble Friend will, therefore, not think that I am taking up any new line. I do not think the question is quite as simple as the hon. Member for Ilford (Mr. Wise) made it appear. It is, of course, a truism of trade that the great bulk or, at any rate, a very large proportion of these international transactions are not merely dual but are triangular, as my hon. Friend says. You may, indeed, have even more angles than that. A purchase or a sale beginning in this country may run in a circle round the world in a series of transactions before the account is eventually balanced. Such conditions as we have before our eyes in the world at the present time, with the lack of purchasing power elsewhere, have a most detrimental effect on our commercial prospects here, but that does not wholly settle this question. Nor is it wholly settled by the fact that in the past India has, in the main, purchased in this market. India has done so in the past, again and again, under the influence or direction of the Secretary of State, and what we want to know is, is the Secretary of State going to exercise the same influence at the present time? Has he come to an understanding with the Government of India that the money raised here shall in the special circumstances of the present time—without trying to lay down a general rule for the future—be, as far as possible, spent in our own market?

Consider what our position is here. We have, by immense sacrifices, largely restored our credit. We have, by shouldering courageously very heavy burdens, fortified the City of London in its old position. We are, certainly for industrial purposes if not for Government purposes, the great lenders of the world. Somebody says America. America is not the great international lender that we are, not even yet. There is no market in the world to which India can go with success for such large sums at the present time as she can come to London. There is no market that will give her her money upon such good terms as the City of London. Is it unreasonable to ask that a borrower in our country, taking advantage of our resources and of our terms, at a time when trade is stagnant and becoming more and not less stagnant, when our manufacturers are working off such orders as they have and cannot replace them on their books—is it unreasonable, is it ungenerous, is it unwise to ask that borrower, as a condition of the facilities which we offer her that, where she has to spend money for her own purposes outside her own boundaries, she should spend it here rather than elsewhere? It seems to me common sense, and I will undertake to say that if India went to Paris or to New York she would not get a franc or a dollar except on the condition that she placed her orders in France or the United States of America. We have been so strong financially, so prosperous, that it was not necessary, and we have not been accustomed to make a condition of this kind, but I think these are times when the finances of the City of London ought to be put into some kind of correlation with the general conditions of the country. I think I heard questions being asked about the bank rate at Question Time, and some aspersions being cast, most unjustly, on the Bank of England. Why is the bank rate less? Because the ordinary lender is thinking of his own interest and not the interest of the country, and the Bank of England has to step in to protect the interests of the country, and to interfere with the free play of economic forces and enlightened self-interest. I do not think we can afford, under present circumstances, to place our financial resources indiscriminately at the use of the whole world, and I think some such undertaking from a borrower as is suggested by the hon. and gallant Member for Kirkcaldy (Sir R. Hutchison) in his Amendment is a reasonable undertaking and that we shall be given a pledge. For, after all, the Secretary of State has a great responsibility even under the changed circumstances. He has to sign these bonds, and they cannot be issued without his signature.

The Government ought not to resent a condition of the kind that is suggested, though, I would add, not in the exact terms which the hon. and gallant Gentleman opposite has put in his Amendment. I take it that part of the money which is required for construction must be spent in India itself. I do not know what the proportion is, but that must be excluded. Surely, however, we have a right to have some assurance that where the money is to be spent in the purchase of machinery, of material, rails or locomotives, or rolling stock, it shall be done in this country—it is done with the money of this country—even if it cost a little more, unless, of course, a case is made out to the satisfaction of the Government of India or the Secretary of State that there is an undue combination against the Government of India, and that they are not getting a fair price in our market. I do hope my Noble Friend, though I should not advise the acceptance of the exact words of the Amendment, will give some such assurance on behalf of the Government of India.

Over yesterday's Debate hung the shadow of long-continued unemployment, without any prospect of the shadow lifting in the immediate future. My right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) spoke gravely of our prospects—I think not too gravely. Why do we suffer while there is no unemployment in France, in the United States, in Germany? Because those countries, at any rate for a considerable time, can be self-supporting and self-sufficing, and can consume all they produce. We cannot do that even when our domestic trade is good, even when our agriculture is prosperous. We are dependent in the best of times upon our export trade. We stand in a position unparalleled amongst the nations of the world, and when the purchasing power of other nations is so restricted by the chaos of the exchanges, by the political uncertainties and unrest which exist at the present time, I think we should be wanting to our people if we did not secure all that we can reasonably and properly secure in order that we may not be left wholly without work or employment. I think this is a very fair condition to lay down—that, in return for the use of our market, money which is raised here must be spent here for the goods that are required, given that they can be purchased here on reasonable and fair terms.

The UNDER-SECRETARY of STATE for INDIA (Earl Winterton)

It is well not to be surprised when the unexpected occurs in Debate, but I confess that I was somewhat surprised at the speech on which the hon. Member for Kirkcaldy (Sir R. Hutchison) based his case for the Amendment which he has put on the Paper, and I will say a word or two about that case in a moment. But I would first like to refer to the speech of my right hon. Friend the Member for West Birmingham (Mr. A. Chamberlain) the importance of which I fully recognise. He referred to a personal incident. He said that last year, when he was sitting on this bench and I was occupying the same position as I do to-day, he had said to me in private conversation that while the Government of India might be able to get the Loan Bill then brought forward, without any such condition as that which has been suggested in his speech to-day, he thought that they would not be able to do so on all future occasions.

I am sure he will believe me when I say that I have no recollection whatever of such a conversation, but I accept his statement most fully that it did take place. But if it did, I must have been very much to blame, because I could not have made it clear to my right hon. Friend at the time, what is quite clear, that it was not a question of this Bill or that Bill, but that it was a question of the Government, of which he was a Member before my Noble Friend and myself were, accepting, as I understand through the then Secretary of State, the Resolution of the Legislative Assembly of India, which was passed in September, 1921, on the subject of these contracts, in reference to the requirements of the Government of India in matters of railway and irrigation supplies. That Resolution was as follows: That this Assembly recommends to the Governor-General in Council that the High Commissioner for India in London should be instructed by the Government of India to buy ordinarily the stores required for India in the cheapest markets consistently with quality and delivery, and that every case where this rule has not been followed should be communicated to the Government of India with full reasons for the information of the Legislative Assembly. That Resolution, which was passed by the Assembly, was accepted by this Parliament and by the Secretary of State. My right hon. Friend I am sure will agree that this is so. I will not go into the history of the amount of Cabinet responsibility which existed in His Majesty's Government at the time, but it was accepted by the right hon. Mr. Montagu. That is a matter to which I refer first of all because I think that is the crux of the whole case, and I have ventured to bring it to the notice of my right hon. Friend first in as short and concise a form as possible. What has taken place under that system since it was established? During the first year from April, 1922, to March, 1923—may I say in passing that had I been in possession of figures so good as these last year I should have put the case in my private conversation with my right hon. Friend far more strongly than apparently I did—on behalf of the company managed railways there was spent £6,867,500 in all, of which £6,665,000 represented orders for articles manufactured in Great Britain; and by the State managed railways £1,735,000, of which all but £200,000 was placed in Great Britain, the total being £8,602,500, of which all but £402,500 has been placed in Great Britain.

The orders placed by the High Commissioner for India in the half-year ending June, 1923, represent a total of £1,887,000, of which only £102,000 or roughly 5 per cent., was placed abroad. Hon. Gentlemen may say, "It is all very well to say that only 5 per cent. was placed abroad, but when you speak of orders placed abroad do you include goods purchased in this country but manufactured abroad?" No, I do not. I refer to goods actually only manufactured abroad. So we find—these figures are most important—that of these very large contracts—for they are large even in these days—placed on behalf of the company and State-managed railways in India, roughly all but 5 per cent. have been placed in this country. The hon. Gentleman opposite in this Amendment wishes to lay down that 75 per cent. of the orders shall be compulsorily placed in this country, but if you find as a fact that, under what is called the free borrowing system, no less than 95 per cent. has actually been placed here, surely you could hardly get a stronger answer than the case which has been put forward by the hon. Gentleman.

