GERMAN REPARATION (RECOVERY) ACT.

HC Deb 06 March 1924 vol 170 cc1661-725

Mr. A. M. SAMUEL

I beg to move, "That Item Class 2, Vote 3 (Treasury and Subordinate Departments) be reduced by £100."

My reason for moving this reduction is the dissatisfaction that is felt by myself, certainly, and, I think, by other Members on these benches, with the conduct of the Government in reducing the amount due to us under the German Reparation (Recovery) Act, 1921, as set forth in the Minute published as Command Paper 2065, from 26 per cent. to 5 per cent. It will be within the memory of the House that this matter was dealt with in the Act of 1921 to which I have referred, and, for the purpose of better illustrating my remarks, I think I might read the Title of that Act, which is as follows: An Act to provide for the application of part of the purchase price of imported German goods towards the discharge of the obligations of Germany under the Treaty of Versailles. The Act deals with German manufactured goods imported after the 15th April, 1921, and I would ask the Chancellor of the Exchequer, in due course, when he replies—I do not want to press it as a debating point; no doubt he can easily explain it—why the new arrangement only endures to 15th April, 1924, and not to any other date. I would ask the House to mark that this Act is not an Act for the purpose of putting duties, in a protective sense, upon manufactured goods coming from Germany. It is an Act purely for the purpose of collecting reparation from Germany by the method which the Government of the day thought most convenient. I was rather surprised that the Chancellor of the Exchequer, in an answer to a question which I put to him on Tuesday last, referring to this Act, said: It has nothing at all to do with Protection, and so long as I am responsible for its administration it will not be used as an instrument of protection."—[OFFICIAL REPORT, 4th March, 1924; col. 1171, Vol. 170.] Why did the right hon. Gentleman jump to the conclusion that we thought it had to do with Protection? I do not want to blame him too much, because he has much work to do, and, perhaps, may have been too pre-occupied to have studied the meaning of the Act, but it shows that he had no great grasp of the matter if he thought we were dealing with this subject or raising our protests from the point of view of Protection. The 26 per cent. is not and was not a protective duty at all, as I shall proceed to show. The scheme is as follows—I will not speak in pounds or marks, but merely in units: An Englishman purchases from a German manufactured goods, and the manufactured goods to which the Act applies are defined in one of its early Sections. The Englishman buys, and contracts to pay 100 units of money for the goods. He pays 74 units to the German, and the other 26 units he pays—or did pay until last September or November, or even up to the time of the arrangement recently made by the Chancellor of the Exchequer—to the British Treasury. The British Treasury receives the 26 units, and issues a receipt to the English importer. He hands on that receipt to the German exporter, who, in turn, presents the receipt to the German Treasury and receives these 26 units from the German Government, which 26 units, together with the 74 units he has received from the English importer, make up the total of 100 units to pay for 100 units worth of goods. There is no element of Protection in that My right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) introduced this Measure, and we supported him in it, and I do not think for a moment that he argued it from the I point of view of a protective duty. I see that he indicates by a nod of his head agreement with what I have just said. All that he had in mind was that it was a method by which 26 per cent. of the amount due to the German exporter was to be taken out of the pocket of the German Government and paid into the British Treasury towards reparation, the German Government making good the 26 per cent. to the German exporter.

What has been the result? Up to September or November Brtish importers buying 100 units' worth of goods from Germany sent 74 units of value to Germany, and paid 26 units into the British Treasury. After these dates, to use a vulgar phrase, the German Government cocked a snook at the British Government, and, breaking the agreement, said they would not encash the British receipts. Thus, if an Englishman has bought goods for 100 from Germany since September last, he has had in many cases, to pay to the German exporter, not 74 per cent. of the units, for the German exporter would not often part with the goods unless the whole 100 units were sent to him, saying to the British importer, "If you have to pay 26 per cent. for reparation, that is your affair. If you want my goods you must pay 100, and you will have to pay yourself the 26 per cent. into the British Treasury." The result has been that the British importer has had to pay 126 units for 100 units' worth of goods. That is a protective duty against German goods, and we want it taken off. We object to this particular protective duty, but we do not want it taken off at the expense of the British taxpayer, as has now happened owing to the action of the British Government, but at the expense of the German revenue. Hitherto, whatever money has been received from the English importer in the form of these 26 per cent. payments has gone into the pocket of the British revenue, and has lightened our taxation over the whole country. The British importer, as a result of the reduction of the 26 per cent. to 5 per cent., does not now get his goods any cheaper or any dearer than before. All that has happened is that, by this now arrangement of surrender a burden of 21 per cent. has been transferred from the German revenue to the shoulders of the British taxpayer. We do not want this to continue.

If the 26 per cent. duty were kept on, and the German exporter compelled the English importer to pay, it would be a clog upon the export of German goods to this country, and we do not want that at all. We say that this 21 per cent. should be transferred from the shoulders of the importer in this country to the place which it first occupied by agreement and ought still to occupy, namely, the shoulders of the German Government. The Chancellor of the Exchequer, with flashing eye, told us, to my surprise, that It has nothing at all to do with Protection, and so long as I am responsible for its administration it will not be used as an instrument of Protection. Why! that is the very thing we say! We object to the 26 per cent. reparations as a protective duty.

The CHANCELLOR of the EXCHEQUER (Mr. Snowden)

May I ask the hon. Member to read the rest?

Mr. SAMUEL

Shall I read the whole of it?

Mr. SNOWDEN

No, just the beginning.

Mr. SAMUEL

I will read the question and answer. Mr. SAMUEL: What objection would there have been to granting similar facilities to other Allies? Mr. SNOWDEN: The hon. Member is evidently suffering from a mental illusion."— a dangerous thing to say after the Harnett case. He appears to be under the impression that this Reparation Act has something to do with Protection."— Let me now say that I had no such impression. I knew very well what if meant. It has nothing at all to do with Protection, and so long as I am responsible for its administration, it will not be used as an instrument of Protection."—[OFFICIAL REPORT, 4th March, 1924; col. 1171, Vol. 170.] 4.0 P.M.

