HC Deb 05 August 1924 vol 176 cc2787-840

I rise to put a few questions to the Prime Minister—I understand he will be in the House in a moment or two—in regard to the very important statement which he made to the House yesterday on the work of the International Conference. Had the House been sitting in a week or fortnight's time I should myself have thought it more advisable to postpone the discussion until the Conference was completed. But I understand that the Motion for the Adjournment will be taken on Thursday and, therefore, there will be no further opportunity, I will not say for debate, but for elucidating the statement of the Prime Minister. We are therefore forced by that circumstance to have what might be regarded as a premature discussion. But I am sure that all Members of the House will bear in mind the fact that the. Conference is not complete and that no one will do anything which will embarrass the Prime Minister in the completion of what is a very difficult task, as I happen to know. However, I repeat, it is desirable, before we separate, that we should have a clear idea as to what the proposals, I will not say of the Government, but what the proposals of the Allies are. The French Parliament, I understand, has adjourned, and there will be a discussion upon the completed action of the Conference in the French Assembly and the French Senate. That is so, I believe: is it not?

The PRIME MINISTER (Mr. J. Ramsay MacDonald)

indicated assent.


Yes, that is it. Well, that is worth the Government's while to consider, because by the time we meet in October it will obviously be too late for Parliament to express any opinion. The Government must take action upon whatever decisions are arrived at at this Conference, and although the primary responsibility is the responsibility of the Government, the final responsibility for all these decisions must be the responsibility of Parliament, and I think it worth the Government's while considering, not that they should adjourn till a specific date, but that they should adopt the method which was pursued, I think, in 1920, when there were some difficulties in regard to Poland, and the Government of the day, in response to pressure from the Opposition, agreed to summon Parliament upon a notice by Mr. Speaker six days' after consultation between the Government and the leaders of the Opposition. I think it is worth their while considering whether that is not the course they ought to pursue.

I can assure the Prime Minister that the few words I want to say will not be in the spirit of criticism, because I know too well how great are the difficulties of the task which he has in charge, and therefore I shall speak in the spirit of what I call reminiscent sympathy with him. I remember, when he was on the threshold of office at the beginning of this year, I told him that he must remember that he was not going to get his own way and that he had to reconcile his own ideas with the ideas of at least five other Prime Ministers' ideas of a totally different character, and that the best he could do was to achieve the most successful compromise and the most successful bargain. That did not mean that he could carry out his own ideas entirely. He very frankly said to the House yesterday that the statement which he made represented a bargain, that is, it will be a give-and-take arrangement. Well, I hope he will remember that that is equally true of the transactions of the past. No British Prime Minister at any of these Conferences has ever been successful in achieving exactly the arrangement of the Treaty which he would have wished. It has always been a question of give and take, a question of compromise. The best that you can achieve is to arrive at a compromise which will prevent a break-up among the Allies and carry you, at any rate, one step further towards peace.

Listening to the statement of the Prime Minister, one's first impression was that it was a very elaborate and very complicated agreement. The recommendations of the Dawes Report itself are very elaborate, and the Reports of the Committees or Commissions evidently have superimposed upon the Dawes plan a number of complex adjuncts and safe- guards which will be very difficult in working. Any human machinery, however complicated or however clumsy it may be, if it is lubricated with goodwill will work well. It will depend entirely upon that. But at the same time, every complication which is introduced into machinery adds an additional chance of friction and of frustration. It is important, therefore, that, if possible, there should be nothing left to chance, and that no element of doubt which can be cleared up should be allowed to remain.

I want to call attention to two or three things where I think there are very considerable elements of doubt still left. The statement of the Prime Minister was, if I may say so, very clear—and I am not complaining of any obscurity, it was clear as far as it went—but there were very grave gaps. The first was that he made no statement as to what agreement had been arrived at in regard to the evacuation of the Ruhr. That is a matter of first-class importance. It is the question which has clearly agitated the Germans more than any other, and I have no doubt it will be raised as soon as they enter into discussions. The Prime Minister's view, the view which I think was taken by almost everyone in this House—it was taken by the late Government; it was taken at the time by the Leader of the Opposition; it was taken by my right hon. Friend the Member for Paisley (Mr. Asquith) and all those who followed him—is that the invasion of the Ruhr was an illegal act; it was a transgression of the terms of the Treaty of Versailles; it was an outrage on national rights. That, I understand, is still the Prime Minister's view. He went further yesterday and said that since he became better acquainted, through the medium of the Foreign Office, with the whole of the facts of the case, his impression with regard to that transaction has been confirmed. It is, therefore, very important that that should be cleared up. The Dawes Report has declined to express any opinion on the military question, but it does express an opinion with regard to civil evacuation and the economic evacuation of the Ruhr. But as M. Poincaré, when he entered into the Ruhr, made it clear that the soldiers went there merely to protect the civilians and to enable the civilians to carry out their economic functions, the moment you have an economic evacuation there is no further ground for the presence of those troops in the Ruhr; they are purely provocative; they are a source of irritation.

In the absence of a statement, an authoritative statement, from, the Prime Minister, one has to fall back upon such reports as appear in the papers, and I saw something in the Press about the French and the Belgians intending to remain in the Ruhr for two years—that they intended to remain in the Ruhr until not merely was the agreement signed, but until there had been complete evidence of the bona fides of the German Government by the discharge of certain obligations under this new agreement, and that they meant to remain there two years. That is a very serious thing, and I cannot imagine His Majesty's Government not making it quite clear that that cannot possibly be the case.

I want to press further a point which my right hon. Friend the Member for Paisley put to the Prime Minister the last time we had a discussion on this subject, and my recollection is that the Prime Minister could not see his way then to answer it, but I think it is important. It is with regard to the evacuation of the Cologne area on the 1st January. Under the Treaty, the five years, I think, come to an end—I am speaking subject to correction—at the beginning of next year, the 10th January. That is really a very important point, because it is a guarantee of our good faith in the carrying out of the Treaty of Versailles. We cannot say to the Germans: "Whenever there is any obligation or burden imposed by the Treaty of Versailles, we mean to insist upon it, but whenever there is any relaxation, whenever there is anything which is favourable to you in the Treaty of Versailles, we cannot accept it. We will set it on one side. We will treat it as a scrap of paper." That is an impossible position. What makes this serious is the declaration made—I am not sure whether it was made by M. Herriot, but it was certainly made by his predecessor, and it has never been repudiated by him—that the five, 10 or 15 years of occupation have not yet started to run, because of the action of the Germans, until some date they choose to fix.

That is really getting out of your Treaty obligations in a way which is not strictly honourable. Of course, it has a bearing on the occupation of the Ruhr. If the Cologne area is evacuated, then obviously the Ruhr cannot be occupied, because it is necessary that there should be Allied occupation of the Cologne area in order to sustain an occupation of the Ruhr. If that is in German occupation, it renders the military occupation of the Ruhr quite impracticable, certainly without grave risk. It is the test of our good faith. I have no doubt the Prime Minister has discussed this matter, and I think the House ought to know exactly what is the position, not only whether we are going to evacuate Cologne, but whether it is clear that no other Power will send their troops there, because, if they do, things would be very much worse, for there is no doubt at all that there is a very friendly feeling between our troops and the civilian population at Cologne.

There have been no unpleasant incidents, and I have heard no complaints of the action of the troops. The spirit in which they have discharged their task is worthy of the highest traditions of the British Army, and they have won the confidence and the respect in that relation even of the German population, whom they were fighting a few years before. But if they are to leave and other troops enter into that area—which is exactly what happened in connection with the American occupation—that will introduce complications and also a very disagreeable element which I think might upset the whole of the work which the Prime Minister has accomplished. The danger of these military occupations we all foresaw. It was a compromise. The view I have put has been published in a document which I issued before the agreement was arrived at. I was never in favour of it, and I thought it was a very dangerous expedient. As the Prime Minister knows, all these things are a matter of compromise and of give and take.

The danger is a growing one in one respect. There is no doubt it is easier to effect a settlement to-day than it, was four or five years ago, for the simple reason that the economic facts are better understood. There were people who thought that Germany could pay £15,000,000,000 or £20,000,000,000 sterling, and they were men who passed as first-rate financial experts. The economic facts are getting to be better known, and that is one advantage in settling now rather than a few years ago. There is another element which makes it very much more difficult, and it is that during the first few years after the signing of the Treaty we were dealing with a prostrate, broken Germany. Its spirit was broken, there was no fight left in it, and the population who fought with very great courage, as everyone knows, during the preceding years were left without a struggle in them. The result was that incidents and episodes which would have provoked a very disagreeable situation in a high-spirited community were allowed to pass almost without protest. That is passing away, and it is bound to pass away with any high-spirited race. There is a new generation coming into existence. There is undoubtedly a new spirit. The growth of nationalism in Germany is a very formidable fact. Therefore military occupation will become a greater and greater danger as the years go by, especially military occupation by one race of the territory of another where there is an old racial feud which has lasted for unknown centuries and which has provoked countless wars.

Deep down there is a very fierce feeling, and it is no use not recognising that fact. Under conditions of that kind, an indiscretion either on the part of the civilian population or on the part of an officer of the military force that is occupying that area may provoke something which may completely destroy all the work of pacification which has been accomplished after weeks of consideration by any and every conference. It is most important that the area of the military occupation should be limited as soon as Treaty conditions permit. Therefore I urge the Prime Minister to let us know what is the position of the Government, first of all, with regard to the military evacuation of the Ruhr; and, secondly, what is their position in connection with the evacuation of the Cologne area, which is the first area for evacuation prescribed in the Treaty of Versailles? Upon that question I press for an answer, if we can possibly get it.

There is another question, and that is with regard to default, and it raises a very crucial issue. There is a chain of com mittees set up. It is probably the best expedient under the very difficult conditions under which M. Herriot acts, and one must always recognise that. It is probably the only way in which he could be got to assent to some things to which he has assented. But it is a very complicated set of committees, and they can only work with complete goodwill. I should like to ask the Prime Minister this question: The word "default" is the word which is used in the Report of the committees. I need hardly call his attention to the fact that that is a different word from what is used in the Versailles Treaty. The words in the Treaty are "wilful default." That is a very vital difference. I need hardly point out that, supposing a man says, "Well, I owe you £1,000 and I cannot pay," that is default. But supposing he cannot as a matter of fact pay, that is default but not wilful default. It is only wilful default when he not merely has not paid, but he could have paid and has not paid. Therefore, the issue to be decided is a very different one, and that is why the Versailles Treaty introduced the words "wilful default."

It is very important from this point of view. The conditions of the War created a perfectly new financial situation, and it is one of which nations have never had any previous experience. The payment of huge sums of money in respect of something which does not produce any return to the nation that pays is the difference between a penalty and a loan, and it is a vital one. We were in receipt of about £200,000,000 or £300,000,000 from other countries—I am not sure whether it was £350,000,000—but it was a very substantial sum paid by other countries to us before the. War. That was invariably in respect of money which we had advanced to them which was productive, and which enabled them to raise more wheat, more cotton, and more corn, and, therefore, the very transaction itself helped those nations to pay us interest. But that is not the case here. This is a penalty running into thousands of millions. It is not an investment by us in Germany, which fructifies, and it is not something which helps Germany to pay.