In view of the importance of the speech of my right hon. Friend and the issues raised by him and the hon. Member it is necessary for me to go into the matter a little further, and to answer some specific points. My right hon. Friend said, as I understood, that London was still the money market of the world, and I think that we are all agreed on that. There are many other countries besides India which come to London to borrow money—Brazil, South Africa and many other countries. I do not understand exactly what policy my right hon. Friend was outlining. I do not know whether he suggested—I am asking for information—a proviso that a portion of the goods should be purchased in this country by every borrower who comes to the British market or only in the case in which the borrower is India. If that proviso is to apply to every borrower, I would not venture to enter into a discussion in the realms of high finance with my right hon. Friend, but I think that there would be some practical difficulties in putting such a proviso into force in our markets. I know that such conditions are imposed in the case of other markets, but it is not done in the British market. I think that my right hon. Friend mentioned that it was done in the case of the French and American money markets, but we have never had such a proviso in operation here, and I think that anyone who made that suggestion in this case, or anyone who undertook to carry out such a suggestion, would be undertaking a very large responsibility. I am not sure that I should be in order in going into the merits of the bigger question which is involved in this matter.


This would give too large an extension to the Debate.


Yes, but I was answering a very important speech by the right hon. Gentleman, and a portion of his answer was—


All I said was that there should be some correlation between the action of the City in making these issues and the general conditions of the country.


Quite. Then I understand that my right hon. Friend was not contending that we should impose this restriction generally. I turn now to the second part of his argument which, I think, requires an answer. My right hon. Friend said that this Government and the Secretary of State had a peculiar responsibility in reference to these loans, because in the case of each issue the scrip was signed by the Secretary of State or one of his subordinates. That is an important point. The answer is that it is true that the Secretary of State has to come to Parliament on behalf of the Government of India for permission to borrow in the British market, because of his general responsibility for Indian Government finance. But that is no reason, in my opinion, why he should ignore the expressed wish of the Assembly of India, when that wish is unobjectionable and does not go contrary to the principles of raising money in the best way, and purchasing the best and cheapest goods in the best markets. I need not go into the result of carrying out that policy. I have just given the figures and they seem to me to make out an overwhelming case.

I ask the Committee to consider the effect of passing this Amendment. I have already pointed out that last year 95 per cent. of the total requirements purchased abroad came from this country. I would also point out that the hon. Gentleman suggested that there should be a compulsory minimum of 75 per cent. The effect of putting that compulsory minimum into the Bill, it seems to me, would be simply that you would say to India, "It is true that you have in an absolutely free market, through your own High Commissioner, purchased 95 per cent. of your goods in this country, and we recognise thereby"—and I would put this point to my right hon. Friend—"the ability of British manufacturers to compete against the rest of the world. Nevertheless it must be laid down that you shall purchase here." I suggest that that would not be in the circumstances a wise or statesmanlike course. I do not think that it would be showing any regard for the amour propre of a country which is one of our best customers, and I do not think—though I have every sympathy, as I am sure everyone on both sides of the House has, with the principle enunciated by my right hon. Friend that we should do everything we can to get trade for this country —that it would help the general volume of that trade in the long run.


I think that the Noble Lord has made a very convincing reply. He has certainly demonstrated that it is unnecessary to insert a stipulation in the present circumstances, and I think that it is far more satisfactory to us to obtain through the quality of our goods and the success of our own manufacturers the proportion of orders which has been obtained without any Statutory stipulation. I do not think it is necessary, therefore, to carry that point any further now, nor to lay greater stress on the argument in favour of triangular trade, which was so admirably put by the hon. Member for Ilford (Mr. Wise). I would say, so far as I can read the facts, that I do not think that there is anything which this country and India need more than a revival of that triangular trade, the dislocation of which has thrown everything out of gear. But there is another point. It is really suggested that we should give up the practices of remaining a free money market, and that we should put on restrictions which do partake of a Protectionist character.

I would ask the Committee to consider what the effect of that will be in India itself. In India there are very few Free Traders to be found. There is a growing Protectionist movement. There is an increasing demand that goods bought by the Government should be supplied by India itself. Many of these requirements, of course, such as for railways, cannot at present be provided in India. There is a growing demand that the Government should take steps to make it possible for India to supply her own requirements without coming to this country. We all know how the Protectionist sentiment in India has been fostered by the growth of the Protectionist sentiment in this country. How can you expect India—which was kept previously on a Free Trade basis, because we believed in Free Trade in this country—how can you expect, when we abandon Free Trade, the Indian Protectionist not to point to the fact that here, in the home of Free Trade, the statesmen and Government are giving it up? If you adopt this Protectionist restriction, you will get an increasing demand in India that moneys on interest raised in India should be spent far more in India and not in this country than they have been in the past. That will have a very wide effect. I do not think you can stop that demand in India, considering the prevalence of the Protectionist views in this country, but you need not go out of your way to increase it. If you say that by a Protectionist restriction of this kind you are going to make a statutory Regulation under which India is bound to spend part of the money which she demands in this country, I think you will find the Legislative Assembly in India increasingly determined that its moneys should be spent in India itself, and that British goods should be more and more excluded from the Indian market. The short-sighted policy of putting on these Protectionist restrictions will, I think, in the long run, tell heavily against the prospects of British industry.


I am glad the right hon. Gentleman the Member for West Birmingham has raised this point, because I have endeavoured to raise the point, though from another angle, on other occasions on which the Bill came before the House and Committee. It is necessary, I suppose, that some supervision should be exercised in the spending of these millions of money on the lines laid down by my right hon. Friend. Otherwise, why come and ask for the permission to borrow? We have abandoned all supervision of Indian finance by the House of Commons. We are not liable for Indian finance if India defaults. We take no part in the Indian Budget. Then why does the Under-Secretary for India come down and ask for this permission unless there be some understood condition? At the present moment we are not responsible for a farthing of the finance of India. We do not guarantee her loans. I want to go back further and ask why it is that the Noble Lord comes down here to ask for permission to raise the money at all? The Indian Government could go to the Imperial Bank of India—they have an office in London, and could raise £50,000,000 by the usual means adopted by our Dominion Governments. Therefore, I presume there must be something in the mind of the Secretary of State which induces him to do something which is not otherwise useful, and which is the outcome of an obsolete Statute. Recently the Bank of England, considering the public interests of Great Britain, has put up the price of money by one per cent. in order to prevent a drain of money to the United States. Suppose this £50,000,000 were raised in England. Suppose it is not spent as I believe it will be spent; suppose that it goes to purchase railway material in America—[AN HON. MEMBER: "The fact is that the £50,000,000 does not go across to the United States. It is goods that would go across."] I agree, but I am asking this. If there is no danger in that connection, how is it necessary in a similar case, although no money passed to America, that the bank rate was put up 1 per cent.? The Under-Secretary of State did quite wrongly to come down here at all. Such a Bill as this ought no longer to be brought in. It is a farce and meaningless. Unless there is some understanding about spending this money here there is no meaning in the Bill, and the statutory obligation should be repealed that requires its passing by us.