But it has been used as an instrument of Protection. So long as the German Government refused to honour the receipts for 26 per cent., it acted as a protective duty against the importation of German goods into England, and, so far from us wishing it to be a protective duty, we wished the 26 per cent. to be repaid by Germany to German exporters so that there should be no Protection. Protection resulted when Englishmen had to pay 100 plus 26. What do we see, now that the alteration has taken place? We have surrendered 21 per cent. 95 per cent. is paid henceforth by the British importer to the German exporter, and only 5 per cent. is paid by the British importer into the British Treasury. The Chancellor of the Exchequer may make the point that we are now getting 5 per cent. as against nothing since Germany first defied us in this matter. That is not so. The 5 per cent. is not worth much. It will cost nearly that to collect it, with the merchants' clearing expense and trouble. The result is this: Since the Act came into operation £18,000,000 has been paid into the British Treasury—so the right hon. Gentleman said himself—and the money has been dealt with under Clauses 8 and 9 of the Treaty of Versailles. We have to look forward. By refusing to make the German Government abide by its 26 per cent. undertaking, the right hon. Gentleman has given away a sum amounting in any future three years to £18,000,000, and there is no reason why that sum going into the British Treasury should not have been increased. We have surrendered 21 per cent. of this tax to Germany, and the German Government is not now under any obligation to transfer that original 26 per cent. in the arranged way, a very skilful way—I pay my compliments to the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George)—into the British Treasury. But what did the geniuses at the Treasury do when they made this new bargain? They had a good fighting bargaining counter, and they asked for no benefits in return for that 21 per cent. advantage surrendered to Germany. I suppose from the brilliant speech on trade yesterday of the Secretary to the Overseas Trade Department (Mr. Lunn) that he may have had something to do with this clever negotiation. They had not the drive and the skill to get some legitimate advantage in return for that surrender of future I reparations to the German Government amounting to £18,000,000 in the last three years. The Treasury might have said: "This is undoubtedly a great advantage to you"—the Germans could not have denied it;—"what quid pro quo, in fair play and reason, are you prepared to give us? You have certain duties on English imported goods which bear heavily upon our imports into Germany. Give us some concession there. We do not wish to be selfish. Give the concession also to France, Italy, and Belgium, so that all the Allies will come in alongside with us." We should have been satisfied, grateful, and pleased. We had a good bargaining counter. It would have helped British trade, and at the same time it would have helped our Allies. With a lack of imagination which marks those who have never had to deal with this sort of thing, the Government have utterly failed to get a single concession out of the arrangement of the slightest benefit to us in return for the 21 per cent. which we have surrendered to Germany. That is a thing that ought to have been looked into. We threw away a legitimate chance. There is another point. I see from the Board of Trade notice that the Germans are to issue Treasury Gold Bonds for the 26 per cent. and that money is to be paid to the German exporter by the German Government for the 5 per cent.

Mr. PRINGLE

No.

Mr. SAMUEL

Then what does it say?

Mr. PRINGLE

It only says that a claim for compensation can be made later

Mr. SAMUEL

I have not the Board of Trade document before me, but my recollection is that it says: The German Government will reimburse the German exporter the sums paid to the Commissioners of Customs and Excise in respect of goods imported before 26th February, 1924, in gold mark Federal Treasury Bonds.

Mr. PRINGLE

That is the 26 per cent.

Mr. SAMUEL

Yes, that is the 26 per cent., as I said.

Mr. PRINGLE

Not the 5 per cent.

Mr. SAMUEL

Yes, later on apparently. We ought to know from the Chancellor of the Exchequer whether he made any arrangement that the Federal Bonds that the Germans are to give for the 26 per cent. will be taken by the German Government in payment of taxes and duties on imported goods at their face value. I believe that the Germans have issued various bonds on other similar occasions, and that they have not been accepted back at their face value. That is an important thing for us. Are these to be accepted by German Government at face value for taxes? After all, German firms desire to reopen trade with us and desire to treat us honourably and honestly, and so re-establish confidence. I have no doubt that in many cases they regret that we have had recently to pay this 26 per cent. into the British Treasury on top of the 100 per cent. because it puts a clog on their trade with us. They do not like to see their English customers penalised and trade upset, and they would be glad to get back that 26 per cent., and repay the English importer, and they could if these Bonds were accepted by the German Government for taxes at their face value. If the German exporters to England, having received these Treasury Bonds, could feel that they would be accepted at or about par by the German Government for taxes or for Customs duties on imports into Germany the German firms would, I expect, feel it their duty to send those bonds over to their customers in England, so that English customers could use the proceeds to reimburse themselves against the 26 per cent. which recently they have to pay into the British Treasury in excess of the 100 per cent., or transfer them for cash to other British merchants to use them, to pay Customs duties on goods that are exported from England into Germany. I have no doubt that that provision for this method of relief to us has escaped the notice of the Treasury. If it has, it shows further lack of foresight, and that is another reason why I now beg leave to move the reduction standing in my name.

Sir JOHN SIMON

The hon. Member for Farnham (Mr. A. M. Samuel) has raised a very important point in what everybody will agree was a very reasonable speech. He raised it from the Conservative side of the House, and he outlined the situation which, as I understood him, has existed, and existed to the knowledge of the authorities in this country, ever since last September.

Mr. SAMUEL

November.

Mr. PRINGLE

The ordinance was in November.

Sir J. SIMON

The hon. Gentleman certainly said September, though I am aware that the formal ordinance of the German Government, which set out in express terms their refusal to indemnify their own manufacturers in respect of this 26 per cent., is itself an ordinance of November. But whether it be November or September, is not material for the first point that I want to make. It is quite plain, as the hon. Gentleman has just said, that, at any rate since the failure of the German Government to indemnify their own traders has been known, the British importer has suffered, and a condition of affairs has existed which was not contemplated or intended by those who first designed this scheme September, October, November, December, January—be it the whole five months or be it only three of them—what was done by the Government then in power to correct this undoubted anomaly and indeed this absurdity? It lies very oddly in the mouth of the right hon. Gentleman the Member for Colchester (Sir L. Worthington-Evans), if, as I understand, he is to take part in the Debate and press this comment against the Government, to make these criticisms, when the Government of which he was a member month after month sat silently and impotently by while this very result which the hon. Gentleman now deplores was to their knowledge and to the knowledge of everybody going on. Indeed, there is only one possible explanation. It could not, I am sure, have been from want of astuteness or attention on the part of the right hon. Gentleman—quite impossible. The explanation is quite a different one. The explanation, undoubtedly, is that whatever may be the view of the hon. Gentleman who has just spoken—and I do not dobut the complete sincerity with which he spoke—a great many of his party were not unwilling that there should be such a change in the working of this arrangement that there should be a highly protective duty.

Mr. SAMUEL

As a member of the British Chamber of Commerce, I will tell the right hon. Gentleman what was our view. We hoped that, as the result of representations to be made to the German Government, they would see that they were breaking their faith, and that we should get the matter reinstated. If the right hon. and learned Gentleman reads into our view anything other than that, I take this opportunity of assuring him that what I have said is exactly the position.

Sir J. SIMON

I am not having any controversy with the hon. Gentleman. I am merely observing plain facts and perfectly obvious dates.

Mr. SAMUEL

The right hon. and learned Gentleman was speaking of the reason.