That is a new financial transaction in the history of nations. As far as continuous payment is concerned, in the case of the Franco-Prussian war, £200,000,000 sterling was offered, but that was one clean transaction, and it was not a continuous payment running over a whole generation. No one could tell, when this arose, how it would work. We consulted men whom everybody at that time said were about the, best experts in the City of London. We consulted Treasury experts; the French consulted experts, the Americans consulted experts, and the Belgians did the same. It is very remarkable that there was a difference of thousands of millions between the recommendations of one set of experts and another. There was no agreement. Why? They were dealing with a perfectly novel situation—the payment of huge sums of money across a frontier in respect of something which was not a fructifying liability or obligation. What happened? All we could get was a compromise and never a concurrence. Every agreement at any of these conferences represented a compromise. The French, naturally, took a very liberal view of the possibilities of Germany, and the Americans took a very much lower view. Our experts were somewhere in between. But you never had agreement.

5.0 P.M.

A compromise is very useful in politics, as the right hon. Gentleman knows, and it is very necessary in a conference. A compromise always comes to grief with a fact, and the fact is the capacity of Germany to pay. We had figures which we agreed with Germany. A time came when Germany said, "We cannot pay it." We said, "But you agreed to pay it.'' Germany then said, "That does not alter the fact," Nor did it. What was the result? We had to enter into a, fresh discussion with Germany to try to ascertain what she was really capable of paying, and the Prime Minister will find exactly the same difficulty again. The Dawes Report is a compromise. It must not be assumed that it is a finality. I am sorry to put this point, but I am putting it from a fairly long experience. The mere fact that experts—I forget how many there were—they were very able men—arrived at a certain figure as to the capacity of Germany to pay does not make this a final transaction. It was clearly a compromise between French and American, British, Belgian and Italian experts, and, therefore, the question of default is a very important one. If you are going to decide default, it is only a question of fact. What is the fact? That Germany has not paid—that is all. In so far as the documents which are published are concerned, these committees which are to be set up have only to decide default. That is very easy to decide. I am taking the documents which appeared yesterday. I looked at the statement made by my right hon. Friend yesterday. He only used the words "bad faith" when he came to the question of transfer, that is, transfer with regard to raw material and payments in kind, but the words "bad faith" were never used by him when he came to the question of general default. I am only asking the question. If it be so, that is all right, but, on the documents as they appear, these committees have only to decide one thing, and that is default. If they come forward and report that Germany has not paid, that is undoubtedly a default.

I want to know why the words of the Treaty, namely, "wilful default," were departed from? They were proposed in the Treaty—it is no secret—by the British Delegation. There were two very important provisions for which the British Delegation—and I am referring now to the Dominions as well as to the rest of us—were responsible. We fully realised that it was impossible, in 1919, to declare what Germany could pay. No living person could predict, because it was such a novel proposition. We, therefore, urged that sanctions should not operate against Germany unless she was guilty of wilful default, that that question should be tried on the facts at the time by the Reparation Commission, and that Germany should have the right to appeal, not once for all, but at any moment, to the Reparation Commission to decide the question of her capacity to pay. I want to know what is the position in that regard. Are these Committees to decide the question of default, or are they to decide the question of wilful default? Supposing Germany, at any moment, finds she cannot pay these huge sums running up to £175,000,000. [An HON. MEMBER: £125,000,000."] Afterwards it develops. There is no limit at the present moment, whatever the figure is. If she says she cannot pay, to whom does she appeal? Under the Treaty of Versailles, she goes to the Reparation Commission. Would the appeal be to the Reparation Commission, or to these new Committees? The next question I put to the Prime Minister is this: If it is the Reparation Commission which decides the question of wilful default, is the American representative to be added to the Reparation Commission for that purpose? That is a very important point. I am not criticising the Dawes Report, but it is introducing one new element which is rather dangerous. It has got six tests of prosperity. Anyone who has followed the difficulties of this business knows perfectly well it has got six tests in order to arrive at the index figure, upon which the demand, for the time being, rests, and the whole success of the Dawes Report depends upon that automatic machine working perfectly. If it does not, it breaks down. May I trespass for one minute upon the patience of the House to point out exactly what it is? We are paying at the present moment—I forget what it is—£30,000,000 or £40,000,000 to America.




On the question of how that money is to be paid, I see that Mr. Cape says—and I am bold enough to agree with him—that it is paid out of the surplus which is invested. Before the War, we had a surplus of about £200,000,000, £300,000,000 or £400,000,000, according to whether we were prospering or not. I forget what our surplus is now.




That enables us to pay, and still have a balance of £67,000,000. What is that surplus? Because it has a bearing on this issue. It is the surplus over what we pay for our imports of food, raw material, and so on. Supposing we had to pay £125,000,000, clearly we should be done, although we are a very much richer country than Germany. But the Dawes Commissioners, for the first time, have introduced evidence which I cannot, for the life of rue, see has anything whatever to do with the capacity of Germany to pay a sum across her frontier. Her tests of internal prosperity, what she pays for her tobacco, her sugar, her railway receipts, her iron and steel—those are tests of internal prosperity, but she can only pay in two ways. I cannot think of any other way in which Germany can pay. She can pay out of that surplus, worked out in exactly the same way as our surplus is worked out, or she can pay by payments in kind. The Prime Minister knows perfectly well how payments in kind work out. There was an agreement entered into in 1922 between the French and German Governments, known as the Wiesbaden Treaty, for deliveries in kind for the purpose of reparation. My recollection—and I am speaking now purely from memory—is that the French Government had anticipated that, under that Agreement, they would get £70,000,000 and £75,000,000 in a year. I forget whether that covered Italy and Belgium. Let us assume it covered the whole reparations in kind for Belgium, Italy, France and ourselves. That was a very considerable contribution. It has broken down. It is a matter for France entirely, because most of that Treaty was for the supply of material for the devastated areas of France. There was nothing in it for us. It was for timber and other material for the purpose of re-building France. That has broken down, for the reason which my hon. Friends here have in their minds. The French manufacturer began to realise that it interfered with French iron and steel, with the French carpenter and with a good many people in France who were making an honest living out of an honest trade. The result was that that Agreement broke down.

Let us see exactly where we are Germany, therefore, can only pay a limited amount in that respect. Coal she can deliver, potash and dyes she can deliver. There is a certain amount of timber she can deliver, although I have always thought that was exaggerated. Beyond that, I cannot see what Germany can deliver which will amount to very much. She has, therefore, her surplus, which is for the moment nonexistent. She has her raw material which other countries can take without detriment to their own manufacturers, and there is a test reported by the Dawes Commissioners which, so far as my observation goes, and, I think, so far as the experience of this country and the Allies goes, is not a test of German capacity to pay across the frontier. Supposing, therefore, those tests are applied—tests which are not really tests of capacity to pay. My right hon. Friend opposite used to urge that German exports were the best test of all, and I think that is so. What will happen? Germany is in default; she cannot pay. The index figure points to £100,000,000 or £125,000,000. Her surplus points to £40,000,000 or £50,000,000 or £70,000,000. There is default. There is prosperity, according to the index figure; there is no capacity to pay, according to the realities of the case.

What is the tribunal that decides, if Germany makes an appeal under the Treaty of Versailles, an appeal the right of which we have conceded to her by solemn Treaty, to come before a body set up under that Treaty to demonstrate that she has not the capacity to pay without bankruptcy, without ruining her currency? To whom does she go? Does she go to these new bodies, or does she go, under the Treaty, to the Reparation Commission? That is one of the questions I should like to ask, and I think it has a very important bearing, because default brings very serious consequences. There is something about trusteeship; there is something about sanctions being operated in the spirit of trusteeship between the Allies; that means that if we accept a certain machinery, that machine decrees, at any rate, that a bargain is a bargain. If you have accepted a certain tribunal, and said that you will accept its decision, sanctions must follow. It is, therefore, very vital, if there is an agreement of that kind, that it should be perfectly clear that there is an opportunity, not merely for Germany to put her case upon the conditions of the day, but also an opportunity for us to consider what our attitude should be in reference to that matter. I should like, therefore, to ask the right hon. Gentleman what his view is with regard to that.

I can understand how vital it is that America should be on the Reparation Commission. Is she on it for all purposes? Is she on it for the question of declaration of wilful default? Is she on it for the purposes of revising capacity—because that is in the Treaty? I can well understand the doubts cast on the Reparation Commission by the Prime Minister in the very strong statement which he made yesterday—not a word of which is too strong—in which he said that the Reparation Commission had forfeited the confidence of the world. It was inevitable. We appointed experts on it, and I think that is true of most of the other Powers, but, unfortunately, France put on a man who remained a politician. I am not objecting to a man being a politician if he is going to remain an expert, but this was a man who knew perfectly well that he was only on the way there, and that according to the manner in which he discharged his duties there, so would his political qualifications and chances be judged later on.

That was fatal from the point of view of a judicial tribunal, and another fatal thing was that the French Government were always of opinion that their representative on the Reparation Commission was not a judge or an arbiter, but a delegate of the Government. M. Poincaré quite frankly invited us to give instructions to our representative on the Reparation Commission, but Sir John Bradbury always refused to accept that view of his position, and he was quite right. He was there to judge; he was there as an arbiter; and he always repudiated the idea that he should take instructions with regard to his decision from a Government which, after all, was one of the parties to the transaction. That, however, was not the view which was taken by the French Government. They always had their commissioner by the coat-tails during the whole of those years, and the moment he looked like becoming an arbiter or a judge they pulled him roughly back.

Therefore; there was no confidence, but I agree that if America is added it does make a very great difference. It is not a question of a casting vote. I cannot recall a single case where any important decision was taken by a casting vote. The very important decision which enabled M. Poincaré to go into the Ruhr was due, not, I think, to a casting vote but to the fact that for the moment Italy sided with Belgium and France; it was throe to one. I think it is fair to the French Government to say that they have never taken advantage of the fact that their Commissioner is the Chairman of the Reparation Commission, and, therefore, has a casting vote. They have never taken advantage of that, and, obviously, they could not on a matter of grave importance. But that is not really the important matter. The presence of an American as a full member of the Reparation Commission would make all the difference in the world. It is not merely that he has one vote; it is the knowledge that France, Belgium and Italy would know that, if they were going to take strong action, they would have the two greatest. Powers in the world against them, and the two Powers that have a greater authority and a greater influence in dominating the economic and financial situation than all the Powers of the earth put together. They, obviously, could not do it, and that is why it is important to have America on the Commission.