I rise for the purpose of opposing the amendment which is so happily designed to re-unite the two fractions of the Centre Party, I should like to draw attention, first of all, to the ecomomic differences we have noticed on the benches opposite, and to say how much I appreciate the sound economics of the hon. Member for Ilford (Mr. Wise). I hope that he will take part in that instruction in the elements of simple economics recommended to hon. Members opposite by the Prime Minister. He offered a great contrast to the right hon. Member for West Birmingham (Mr. Chamberlain), whose economics might be described as those of the gombeen man. The gombeen man is the village moneylender, who lends money to all the village and compels them to repay by purchasing their goods in his shop, at his prices. This amendment is gombeen economics. We are tying down to India to purchase in a single market. The right hon. Gentleman still clings to the Cobdenite idea that there is free competition among sellers in this country. We know, as a matter of fact, that there are rings and combines in every kind of goods. As a member of a municipality I have had plenty of experience of receiving tenders for goods from various firms at precisely the same price. India is to come to the country to be obliged to spend money in this country, and the result will be that prices will be raised against her, and she will have to buy her goods at enhanced prices. The right hon. Gentleman is the inventor of a great Imperial tradition, and he comes down to the gombeen method of business. That is thoroughly bad economics and thoroughly bad Imperialism. It is a remarkable way of keeping the Empire together. It is not only bad economics, but bad policy. It is about the most un-statesmanlike thing that could be done at this time, when you have enormous discontent in India. The situation in India is very grave. You have there the beginnings of an experiment in self-government, and the House is asked to tell India how she shall spend the money which she is borrowing, and on which she has to pay the interest.. It is a wonderful way of promoting the union of India with the Empire. I hope the Committee will reject this Amendment on the grounds of economics, and for reasons of public policy.


I may say that the subject has engaged the attention of the Associated Chambers of Commerce in this country, and I would remind the Committee that that association is not one actuated by any political motive. It is composed of members of all parties. It is felt by them that the money advanced by this country should, in the main, be spent on the manufactures of this country in the same way as restrictions are made in other countries. That should be accepted as a principle generally. Surely in times such as these, all the capital of this country should be used, as far as possible, in giving employment in the various industries of this country. Even if it means going beyond the principles of this country in ordinary times, the extraordinary times in which we live should make the principle one, I think, acceptable to all parts of the House, especially to my Friends who sit above the Gangway on the other side.


There have been several speeches made this afternoon which will cause considerable regret in India, but none of them will, I think, cause such profound regret as that made by one who has held the position of Secretary of State for India. I wish he had not made that speech. This question goes very deeply. His main contention was that this country could not afford not to put such an Amendment in the Bill.


I did not say "in the Bill." I asked for an assurance.


The question is, can we afford to make a stipulation? What is the position? Our finances at home may be gravely prejudiced by the consequences of the War. After all, there is something equally important to us as the centre of a great Empire. Can we afford to sap and to undermine the magical secret of our power in India? What is the situation? We are responsible, in a very special sense, for the interests of the Indian people, and we have a very special duty to place those interests, and not our own interests, however great they may be, in the forefront. That very special duty arises out of that peculiar responsibility. What are we asked to do now? We are asked, by a distinguished statesman to deny to the people for whom we are responsible the elementary right, which is freely conceded to any individual, any public company, and to almost any urban district council in this country, to buy in the best markets of the world. If they borrow here, they borrow at a rate of interest which is fixed, and the reward which we get for the lending of money is the rate of interest attached to the loan. If we seek to drive the matter further and to make a stipulation of that kind, then we are taking a step which will gravely prejudice our moral standing not only in India but throughout the world. I have heard it said by distinguished gentlemen who have spent their lives in India that the secret of the British power in India is the sword. The secret of the British power in India is not the sword. It is a secret which this wrecking Amendment would do much to destroy, for it resides, not in the power of the sword, but in the confidence of the great dumb mass of the people of India that our ideals are pure and absolutely unselfish, and that their interests are perfectly safe in our hands.


It is really rather tragic to see the light cavalry of the Tariff Reform movement now in the forefront throwing over their esteemed leader. We listened to-day to the strong, firm accents of the 1906 and the 1910 Elections from the old leader, but they found no echo on the Treasury Bench. This is very sad, but at the same time I think the old guard may take heart of grace from this, that though they have lost the support of their friends now on the Government Bench, the new leaders of the Conservative party, they have gained the support of the National Liberals, and the combination, if they press this to a Division in the Lobby, may be very deadly for the Government. I trust my hon. Friends below the Gangway will not pursue so far, in the interests of Tariff Reform, the life of the Free Trade Government. There are two points which should be touched upon. I think the Noble Lord, the Under-Secretary, in his defence of Free Trade, made a mistake in saying that if this Amendment were put into the Bill it would not really make any difference to the amount of goods ordered in this country, nor to the position of Indian finance. I think it would make a considerable difference, because if the ring or combine which supplies those goods knew that in making their tenders they were not to be faced with foreign competition they would not, in that case, quote such close prices as they do at the present time, knowing that there is foreign competition. In fact, the stipulation for the free market and for free trade involves at the same time the prevention of exaggerated prices, due to the position of the combine in being without competition; so that, if this Amendment were carried, it would not mean that any more goods would be ordered abroad or in this country than at the present time, but it would mean that India might, by reason of this provision, have to pay more for the same goods ordered in the same countries, and I do not believe that even my hon. and gallant Friend the Member for Kirkcaldy (Sir R. Hutchison) wants to see that result.

There is one further point we have to consider. It seems to me that when we have given to India the beginnings of Home Rule, it would be an impertinence for this Committee to tell India that, in the interests of the people of this country, we are going to make for India stipulations which we do not apply to any foreign countries which borrow in this market. I cannot imagine anything more likely to put up the backs of the Indian people. As the hon. Member for Derby (Mr. C. Roberts) has shown, the danger which this country has to face in future is that India will go Protectionist and that the Indians, partly from political as well as from economic reasons, may insist upon getting their goods in India instead of abroad at all. Anyone who has seen the marvellous industrial developments at Jamshedpur and Tatanugger, where hundreds of millions have been spent in developing the iron and steel industry, must realise the grave danger of India simply ceasing to be a customer of this country. It would be a disaster, not only to us, but to the Indians as well were such a Protectionist attitude taken up in that country. We ought to be the last people, by a foolish Resolution of this Committee, to foster any such spirit as that. Do let us realise that it is Indian people who will be paying the interest on this loan, and that it is not only the Indian people but ourselves as well, and the world as a whole, that will benefit by the expenditure of this capital money if that money be wisely spent in the best way in India. The development of Indian transport and the development of Indian commercial facilities will be a benefit, not only to India but to this country, and we should do nothing in this Committee to put any obstacle in the way of India getting that money on the cheapest possible terms and with the freest possible market. For these reasons we on these benches shall support the Government in the Lobby, if the supporters of Tariff Reform go to a Division. In doing so, we shall be acting, not only in the interests of the Indian people but in the interests of the employment of the people in this country as well.


I only wish to detain the Committee with one word in reply to the hon. Member who spoke on behalf of the Associated Chambers of Commerce. He gave as an illustration the case of France, and instanced the fact that when a loan is offered in France it is frequently made a condition that the money derived from that loan, or part of the money, shall be spent in France. I think the hon. Member had in mind the case of Poland, in which particular instance the total sum was so conditioned—


It has been going on for years.


It has been the invariable practice in France.


At any rate, in my knowledge, that is the most recent example. Surely, that is the best possible illustration of the vicious principle involved in the Amendment. Because if we compare the volume of loan issue in France with that of this country, the balance has in the past been very much in our favour. We want to keep that balance in our favour. The reason why the London market has been the biggest money market in the world has been because we have lent our money in an unfettered manner. We have fixed our rate of interest, and allowed our rate of interest on the money to be the recompense and the return for the money. That seems to me to be one of the most important of the considerations that the Committee ought to have before it in considering this matter. On that ground, if for no other reason, I shall be compelled, if there is a Division, to vote against the Amendment.