Sir J. SIMON

The plain fact is that for months before the late Government fell, the position which the present Government are endeavouring to deal with, existed, and the late Government never did anything whatever, good, bad, or indifferent, to correct that situation. I am making the observation—and I repeat it since I do not attribute indolence or inattention on the part of the late Government—that, I venture to think that that situation of impotence and inaction had something to do with the fact that they favoured a protectionist policy. That is the first point that I want to make. We shall be very interested to hear from anyone who speaks from the Front Opposition Bench and who can properly reveal the feelings and motives of the late Government in this matter whether the astutest intelligence on the financial side which that Government possessed—the right hon. Gentleman the Member for Colchester—did not as a matter of fact remain silent and impassive because he was not averse to what was nothing more nor less than an obvious piece of protection. It is more important to make that plain, because I agree that the effect of this arrangement so long as the German Government really did indemnify its own traders in respect of the 26 per cent., is a very much more disputable question. It is a question on which people may honestly hold different opinions. There are undoubtedly some in business who found that the scheme, when it is in full working order, might in some cases have the effect of causing the prices which the German manufacturer exporting to this country charged to rise. When you have regard to the fact that he was not going to get 100 per cent. of British sovereigns, or what represented British sovereigns, but was going to get 74 sovereigns together with a Customs receipt for 26 which his Government would then proceed to cash in terms of marks, that it was within the power of the German Government to increase the production of marks by a more active use of the printing press, and that the more marks that were printed the more the currency was inflated, then, at any rate theoretically, it was possible that the result of that arrangement, even when it was working as it was intended to work, might have been to increase the prices which the German charged for commodities that they were selling to this country over the prices at which they might have sold them if they were selling them somewhere else. I am confident that was not the object or intention of the scheme, and it is an extremely disputable point how far it in fact operated in that way. But to show that I am not without warrant, may I make one quotation from an answer which was given by the late President of the Board of Trade. On 12th January, 1923, the hon. Member for Westbury (Mr. Darbishire) put this question to the President of the Board of Trade in the late Government: If he is aware that export prices, fixed by the German Government, for goods shipped to this country are higher than the prices fixed for similar goods exported to France, Holland and Belgium by a percentage more or less equivalent to the 26 per cent. duty imposed here by the German Reparation (Recovery) Act; and if he will make representations to the German Government which will have the effect of placing this country on the same footing as that of other countries. The answer given by the right hon. Gentleman, relying upon those sources of information which are specially at the service of Ministers, was: I am aware that the minimum export prices fixed by the German trade control officers are in some cases higher when the goods are to be exported to the United Kingdom than when they are to be exported to certain other European countries, but the system of fixing differential export prices for different markets is by no means universal nor, so far as I am aware, is it related in any way to the levy under the German Reparation (Recovery) Act."—[OFFICIAL REPORT, 12th July, 1923: col. 1582, Vol. 166.] While, on the one hand, many persons have supposed the ultimate economic distribution effected by the arrangement of the Reparation Recovery Act might be to induce the German seller to raise the price which he would otherwise charge for the commodity he sells to this country, on the other hand, it is plain from that answer that the view of the Board of Trade in the time of the late President was, as a matter of fact, that even if such instances could be quoted, he would not admit with regard to them the relation of cause and effect. It may be so. But while that is disputable—and it is now merely interesting as a matter of economic history—one thing is not open to any dispute whatever, and indeed my hon. Friend who spoke first put it with great fairness and frankness. It is not open to the slightest possible dispute that ever since the German Government have ceased to redeem in their own currency this Customs receipt offered to them by the German exporter, from that moment there has been an obvious tendency in the working out of this scheme of a protective character, and I am very glad indeed to hear the hon. Member opposite say that as far as he and his Friends are concerned on that ground, that it has a protective effect, he for his part denounces it.

The next question that arises is this: What is the new arrangement that has been made? I think it is all to the credit of the new Government that they have really lost no time in making a new arrangement. To leave things as they were was, indeed, a most ridiculous thing to do in the interest of British trade, and the new Government are to be congratulated because they have handled this matter with a determination to get a change. Whether or not the change that they have got is, in all the circumstances, the best that can be got is again, I should have thought, a very fair matter for inquiry and we shall wait to hear, of course, what the Chancellor of the Exchequer and the Financial Secretary have to say. But look at the way this thing has been working during the interregnum. This is the situation which right hon. Gentlemen opposite thought fit to leave month after month uncorrected. This is what happened. As soon as the German Government—whether it was last September or November does not really matter—made it plain that they were going to suspend the redemption in marks of the amount represented by the British Customs receipt, there has been an obvious tendency, of course, for the German exporter to consider in what other way he could be secured in getting the price of his goods, and the most obvious of all ways, of course, would be to say "if I am only going to get 74 per cent. of the price I quote, I had better be sure the price I quote is such that 74 per cent. of it will satisfy me," and that this is the inevitable economic consequence and the inevitable business consequence of leaving this thing uncorrected is quite beyond any dispute at all. Not only so, but the full absurdity of leaving things as they were left by the late Government can only be realised if one appreciates one thing more. Our Customs insisted that they were entitled to payment by way of import duty of a sum which bore the same relation to the amount actually sent to Germany as 26 bears to 74, and the consequence, therefore, was that in any case where, after the scheme had broken down, the British trader found it necessary to pay more than £74—to put an extreme case, to pay the whole of the £100—the Customs would not then be content with £26, but would insist upon a larger payment of about £35, because 35 bears the same relation to 100 as 26 bears to 74. Here these gentlemen are, so far as one may take the hon. Member as speaking for others on that side, having sat still month after month while that was going on, and now they tell the House of Commons that of course they have the greatest objection to anything which has the smallest Protectionist tendency. You have only to read the formal protest which is now made in some quarters in reference to the new arrangement to see that the new arrangement appears to some minds open to objection because it tends to remove that Protectionist tendency.

May I address one or two questions to the Chancellor of the Exchequer about the new arrangement. It will be material to know, and I think the Committee is entitled to know, what exactly is the advantage which attaches to the 5 per cent. It is obviously so small a percentage that, regarded as a means either of revenue or of getting reparations, it is really altogether trumpery. Would the right hon. Gentleman tell us whether I am not right when I suggest that the cost of collection and all the complications involved in the Customs machinery are just as great if you are going to permit a payment of 95 per cent. and give a receipt for 5 per cent. as if you were going to permit a payment of 74 per cent. and give a receipt for 26 per cent.? I should like the right hon. Gentleman to tell us what is the view that ought to be taken as to the expense of collecting measured in relation to this 5 per cent. In the second place, I should like to ask him what is the main reason why 5 per cent. has been fixed. I could understand it being said, and I think there would be great force in it, that it is desirable that we should keep our hand upon this particular instrument. It is, as it were, a lever which is capable of putting a particular piece of machinery in motion. Originally the lever was so moved as to enable the scheme to operate to the tune of 26 per cent. We find, as a matter of fact, whatever be the reason, that the machine will no longer give out the results which setting the lever at 26 might be expected to secure, but we have set it at a smaller figure, say 5 per cent., more for the purpose of keeping control of the machine so that we shall not shut down altogether, than from any idea that an arrangement such as 5 per cent. is of any permanent value to anyone. I think it would be material for the Committee to know whether that is the reason which the right hon. Gentleman puts forward. One remembers the days of the old fiscal controversy when a 1s. duty on corn, so innocent and slight as almost to escape the attention of a large part of the community, was justified and explained on the ground that it was what is called a registration duty. Is the 5 per cent. regarded more in the nature of a means of keeping the machine working at a low pressure and registering results rather than a material contribution to the poblem either of revenue or of reparations?