I apologise to the House for taking up so much time, but I have just one or two other questions to put, and the first is with regard to separate action by France. It was not made clear—at least, I hope it was not made clear—by the Prime Minister that France was still claiming the right to separate action, If that be the case, surely it is vital and should be cleared up, because most of the recent trouble has come from the separate action taken by the French Government. In fact, M. Herriot's trouble at this moment is due to that. He finds it difficult to get out of it. He has no responsibility for it, hut, once they are there, it is so difficult, because there are questions of the Flag which always come in and complicate the issue. It is, therefore, vital that it should be clearly understood that no Power is to take separate action. If they do, it deprives this Government and the American Government of an opportunity, which they certainly ought to have, of reconsidering even the decision of the Dawes Report with regard to the annuities which should be exacted. Nobody at this moment can tell—I defy anyone to tell—how much Germany can pay four or five years hence. I do not believe that that index would determine it. You cannot determine it by an automatic index of that kind. If there were any index at all, the best index would be the index of exports.

Before we are committed to a position in which we should have practically to make war on Germany—and a different Germany from the Germany of to-day, for the boys who were 18 when the War broke out are now 24, and five years hence will be 29. The men who remember the horrors of war will be passing away and the others will be coming on. That I; the Germany with which we shall be dealing when the index finger points to £125,000,000, and it is vital that it should not point to war—I do hope we are not going to tic our hands to such an extent that we shall not be in a position to reconsider even the Dawes figures when that time comes, and certainly no single Power ought to be in a position to declare war for itself. The lesson of the late War is that, once the fire is lit, it spreads all over the world, and the tinder will be drier then. Therefore, it is important that now we should make it clear that 1922 must not be repeated. It could have been done 18 months ago without disastrous consequences, without calamitous consequences, though not with out serious consequences. I do not believe it could be done five years hence without disaster. I do hope the Prime Minister will have a clear understanding that the Allies must act together, that if there is any difference of opinion between them, either the Hague Tribunal or the League of Nations, which may be a formidable factor then—it depends very largely upon whether America comes in—or some authority, will be called in to decide the issue, and that it should not be left to one Power to do so.

I asked the Prime Minister a question yesterday with regard to distribution. This is a vital matter. At the present moment we receive 22 per cent. of whatever is paid. Let us consider quite seriously what that really means. For the first year or two, most of the money that comes in will be either costs of armies of occupation or payments in kind. The cost of our Army of Occupation is, I hope, coming to an end in January, and, therefore, we shall receive nothing from them in that respect. Payments in kind come to very little, I think, so far as this country is concerned. The amount under the German Reparation (Recovery) Act has been cut down from 26 per cent, to 5 per cent., so that there is very little left. I do not know whether it is going to be continued. That is rather important. But what does it mean? Who is to pay our 22 per cent.? Germany, obviously, will not pay. She pays only £50,000,000 in the aggregate for armies of occupation and for payment in kind, and, having done that, she has no further obligation. Someone, therefore, receives more than his share. If one of the Allies receives more than its share, is it going to pay so that we shall get ours? With regard to armies of occupation, my rights hon. Friend knows that there was an agreement that the amount should be limited to £12,000,000 a year. Up to the present it has not been kept.

I have put these questions, I hope in no unfriendly spirit, but purely in order to elicit information, as we are separating for the Recess, and it is well that we should know. I am genuinely glad that the Prime Minister and his colleagues have invited Germany to take part in a real conference. For reasons into which I need not enter, it was impossible at the Treaty of Versailles, one reason, amongst others, being that it would have prolonged the Conference for months, and there were huge armies which had to be maintained until peace was signed. There was a good deal of force in the French plea that it could not possibly be done, but, whether it was right or wrong, it is an accomplished fact. In 1920, however, they were summoned to a discussion, and so they were in 1921 and in 1922. I am very glad that they are summoned to a conference now, and I have no doubt at all that they will be made to feel that it is a real conference, that it is not an attempt to dictate terms to them, that they are to be in a position to argue their case, and that, if there is any case which they can make, concessions will be made, if necessary, in order to make this a success, because everything depends upon their good will. The final success depends upon their working this thing willingly.

I fully realise the difficulties which the Prime Minister has had. He has had to deal with a state of things in France which I know full well. He has had the advantage that there is a man at the head of affairs there who is of a different mind from some of his predecessors. He has had the advantage that there is a Parliament there which is different in its tone, its temper, its spirit, and its composition from the Parliament that was elected immediately after the War. Nevertheless, there are certain fundamental difficulties. When you come to deal with French public opinion, there is the real, I will not say hatred, but there is the real fear of Germany. There is a constant apprehension of what Germany will do. There is the memory of two invasions and two devastations of France. All that is in their minds. There is the fact that they have got to increase their Budget annually by hundreds, and even thousands, of millions of francs, to repair damage that was wantonly inflicted by Germany upon their territory and upon their people. There is the fact that they cannot meet that liability, and that very much adds to the difficulties of M. Herriot. I tell the Prime Minister this, that if he achieves now not a final peace—I think that is impossible for the reasons I have indicated—but if he takes a step further and a big step forward in the direction of peace, not merely will this House be glad, not merely will Britain be glad, but the whole world will be glad, too.


The right hon. Gentleman's speech, as all his speeches are, was, of course, a remarkable one. Whether it attracts agreement or excites disagreement, I cannot help thinking it will mainly cause surprise, unless the impression left upon my mind is very different from that left upon others. After all, he was the author and the most distinguished protagonist of the policy of making Germany pay, a policy with which I entirely agreed when at that time a humble follower of his. I do not know whether he still adheres to what I have so frequently heard him say, that his policy was that of making Germany pay to the limit of her capacity.


indicated assent.


I am glad to have the assurance that that remains his policy. The only result is that, from the speech he has just made, we gather that, at all events, now he has come to the conclusion that what Germany can pay is something very elusive, because he has told us there may be a few commodities which may be paid in kind and, possibly, a precarious and small surplus out of which something else may be paid. There is one point he made, not necessarily connected with the main portion of his speech, on which I should like to say a word. That was where he spoke of our obligation, as he put it, to evacuate the Cologne area in January. When he said that, and when the right hon. Gentleman the Member for Paisley (Mr. Asquith) said the same thing a short time ago, I think bah of them left out of account that, under the Treaty, if I recollect rightly, we are only called upon to carry out that evacuation if at that time Germany has fulfilled her part of the Treaty. I do not express any opinion as to whether or not, when January comes, it will be right or wrong for us to carry out that evacuation, but I want to press upon the Prime Minister that I hope he will not assume that, whether desirable or not for other reasons, we shall be under an obligation under the Treaty to carry out the evacuation at that time.

The right hon. Gentleman the Member for Carnarvon Boroughs said a good deal on the question of default and drew a very clear distinction between what he calls wilful and ordinary default. But surely it is not fair to consider the question of default actually at the moment when payment has to be made. It may be quite true that a debtor at a particular moment is unable to meet the claims of his creditors, but his inability may be due to a long course of previous fraud. I remember some time ago I was criticised rather strongly because I said, not in the House but elsewhere, that in my judgment Germany was not only a defaulting but a fraudulent defaulting debtor. I hold that opinion still, and I think the history of this Dawes Report is really going to prove an affirmation of that position. This Commission expresses the view that it would be within the capacity of Germany to meet the obligations which the Report seeks to impose upon her and it goes on to say that, if she meets those obligations, very substantial payments on account of reparation will thereby be made. Germany has got an ample supply of efficient financial experts of her own. After all, if she had really had from the first the will to meet the obligations which she had contracted for under the Treaty, there was nothing to prevent- Germany forming a Dawes Commission of her own or something similar, and there was nothing to prevent her putting forward the same sort of proposals without waiting to have this scheme devised for her and presented to her by her creditors. I agree with the concluding remarks of the right hon. Gentleman in hoping that the scheme which has now been debated in this Conference will be brought to a successful issue.

I think the Prime Minister ought to be and I have no doubt is very grateful to us on these benches because, on the eve of his advent to his present position, we took steps which led immediately to the setting up of this Expert Committee and procuring the invaluable co-operation of the very distinguished American citizen who, by accepting its Chairmanship, has done an immense service to the world. Therefore, having taken that step, the Prime Minister is, I am sure, grateful to us, not merely for the value of the Committee on its own merits for what it may do, but because it has saved him during the seven months since he went to the Foreign Office from what he otherwise would have suffered—the harassing necessity of seeking other solutions. All he had to do was to wait until the Report was issued and then, very skilfully, as I hope he is doing, endeavouring to give effect to its recommendations. One point on which I unreservedly congratulate him—I do not think the right hon. Gentleman below the Gangway was so ready to congratulate him on that point—is the determination he has shown to maintain the Entente and the success with which he has continued to cultivate friendly relations with France. In fact, so satisfactory is that from my point of view, that I am going entirely to refrain from recalling some of his past declarations and his former criticisms of us, which I freely confess now led us to some apprehension as to what his course might be in regard to our relationship with France.

The Conference over which he is presiding, as I understand it, has one sole aim. I do not think it has anything to do with the evacuation of the Ruhr, on which the right hon. Gentleman below the Gangway said so much. Its one and only aim, as I understand it, is to devise machinery by which the scheme contained in the Dawes Report may be carried into practical effect. That scheme, as the right hon. Gentleman said truly enough, is very intricate, technical and complicated; therefore it is not surprising that the measures which are now being taken or proposed for giving effect to it are themselves not perfectly easy to understand, and are sometimes difficult to follow. It is very difficult, I think, to be certain exactly how they will work out.

It appears to me, in view of past experience, that there are two] points which stand out as of primary importance. The right hon. Gentleman has already said something about them both, although I do not think he quite correctly interpreted what is being done in the Conference—I mean the two points of the machinery, by which it may be authoritatively declared that there has been default by Germany in carrying out her obligations, and the second point, following from that, that if and when it has been authoritatively declared that default has taken place, what sanctions may be used, and under what circumstances and by whom, in order to bring pressure to bear by the creditors. As I understand it, what has been now arranged with regard to the declaration of default is really a compromise between the British and the French points of view. I hope that compromise—I see no reason to believe it will not—will be found to work very smoothly, because we know that at the outset, when preliminary negotiations were going on, the Prime Minister intended entirely to supersede the Reparation Commission. I think he was very well-advised, when he found that met with a most hostile reception in France, to defer on that point to the French nation. But I cannot agree with what the right hon. Gentleman who just sat down said in regard to the reference the Prime Minister made yesterday to the Reparation Commission. I do not want to speak too strongly about it. I thought at the time it was, to say the least of it, indiscreet, and I certainly think it was unnecessary for the right hon. Gentleman, in his position, to pass such a very sweeping condemnation. His words were: On the British and American markets confidence in the Reparation Commission as a judicial body for declaring default has been completely forfeited,"— That may be so, as a matter of fact. He goes on: and we are informed that so long as it could destroy the economy and credit of Germany by a declaration of default which as a matter of fact might not exist."—[OFFICIAL REPORT, 4th August, 1924; col. 2528, Vol. 176.] Whether he is stating his own opinion or recording what he has heard front other authorities, I think, on the whole, it would have been very much better if the right hon. Gentleman had not committed himself to a phrase of that sort with regard to an international body to whom very important functions are to be confided under the scheme which he is now arranging. The Reparation Commission continues to be the primary authority for this particular purpose of declaring default. I quite admit that its character has been very considerably modified by the admission to it of an American citizen, and also by the system of arbitration which lies behind it. Nevertheless, not only for this purpose but for others in this general scheme of carrying out the report, the Reparation Commission remains an international body of very great importance, and I think it would have been more becoming, to say the least of it, if the Prime Minister had not been quite so disrespectful in his reference.