I think it is within the knowledge of most hon. Members that there do exist in this country certain rings, cartels and trusts. As my hon. Friend the Member for Limehouse (Major Attlee) pointed out, he knows by bitter experience, from his previous experience of municipal councils, that these rings do exist for the express purpose of raising prices against the purchaser. A few weeks ago we were discussing here the incidence of the Salt Tax in India, which has caused a great deal of concern amongst the people of that country. The people of India have had that tax imposed upon them, certified by the Governor-General of India, very much against their desires. We are asked now to lay down the stipulation that the Indian Government, in borrowing money, shall spend the money in this country. The market is fixed. I say that the fixed market is an invitation for the imposition of a tax like the Salt Tax by the monopolists in the industries in which the money must be spent. It is fairly well known beforehand how the money must be spent, and what are the kinds of commodities to be bought. By laying it down as a stipulation that the Indian Government must spend its money here you are laying the Indian people open to be taxed to the extent of the Salt Tax, and are handing them over to the monopolists of this country. This is a most iniquitous proposal, and one can only imagine that the Indian people will resent it very much if it turns out, ultimately, that they are to be overcharged in the interests of the monopolists of this country, to the extent of the amount of the Salt Tax, which was imposed on them against their will. That is one of the surest ways of accentuating the grave discontent that exists there already, and very rightly so. Therefore, I hope this Amendment will be defeated, in the way it deserves to be defeated, in the interests of the Indian people.

5.0 P.M.


I am very glad that my hon. and gallant Friend the Member for Kirkcaldy (Sir R. Hutchison) has raised this discussion. It is a matter of very considerable importance to the business of this country. I regret that what I think is a pure business proposition should be tangled in the barbed wire of old controversies. I really do not see myself what this has got to do with Free Trade and Protection. It is a business proposition. My hon. Friend the Member for Ilford (Mr. Wise) opposite criticised the Amendment from the standpoint of the business of India in this country. That I can understand, but that is not a question of Protection. Protection is a tariff which is raised against goods coming into this country; this is a question—and one of the most important questions which we shall have to consider in the immediate future—of whether we are going to exercise any control upon the lending of money across the seas. I am going to bow to the ruling which you, Mr. Hope, laid down earlier in the course of the afternoon, that I cannot discuss the question of principle broadly. I regret it, but I quite see that it would not be within the four corners of this Amendment or of a discussion of this Bill to do so, but, to this extent, I am bound to take note of it. This Amendment is setting a precedent. Undoubtedly, if a precedent were set with regard to India, it would have to be followed. Let us see what the position is at the present moment. As my right hon. Friend the Member for West Birmingham (Mr. A. Chamberlain) has pointed out, we have pursued a policy which differs from that adopted by practically all our great rivals. We have used our resources to restore our credit; they have used their credit in order to increase their resources. They have used their credit to re-equip machinery, as I pointed out yesterday, and in other ways; whether it is in Germany, or France, or Czechoslovakia, or Poland they have done it freely. They have damaged their credit to a certain extent. We have gone in for a policy of strengthening credit and improving the value of our currency. The result has been undoubtedly that we have got money to spare to spend abroad where other countries have not. The sovereign is able to look up, whereas their particular coins are going down and down in value. It has yet to be decided which of those two policies will win in the end. Our policy has been what is known as a banker's policy; they have listened rather to their industrialists. That has been the great conflict of policies between the various countries of the world. It has not yet been settled which is right, but, at any rate, we have got up our credit. They will use the equipment they have built up for the purpose of their trade. Why should not we use what we have built up for the purpose of our trade, that is, our credit? Is it imagined that during the last few years there has been an absolutely free market in money? As a matter of fact, this control, which my hon. and gallant Friend the Member for Kirkcaldy suggested, is one which has been exercised by the Bank of England. When we were considering the question of unemployment, we had to use what resources were available for the purpose of financing exports abroad—export credits, trade facilities, and so on, and we had to consult the Governor of the Bank of England. We found he was exercising control over issues. I will not say it is an irregular control, because it is a control which was accepted by the City. It was a control by consent, but imposed upon the finance of the City. Men came to him and he said, "I am against that issue." He could not have stopped it, but his decision was accepted. He would say, "I am against it because British trade gets nothing out of it. That is purely for speculation, or a gamble, or whatever else you may call it, which may interest the particular people who put money into it, but it does not benefit the country as a whole." That was accepted by the City during the last three years. I listened to the argument about triangular trade. It is a very complicated affair, and it does not always work out in that way. The payment we are making to the United States of America is going to prove it, the £30,000,000 a year. That is not going in goods to the United States from this country.


That is exceptional.


I know. Why should it be exceptional?


It will go in goods ultimately, in raw materials even.


It is going to be a burden. My right hon. Friend and my hon. Friend behind me pointed out that when you want to prevent money going across to the United States of America you put up the Bank rate. That is a legitimate transaction. You do it to prevent money going across in such a way as would be damaging to your own business at home. We are building up our credit; we are about the only country in the world that can spare money for abroad. The United States of America has had a very unfortunate experience in its lending.


Their investments abroad in 1922 were larger than ours.


I do not contradict that. What I said was that those investments were rather unfortunate, and the fact of the matter is so much is that the case that those who have money to spare in the United States of America are more and more consulting the men here who have got the "touch," who understand it. I remember perfectly well the late governor of the Bank of England, an extraordinarily shrewd person, explaining to me all this triangular business. He showed me a piece of paper upon which a good deal of money had been advanced, and I said to him, "Would you mind telling me how you can distinguish between one and the other?" and he said, "I smell."


We smell you too!


There is no use in being rude. This discussion is very important, and I hope it will not be controversial. That is really what it means—that you have got in this country generations of training in dealing with these advances abroad such as no other country has got; it is almost a trained instinct. Then let us make some use of it for the purposes of our industries. It is no use pretending there is not a serious suspicion in the industrial community that the bankers are controlling things rather too much, that our policy is a banker's policy, a lender's policy, a money policy, a financier's policy, and not the policy of industry. That view has gone deep amongst manufacturers and business men outside. I am not going to say whether that is so or not, but I am perfectly certain that the whole of that position has got to be reconsidered. I am a Free Trader, I am against tariffs, but I do not put this in the same category at all. I am in favour of using the special advantages of this country for the purpose of promoting its trade and its industry. If we have got hundreds of millions which we can spare, do not let us merely look at the fact that we may get five or six per cent. for it. That will benefit a certain number; but the money ought to be used for the benefit of the whole of the industries of this country. I could have gone broadly into this question; but let us take this particular issue. The challenge came from India. The noble Lord the Under-Secretary himself quoted a statement about it. We did not begin this business.


It was when the right hon. Gentleman's Government was in power.


I do hope this is going to be regarded as a matter which is a little above mere party points. If we cannot consider a business proposition without a bandying of petty, little, party points of that kind, it is hardly worth while entering into the discussion. This was not done by the Government. This was done by the Indian Government. This document to which he referred was issued by the Indian Government when Mr. Montagu was Secretary of State for India. But what I want to point out is that it was a challenge issued by India. India began it. India said: "We are going to buy in the cheapest market, wherever we borrow." That was their challenge. I think we are perfectly entitled, if the Indian Assembly is entitled to issue a document of that kind, which is a challenging document, to say, "Certainly, you can buy in the cheapest market; but we are bound also to see that our capital is used to the best purpose for the industries of our country." I do not think there is anything offensive in that. I do not think there is anything unfair in it. Why should that be regarded as something which is an oppression on India?


Would you apply it to Australia?


Certainly I would. But I cannot discuss the whole issue here, as I should be out of order if I did. I would introduce that principle of control within the whole of our finance, but I cannot go into that. I hope the Government will reconsider this matter. I can well understand that the Under-Secretary is not in a position to give an answer. He has got his instructions, he is dealing with this particular Bill, and he is not entitled to give an answer of such very great consequence upon the whole of the financial policy of this country. But I do hope that he will convey the sense of the discussion here to his colleagues.