Lastly, I invite the right hon. Gentleman to give the Committee an explanation as to the terms of the new arrangement he has made. As I understand it, it is the result of negotiations and agreement. I look at the Board of Trade Journal for 28th February last, and I find on page 271 the Government announcement in this connection. It begins: An agreement has been reached between His Majesty's Government and the German Government respecting the German Reparation (Recovery) Act, 1921. May I ask are there not any papers which ought properly to be published for the purpose of seeing what is the course of the negotiations and what is the reason why we have ultimately reached the conclusion stated in the Board of Trade Journal. In the second place, may I direct the attention of the Committee and the right hon. Gentleman to the terms of the new arrangement, because they appear to me to differ from the old arrangement, not merely in that they substitute 5 for 26, but in matters which are much more important than that. The old arrangement was one by which if an English importer purchased from Germany £100 worth of goods he proceeded to discharge his obligation to the seller by paying £74 and sending him a Customs receipt for £26, and it was an essential part of the arrangement that upon that Customs receipt being presented to the German Treasury, the German Treasury then and there, without any delay, would give the full equivalent for that in German currency. This is the new arrangement: In order to guarantee that no part of the sum levied under the Act at the rate of 5 per cent. shall be charged to British importers, the German Government agree"— It does not say they agree then and there to pay in satisfactory currency the equivalent of the 5 per cent. The document says: The German Government agree to arrange for the compensation of the German exporters at a later date. I do not know what view the German trader takes of the fulfilment by the German Government of the undertaking or promise to make certain payments at certain future times, but the world at large has some reason to think, whatever the excuse or reason may be, that promises to pay sums of money at some future time have not always been such that the German Government would fulfil them on the day appointed. If the best that you can do is to say, "We have negotiated with the German Government, and the German Government have been good enough to promise not that it will cash the Customs receipt but that it will arrange for the compensation of the German exporters at a later date"—without describing what the arrangement is, without describing what the security is, without describing what the date is, without defining the date—I should have thought that it was open to question whether that particular phrase in the agreement was as satisfactory as the old arrangement. There follows a still more curious paragraph: The German Government further agree"— There was nothing like this, as far as I know, in the old arrangement to provide by decree"— I suppose that means by enactment— that if"— if, mind you— in any case any part of the sums levied under the Act has been charged to the British importer, the German exporter will forfeit his claim to reimbursement, and will, in addition, be subject to penalty. What does that mean? I labour under the grave disadvantage—and hon. and right hon. Gentlemen often remind me of it—of earning my living as a lawyer, and, therefore, naturally, I am disqualified from understanding any matter of business. If, for a moment, a person who is not ashamed to call himself a commercial lawyer may be allowed to direct attention to the language of this document, I should like to ask the Committee and the Chancellor of Exchequer, what does it mean. How is it expected to work? The German Government agree that if in any case any part of the sums levied under the Act. That is the 5 per cent. which the British importer pays to the German exporter— has been charged to the British importer, which, I suppose, means that if in any given case the German merchant has charged the British purchaser more than he would have charged him if this scheme did not exist—but how you are to find that out without a Royal Commission, or even with one, I have not the faintest idea—and if as a result of mature economic calculation and, presumably, of conflicting evidence— the German exporter will forfeit his claim to reimbursement. I should have thought that was an instigation to every German vendor to charge more than the 100 per cent. and to secure that he got by 95 per cent. of the total price all that he really needed. A bird in hand is better than a bird in the bush, and it is better to get paid all you need in good British cash, by the ordinary methods of exchange, by the British purchaser, than to take a portion of the price from the British purchaser in the hope that at some later date an arrangement would be made for compensation. That seems at the moment to be rather a serious objection to the language of the document.

My right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) reminds me that there is one further point. The whole thing, as I understand it, and as appears from the document, is intended as a temporary arrangement, and it would be very unfair to treat those who are putting it forward as though they regarded the thing as a solution. Obviously, it is not meant as a solution, but as a temporary arrangement. We would like to know from the Chancellor of the Exchequer whether the plans which he has in mind for some permanent arrangement are in an advanced condition, and whether he can give us any information about them, and more particularly what are they. In conclusion, it seems to be right and proper that the attention of the Committee should be called to the language of this agreement, which is rather obscure and not very satisfactory.

I want to say on behalf of my friends and myself that we think it entirely right that the Government have not left things as they were. It was a great dereliction of duty on the part of those previously responsible that they left this thing to operate, and they have no justification, unless they are prepared to say to those who criticise them that really by lying quiet they had secured, as it were by a side wind, something which was an admirable piece of Protection. If, indeed, you add to that the McKenna duties, and if in some cases you add the Safeguarding of Industries Act duties, I should have thought that even the appetite of the most avid Protectionist, for the time being, would have been abundantly satisfied. Now it is too late to do that. My hon. Friend the Member for Farnham says he repudiates any thought of Protection.

Mr. SAMUEL

In this connection.

Sir J. SIMON

He tells us that he is speaking not only for himself, but as the mouthpiece of a very powerful organisation. We are grateful for that concession. We are glad that the Government have taken this matter up, but we should like to have the explanation for which I have asked, because it appears to be unfortunate that it is not possible by agreement to secure a more satisfactory conclusion.

Mr. D. G. SOMERVILLE

In considering the proposals of the Government to change this levy from 26 per cent. to 5 per cent. it is essential to find out why this levy was first installed. It was introduced in 1921 by the Coalition Government of the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George), sponsored by the right hon. Member for West Birmingham (Mr. Austen Chamberlain) and warmly supported by the then Prime Minister. No objection was raised to it except by a few Members who did not challenge a Division. It was passed with the agreement of the German Government, which is a very important point.

Mr. PRINGLE

No, it was not. The German Government did not agree until later.

Mr. SOMERVILLE

It was introduced with the approval of the German Government. The Act can be summed up as follows: "The effect of the Bill is twofold. It affords, with the co-operation of the German Government, a method of collecting reparation, measured according to Germany's capacity to pay, if Germany reimburses her exporters. On the other hand, if Germany remains recalcitrant and refuses to co-operate, it acts as a penalty automatically imposed upon German trade in all countries where similar measures are applied. In other words, if Germany co-operates with us under this Measure in making the payment required, German trade may proceed practically unhindered, and the German reparation debt may, pro tanto be redeemed. If Germany refuses to meet her obligations, then the economic penalty is imposed automatically upon economic default."