Behind the Reparation Commission there is to be, apparently, what is called an arbitral tribunal, consisting of three persons. These three persons are themselves to be appointed by the Reparation Commission, and their only qualifications for the post are that they are to be impartial and independent. It is very desirable that they should be so, but I hope the Prime Minister when he speaks will say exactly how these qualities are to be found. Does "impartial" mean or does it not mean that they are to be men of neutral nationality; men of nationalities that were not concerned in the War? I should not have thought that that in itself would have secured an impartial mind for an individual. Therefore, I do not know what the phrase "impartial" really means. I am only anxious to find out how this arbitral tribunal is to be secured. In this connection, what is the meaning of the phrase "independent." Of whom or of what are these persons to be independent? Does that mean anything more than that they are not to be appointed by any Government, or that they are not to have any relations with any Government, or what does the phrase "independent person" in that particular connection mean? I freely admit that the scheme, with this arbitration behind it, and the new position of the Reparation Commission, will make it much more difficult than it was in the past to obtain a declaration of default. I hope that the elaborate system of double-barrelled or alternative arbitration which characterises the scheme as a whole at several points, in a case where unanimity cannot be reached on the part of the authority primarily responsible, will not be found rather to clog the machinery than to lubricate it. It seems to me that it may be extremely cumbrous in its working.

Now I come to the second point. If and when default has been declared, what are the sanctions that may be carried out I cannot help thinking that it is significant that, as far as I have been able to discover, nowhere is it laid down what sanctions are open either to the Allies as a whole or to any one of them, or how they are to be specified by any authority. We are told that the Reparation Commission having declared a default may recommend sanctions to be taken. What is the use of their recommending sanctions when no one is under any obligation to adopt their recommendations? I should not have thought it was worth While saying in these circumstances that it was open to them to make recommendations, which it was perfectly lawful for them to do in any case if the Governments concerned wished to have their views. What appears to me to be a most important provision in regard to this point is that the Allied Powers agree not to resort to sanctions unless there is default within the meaning of Section 3 of Part 1 of the Dawes Report. That is where I think the right hon. Member for Carnarvon Boroughs missed what is being done, because he spoke—I suppose he was referring to a report of one of the subcommittees—as if there was a departure from the Treaty in leaving out the word "wilful." I do not gather that that is so. They agree that it must be within the meaning of Section 3 of Part I of the Dawes Report. This Section refers to flagrant failure to fulfil the conditions accepted by common agreement. I do not know whether the right hon. Gentleman thinks that "flagrant failure" is a minor phrase compared with "wilful default." I should have thought that if it was flagrant default it was therefore doubly-distilled wilful default. Section 14 of the Dawes Report refers to the ease of Germany's wilful failure to meet obligations. I would ask the Prime Minister where there is any difference between their two definitions. I should have thought—it would have been better if identical language had been used—that they have in mind the same sort of default, when in one case it is called "flagrant failure'" to fulfil the conditions, and in the other "wilful failure" to meet obligations.


They are both included.


That is what I thought. I thought that it was really aiming at the same class of default. May I call the Prime Minister's attention to another point? I have quoted the language of Section 14. Section 14 in the case of that wilful default recommends a sanction, and a very serious sanction, because the sanction that it recommends is control of German expenditure and revenue, which it calls "general budgetary control." Has it been, or has it not been agreed by the Allies that in the case of this wilful or flagrant default the sanction is to be that which was recommended by the Dawes Committee, namely, "general budgetary control," that is to say, taking over the whole financial system of Germany and administering it on behalf of the creditor nations? On the other hand, if that is not so, is it that reliance is being placed on the mere improbability that the case will arise? If so, I think it is rather dangerous. It appears to me that if that were so, it is a question of gambling on improbabilities. It is true that the case may never arise but, surely, provision should be made for the case where it does arise.

The matter is made even more perplexing when I find in what I may call the London agreement—the agreement which is now being negotiated—that in case a default occurs, and I suppose it is the same wilful default, the Allied Governments undertake that they will confer on the nature of the sanctions to be applied. That really is very significant, not so much for what it says as for what it does not say. First of all, obviously, in any case, whether you put it in a written agreement or not, the Allies would confer as to what they were going to do. They have done so in the past when they were in disagreement, and they would do so in any case. The fact of putting into this agreement that they undertake to confer as to the nature of the sanctions to be applied means and proclaims that they have not been able to agree upon anything further. It is quite obvious that if they could have gone further; if they could have said, "We agree to take sanctions of such-and-such a nature," they would have been only too glad to do so. Therefore, it means really that no agreements have been come to on common action in that case.

This becomes still more clear when you find that although at numerous places through the machinery which is to be set up provision is made for arbitration, for double-barrelled arbitration or alternative arbitration, when we come to this vitally important matter of a possible disagreement, when the Allies of the creditor nations confer as to the nature of the sanctions, and where it is possible there may be disagreement, the allusion to arbitration is significantly absent. Therefore, it appears to me to be quite clear that there has been, unfortunately as I think, failure to agree upon that point. It comes to what I think the Prime Minister himself acknowledged in the House yesterday, that there is no provision for common action and that each Power reserves the right to act separately. The right hon. Member for Carnarvon Boroughs, in looking at this subject of separate action by the Allies, recalled that yesterday the Prime Minister was very emphatic that he has done nothing, and will do nothing, that can be construed as acceptance of the French view that they were entitled to take separate action under the Treaty of Versailles. That is all right, but it will not prevent the French holding their own views, nor will it prevent them, if they think that the occasion demands it, acting upon their views. Therefore, I do not quite see how the situation in that respect has been very much altered.

As I see the right hon. and learned Member for Spen Valley (Sir J. Simon) in his place, may I refer to a criticism which he passed regarding myself, in the last Parliament? It is very relevant to this point. I remember that he criticised me because I said that, as far as I could see, there were no means by which as between the French view and our view, in relation to separate action, anybody could decide which was right and which was wrong. I remember pointing out to my right hon. and learned Friend that it was perfectly useless for us to brandish in the eyes of our Allies or of anyone else the mere opinion of our Law Officers.


Yes, but there is provision in the Treaty of Versailles itself for referring to the League of Nations, the interpretation of the very part of the Treaty under which this difficulty arises.

6.0 P.M.


The right hon. Gentleman knows that there is no use in putting forward an argument if others, who are concerned, do not take the same view. What we were confronted with, and what the right hon. Gentleman is going to he confronted with is, that no matter how clear it is that one course is right and another wrong, other people, presumably entitled to form an opinion and act upon it, take diametrically the opposite view. That is the difficulty, and there is no possibility, so far as I can see, of getting over it. Again, differing probably from right hon. Gentlemen below the Gangway, I warmly commend the Prime Minister. I think that he rather shrinks from my commendation, and, if so, I must apologise for administering it to him, but I cannot withdraw it, and, therefore, I say that I warmly commend the Prime Minister in that, while holding, as we do, that the action of the French in relation to the Ruhr was illegal under the Treaty, he has also, in the seven months during which he has been in office, followed our example in scrupulously refraining from doing anything to embarrass the French Government, who are our Allies, in carrying out that policy.

Speaking generally, the Conference, as I understand it, seems to have concerned itself more with methods dealing with a threatened breakdown of the Dawes scheme than with the essentials of the scheme itself. For example, Section 14 of the Report recommends the assignment of certain German revenues and customs—tobacco, beer, sugar, etc.—as security for the fulfilment of German obligations. This assignment is not a mere security against some future contingency. The recommendation is that this assignment should take place forthwith. It may be, and probably is, true that that cannot be done before you have ascertained the attitude of the German Government, but have the Allies agreed among themselves as to how the administration of details of that sort is to be set up? These assigned revenues, as I understand, are to he under the control of a Special Commissioner as laid down in Section 16 of the Report, and that Commissioner is to have under him a number of Sub-Commissioners to deal respectively with the various categories with which they are severally charged. What I cannot discover anywhere is that it is provided how or by whom the Commissioner is to be appointed, how the Sub-Commissioners are to be appointed, and from what bodies.

In the case of the agent for payments and of the trustees, the appointment is to rest with the Reparation Commission, but I do not think that anything is said about the appointment of the Commissioner of controlled revenue, and yet we know that there can be hardly any more fruitful source of friction than the appointment of international officers of this sort, and I should he glad to hear from the right hon. Gentleman whether any arrangement, and, if so what, has been made for dealing with that point? I would further like to call his attention to the fact that the Dawes Report iteself, while making suggestions under the head of organisation, when these various officers are dealt with, inserts this paragraph: These suggestions naturally far from exhausting this important subject"— that, is, the subject of organisation— one of the most important of our plan. They are laid down simply as an indication as the drafting of the rules for such a co-ordination will devolve upon the Reparation Commission, so far as they have power, and upon the various Governments. I mention that as an illustration of what appears to me to be a vast amount of detailed arrangement which, some time or other, will have to be made for carrying out the Clauses of this Report.


They are all in hand.


I do not know whether the right hon. Gentleman will be able to give us any information about that matter, but so far as the published Report goes, very little has been said about many details, and the Conference seems to have concentrated its attention more upon provisions for a breakdown in the particular machinery. While, therefore, I freely acknowledge that the Conference has done a great deal of useful work, mainly, so far as I can see, in the nature of eliminating likely causes of future disagreement between the Allies, it seems also to have left a great deal of ground untouched as yet. I dare say that that is the best line that could be adopted until it became known exactly how far the German Government is prepared to go in not merely accepting the Dawes Report, but in assisting in a bona fide way the working of the scheme in detail. But, at all events, it is clear that a very considerable advance has been taken, and that the whole position in relation to the problem of reparations, which has troubled not only the present Government but several of their predecessors, appears to be in a more hopeful state in consequence of the Conference which is now going on than it has been at any time during the past three years, and we on this side will be only too ready to offer our congratulations to the right hon. Gentleman if he carries the matter through to a successful issue.


The right hon. Gentleman who has just sat down began his remarks by the lament that he found himself deserted by the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) in the ancient contention that Germany must pay. I hope that he will find some consolation, upon being left alone on the battlefield, from the heroic situation in which he now finds himself placed, but I would remind him that when anyone is left alone upon the battlefield, when the whole army has deserted, he must he one of two things—either the most courageous man in the army, or, on the other hand, the only one who has not had the wit to run with the rest. After listening to the speech of the right hon. Gentleman the Member for Carnarvon Boroughs, I can wholly sympathise with the feeling of isolation and dismay which the right hon. Gentleman who has just sat down must have experienced during the course of this Debate.