With regard to cartels and trusts to which the hon. Member for Merthyr (Mr. Wallhead) referred, that could easily be safeguarded. I can quite see that if you put in a condition that the money must be spent in this country, and made it statutory, you might get into the hands of a cartel or trust which would overcharge India. It would take advantage of that fact. But it is easy to protect the Indian taxpayer against that by inserting a condition that if they find they are overcharged in this country there should be an appeal to the India Office, or the India Council, or anybody which would be a fair body, to liberate them from the obligation of the Statute. That would instantly bring down charges and put them in a position which is a perfectly fair one. But I do ask that when we are going to sanction the expenditure of a loan of £65,000,000 upon the development of Indian railways, that, at any rate, we ought to have some assurance from the Government that they will do their best to get a promise from India that, provided the prices are fair, money will be spent in this market.


I feel I must answer at once the points put by my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George). May I start by stating that I hope he did not misunderstand me when I interrupted him, and did not think I was trying to make what he described as a petty point against him personally? On the contrary, I do not consider that the point which I endeavoured to make is a petty point. It is a point of the greatest substance. He referred to the resolution passed by the Legislative Assembly, the terms of which I read out, and he said it was a challenging resolution. I do not think it is fair to describe it as a challenging resolution.


It has been the practice.


As the hon. Member reminds me, it has always been the practice, and I do not think this resolution was intended as a challenge. When I reminded the right hon. Gentleman that he was at the time Prime Minister, and that it happened before my noble Friend the Secretary of State for India or myself took office, I thought it was not a petty point. The Government through its Secretary of State, at a very important time in the history of the relationship between India and this country, accepted a resolution of the greatest importance, and yet my right hon. Friend comes down to the House this afternoon and says, "That is a challenging resolution." Challenging what? Challenging this country? Then why did not his Government and his Secretary of State at the time refuse to accept it? That is a complete answer, showing that it is not a petty point; I think it is a most important point. I say it is not a challenging Resolution. I go further and say that the late Government and the late Secretary of State (Mr. Montagu) were quite right to accept that resolution, because I do not think it was a challenging Resolution. My right hon. Friend the Member for Carnarvon Boroughs said, "Let us not be entangled in the barbed wire of old controversies." I quite agree. We all want to avoid barbed wire, but I wish he and his friends would accept his description of Free Trade as an old controversy, because it was only the other day I saw they had decided to hold a meeting upstairs or in another place—


I am afraid the Noble Lord is going too far.


When my right hon. Friend says that he does not wish to see us entangled in the barbed wire of old controversies, perhaps I may say that I am very glad to hear it. He went on to say that this was really a business question—whether or not we should allow countries to use our credit without conditions. He said that was the main question. I have already endeavoured to meet it in a reply to another right hon. Gentleman—and certainly no Under-Secretary could complain of not having had sufficiently big game to shoot at this afternoon. I endeavoured to deal with that point, but the Chairman thought I would be wandering outside the bounds of order if I were to proceed to a discussion on how far the application should be made a general one. Therefore I do not propose to pursue the subject now. May I repeat what I said to my right hon. Friend the Member for West Birmingam (Mr. A. Chamberlain) which, in the main, answers my right hon. Friend opposite me? This Amendment seeks to impose the obligation upon India that, when purchasing her requirements for railways, irrigation and such like purposes, she must purchase 75 per cent. in this country. In actual practice, during the last year for which figures are available she has purchased no less than 95 per cent. What, in these circumstances, is the reason for putting such an Amendment as this in the Bill? My right hon. Friend opposite talked a great deal about business not always being concerned with industry and manufacture, but may I point out to him, that you could not get a better result from the point of view of British business and British manufacture than you get from the existing policy, under which 95 per cent of these huge requirements are purchased here? Surely in these circumstances it would be folly to impose this condition and I venture with great diffidence and respect to suggest to the Committee that, after the very full and interesting discussion we have hart on this subject, we might come to a decision.


I think as the purpose for which the Amendment was put down has been fulfilled in the interesting Debate we have had, I would beg the leave of the Committee to withdraw it.




I think we have had a most valuable and interesting discussion, and I congratulate the Under-Secretary for India, on his firm stand for a great principle. His action will inspire the confidence of our fellow-subjects in India, and will make them appreciate, as we in this Committee appreciate, that the Noble Lord approaches these problems as a trustee for our Indian fellow-subjects. I am glad that the Noble Lord is not to be led aside from that position by any arguments, even though there is a new Coalition between the right hon. Member for West Birmingham (Mr. A. Chamberlain) and the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George). I do not know if this is a new move at any rate, it tends to suggest to us that my right hon. Friend the Member for Carnarvon Boroughs is gravitating, not towards us, but towards the right hon. Member for West Birmingham, and he promises, before long, to develop into a prancing imperialist. That is the danger of associating for so many years with opinions so divergent from his own.


I think the hon. Gentleman is going outside the subject under discussion.


I only made those remarks by way of introduction. What I do wish to say is that these discussions at the present time, in relation to the new Constitution in India, have a tremendous effect upon the destinies of our Empire. At the present moment, in France, there is a very strong anti-British movement, and the contention is that we in this country control the destinies of one quarter of the civilised world and that we use our position to divert trade to this country. As a matter of fact, we have always taken a sound line and a justifiable line and the line taken by the Under-Secretary for India in this matter to-day. Each part of the Empire is a self-governing unit. We ask for no preferment beyond any other country where trade is concerned, and each part of the Empire can buy in whatever part of the world it likes, uncontrolled and uninfluenced by this House of Commons. Therefore, this is not merely a matter of trade or of detail, but there is a great principle involved, and I hope the Committee will be firm and will not allow itself to be diverted from the right course at a time like this when there is great unemployment and trade depression and therefore a great temptation to our traders and manufacturers to bring the influence of this House to bear—and thus to be unfaithful to our trust—not in the interests of the Indian Empire, but of our own trade and commerce and industry. That way lies the break-up of our Empire. So soon as we allow ourselves to exploit our Empire for our own selfish interests, so soon will the Empire go to pieces. That applies especially to India. The Indian people have confidence in us so long as we show we are guided by the sound principle that the interests of each part of the Empire shall be considered first and the interests of the trade of this country second. As the right hon. Gentleman the Member for Carnarvon Boroughs has left the Committee I am not going to say all that I had intended to say. In any case, I would not have the effrontery to lecture him on triangular trade, but I am sure the right hon. Baronet the Member for the City of London will put him in the right direction in regard to that. Every day in Lombard Street in the great bill houses, these matters are being decided quite impartially, quite apart from whether the country concerned belongs to this Empire or not, and quite apart from whether a bill comes from within the Empire or from foreign trade. It is purely a matter of economic adjustment and whether a cargo of wheat is coming from Canada or bales of cotton from the United States, whether meat is coming from New Zealand or tea from India, all these things are adjusted according to the movements of trade. So soon as this country tries to interfere with the delicately balanced and highly scientific working of the exchange, so soon will Lombard Street cease to be the centre of the world money market for that reason, and that reason only, I hope there will be no interference by Parliament with the money market of this country.


I understand the Mover intends to withdraw his Amendment, and therefore I do not know that there is any need for further discussion, but I should like to say that nothing to my mind could be more fatal than to put a provision of this sort into the Bill. What would be the result? The result would be exactly that which we have already seen in other matters. At once the people who supply the goods which are to be bought under this Bill would make a ring. One has to look these things in the face, and naturally these people would say—and I do not know that I should not say it myself if I were in their place—that as the Indian Government had to buy so many tons of steel and iron and so many railway engines in this country, they must take good care that the tenders were placed at the proper prices from their standpoint. If this condition be omitted, the vast majority of the goods will be bought in this country in any case, but there will be competition, and the Indian Government will be free to go to Belgium or France, or elsewhere, to buy the goods if they cannot get them at suitable prices here. I cannot understand why the Committee should discuss such a proposal at all. Its only result would be to force up prices and to put the Indian Government and the Indian people in a false position. I heard a debate upon India in this House many years ago, in the course of which it was said that we were all Members for India. I trust hon. Members will bear that in mind in dealing with this question.