By means of repeated and searching questions by hon. Members on this side of the House, and after contradictory replies from Ministers responsible, we have arrived at the following facts. From March, 1921, up to December last the receipts have been practically £18,000,000, which the then Chancellor of the Exchequer considered was the maximum that Germany could pay under the circumstances. These £18,000,000, according to a reply given by the Chancellor of the Exchequer on 18th February, were paid into the British revenue and treated as revenue under the heading of Miscellaneous Revenue, so relieving the British taxpayers' pockets. We are now informed that, owing to natural or unnatural regard for the German Government's fiscal system of inflation, this reparation duty or levy is to be reduced from 26 per cent. to 5 per cent., and that the £800,000 which we have been receiving every month is to be reduced to £150,000 a month. Why are the Germans to have more consideration than our own taxpayers? Evidently, the Government are not very happy about it, because although in a Treasury Minute it is stated that the reduction is to take effect until further notice, the "Board of Trade Journal" states most specifically that this reduction is only to have effect until 15th April, 1924. Why fix that date? Does the Chancellor of the Exchequer expect that in 3½ months Germany is going to put her fiscal arrangements and her fiscal policy in order so that she can pay this amount again? Why not cancel the full duty? What good is 5 per cent.? The right hon. Member for Spen Valley (Sir J. Simon) asked a certain question. Perhaps this is the explanation. If we look at Clause 6 of the Bill, we find the following: If a Resolution is passed by both Houses of Parliament for the suspension of this Act it shall be lawful for His Majesty in Council by Order to suspend the operation of this Act to such an extent and for such period, definite or indefinite, as may be specified in the Resolution. That is to say, that if the Government wish to suspend this duty altogether, they would have to get the approval of the House of Lords, which, very obviously, they could not get. Therefore, they fix it at the very lowest point they can, namely, 5 per cent., which, in my opinion, is quite useless for the purpose of revenue. Questions have been put as to whether any outside advice has been asked, whether the advisory committee of the Board of Trade have been consulted, or whether the manufacturers have been consulted before this levy was reduced. The answer given was "No," but it was stated that a large number of representations had been received from manufacturers protesting against a duty being collected from them and not refunded by the German Government. What manufacturers? Which manufacturers? I suggest that it was German manufacturers who made the application. Hon. Members below the Gangway opposite have suggested that this duty is in some way a Protective tariff.

Mr. PRINGLE

Is it a duty?

Mr. SOMERVILLE

A duty or a levy. Surely in view of the fact that this Reparation Act was brought in by the Coalition Government under the right hon. Member for Carnarvon Boroughs, that should be sufficient answer. It is not a Protective tariff. Moreover, we have had it on the very eminent authority of the present Chancellor of the Exchequer, in answer to the hon. Member for Farnham, that it had nothing whatever to do with Protection, and that as long as he was responsible for its administration it would not be used as an instrument of Protection.

It may interest hon. Members both above and below the Gangway on the opposite side to know that since this duty has been reduced retail offices and large shopkeepers have been crowded with travellers and inundated with telegrams and letters from German manufacturers offering goods at reduced prices. [HON. MEMBERS: "Hear, hear!"] Hon. Members opposite applaud that. I want to ask those hon. Gentlemen, what is going to be the effect of this on the manufacturers in this country? Is there not enough unemployment in this country at the present time? It is a very serious question for the Labour Government, in view of their anxiety to do away with unemployment. A further reason was given in an answer to one of our questions as to why the duty was reduced. It was suggested that the German Government would not pay any more, and the Labour Government said, "Very well; will you pay 5 per cent.?" The German Government replied, "Rather; of course we will." Would not any business man jump at the opportunity of only giving 5 per cent. discount instead of 26 per cent. discount? Why is it that we are always giving way? Why is it that the Germans can always get what they want, and that all we can do is to say, "Yes. Let us have something, so long as we have something." The right hon. Gentleman the Member for Carnarvon Boroughs stated, when dealing with German reparation last year: The German Government might say, we will not pay 50 per cent., but we will pay such a percentage as will leave the employers, the producers with quite a fair margin of profit. They might say 20 or 30 per cent. That would leave them with a fair margin. What does that mean? That means practically a tax, not upon our importers, not upon our merchants, but on the industrial magnates of Germany to pay the indemnity and the compensation to the country. What is unfair in this? It is a perfectly fair proposition. If Germany takes up this attitude, that she is not going to pay this 26 per cent., why should we allow her goods to come into this country at all? We want work for our working people and, further than that, if we take up a strong attitude with the German importers they will find a way to pay this tax, as they have always done when it is a question of doing business Therefore I press strongly for a reduction of this Vote.

Mr. SNOWDEN

I understand that there is an agreement that I should explain the position in the early stages of the Debate, for the purposes of the Debate, and if any matter of importance arises later on a reply can be given by my hon. Friend the Financial Secretary to the Treasury. I have no complaint to make about the tone of the criticism to which the Government have been subjected, or the manner in which it has been brought forward this afternoon, and I shall try with the utmost frankness, and without any hesitation, to deal with the questions that have been raised. I do not think that it will be necessary, after the rather severe criticism of the inability or the inactivity, of the late Government during three months to deal with this question, which was brought forward by the right hon. Member for Spen Valley (Sir J. Simon), to say much about that matter. I would like to remind the Committee that this is not a difficulty of our creation. It is one of many disagreeable legacies which we have inherited from our predecessors.

An intolerable situation existed when we took office through the breakdown of the German Reparation (Recovery) Act, and the duty devolved on us to see what could be done to meet the hardships which were being inflicted upon some, at least, of the British traders who were engaged in German trade. There were various courses open to us. We might have given up the attempt to persuade Germany to resume the payment of the 26 per cent. to her exporters. We might have come to Parliament and asked Parliament to provide some method of repeal, or we might have taken steps to compel Germany to observe her obligations under this Act, or we might have adopted the fourth course—which is what we have done—and have tried to come to some temporary arrangement with Germany for the reduction of the duty. After negotiations and conference with the representatives of the German Government we arrived at the agreement which is the subject of this discussion this afternoon.

I do not think that it is necessary for me to say more than a word or two upon an aspect of the question which has figured very prominently in this Debate so far as it has gone this afternoon. The hon. Member for Farnham (Mr. A. M. Samuel) on behalf of himself and his colleagues declined to regard this Act as a measure introduced for the purposes of protection, but I think that the hon. Member cannot complain of the criticism in this respect, and he cannot have read the many speeches similar to the speech delivered by the hon. Member for Barrow (Mr. D. G. Somerville), because that hon. Member has shown, in spite of certain protests which have been made, that he desires, at any rate, that this Measure, or something analogous to this Measure, should be used for the purposes of protection. I do not know if it is necessary for me to explain the nature of this Act and its operation prior to the breakdown in November last. The arrangement was, of course, that the British importer should remit to the German exporter 74 per cent. of the invoice price of the articles imported, and with that he was to send customs receipts for the remaining 26 per cent. of the price. Under the new arrangement the British importer will send 95 per cent. of the cost of what is imported and a customs receipt for 5 per cent. in place of the customs receipt for 26 per cent. which he formerly sent.