Then the right hon. Gentleman went on rather to claim credit for himself for the present great advance in the solution of the European difficulty. He seemed to think that, because the Conservative party had set up the Dawes Committee, they therefore could claim some credit for carrying through the Dawes Report, but it is quite one thing to set up an inquiry, and it is quite another thing to carry it through in policy. Labour presents this country with a concrete achievement. The Conservative party presented them with a helpless mark of interrogation. The setting up of the Dawes Committee by the Conservative party was a confession of failure after five years of a clear majority of the House of Commons. It was a confession of their own bankruptcy. That Committee has reported and that Report is being carried through, and is in a fair way to become the public law of Europe and establish conditions in which, for the first time in five years, we may return to normality and to sanity.

But I would remind the House that even after having the advantage of having the Dawes Report in their hands, right hon. Gentlemen opposite, only a fortnight ago, envisaged a solution of this problem of a far feebler character than that which has been secured by my right hon. Friend the Prime Minister. They were ready to accept far weaker conditions from the British point of view than the right hon. Gentleman has just secured. More than that, they violently attacked him for daring to stand for a better state of things than prevailed in the past. In the words of the right hon. Gentleman the Member for West Birmingham (Mr. A. Chamberlain), he had been guilty of an almost unpardonable blunder because he dared then to say that he was not going to mortgage the future of this country to a Reparation Commission which, in the past, had been proved utterly unworthy of confidence, and they said, because that contention was then advanced in the dispatch which was so much discussed, that the whole Conference was jeopardised, and that a proposal was being put forward which no French Government would accept, and which this French Government would not accept. Now we find that the whole substance of that proposal has been accepted by the French Government and it has become part and parcel of the agreement.

But in what position should we have found ourselves if the policy of right hon. Gentlemen opposite, after having the advantage of having the Dawes Report in their hands, had been accepted. That proposal was that another Dawes Committee appointed by the Reparation Commission, acting under the Reparation Commission, and advising the Reparation Commission, was the solution, and that this was the more hopeful way of securing American association. These were the words of the right hon. Gentleman the Member for West Birmingham, who was so uproariously applauded from the benches opposite. How much better is the solution which we have embodied in this agreement. We have an American representative added to the Reparation Commission. The whole vicious position by which one nation in Europe commanded a majority on that body is removed. Not only that, but, if that body fails to arrive at a unanimous decision, then a further reference is made to a judicial and international tribunal to a superior Court of Appeal above the Reparation Commission, which can decide the issue. That is the actual achievement. Compare that with the proposal of right hon. Gentlemen opposite, which said that the matter should be left for all time in the hands of the Reparation Commission as previously constituted and that the only addition should be an advisory committee set up to proffer advice which need not be accepted. That was the proposal which right hon. Gentlemen opposite put forward only a fortnight ago. We should have been tied for ever more to the wheels of France's chariot, as we have been during the last four years, if that proposal had been listened to by my right hon. Friend.


And you are tied to them yet.


It is a popular observation below the Gangway to wait and see, and in the elaborate series of safeguards set up in this agreement the future peace of Europe and the position of this country are safe-guarded in the most remarkable degree. You have, first of all, the declaration that the issue whether default has occurred is to be decided by an impartial and judicial tribunal. You have abolished the position in which one country was the judge and the debt collector in its own cause. You have, in fact, the condition of war removed for the first time after it came. In place of the rule of war, you have the rule of law once again constituted in Europe and a system of arbitration set up instead of the undivided power and authority of one nation to take what action it likes in the wreaking of its private revenge. But you have an additional safeguard, not so far mentioned or stressed in this Debate, a safeguard to which I personally attach even greater importance—the safeguard mentioned in the speech of the Prime Minister yesterday in relation to what happens even in the event of wilful default being declared, that any sanction to be taken shall do no damage to the security of the Joan. That is a provision which gives a very great safeguard indeed against the repetition of any of those events which have struck such a blow at the economic machinery of Europe in the past.


You might as well put in a text from the Sermon on the Mount.


I am sorry to find the Liberal party turning its back on the Sermon on the Mount.


The hon. Member in his new orientation is more than usually obtuse. I was suggesting that reversing the Sermon on the Mount was not a good legal sanction.


Let me try to enlighten the abnormal mentality of the hon. Gentleman with my view of the situation. If a sanction cannot be taken which does not interfere with the security of the loan, it is evident that no sanction can be taken which seriously interferes with or destroys the economic position of Germany or of Central Europe. That is quite evident. In fact, the total resources of Germany are the security for this loan. Any sanction, then, which interferes with the general position of Germany interferes with the security of the loan. Consequently, it seems to me that this is a very serious safeguard against the repetition of any such thing as the Ruhr adventure, or any proposal to stick bayonets into the economic machinery of Europe which may be made in future. There is one question which I wish to press on this point. In the event of a difference of opinion occurring as to what will, in fact, interfere with the security for the loan, will this matter also be referred to arbitration or some impartial body of experts, or some other tribunal. It is not mentioned in the Prime Minister's statement of yesterday, but I should imagine that something of the kind would be implied in this part of the agreement.

Of course, with every settlement of this kind, involving great compromises and hard bargaining, there must be many things to which we should all object. The great merit of the scheme, as I see it, it that it provides for its collapse—a very rare provision in human affairs and one which is a great credit to the scheme. For instance, if the view which has been maintained from these benches is proved to be correct, that payments between nations on a large scale, that reparations, that tributes between countries, cannot be carried through without a great measure of economic dislocation, automatically under the provisions of this scheme the payments become suspended. That is, from a left wing point of view, a great merit in the present scheme. It has been argued also that payments extended over a very long period of years must provide an almost burning incentive to any country to renounce and go to war. But if economic conditions were rendered so intolerable as to give the incentive to a country to renounce the comity of nations, to tear up every agreement to which it has put its signature, and to thrust Europe hack into the melting pot again, those economic conditions would be reflected in the condition of the exchanges and would bring into operation the provisions of this Report and this plan; would, in fact, suspend the operation of reparation. Although the scheme embraces imperfections, as any scheme must, I seriously ask anyone who criticises or rejects it, what are the alternatives to it? You must either accept the Dawes Report or you must persuade France as well as this country to renounce her share of reparation, or, failing that, you must provide some means to prevent France making, at any rate, an attempt, fatal to Europe, to exact reparations for herself.


You cannot.


I observe a profound economic authority illuminating this problem, as he does all problems, and I trust that his analysis of these rather complicated details will thoroughly expose my worthless arguments when I sit down. Who is prepared, in the present position of affairs, to renounce this Report, even if it does contain possible future dangers; who is prepared to turn round to Europe and to say, "There is no solution except that of isolated action. Let France go on, let any country go on and carry on its private feuds and throw Europe once again into the abyss"? Can anyone take such a responsibility upon himself? If not, one must accept this Report with whatever imperfections it may possess. One must go onward with this policy and recognise it, as I do, at any rate as the greatest step on me road to sanity and normality in Europe which has been taken for 10 long years past. That step forward, this great advance which takes us well on the road to ultimate peace and brings us immediately stability and security from the chaos of the last few years—I think that for this great advance we may claim some credit for those principles of international Socialism which have animated our party.


I have listened to the last speaker with great interest and with some amusement. I cannot help thinking that he is not making a really serious speech such as this subject requires, and that he does not realise that although a country may be prosperous it is impossible in some eases to pay your money across the border even if you owe another country. He stated that this was a first step. I agree that it is the first step. But it is not a concrete achievement, as he stated. I fully recognise that the Conference is still in progress, but perhaps the Prime Minister will forgive me for any criticisms I offer. They will be constructive criticisms and made in all good will. The right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) dealt with the Ruhr policy. I propose to deal with the financial side of the loan. The right hon. Member for Carnarvon Boroughs stated that this was a novel situation. The large transfer of big amounts of money is a novel situation. You had practically the same position 100 years ago. If the Prime Minister will refer to the payment which we received from Austria 10 years after Waterloo he will find that although Austria owed us about £25,000,000, which was a large sum in those days, we were very pleased to settle the debt for just over £2,000,000, and we would not have received that but for the fact that London discount bankers took the Austrian bills and paid us the money. Out of the total amount of £58,000,000 which we advanced to our allies 100 years ago, the total amount received after 10 years was just over £2,000,000. Perhaps the right hon. Member for Carnarvon Boroughs recollects that fact?

The right hon. Gentleman also referred to the payment to the United States of America. He said, "Supposing you could pay £100,000,000; supposing Germany could pay £100,000,000 a year and the amount to pay was £125,000,000 a year, it might be impossible for that country to carry it out." This is quite likely and may happen; the country might even be prosperous. I contend that the only way in which we are carrying out our debt to the United States to-day is that our Empire is the largest producer of gold in the world. With the Fordney Tariff round our neck, or round the American neck, it is quite impossible to get some of our goods into that country; anyhow, not in the same way as we would like to do. There are two main points in the Dawes Report with which I wish to deal. One is with regard to the loan. The Prime Minister stated yesterday that the basis of the Experts' Report is the raising of a loan for Germany in order to put it on its feet economically and enable it to meet its obligations and re-enter the economic system of Europe. The Dawes Report suggests that £50,000,000 of reparations should be paid in the first year, of which £40,000,000 is the loan and £10,000,000 represents railway bonds. What is going to happen to this loan? I agree that the Prime Minister states that he has no responsibility for the flotation. I believe that America is going to take a portion of the loan. No doubt she will. But the rest of the loan is going to affect the money market in this country. When we partly guaranteed a loan to Austria we insisted that. Austria should have a local loan in Austria. I believe the same thing was suggested when money was advanced by this money market without a guarantee to Hungary.

One of the essences of this £40,000,000 loan—I think the amount is far too great—is that the German Republic should float a similar loan internally. I also understand that not all the Allies are participating in the loan. I think all the Allies should participate in it. No doubt the Prime Minister realises that a petition was presented by the National Union of Manufacturers in this House urging the inadvisability of floating this loan. I do not agree with all that they stated. But unless we do something to protect the goods coming in from Germany we shall have our markets in this country flooded with goods. It is different with the United States of America and other countries. As I said just now, America has the Fordney Tariff, but we want to consider seriously the possibilities of these goods coming into this country. It may be said it has nothing to do with us whether British investors take this loan or not, but in a certain respect it should be our concern because, supposing it is not even floated to the public, it means that the bankers in this country and the foreign bankers, and the underwriters will take it. That means they will have to subscribe out of savings, because the loan can only be subscribed out of savings which will prevent that amount from going into industry, or perhaps into Dominion loans. That is my first point in regard to the loan. I think it is too big a sum to grant Germany at the present time.