I have listened to this Debate with great interest, but most of the hon. Members taking part have spoken from the standpoint of commerce. The rights of the people of India have not been recognised. [HON. MEMBERS: "Yes!"] No; you have laid stress on the bankers' interests, and spoken at great length about the commercial interests, but nobody has taken up the point as to what right this House, or any other House, has to limit the rights of 300,000,000 of people to control their own policy. I am glad the right hon. Baronet the Member for the City of London (Sir F. Banbury) agrees with me. This great Dependency, or what is now called a Dependency, but which I hope some day will become a self-governing community—


I do not agree with that.


I know the right hon. Baronet does not agree with that. I hope eventually that India will become a self-governing part of the British Empire, because, if she does not become self-governing, she will become independent and she may become antagonistic and, by her competition in the production of textile goods, she may knock Lancashire out of the market in the cotton trade. I ask the Committee to reject that Amendment which is going to antagonise the people of India. What right have we to say that the "Big Five" should lay down these conditions. Is it an accident that the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) has supported the proposition that we must place these conditions upon the people of India. Probably they are looking for a seat for the chairman of the "Big Five" Who fixes the rate of interest? What control has this House over the rates of interest charged for the use of money? We have no control. A certain number of people meet in Lombard Street or Throgmorton Street or Petticoat Lane and decide what the price of money is to be. [An HON. MEMBER: "Have you been there?"] Yes, I have been there many a time and the oftener I go there the more I loathe it. I can see them working the oracle—the three-card trick. Some people play it in cloth caps and others in silk hats.


The hon. Member is getting a long way from the Amendment.


I am only following the example of those who have gone before me.


The hon. Member is improving on it.


I am glad to have your commendation Sir. The principle for which I stand is the principle of self-government. I contend we have no right to say to the people of India that they must buy so much per cent. of these goods with us and give us the extra profit. By doing so we shall create the very feeling which the extremists in India desire to see created. We shall then be feeding them with the very ammunition they want. They will say to the people that they have not a free market for their money, nor a free opportunity of expressing their demands and that Great Britain is the enemy. As a consequence the Imperialists who support this policy will be helping towards the break-up of the Empire of which they pretend to be so proud. Let the people of India decide for themselves and if they decide, as according to the Noble Lord they already have, that they will purchase 95 per cent. of their goods here, then there is no need for an Amendment of this character. We should say to India, as to all other parts of the Empire: Do your own business in the way that suits you best and we support you in any policy which is necessary for the development of your trade and industry according to your own ideas.

Lieut.-Commander KENWORTHY

I am never anxious to prolong Debate unnecessarily, and when, under ordinary conditions, an hon. Member proposes to withdraw an Amendment, I acquiesce, but this Amendment is very important, and it has an added importance because it is moved by the hon. and gallant Member for Kirkcaldy (Sir R. Hutchison), who is a member of the National Liberal party. In India, I am afraid, amongst the teeming masses there, the essential differences between the hon. and gallant Member and myself and those with whom I usually co-operate are not always recognised, and the extremists will seize hold of this Amendment, and will say: "Here is the Liberal party"—with no suffix or prefix—"moving an Amendment to restrain the liberty of the Government of India," which is as unrepresentative as it is autocratic, according to these extremists. Nevertheless, this attempt is being made by an hon. Member of the Liberal party, backed up by the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George)—that is the serious point—against the advice of the Noble Earl who speaks for India in this House, and of the right hon. Baronet the Member for the City of London (Sir F. Banbury), against the advice of those two great pillars of the Conservative party, finance on the one hand and the landed interests on the other. We have two members of the Liberal party, or what the people who are trying to mislead the masses of India will call the Liberal party, moving this extremely dangerous Amendment, and, therefore, I think it is necessary to make it clear that the sense of this House and the sense of the great part, I believe, of both wings of the Liberal party, is against it.

The right hon. Gentleman has used the extraordinary argument that the trust danger can be got over by some right of appeal. I think we ought to make it clear that nobody else in this House thinks so for one moment. We, ourselves, in this country cannot control our own rings that are forcing up the price of building materials, and what is the use of a right hon. Member, with the experience and the name of the right hon. Member for Carnarvon Boroughs, trying to hoodwink the people of India by telling them that some visionary and illusory right of appeal can prevent the forcing up of prices? It is quite absurd, and although I am sorry I was in a Committee upstairs, and did not hear the earlier part of the Debate, I think it is necessary to say these few words. I hope the hon. and gallant Member for Kirkcaldy will not allow himself to be led astray into these false courses again, and will not pay too much attention to what his right hon. Leader says on these questions. For the very few years that I have been in this House, I have seen nothing but attempts by that right hon. Gentleman to get round these questions of Protection and Free Trade.


Having regard to the answer made by my Noble Friend the Under-Secretary of State for India, I wish to add one word to what I have already said. The conversation to which I alluded was a personal conversation, but it was on public policy. It was in no sense a confidential conversation. Indeed, it was one in which he informed me that a pledge prevented him from giving the answer in the House of Commons which I thought ought to be given at the moment, and I said that before any similar Bill was brought in again, I should take the matter to the Cabinet and see whether the Cabinet thought that that pledge ought to govern our action in the future. We are all agreed that this particular Amendment will not do, and the hon. and gallant Member for Kirk- caldy (Sir R. Hutchison), who moved it, is contented with the discussion, and some little time ago asked leave to withdraw it. I do not want to prevent or to delay its withdrawal, but I think it is necessary to add this. My Noble Friend and other speakers have obviously thought that those of us who thought it not unreasonable to ask that Governments or corporations having recourse to the resources of the London market should give a preference to British manufactures when spending their money were making a quite exceptional demand. My right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) has already said that a great deal has been done in that way, without legislative or statutory authority, through the influence of the Bank of England, and through the good will with which representations as to the public interest from, the Bank of England are received by those who are making the issues, but you can carry the case a little bit further.

I left the House for a moment to try and find my references, and I have not been able to do so, but what is the practice of our own Government? We give a preference, unless the Government have altered the practice, to British and Empire manufacturers on all Government contracts. The Dominions who borrow in our market give a preference because they have preferential duties which enforce it, and they themselves brought up at one of the Imperial Conferences in the last few years the question of placing orders within the Empire, and sought to get a general agreement among them. I thought we had got it. I thought that India had agreed in that, and I was startled when I learned that India, alone among the British Dominions, had announced a policy plainly disregarding what had been the agreed policy of the nations of the Empire met in council. We are not, therefore, asking for anything exceptional. We are asking for conformity on the part of India with what is the general practice of this Government and of the Empire.


I think it is important, although the hon. and gallant Member for Kirkcaldy (Sir R. Hutchison) has asked leave to withdraw his Amendment, because, as the right hon. Member for West Birmingham (Mr. A. Chamber- lain) has said, he was contented with the Debate, that there should be some further expression of opinion on this very important matter. The right hon. Member for West Birmingham has, by his second speech, shown the importance he attaches to it. He has intimated the practice of other parts of the Empire, but I think this is a matter which should engage the attention of the Committee and guide it in its decision, that there is an essential difference between a voluntary decision, taken on the part of the self-governing Dominions, and a condition imposed upon India by this House. I am surprised indeed that right hon. Gentlemen with the responsibility of the right hon. Member for West Birmingham and the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) should have lent the weight of their authority to a proposition such as that which is contained in this Amendment. I can conceive of nothing which could be more disastrous to our relations with India than to impose such a condition as that which this Amendment suggests. My right hon. Friend the Member for Carnarvon Boroughs made a number of other general statements in the course of his speech which I think are calculated to create the very worst impression outside. He talked about the financial policy pursued in this country as being a bankers' policy, a policy carried out in the interests of lenders, and, consequently, not in the interests of the rest of the community. In the present condition of things in this country, it is the very worst possible impression that could be conveyed to the people outside, that the finances of this country are being regulated in the interests of the lending community. I am surprised that, in view of the situation which exists here at this time, such a statement should have been made so light-heartedly as the right hon. Gentleman made it.