I want to answer the right hon. Member for Spen Valley with perfect frankness. He seemed to be labouring under considerable difficulty in understanding the terms of the article in the "Board of Trade Journal," and he asked if there are any Papers which can be laid. I have already stated, in reply to questions addressed to me in the House, that there are no Papers, that the negotiations were carried on verbally. As to whether there was a reimbursement of the German exporter, I do not know that after all this is a matter with which we ought to concern ourselves. That is a matter between the German exporter and the German Government. But the right hon. Gentleman was in error in assuming that, under the old arrangement, the German exporter has recently been paid by the German Government in cash. He was not. He was paid in bonds which were known as K bonds. Under the new arrangement he will be paid in gold bonds, and these, of course, can be discounted for cash, and the K bonds will also be transferred into these new bonds. That is the explanation of what appears to be so very mysterious to the right hon. Gentleman.

Sir FREDRIC WISE

Will the K bonds act as currency?

Mr. SNOWDEN

I am afraid that I cannot answer that question.

Sir F. WISE

Are they accepted at par?

Mr. SNOWDEN

The point was raised by the hon. Member for Farnham as to whether these bonds will be available for the payment of taxation. Of course they will not, as bonds, be available for the payment of taxation, but, as they can be negotiated and discounted, of course they will be available in that way.

Mr. PRINGLE

Can the right hon. Gentleman refer to any article in the agreement in which provision is made that, for payments subsequent to the 20th of February, such bonds will be given by the German Government?

Mr. SNOWDEN

Yes.

Mr. PRINGLE

Will the right hon. Gentleman point out where the agreement expressly states that for payments before 26th February these bonds will be given?

Mr. SNOWDEN

I do not know if hon. Members have the memorandum in the Board of Trade Journal. It states: The German Government will reimburse to German importers the sums paid to the Commissioners of Customs and Excise in respect of goods imported before 26th February, 1924, in gold mark Federal Treasury Bonds in all cases, whether in respect of contracts prior to the 17th November, 1923, or in respect of contracts subsequent to that date.

Sir LAMING WORTHINGTON-EVANS

I think that that refers to arrears and does not refer to future payments in respect of buying or selling.

Mr. SNOWDEN

It is in respect of contracts prior to 17th November, 1923, or in respect of contracts subsequent to that date.

Sir L. WORTHINGTON-EVANS

That is all arrears.

Mr. SNOWDEN

It says: Where the levy has been reimbursed in the old K Bonds the German Government will continue to apply the decree of 9th February, 1924, providing for the conversion of such bonds on presentation into the above mentioned Federal Treasury Bonds. It is understood that the proceeds of the reimbursement should be allocated in accordance with the incidence of the levy. I am quite prepared to concede to the right hon. Member for Spen Valley that there is a certain ambiguity in the drafting of the provision which I have quoted. I understand there was some uncertainty in regard to the incidence of the levy in particular cases. It was understood that where the German Government had not been reimbursing their own exporters, the cases of those exporters would be taken into consideration at a later date when the facts would be ascertained.

5.0 P.M.

Sir J. SIMON

I am very much obliged to the Chancellor of the Exchequer, but I should like him to make plain to me the other phrase which I quoted, which provides that the German Government will compensate the German exporters at a later date. Does that not indicate that the matter is in rather a vague state?

Mr. SNOWDEN

It has been agreed between the German and British Governments that it is understood that the proceeds of the reimbursement, that is the cash obtained by the German exporters, shall be allocated in accordance with the incidence of the levy. I appreciate the distinction between the future payments and what the hon. Member for Penistone calls arrears.

Mr. PRINGLE

I am referring to the "Board of Trade Journal," which says: The remaining provisions of the agreement are as follows: In order to guarantee that no part of the sums levied under the Act at the above rate of 5 per cent. shall be charged to British importers, the German Government agree to arrange for the compensation of the German exporters at a later date. … There is no reference there to bonds or anything else. It is merely an arrangement for compensation at a later date, and to provide by decree that if in any case any part of the sums levied under the Act has been charged to the British importer the German exporter will forfeit his claim to reimbursement and will, in addition, be subject to a penalty. … Then we have the paragraph which the Chancellor of the Exchequer refers to. It says: The German Government will reimburse to German exporters the sums paid to the Commissioners of Customs and Excise in respect of goods imported before 26th February, 1924, in gold mark Federal Treasury Bonds. … So that you have there two distinct statements. The first is that the 5 per cent. compensation is to be arranged at a later date. In respect to payments made before 26th February, 1924, these Gold Mark Federal Treasury Bonds have to be delivered. The contention now made is that you have a provision in respect to arrears in these Treasury Bonds, but there is no provision whatever as to any formal payment for the 5 per cent.

Mr. SNOWDEN

The point made by the hon. Member was in regard to an unspecified penalty. I would refer to an ordinance which has been enacted by the German Government, dealing with this question of compensation, the last clause of which states: Anyone who charges the reparation levy either in whole or in part to the English importer, directly or indirectly, forfeits all claim to reimbursement and will be subject to a fine of not more than five times the sum involved unless a higher penalty is imposed by virtue of the General Penal Code.

Sir L. WORTHINGTON-EVANS

Will the right hon. Gentleman lay that Paper?

Mr. SNOWDEN

There is no reason why I should not lay the Paper. The reparation levy which the British Government levies at 5 per cent. of their value on goods imported to England since the 26th February is to be compensated to the German exporter at a later date. The British reparation certificates are to be presented to the German federal authorities on or after 1st April, 1924. The Federal Minister of Finance is empowered to publish further details as to the methods of compensation, and more particularly as to the time.

Sir J. SIMON

It would appear, from what the Chancellor of the Exchequer has said, that the situation is left in this way, that while there is an agreement that the levy shall be reduced to 5 per cent., there is no certainty at all that the German exporter will not increase his price in view of that fact, and if he does increase his price, this German ordinance will deprive him of any payment from the German Treasury, and will therefore, in effect, encourage him to Charge the British importer more than he otherwise would.

Mr. SNOWDEN

There is a very effective safeguard against that. It lies in the present economic condition of the world. Let me give a few facts. Recent figures show that Germany exports to this country much less than before the War and has a much smaller share of total British imports. Although until recently German prices have been below world market prices, this situation has been changed by the stabilisation of German currency. In January, 1923, the American wholesale index figure was 140 per cent. higher than the German figure, 107 per cent. higher in June, 30 per cent. in October, 9 per cent. in November, and in December was actually lower. The British index figure for industrial materials was higher than the German during the whole of 1920, 1921 and 1922, but by October, 1923, had fallen well below the German figure. At present, it is undoubtedly the case that German prices are well above world prices.