My second point is in regard to the £125,000,000 which is to be raised in the fifth year by £33,000,000 in railway bonds, £14,500,000 in transport, £15,000,000 in industrial debentures, and £62,500,000 in the Budget. Five years hence is a long time, but Germany in order to pay that amount of £125,000,000 a year must have foreign trade to the extent at least of £2,000,000,000 a year. That is the minimum figure, and it might be raised to £3,000,000,000, because this amount of £125,000,000 can only be paid by the export of goods after the import of goods has been paid for. In the Treaty of Versailles it was mentioned that the German taxation should be as high as that of any of the Allies. No doubt the Prime Minister has referred to that provision. I think it is worth reading. It is in the Reparations—Section I, General Provision (236 to 244), Annex II: (b) In periodically estimating Germany's capacity to pay, the Commission shall examine the German system of taxation first to the end that the sums far reparation which Germany is required to pay shall become a charge upon all her revenues, prior to that for the service or discharge of any domestic loan, and secondly so as to satisfy itself that in general the German scheme of taxation is fully as heavy proportionately as that of any of the Powers represented on the Commission. That is one of the most important Clauses in the Treaty. It is the Clause on which Germany has defaulted. I quite agree that Germany could not keep up the taxation which was so heavy in this country because of the inflation in Germany, but it is the first and most important point to put forward in connection with the Dawes' Report. I contend, quite apart from taxation, that we should also protect our manufacturers with regard to insisting on Germany having an internal loan created and handed out pro rata to the various commercial firms and industries. In connection with this internal German Republic Loan, the industries should pay the interest on their quota to the German Republic, and the German Republic would hand the amount on to the new gold bank. What would it do? It would put German industry and ourselves on the same quota as far as the internal loan was concerned, and cur manufacturers would have an opportunity of competing with Germany on fair terms. When the money went into the new gold bank, it would not be cashed. It would stand to credit and, eventually, would be cancelled. You dare not cash it. Otherwise, it would mean inflation again. I contend it would not affect the credit of Germany and it would put a charge on German industries which is what we require quite apart from any suggestion of taxation. Owing to inflation, German commerce and industry have paid off their mortgages.

I cannot help thinking that the hon. Member for Harrow (Mr. Mosley) does not realise how difficult is this transference of money. The right hon. Gentleman the Member for Canterbury Mr. McNeill) referred to the default, but do the right hon. Gentleman and the hon. Member for Harrow realise that you often cannot transfer money from one country to another even if you are pros. firma s, unless your exports are greater than your imports. I remember the right Lion. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) two or three years ago stated that we did not want a shipload of marks. Marks are no good to us. What we want is sterling, when and how it can be transferred. I often think of that saying of Bismarck's in 1875, after the Franco-German War, when he said that if he won another war he would give reparations. I come now to the question: Is the Dawes Report possible or impossible? I have been connected with reparations almost ever since they started. I believe I was the first person to report for the Peace Conference before the signing of the Treaty of Versailles. My arguments were, then laughed at, but to-day, as the right hon. Member for Carnarvon Boroughs said, economic facts are becoming better known. That is very true, and I believe in five years time—remember it took 10 years after the war of 100 years ago—we may realise the difficulty of transferring money from one country to the other.

It may be asked what happened in the old days. It was quite different in the old days with a gold basis. The dollar or franc only moved a few cents or a few centimes at a time. I am not arguing a gold basis. That is a different matter entirely, but it gave us stability. I do wish to impress on the Prime Minister, that except for having got the United States into this Commission, on which I heartily congratulate him, I feel the Dawes Report is quite impossible, and he will find at the end of perhaps two years, or perhaps less, this will all have to be discussed again. You cannot divorce reparations from the Allied debts and the loan to the United States. They are all one, and when we think of the terms of reference of the Dawes Report, which only relate to the balancing of the Budget and the stabilisation of the currency, we come back to the Pact of London in May, 1921, which fixed the price to be paid by Germany at £6,600,000,000. I have pointed out on several occasions the impossibility of that sum. The only possible way in which Germany can pay that sum is by the whole of the trade of the world being idle except in Germany. There is one point which I should like the Prime Minister to consider. As Germany has created the renten mark, will he consider increasing the German Reparation (Recovery) Act from 5 per cent. to 26 per cent., the figure it was at early this year. I think it will bring in flume to the revenue of this country. In the old clays it brought in £10,000,000, and under the 5 per cent. arrangement it brings in about £1,800,000. I do not think anybody wants Germany crippled through hate, nor Germany made strong through mawkish sentiment, but we want a Germany that understand she must pay a bill.


If anybody in this House ought to be satisfied, I am that man—not at all on account of the support which I have had from my right hon. Friend, but on account of the rather novel views on economics and reparations which have been expressed from unusual quarters. I wish public opinion was enlightened in that respect. Those of us who, in the meantime, carry on the government of the country, and try to maintain good relations with other countries, must go slowly. But I can assure the House that after listening to the speeches delivered from below the Gangway and from the other side to-day, I pray most devoutly that this enlightenment may proceed far more rapidly than, unfortunately, I have found it has proceeded during the last fortnight.

The House will bear with me if I offer an excuse. I should like to discuss the contents of the Dawes Report. They are very interesting. They raise some most fascinating problems, both in political machinery and economic theory. But this happens to be my unfortunate position: I am sitting day by day now as Chairman of the Conference which is meeting at the Foreign Office, and I have to watch with the most lynx-like vigilance—lest the discussions in that Conference should stray away from the problem of how to apply the Dawes Report—into questions raised by the contents of the Dawes Report. If we begin to discuss at that Conference the contents of the Dawes Report, we shall be there for two or three years. Every sentence is contentious; every proposal made in it has another side. Whoever has listened to the very interesting speech made by the hon. Member for Ilford (Sir F. Wise) will be aware of that fact.

The question which the Government had to consider when the Dawes Report was issued was a very simple one, namely, whether we could take the Report as a whole, with all its faults and with all its doubtful provisions, and use the opportunity which its issue gave us to try to begin a new chapter in the history of the relations, first of the Allies with each other, and, secondly, of the Allies with Germany. The Government gave an affirmative answer to that question, and, since then, I have rigidly refrained, either as Foreign Secretary or as Prime Minister, from committing myself to any of the details of the Dawes Report, and from discussing them officially, because I feel that one thing we have to do now is to take it as a whole, and put it into operation. We have to give it a chance, and provide, as far as we can, safeguards against any calamity that may happen, or the breakdown of any particular part That is my problem. It is a very limited one, and my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) said, quite truly, that I am not frying to setae everything. I am trying to settle a very small point—the point that I have defined, small in its compass, but, I hope, of profound importance in relation to the future transactions of France and ourselves, on the one hand, and of Germany and the Allies on the other.

Therefore, when people criticise this, and talk about the loan, about the theory of reparation, and so on, my reply is rather in the form of a question: Will you scrap the Dawes Report, and go back to the position we have been in between 10th January, 1923, and the beginning of this year? I confess I cannot take that responsibility upon myself. I believe we should be profoundly wrong, and I have pursued a different policy. I think that what has been said to-day, even of criticism, has been very helpful. There is criticism which is bad, but there is criticism which is admirable and very good; and those expressions of opinion about reparation, about the difficulties that beset us, and so on, will, I hope, be studied very carefully by some of my colleagues across the way. If the House be the least interested in the pledge, I pledge myself to draw their attention to it. I do not know that it is necessary to deal with all the points that have been raised, but I will ask the House to allow me to trouble it with a somewhat disjointed and disconnected reply to the various points which have been made, because I feel that this is not the time for me to say very much, beyond reporting the bare, bald facts of the situation as far as the Conference is concerned.

To-day, we reconstituted the Conference, with the representatives of the German Government present. We presented them with all the agreements we have come to, holding nothing back, and we have asked them to give us the points upon which they wish to comment, and regarding which they desire to have guarantees, and so on. To-morrow, we start what, I hope, will be an almost continuous session, because nobody wishes this thing to drag on, and I think the House will excuse me if I am optimistic once more. I have a glimmer of hope that, perhaps, before the week be over, we may see so much daylight ahead that we shall understand exactly what are the prospects of the Conference. There were points raised by my right hon. Friend opposite, the Member for Canterbury (Mr. McNeill) about who was going to control those revenues, and how the by-laws and the ordinances were to be drafted. I will answer by saying that the Governments agreed to hand it over to the Reparation Commission. As a matter of fact, the work is done. The Reparation Commission, with the assistance of an American expert, one of the members of the committee of the experts, has done this work; it now just remains to be carefully scrutinised, and that is in hand now. With reference to his question regarding the appointment of the Commissioner of Controlled Revenues, it is provided in the Dawes Report that he shall be appointed by the Reparation Commission. I think he will find that, in some corner or another, either by a specific reference or by some covering and general statement, all these points have been provided for by the experts.

My right hon. Friend raised a, point which concerns me very much. The House is going to rise almost immediately, but I doubt whether the work can be finished or a report made before the House rises. The lines, however, upon which we are going, I think, are pretty well known, and all that remains to be settled is whether we can get an agreement upon those lines sufficiently satisfactory for us to sign. If there were to be any serious question that would arise, we would have to take some steps to consult Parliament. My own impression is that no such serious question will arise, and that, if there is going to be an agreement, it is going to be such an agreement as this House will quite readily accept. But if there is to be no agreement, and the Conference should fail—and I have no idea that it will, none whatever. I have fought from the beginning under the impression that I was, to use a golfing phrase, going to "hole out," and I am still standing by that, but if it did fail—I think it would fail upon a disagreement which, if reported to the House, the House would accept as being a very unpleasant, but a most inevitable, necessity. Therefore, I think, unless there is some very serious modification made, the House may go on its holidays and leave us in London to finish the work.

My right hon. Friend says there was no statement regarding the evacuation of the Ruhr. As far as the economic and fiscal evacuation of the Ruhr is concerned, did deal with that. It is quite definite. A very carefully drafted agreement has been made—an agreement drafted by experts who know the administration of the Ruhr, and who know the administration of Germany. The French, the Belgians and the whole of the Conference have agreed to it and accepted it. With reference to the military evacuation, the position is this: The experts said: "We cannot pronounce upon that., because it is not within our terms of reference; but we want to warn you, the Governments who are going to put this Report into operation, that in creating or in trying to create an economic and a fiscal unity, you must remember that military occupations may have a bearing upon it."

Well, we have not forgotten it. Moreover, the French Government have made it quite clear that they went into the Ruhr not for security, not to occupy territory, not for any purpose of a military or of a political character. When they went into the Ruhr because Germany had defaulted, so they said, they were taking sanctions against that default, and that were to back up certain economic machinery which was to yield revenue to France by what they considered to be the necessary military forces. That was the situation. France accents the Dawes Report. France accepts a new machinery and a new method of getting reparation. I do not believe for a moment—although French public opinion may have been very largely misled by certain newspapers—that French public opinion is blind to the obligations now placed upon it by the declaration of its own Government. It was quite obviously an arrangement which could not be finally agreed to until the German representatives were consulted. As I say, they have arrived only this morning, and we have only just reconstituted the Conference and adjourned after having done so.