I do not think the right hon. Gentleman said that. I may be wrong, but I listened closely, and I understood him to say it was in the industrial interests of this country.


I think my hon. Friend the Member for Farnham (Mr. A. M. Samuel) has misunderstood. The right hon. Member for Carnarvon Boroughs drew a distinction between a banker's policy and an industrialist's policy, and he said that the policy which this country had been pursuing was a banker's policy, and not an industrialist's policy. I say that that is a most unfortunate impression to convey, and, furthermore, that it is an unfortunate impression in relation to an Amendment of this kind, and I think, therefore, it is only right that in this House some protest should be made against any such proposition. He also poured contempt on the theory of triangular trade. I am not personally associated with trade, and have no right to speak upon that triangular process from any practical acquaintance with it, but all the people whom I know who are acquainted with the working of trade attach importance to this triangular process, and I recollect that the right hon. Gentleman himself, when he proposed his Motion for the Genoa Conference in this House, in a speech which I heard under the Gallery in those days, laid the greatest possible emphasis on this triangular process of trade. He argued, it may have been, without conviction, and that may account for the want of success of his speech, but that was the contention to which he committed himself at that time. It is most unfortunate that such erroneous ideas should be propagated with the authority of gentlemen who were such distinguished Members of the late Government.

As to what India is doing, we have the testimony of the Noble Lord the Under-Secretary as to the practice in the last year for which figures are available, that during that period India bought, I think, 95 per cent. in our market. I have information that in one case at least India bought here at a higher price, when she could have got the same thing at a lower price in Belgium, and I think that is a very important consideration to have in our minds. It shows that India, of her own free will, is giving a preference to this country, even at a sacrifice in the matter of cost, but what would be the position if you imposed such a statutory condition upon her? In every case prices would be examined, and in every case the people of India would be considering what India was losing as a result of her having to pay a higher price in this country. There could be nothing which would offer better material for the extremists of India, and therefore, not only on grounds of general principle, but hav- ing regard to the special situation of India, nothing could be more dangerous, nothing could be more likely to cause greater difficulty in regard to the future relations of India and Great Britain, than to impose such a condition as that which this Amendment suggests.

We are, indeed, in a rather topsy turvy condition. I am in the unusual position of defending the Noble Lord the Under-Secretary for India. It is not, of course, unusual that I should be in opposition to the right hon. Member for Carnarvon Boroughs, but my company is somewhat strange on this occasion. I am, however, bound to congratulate the Government on the stand they are taking. Apart altogether from general considerations of fiscal policy, the position to which they are adhering is in the best interests of India, in the best interests of this country, and in the best interests of the Empire.

Amendment negatived.

Motion made, and Question proposed, "That the Clause stand part of the Bill."


Before this Clause goes through, I should like to urge on the Noble Lord, on behalf of the India Office, the advisability of considering into what part of the scheme of such Bills as this, a Measure would, or might come, of decentralisation in respect of borrowing powers in India. I have no criticism to make of the substantial scheme of the Bill—far from it. On a recent occasion, when I had some opportunity of acquainting myself with the financial policy and record of the Government of India in respect of their borrowing, I was surprised by nothing more than to find the ultra-conservative nature of the Government of India's policy in that respect. Nothing was ever paid out of capital account except such works as were absolutely certain to give not only a return but a large interest. The policy seemed to be based upon an ultra-conservative basis as regards borrowing for capital purposes. Indeed, I venture to say that if any of our great dominions had been dealt with by their governors by a policy so conservative as that of the Government of India, they would never have made any progress at all. I could not but think that the general progress of India had to appreciable extent been delayed by the lack of enterprise and forward policy, and the use of money on capital account for development purposes.

It occurred to me at that time, and it seems to me now when I mention the matter, that the remedy, or at least one remedy, or a remedial act in the direction of a more advantageous policy in that respect was the decentralisation of borrowing powers out of the sole hands of the Government of India where they are at present into the hands of the provinces. As the Committee are well aware, it was part of the central idea of the new scheme, of the new regime, in India that there should be a decentralisation of the powers of the Government of India into the hands of the provinces, and that the provinces should become to an increasing extent States responsible for their own well-being and for their own destinies. It is, therefore, in accordance with that central idea of the new regime that there should be a greater measure of decentralisation in the respect I name. There are, it appears to me, two very solid business reasons why there should be a further measure of decentralisation. It can be indicated in the distinction between the Provinces of Bombay and Bengal and the United Provinces which stand, as regards borrowing powers, on a footing similar in status though not quite so absolute in power as those other provinces, the Dominion of Canada or the State Commonwealth of Australia. They should follow their own aims and their own purposes.

That idea, I know, always seems startling to Indian officials, and it is startling only, I think, because of its novelty, not because of its natural disadvantage. At the time of the reform scheme the provinces were given separate purses, and a large part of their own revenues are now in their own hands, and out of the hands of the Government of India. That credit, therefore, upon which useful borrowing can be based, can only be mobilised by the provinces borrowing upon it. The basis of credit for useful credit purposes can only be attained by allowing the provinces purses of their own. Another very important reason, the reason upon which I base this suggestion, is that I do not think the provinces would ever become really self-conscious as States, never become truly inspired by a sense of their own financial responsibility, unless, in this connection, they were put into direct contact with their own credit with the money market.

As the Committee are well aware, many improvements and hopeful ends of government are now in the hands of the provinces—education, land, irrigation, and so on. The provinces may become masters of their own destinies, and unless and until, in addition, the Central Powers tax for revenue purposes in order to maintain these services, they also have the powers of borrowing, because apart from prejudice, it is, of course, for the Government at the present time, that in order to maintain such services as these in the manner which they must be maintained by the Government, and under the regulation of the State responsible for control, that there should be full control over the capital account as well as over the revenue account. That appears to be a most important reason. I do not think it can be expected that the provinces will ever attain to a full sense of responsibility for their own finances and towards their own high services with which they are entrusted until they have full control of the financial supply as it applies to these services. What more healthy state of things can there be to bring to bear upon any Government in learning the business of finance than that it should be brought in direct contact with the money market and learn by reference to it for the purposes, for borrowing purposes, exactly how its own finances stand? Supposing any of these States were a little lax in making their budgets balance, what more instructive lesson could they have as to the essential necessity of sound finance and of making their budget balance than to come to the money market in London or to the rupee market, and find the reception they would get? One last word in this connection, which, as I think, is not without importance to the future of India. I know it might be said by most of the English financial advisers of the Government of India that it is cheaper to centralise their borrowings in the Government of India.


Does the right hon. Gentleman realise that in this Clause we are only borrowing for railway purposes, and that the general question does not arise, and, therefore, I cannot give him any answer to some of his points?


I know. As the Noble Lord truly says, borrowing under this Clause is for railway purposes. It may be possible that I shall be more directly in order in a subsequent Clause, still it appears to me that this matter can be brought in order in view of the rather wide nature of the perspective allowed. I do not think in the long run that it would be any dearer to borrow on their own. I refer to provinces which have good credit. In the case of provinces which have not good credit and they are prevented from borrowing on their own account that would be all to the good. There is no reason why they ought to. But a well-to-do province like Bombay should borrow on a basis very little less expensive to itself than the Government of India. Indeed were I myself an investor in such securities I am not at all sure that I would not prefer investment in a well-supported security of the province of Bombay than of the Government of India itself. I do not say one word in encouragement of extravagance. I fully recognise that in making these suggestions that it would be impossible to attain to this end and to make the provinces masters of their own financial house at one step. I think it is possible, if not quite certain, that there might have to be an interval during which the market was made accustomed to provincial loans on the same basis as the Canadian or Australian provincial loans, by some form of support which I need not now par ticularise, from the Government of India. I freely recognise it would be always essential for the Government of India to maintain what I might call an impartial control over the loans such as we have heard is exercised behind the scenes by the Governor of the Bank in difficult times in marshalling together the loans in the City of London. It would, of course, be impossible to allow the matter to sink into mere disorganisation, and for the provinces to become competitors to each other, at one time tumbling over each other and perhaps exciting the market, and at another going in the opposite way. The Government of India would no doubt, at all times, have to exercise this impartial control over the new loans, but in the interest of the future of the provinces themselves, as healthy States in the great Indian State, in the particular interests of their own sense of responsibility, in the interests of their own financial responsibility and the discharge of it, I would like to make the suggestions I have to the India Office, and possibly also to the Government of India.