Mr. MASTERMAN

Then this is a protective tariff?

Mr. SNOWDEN

Perhaps I may, in answer to the right hon. Member for Rusholme (Mr. Masterman), read him the following paragraph: The reparations levy, which the British Government levies at 5 per cent. of their value on goods imported to England since the 26th February is to be compensated to the German exporter at a later date.

Mr. MASTERMAN

The point put was that unless the German Government pays compensation to its exporters in bills or bonds which they can discount at par value in the world's markets, the 5 per cent. is a protective tariff.

Mr. SNOWDEN

The German Government have given a strong pledge that they are willing to carry out the agreement.

Mr. MASTERMAN

Why was it impossible to apply to the 5 per cent. the same conditions you are applying in connection with the arrears?

Mr. SNOWDEN

I should have thought that it was not possible to apply this condition to the new arrangement, but I will inquire into that matter.

The hon. Member for Farnham (Mr. A. M. Samuel), in the course of his speech, raised the point that he put to me at question time when he asked why we had not attempted to get some quid pro quo when we made this arrangement with the German Government for the reduction of the import duty. He charged us with a lack of imagination. I think I might quite justifiably say that he himself showed lack of imagination in putting forward such a suggestion as he made. Let me lay down the fundamentals of this case. Why have we agreed to this reduction from 26 per cent. to 5 per cent.? We are convinced that the alternative was between 5 per cent. and nothing. Five per cent. was as much as we could get, and if we did not accept that we should have got nothing. Why? Suppose that we had put forward such a suggestion as that made by the hon. Member for Farnham. What would have been the effect? It would have meant a reduction of the German Customs duties. What would have been the effect of that? A fall in German revenue. What then would it have been necessary for the Germans to do? To resort to the old vicious system which is so largely responsible for the present economic situation of Germany inflation by means of the printing press, and a further reduction in the capacity of Germany to pay any reparations at all. If that had been done we should have been defeated in the very purpose we had in view; we should have been reducing the capacity of Germany to pay even this 5 per cent. I think that that is agreed among all parties.

I recall a statement made by the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) in dealing with this very point. It was a sort of prelude to the proposal last autumn that a Committee should inquire into Germany's capacity to pay. In substance the right hon. Gentleman said, "Things have been going from bad to worse, and the condition of Germany is worse and worse and worse." Therefore, if Germany was not in a position to pay the 26 per cent. Reparation Duty even then, she is not as good a position to pay to-day. We have not lost sight of the fact that this is a mere incident in the much wider question of reparations, and that we must do nothing to impair further the capacity of Germany to pay. That is the answer to the hon. Member for Farnham. If his suggestion of trying to impose a reduction of German Customs Duties had been adopted, the effect would have been that Germany would have been reduced to that extent in her capacity to pay even 5 per cent. Another point raised related to the cost of collecting the 5 per cent. duty. The right hon. and learned Member for Spen Valley (Sir J. Simon) seemed to have a very exaggerated idea on the subject.

Sir J. SIMON

I asked whether it was more or less.

Mr. SNOWDEN

The cost of collecting the 5 per cent. is probably the same as the cost of collecting the higher percentage. The cost of collecting the 26 per cent. was about £5,000 a month. Probably the cost will remain the same. The proceeds from the 26 per cent. were about £800,000 a month. The new percentage brings in £150,000 a month. I am asked why we have retained this duty of 5 per cent. In the first place we did not want to come to the House and ask them to annul this Act. This is the only reparation that we now receive from Germany. As a matter of fact it is more than France and Belgium have been receiving on reparation account One reason, apart from the considerations I have mentioned in regard to Germany's reduced capacity to pay, why we kept on this 5 per cent. was that we wanted to have something with which to bargain. We should have thrown away every weapon if we had asked the House to agree to a total repeal of the Measure.

Mr. D. G. SOMERVILLE

And we lost £800,000 a month.

Mr. SNOWDEN

The hon. Gentleman mentions £800,000 a month. As a matter of fact during the last three months the duty has not been bringing in anything at all from the Germans. Therefore, what the House has to consider is not that we have lost £800,000 a month. It is perfect nonsense for right hon. and hon. Gentleman to talk about the difference between £800,000 and £150,000. The choice is between the £150,000 that we are getting now and nothing that was received during the last three months. It is a fair contribution and one to which a Chancellor of the Exchequer cannot be indifferent in these times. The arrangement for the German Government to re-imburse the industrialists expires on 15th April; the German Government have said that they will not be able to recoup the industrialists for the goods supplied to France after 15th April.

As the House is aware, a Committee is inquiring into Germany's capacity to pay. I hope that it will report within the next few weeks. Then the whole question of reparations will be reviewed. We did not want to give this agreement more than a very temporary character. The right hon. Member for Spen Valley asked if we had any plans as to the future. We think it extremely likely that in the next few weeks the whole question of reparations will be raised once more, and then this question will be merged in wider issues which will have to be settled We had a very difficult problem with which to deal. We have done the best that we could. We were aware that the heavier duty was placing an intolerable burden on a not inconsiderable section of traders in the country. I ask the House to endorse our action. I do not think it is perfect; I am as conscious as any hon. Member of its imperfection and of the possibility of further difficulties arising in connection with administration. But we have done the best we could in the difficult circumstances, and we have in four weeks' time succeeded in doing what the late Government failed to do in three times that period.

Sir L. WORTHINGTON-EVANS

The right hon. Gentleman has just congratulated himself upon having done something in contrast with the late Government, which is accused of having done nothing. He got a hint for that self-congratulation from the right hon. and learned Member for Spen Valley, who hastened to congratulate the Government on having done something, in contrast with the last Government, which did nothing in these difficult circumstances, and then proceeded to criticise the present Government for what they had done. I am prepared to do the same thing. I hope that the right hon. and learned Gentleman will agree with me when I have spoken that it would have been a great deal better had this Government done nothing until 15th April. They would then have had an opportunity of doing something which would be valuable, instead of doing what they have now done. I think the Committee has a just cause of complaint. We have been asking for 10 days for papers and for information on the subject, and I do not wonder that the hon. Member for Barrow (Mr. D. G. Somerville), who has been a close student of this matter, has complained. I recommend to other hon. Members his action in the matter, because at least he has made himself familiar with the case. The only paper that we have been given is a document in the "Board of Trade Gazette." The right hon. Gentleman explains that by saying that these negotiations have been verbal negotiations and that no notes, or not sufficient notes, have been kept of the conversations.