As regards the matter of Cologne, there again, I had better be careful. I do not think it would be wise for the Government to mix up the question of our occupation of Cologne with the question of the French occupation of the Ruhr. I do not think it would be advisable, whilst we are negotiating the subject matter of this Conference, to begin with a pledge this way, a pledge that way, or a pledge the other way. My remarks will be in the form of questions. Is my right hon. Friend quite certain that the legal interpretation of the Clause is as simple as he seemed to assume in his speech to-day?


The Cologne Clause?


The occupation Clause. I am not saying what view I take. I shall be very glad if the House will allow me not to do so, but I put the question, because I think the House will then be made aware that the problem has not escaped our attention, and that action is not absent from our minds. There is another thing. Are we quite certain about this? The Clause says that, after five years, Germany in the meantime having faithfully fulfilled—or words to that effect—its obligations. Is this the interpretation of that? Can Germany, say, for four and a half years prove faithless, and then for six months be faithful, and then is our occupation finished under the Agreement? I beg the House to remember that I am putting questions that will have to be answered, but I am not taking up a position myself. There is another question. If we go out of Cologne, who settles whether any of the other Allies go into it? Supposing we go out of Cologne, and nobody goes in there, are we, under the Treaty of Versailles, under the general obligations, which are inter-Allied obligations under the Treaty, then bound merely to transfer our troops into another section of the occupied area? Because the occupied area, although divided for convenience sake into French, Belgian and British, is, as a matter of fact, one and indivisible as far as the occupation is concerned. I say this, and I say it without the least reserve: "I shall not agree to a British soldier remaining 60 seconds longer in Cologne than is necessary to carry out our fair obligations, the obligations im- posed upon us under the Treaty of Versailles."

7.0 P.M.

The next point to be raised was about default, and in connection with that the right hon. Gentleman the Member for Carnarvon Boroughs raised the general question of reparations. I followed what he said with great interest, great pleasure and great appreciation. I put the problem in another way, and if he will allow me I will restate it. The problem of reparations is not "how much can a country afford to pay?" That is an essential question, but there are two other questions equally essential. The second question is, "In what form can it pay?" because the form of the payment limits the capacity to pay. There is a third one, another limiting one, "How far can a country which is supposed to receive payment assimilate the payment without undergoing such economic disturbance that unpleasant results may follow in consequence?"

Why I feel rather comfortable about the Dawes Report is this: We can discuss the problem of reparations from those three points of view until judgment day, as theoretical financiers or economists or politicians, and we will solve nothing. I have never said that I could say with definiteness what was going to happen beyond this—that I knew the expectations of many people were going to be thoroughly falsified. What do we want? It is perfectly obvious if, taking advantage of our special economic and industrial position, we are going into Europe in professors' gowns or in a virgin's robe, lecturing them on either economics or on moral conduct, the result will be that they will get so disgusted with us that they will turn us out, and refuse to listen to us or to take our advice. Is there another policy? They say, I am sorry to add, a lot of them still say, that the payment by one country to another of huge sums of money is precisely the same transaction as a payment, say, by my right hon. Friend the Leader of the Opposition who, if he owed me a shilling, were to transfer it to me across the table. Of course it is not the same transaction.

The unfortunate thing for those of us who, I think, have sounder views on the matter of reparation,; than that, is that as soon as we go in for conferences, we find, perhaps, a majority of our colleagues regarding us as being too soft hearted, and explaining all our economic wisdom by that fact. Can we do something by which we will say to those who do not take our views on the economics of reparation, "Let us try; let us see what can be got out of those proposals." But if we do that, we must be very careful to safeguard ourselves against troubles which may come from unfortunate experiments. If I am comfortable about the Dawes Report, it is because I think the machinery of the Dawes Report provides for that. I will not go into all the details of my right hon. Friend's criticism under that head. I may have misunderstood him, but I think he made one mistake. He assumed that if Germany were not delivering her goods, if the goods were not, actually crossing the border, that would create a default. Not necessarily. Germany's responsibility is to pay into a pool, which is kept in Germany, but which is not under Germany's control. When Germany has handed over her currency, her goods, her scrip, her wealth, in whatever form it be, to the various controls set up under the Dawes Report, that is the end of her obligations. That goes into the pool, into a central pool, and then, only in so far as economic circumstances will allow—they are provided for: the rate of exchange, the balance of trade, and so on—then only will that pool be drained; one stream going to France, another stream going to another country, and so on. That is the machinery, and it is very important to remember this when one criticises the Dawes Report.

There is another point about the Report. There are now two kinds of defaults. There was only one under the Treaty of Versailles. There is the default which arises from the failure of German resources to yield what is expected of them to each of the various controls—the rail, ways, the Customs, industries and so on. The Dawes Report provides that defaults of that kind—purely economic defaults, defaults regarding which no one could allege ill will, no one could impute maliciousness, the defaults of overestimating, the defaults arising out, of industrial disturbance, strikes, lock-outs and so on—are, under the control of the Committees in charge of the Departments, providing income to which the default refers. The default which is a serious one, and which comes before the Reparations Commission, is a large, general default—a flagrant default, a default which cannot be judged to be a mechanical default, a default about which it can be alleged, and about which evidence can be presented, "This could not have taken place unless there was a conspiracy in high places to throw off obligations undertaken in August, 1924, by the German Government to put this Report into operation." My right hon. Friend the, Member for Carnarvon Boroughs claimed a little too much for the Treaty of Verrailles when he said that those who drafted that Treaty were very careful to define the default.




I think my right hon. Friend is wrong. The Treaty of Versailles refers to a voluntary default only in paragraph 18 of Annexe 2 of Part 8.


That is wilful.


It is different. In paragraph 17 of Annex 2, Pact 8 of the Treaty the reference is only to default, undefined; there is no qualification. Paragraph 17 makes no limitation qualifying the default at all. I am not making much of it; it is only that I would like to defend the very admirable men at the Foreign Office here and at the Quai d'Orsai who have drafted the legal section of our declaration. But the real reply is this: If my right hon. Friend will look at the decision of the Committee in the Report of Committee 1, he will find that a default which the Reparation Commission has to decide is the default defined by the Treaty of Versailles and the Dawes Report. I will read the words from the Resolution of Committee No. 1, for that is the one he has been putting questions to me about, and doubting whether we have not so widened the kind of default that we have increased Germany's responsibility. I can assure him that is not so: It will be the duty of the Reparations Commission to come to a decision concerning any application that Germany be thus declared in default in any of the obligations contained either in the present part of the present Treaty as put into force on 10th January, 1920, and subsequently amended in virtue of paragraph 22 of the present annexe, or in the experts' plan dated 9th April, 1924. The reference to the kind of default which the Reparation Commission has to declare is embodied in the Treaty of Versailles and in the Dawes Report—




Both. If the allegation be under the Dawes Report, it must be a flagrant default; if it be under the Treaty of Versailles, it must be a voluntary default. It is quite clear, because it is a definition by reference to the dominating documents.


I am very sorry to interrupt. That means that if there be a failure under the Dawes Report, it has to be a flagrant failure. If it be something which has reference to the Versailles Treaty, apart from the Dawes Report, it must be a voluntary default. That is the difference. A voluntary default, that means a default of Germany's own will, a deliberate default, and "flagrant" is the word that governs the failure of the Dawes Report.


The point is this. We could not change the Treaty of Versailles. Had I tried to change that adjective—oh, dear me, it is like touching the Ark. That adjective had to be left. I was not very keen about the adjective. Under the Dawes Report, as I have just explained, there are two categories of default. There is the minor and mechanical default which does not come before the Reparation Commission, and there is the large default which does. I think the House can be assured that all the safeguards necessary have been taken to make it impossible for the Reparation Commission to have a mere frivolous complaint put before it, which might have serious consequences.

There are still some other points to deal with, and I will content myself with just answering them, and giving the information required. What is the American to be added to the Reparation Commission for? For the purpose of considering default and declaring default—that, and that only. With reference to the index of prosperity, that is not going to affect the Dawes Report unless there be an absolutely free flow from the pool. But under the economic conditions—and I think our theories are sound here—if there be not a free flow from the pool, it is impossible that that index of prosperity should be as high as my right hon. Friend imagined. It is an automatic economic check which is put on. If there he a, free flow from the pool, and Germany conspires to default, then Germany must conspire to default before it can default under a high state of internal prosperity, with a good exchange for its currency. It is impossible to conceive how Germany can fail to put its will into the default under these economic and industrial conditions. If Germany has a complaint to make, it can go to the Reparation Commission, and make it; or, if it is regarding the delivery of goods, it can go to a Joint Committee on which the Allies have three members and Germany itself has three.


Can it go on the question of capacity?


It can go on the question of capacity, and the question of capacity is undoubtedly one which will be carefully examined, especially by the Arbitration Court.


That appeal is not taken away? Supposing the index finger point to something which Germany feels is destroying her currency, can she, under this arrangement, appeal, under the provisions of the Act quoted by my right hon. Friend, to the Reparation Commission, or to some body, to fix a different figure from time to time?


The Reparation Commission can vary the details. There is a Clause about the variation of the Dawes Report. The Reparation Commission can vary the Dawes Report without changing its substance. My right hon. Friend would find a document very carefully drafted by our legal experts, in order to meet that very point. I could not possibly put my signature to an agreement that that Report was going to be put into operation, without at the same time providing full opportunity for varying it in accordance with our experiences. It is very important that that should be done, and that has been done.

With reference to sanctions, I confess that remains unsatisfactory. But when one thinks of the machinery, I think one sees more and more grounds for contentment than my right hoe. Friend indicated. A friend of mine the other day said, "Give us an agreement which, at any rate, Will look well on paper, even if it cause trouble in the working." I said, "I am rather looking the other way. I am trying to get an agreement which may look as though it is a little bit patched on paper, but in the working of which I have every confidence." That is the idea which I would suggest to the House it might keep in its mind when it is considering sanctions. No Government can take sanctions until the Reparation Commission has declared default. We may rave, and have all sorts of ideas that we are being cheated and swindled in a most barefaced way, but if we cannot get a declaration unanimously, either from the Reparation Commission, or a decision from the three experts appointed unanimously by the Reparation Commission, or, failing them, by the present President of the International Court of Justice at The Hague, that Germany has defaulted, we cannot do a single thing in the way of sanctions. [An HON. MEMBER: "Separate action."] Separate action comes after that.