The hon. Gentleman the Member for Norwich (Mr. Young) has put forward a suggestion of enormous importance. I feel this point. The Provinces of Bombay and Bengal cannot raise loans, yet the cities of Bombay and Calcutta can raise loans. So that it would appear that we have strict confidence in the municipal administration, yet we have not up till now granted this power to the Provincial Governments. I think it must be understood that the real objection to this decentralisation of the borrowing powers in India comes from the Central Government, who have had up till now control and who desire permanently to keep control. To my mind it is a narrow obscurantism on the part of the Central Government. At the present time when the development of India is in the melting pot, it is of vital importance that we should give all these Provincial Governments a sense of responsibility, and a sense of responsibility can, as the right hon. Gentleman has said, only come, I should say, not "best" but "only," from a real control over the purse and the power that the purse gives. It is nonsense to tell people that they are in control of the purse when they do not get the advantage of controlling the purse wisely; that it matters not one jot to them whether their Budget balances or not; that they are not really in the responsible position that they ought to be in if they are developing their provinces on the right lines.

But there is one contention which I want to put forward now, and that is that the provinces have not yet got control of certain of those services upon which capital expenditure is desirable. Take, for instance, irrigation. Schemes have been put forward. Enormous advantage might be taken of these, and of the powers suggested in the Punjab, where great irrigation and navigation schemes have been brought forward. Irrigation is not only a suitable subject for capital expenditure, not being amongst the transferred services under the control of the citizens of the Province of Bombay or in the Punjab. There are railways which have not yet been transferred; therefore expenditure on these would be fully advantageous. I think we might be a little cautious in giving very wide powers in the case of the non-transferred subjects, because there you may find yourselves up against criticism in time to come when these subjects are transferred that the money has not been spent wisely by the old bureaucracy. If that objection is raised to this decentralising of borrowing powers the reply is obvious: that it is not to restrict the powers of the local government in borrowing, but rather to widen the subjects which are subject to popular control in those provinces. Far from restricting the borrowing powers, I would say, widen the control powers. When the Rules and Regulations under the Government of India Act are next revised, I hope we shall see complete autonomy given to the provinces, coupled with complete control over borrowing.

6.0 P.M.


The suggestions which my hon. and gallant Friend has made would require an Amendment of the 1919 Act. With regard to what has been said by the right hon. Member for Norwich (Mr. H. Young), I recognise that in this question of Indian finance and centralisation and decentralisation one must always regard the question in every succeeding decade from the point of view of what the situation in India is at the moment. In the case of this particular Clause we are only concerned with borrowing for railway and irrigation purposes. I do not understand how my hon. Friend brings in his argument in relation to this Clause.


I say, quite frankly, that my observations would have been more relevant to the following Clause.


I hope there will be some sort of understanding that, if I reply now to these criticisms, the same point will not be raised again on the next Clause. As regards the railways, no question of decentralisation arises. With regard to other general matters, take, for example, irrigation, I am sure my right hon. Friend must be aware that there is now provided under the law an opportunity for those provinces to borrow with the permission of the Government of India and the Secretary of State, and in point of fact there have been provincial loans in India for all sorts of purposes. There are many hon. Members in this House who are more familiar with Indian finance than I am, but I am sure they will agree with me when I say that these loans have been exceedingly successful. It is quite true that recently in the case of a good many undertakings, such as the big undertaking which is now being carried out by the Government of Bombay, it has been found more satisfactory for various reasons for Bombay to borrow this money from the Government of India rather than by placing a separate loan upon the market That is due to various reasons, one of which is that although there is no legal reason why the authorities should not authorise the Government of Bombay to put its loans on the market, there are reasons well known to many hon. Members, into which I need not enter at the present moment, which make it more convenient to borrow from the Government of India. Lately it has been found more advantageous to borrow through the Government of India. I hope my hon. Friends will be satisfied with that explanation. In conclusion may I say that all these matters are always considered in the light of what is the best thing to do in the circumstances?


I do not think the position is quite that which has been stated by hon. Members opposite. The fact is, that it would be impossible for the Provinces of India to raise loans in the general market in India from time to time for their own purposes. You have in Bombay the largest market for this purpose, and almost every loan, or a very large proportion of it, has been raised in Bombay. But if there was too much of this kind of thing, the Indian market would be exhausted. For practical purposes, all this business must be under the control of the Government of India. It is correct to say that loans have been raised by the Provinces in India, but it is not correct to say that they have been raised in this country. Bombay has a large development loan, but it would be impossible for the Province of Madras to raise all the money required without reference to the Government of India. Bombay might be raising too large sums for development, and then other Provinces would suffer in consequence. The Government of India, of course, should always have the last say as to where the loans should be raised.

I wish to allude to one or two points about the raising of money for railways. It will be within the recollection of many hon. Members that the Acworth Committee proposed two very definite changes. The first one was that the system under which budgeting for railway finance in previous years in India had been carried on, in connection with railway finance, should be entirely separated from the Budget of India for other purposes. That recommendation was not accepted by the Legislature Assembly of India in 1921. The Acworth Committee further suggested that the railway finance should be a separate thing, that the Government of India should raise money for railway purposes, and the profits of the railways were to be kept separate and devoted to the provision of facilities for a reduction of the rates on goods, passengers, and so on.

The second thing was that they wanted an end put to the ridiculous system which has existed for many years by which the money which was not spent in one financial year lapsed. That recommendation, was accepted, and it was laid down that the Railway Commissioners should have a fixed programme ahead for a period of years, and that policy has now been adopted. That being the case you are now in the position that the railways know exactly what they have to do. They can make their plans ahead; they know that they will have proper support for their plans for the enlargement of railways and the increase of rolling-stock, and that is all to the good. Up to the year 1900, or perhaps later than that, the railways returned to the Indian Government a very large sum of money every year, and they were very profitable undertakings. I think we might say that during those years India was the only country one might turn to as an example of the success of the nationalisation of railways, although the railways in India are not nationalised at all, but a great many of them are under State control. The position now is that, owing to the War and other causes in the last five or six years, the return has fallen steadily, and now those railways are a burden to the taxpayer. This point is brought out prominently in the Inchcape Report, although these railways in the past have been profitable undertakings. Of course, it is possible to develop them far more than has been the case up to date. We want to develop more the feeder line system; these railways can be built very cheaply, and the money can be raised in India, and in that way the heavy strain of the railway budget will be very much less. India has still to get permission to raise loans, and that is not the case in any other part of our Empire. I think it is perhaps unfair that India should have to come to this country to ask permission to borrow at all. I do not see why India should not come to the British money market when it suits her; and I think it would have done the greatest harm to India if the Amendment put down to-day had been accepted. I am certain that under the conditions which exist in India she looks for freedom, and she looks also to be treated as well and as freely as any other part of the Empire, and the quicker we do away with the system under which she has to come here for permission to raise money the better.

Clauses 4 (Power to raise fifteen million pounds for the general purposes of the Government of India) and 5 (Issue of Bonds) ordered to stand part of the Bill.