A declaration of default must be made before any Government can come together for the purpose even of considering sanctions. It was easy to get a declaration of default before. The point my right hon. Friend the Member for Canterbury (Mr. McNeill) made was that I was setting up machinery which would delay. Perhaps I did that purposely. Give us delay. Give us machinery which means that the case for default must be made out. Bring the declaration of default away from the politicians—away from this Bench and away from that Bench. If you do that, if you place the responsibility of declaring default upon a body as near to a judicial bench as you can create, then you have got very far indeed to enable yourselves to say, "I do not mind very much about sanctions," because, if you get your declaration of default under those circumstances, the chances are that you will get unanimity on the part of the Governments as to the programme of sanctions which they will carry out.

I admit, and I do not think any of my colleagues will object, that I should like arbitration; but do you not see what you are asking for? You are asking for an alteration in the Treaty of Versailles. I am optimistic. We may not get it this week or next week, but if we can get this machinery working, if we can get this plan put into operation, I believe that, before long, we shall get an arbitration body created which will interpret and decide disputed points in the Treaty of Versailles. Until we get that, there is going to be no security. But that is a matter of the Treaty of Versailles, and not a matter of the Dawes Report. As far as that is concerned, the position remains where it was, except that we put many difficulties in the way of a simple, passionate, political declaration that might be unjust to Germany.

With regard to the distribution of reparations, there is no change. I cannot discuss the question of distribution in connection with the Dawes Report. You would require a conference of our financial experts on the matter. The income of the Dawes Report and the changes in the responsibilities placed upon the Governments for payments from their own purses for things for which they now get paid by Germany, may require a conference. It will not be settled here. It will be considered by the Finance Ministers and by the experts of the various countries concerned, and I must leave it there.

I am afraid I have kept the Hours a little longer than I intended. What I would impress upon hon. Members is that the Government know perfectly well the specific and limited character of Conference, and their hope is that if we come to a good, friendly settlement, and if the hand-shakes which are given at departure are very hearty, they will have the most wonderful effect in carrying into operation even a somewhat imperfect scheme. I do not think it is going to be so imperfect. We are beginning the principle of our arbitration at a point where it can be applied, and I have no doubt that when the great countries of Europe have experienced its operation, they will be only too anxious to extend its scope.


We are much obliged to the Prime Minister for the fullness and the care with which he has put this information before the House. I do not wish to break any new ground, but I wish to be sure, as regards the questions put by my right hon. Friend the Member for Carnarvon Boroughs (Mr Lloyd George), that there is a perfectly clear under standing on one or two points only. Might I be allowed to put to the Prime Minister first this point, which I do not think he made quite clear to us. It has to do with the provision in the Treaty of Versailles as to the evacuation at the end of a certain five years of an area which includes Cologne. The language used by the right hon. Gentleman almost seemed to suggest that it was merely that bridgehead at Cologne which was involved. May I respectfully point out to him, what he knows very well, that it is very much more than that, because the provision in the Treaty for a partial withdrawal at the end of five years is a provision which affects an area north of a line, and that line would include, among other things, a good deal of the area which is at the back of the Ruhr, and a good deal of the area now occupied by Belgian troops. May I further point this out? I cannot see the validity of the answer which the right hon. Gentleman made in reference to this part of the inquiry. He threw up the doubt as to whether Germany's policy of failing for four years in some respects faithfully to carry out her obligations under the Treaty of Versailles, was atoned for by her good behaviour during the balance of the five years. But may I point out, with respect, that if you are asking Germany here for the purpose of getting German agreement to the Dawes Report, that necessarily involves, does it not, a wiping out of complaints as regards the past?


Might I ask my right hon. and learned Friend to remember what I said: that he must not assume that I was indicating my own view. I only wished to impress upon the House this fact, that these questions have got to be answered and if you assume that I have answered them "Yea" or "Nay," then it is doing me a great injustice.


The point is one which is very important for the House, and for us all, but speaking for myself I cannot understand how France or any other Ally proposes to arrive at a new agreement with Germany now on the basis of the Dawes Report unless it be upon that assumption, that the past, whether it be good or bad, is wiped out. I am not for a moment attributing any other view to the right hon. Gentleman, but it is a commonplace of the negotiation. If you call Germany at this stage to your councils—and if I may say so, the Prime Minister is most warmly to be congratulated on his success in having got things to a point where that has been done; it is a tremendous achievement upon which everybody ought unfailingly to congratulate him—surely the basis of it ought to be—and I am sure the Prime Minister will support me—that it is no use talking about alleged past failures. The only possible ground upon which you can invite Germany to deal with you is on the basis of the Dawes Report, and that, whatever be the necessity for good conduct in the future, al1 question of compliance or non-compliance with the Treaty in the past is disposed of and wired out for ever. I can quite understand that the right hon. Gentleman has not expressed a contrary view.

Then the right hon. Gentleman gives some information about, the word "default." I feel a good deal of sympathy with him, because I must say he is one of those who greatly dislike this linguistic tongue-twisting between one epithet and another. I confess I think the word "flagrant" as an epithet is of no particular meaning. It merely means that the person who is pronouncing condemnation feels very indignant about what is before him. It has no particular meaning. As I understand the Prime Minister, the situation is left necessarily very complicated so far as regards the application of the Treaty of Versailles, apart from the Dawes Report, and the relevant question is, is the default "voluntary"; and that so far as regards the application of the new provision involved in the Dawes Report, the question will be whether the failure is "flagrant." I think the right hon. Gentleman said, very wisely, if I may say so, that he would not put his signature to these documents until he has had every word of them surveyed as a whole, and I mast say everybody will agree with him. But I hope one day we shall never be left with so awkward a double-barrelled question, which is made all the move awkward, I think, because the only provisions secured by the London Conference which holds the hands of the signatory Governments as regards he taking of sanctions is, as the right hon. Gentleman will recall, the provision that signatory Governments undertake not to take sanctions unless default within the meaning of Part I of the Experts' Report is declared. It would obviously not be his intention that there should be a greater freedom to take sanctions under the Treaty of Versailles itself than there is to take sanctions in the event of a failure being declared which is a "flagrant" failure. I gather the intention is that neither in the one case nor the other is there the possibility of either one Government or two Governments, or any combination of Governments, seeking to take sanctions unless and until the conditions are complied with which are to be found in Paragraph 16.

May I be allowed with great humility and respect to say that I do think the Prime Minister made a perfectly good point, when he said that although the situation as regards sanctions is not satisfactory, none the less undoubtedly he has greatly improved the position in regard to the declaration of default which is preliminary to the imposition of sanctions. I think that is a perfectly good point. The great difficulty which existed under the working of the Treaty of Versailles was that as long as a majority of the Reparation Commission—possibly members acting from very strong bias on one side or the other, or possibly even a member acting under the instructions of his own Government, in the case of some other Power and not ourselves—that once a majority of the Reparation Commission has been induced to vote a voluntary default, then nothing was left, only the application of sanctions. I do think the Prime Minister has greatly improved the position, because he has secured by the present terms that this declaration of default is to be a much more deliberate and much more judicial process. We must admit, at the same time, that it is a most unsatisfactory position, now—thanks to the efforts of the Prime Minister that we have secured a more judicially-minded tribunal to return a verdict whether there has been a voluntary default or not—that once the jury has returned a, verdict, as the Prime Minister admits, each ally is really left to execute the sentence, if he thinks right, according to the way which most appeals to him. That is a most astonishing situation, and one which I believe by this time the better sense of the British people in all parts of the country deeply deplores.

I do not think the Prime Minister answered another question. He was asked as regards the American member of the Reparation Commission and as to whether this American member was there, as would appear from this draft of the Report, only on an occasion when the declaration of default was under discussion, or whether the American member would also be there on occasions when the discussion was taking place about revising capacity to pay, or when the different parties concerned were conferring on the subject of fixing a sanction. That was one of the questions asked of my right hon. Friend. I do not think that particular one was, in fact, answered.


The American member is there only when the Reparation Commission is dealing with the declaration of default under the Dawes Report. Outside that, it is inside the Treaty of Versailles.


So the result is that the American member does really sit on a discussion of the capacity to pay or revising the capacity to pay, but I gather not on the subject of discussing sanctions.


It all depends. If the question of capacity to pay is raised, say, apart from any other problem and on its merits or demerits, I should think the decision would be that the American member could not sit. But if the question of capacity to pay is raised in connection with an alleged default, then the American member does sit.


There is another point. It has to do with what really is the gravest question of all—and I am sure the right hon. Gentleman regrets the position as much as the rest of us do—that is, the question whether or not, in connection with the new arrangements, any agreement is to be hoped for on the subject of the evacuation of the Ruhr. I, perhaps, may be allowed to point out this, though it has already been said. When Mr. Bonar Law, in January, 1923, was discussing with M. Poincaré the proposals to impose a sanction, M. Peincaré insisted again and again that, so far as he was concerned, what he was proposing in reference to the Ruhr was not a military expedition. I read his words. He proposed pledges which possess no military guarantees. The only possible justification for the French army going into the Ruhr was, it was alleged, that if they endeavoured to impose economic sanctions and controls, sending in mining engineers, technicians and all sorts of peaceful expert people, that it was necessary to back them up by an adequate military force. It does follow absolutely inevitably, as I am sure the Prime Minister will agree, that the moment you give up the economic sanction which France claimed to be imposing upon the Ruhr there can be no justification for quartering the French army in the Ruhr more than anywhere else. The right hon. Gentleman says that he was keeping strictly within the four corners of the Dawes Report. It is true that the Dawes Report does not in terms say that the French army should be withdrawn, though it gives a pretty broad hint.

The significance is that all this is in relation to the question of a loan. Let us consider what happened in the case of Austria. When the loan was raised for the purpose of reviving the fortunes of Austria, the very first article of the Agreement which was made between the Allies was an article to the effect that Austria's neighbours guaranteed the territorial integrity of Austria. It is the security which the lender has that the land of the prospective borrower is not liable to be invaded or reduced by isolation and violent action, which is the most important security of the lot. When the right hon. Gentleman said just now that he had got to treat the Treaty of Versailles for this purpose as sacrosanct—which, I must say, must go against the grain with him and some of the rest of us—he must have in mind that the Treaty lays down in Article 376 the all-important provision that disputes which may arise between interested parties with regard to the interpretation of all the preceding articles of the Treaty shall be settled as provided by the League of Nations.


I am not a lawyer, but my opinion is that the League of Nations can only decide how they are to be settled if its Council is unanimous.


I give it up. I do not profess to know.


That is the important point.


I only mean that the Treaty of Versailles, which is a much criticised instrument, does contain provisions which might be understood to make provision for the interpretation of doubtful articles. Much as we wish well to the success of the Conference that is now in session, enormously improved as the result will be to Europe and the world, I think the Prime Minister has belittled the ambit of the Dawes Report, and it is very difficult to see how this Conference is going to lead to any satisfactory conclusion unless, by some means, the decision is reached that there will not be isolated action by some great Power such as that in the Ruhr. I am sure, in saying that, that I am saying what is very much in the Prime Minister's own mind. I can only conclude by thanking him for the answers he has given, and regretting very much that it has not been possible, in the circumstances in which he is placed, to give us more absolute assurances on some of those very difficult points.