Is that really an example of what the Labour party intend to do in their foreign negotiations? Are they going to deprive this House of any chance of checking their action, or of seeing what moved them to come to an agreement? I think the Committee has a right to complain now, and if this is a sample of what is to happen, Parliament will be continuously complaining. The Chancellor of the Exchequer himself cannot explain his own agreement. He is bound to say that the last Clause is obscure. Does the Committee know what the last Clause says? As the right hon. Gentleman explained it, the last Clause means that if at a later date it is found that some importer in this country has paid the Reparation Duty instead of the German exporter, the importer in this country is to claim on the German Government for some of these bonds, and then they are to be divided, the proceeds of reimbursement to be allocated in accordance with the incidence of the levy. Imagine an importer, a trader in this country, who believes he has paid more than he ought to have paid and who succeeds in getting some bonds out of the German Government. What is the importer going to do with those bonds? Is he going round to the retail shops, chopping up little bits of bonds, and saying, "We have charged you too much and we want to give you a bit of a bond"? I hope the Financial Secretary to the Treasury will be able to explain what is meant by the words "dealt with in accordance with the incidence of the levy." Those are words in the Board of Trade document to which the right hon. Gentleman has referred as being the agreement. It is true that when he spoke himself he had to refer to another document which he has quite properly promised to lay on the Table. Why could not that and other documents have been given to us any time during the past week or fortnight and why should it be left be us to extract across the Table this precious document which is necessary for the understanding of the agreement. We have asked for documents several times. I myself and my hon. Friends have been asking at Question Time during the whole of the past week for Papers.

Let me deal with one or two of the questions to which the right hon. Gentleman the Chancellor of the Exchequer alluded. We complain of the Government throwing away £7,750,000, and the right hon. Gentleman says that that money has not been coming in—not one penny of it—during the last three months. He said so just now, but I cannot believe that he means it. Does the right hon. Gentleman mean to say that no goods have come into this country from Germany in the last three months? [HON. MEMBERS: "We paid the duty."] That is what, I wanted to know Then the allegation is that the British importer has been paying the 26 per cent. during the last three months. The allegation is not that the Treasury has not benefited. The Treasury has benefited to the tune of £800,000 per month during the last three months, but the Germans are said not to have paid it; the British importer is said to have paid it. The right hon. and learned Member for the Spen Valley is not likely to say that. His objection did not at all take that form, for the very good reason that the suggestion is not true. He quoted a question asked in July, 1923, and in that question it was recognised that the export prices of goods from Germany were fixed by the German Government. Is it to be supposed that the German Government deliberately fixed the price higher because of this 26 per cent. duty, and that if there is no 26 per cent. duty they are going to fix the prices 26 per cent. lower? Is it likely that the German Government, which is looking after its exports, is going to make the British consumer a present of 26 per cent. It is not in the slightest degree likely, and in all competitive goods it is extremely improbable, that any part of that 26 per cent. was added to the price. I do not suppose the right hon. Gentleman the Chancellor of the Exchequer would deny that statement. The Germans got just as much as they could get for their goods. They fixed the price just so as to get into this market in competition with our own manufacturers and not one penny higher or lower, and we have not, directly or indirectly, paid any part of that 26 per cent. in competitive goods.

Lieut.-Commander KENWORTHY

What about dumping?

Sir L. WORTHINGTON-EVANS

That is another matter. I said in competitive goods, but in non-competitive goods it is quite possible that the 26 per cent. was added to the price. Why did not the right hon. Gentleman the Chancellor of the Exchequer use his powers? He has powers under the Act to exempt any goods he chooses from this 26 per cent. duty—or rather the President of the Board of Trade has—and if the right hon. Gentleman thought the 26 per cent. was paid by the British importers on noncompetitive goods — [HON. MEMBERS: "Why did not you do it?"] Because we did not mind. I did not mind a bit if there was an element of Protection in the duty. I make no bones about it, and, if there was an element of Protection, I should shed no tears, but the right hon. Gentleman had it in his hands if he chose to do so, if he thought this 26 per cent. was payable by the British importer in any class of goods—it certainly was not in my judgment on the competitive goods—to exempt those goods. The right hon. Gentleman has apparently made no effort to get the 26 per cent. from the German Government. He mentioned four alternatives, one of which was to try to get it—to compel Germany to pay 26 per cent.—but that was not the alternative he adopted. The alternative which he adopted was a temporary arrangement for reduction. As far as I can see he has not attempted in the negotiations to get 26 per cent. He seems to think that 5 per cent. is as much as can be obtained. Apparently he would get more if he could, but he is taking 5 per cent. because he thinks he cannot get 26 per cent. He has not told us, however, that he endeavoured to get the 26 per cent. He has not given us any evidence to show that he has not abandoned what was, and what he admits to have been, the only money-earner in reparations of any of the devices which have been put up to try to extract something from Germany. Why has he taken this course? Because he says if the German Government have to go on compensating their exporters to the extent of 26 per cent. there will be a fresh issue of paper money and further inflation, and you will never balance the German Budget, and unless you do that you are not likely to get any reparation from Germany. That is the argument the right hon. Gentleman advances for abandoning the 26 per cent. I do not say it is a bad argument, but why does it apply to Great Britain only? Is it not true also with regard to France, Belgium and Italy? [HON. MEMBERS: "They have not got it!"] Do hon. Members realise in connection with reparations in kind, and in connection with some of the deliveries from the Ruhr, the German Government is under a responsibility to compensate its own nationals for those deliveries, and those sums which go to the German nationals are on all fours with the sums which go to the exporters of goods to this country? If it be true that Germany ought to be relieved of some of the charges, then it ought to be done pro rata, and not in one isolated case. We ought not to be the only nation called upon to make sacrifices and to give up the cash which is being paid to us on account.

Lieut.-Commander KENWORTHY

It was not being paid.

Sir L. WORTHINGTON-EVANS

The hon. and gallant Member says it was not being paid. It is being received by the Treasury.

Lieut.-Commander KENWORTHY

From the British merchants.

Sir L. WORTHINGTON-EVANS

Again, he says it is being received from the British merchants. That, I believe, is not true in respect of competitive goods—goods which we also make in this country. It may be true, and that is my argument, as to odd non-competitive goods. There are certain scientific instruments, certain books and other articles which Germany produces and which we do not produce, and the 26 per cent. might, in those cases, be added to the price, but the Board of Trade have the power to exempt those goods if it is thought desirable to do so, and could have exempted them and so freed any importer in this country from any charge upon them. In relieving the German Budget of these charges and not relieving them of charges with regard to reparations in kind the Chancellor is sinning against the light because he has in the Treasury the Report of a Committee of experts which was made on the 7th November, 1922, and which recommended that, in order to relieve the German Budget, not merely reparations in cash but reparations in kind should be released, and I should not make any complaint if, after careful negotiation, it was found desirable to relieve the burden on the German Budget temporarily—provided all were treated alike. What I complain of is that we should be picked out to bear the whole burden alone. Further, was it necessary to make any arrangement at all for the next two months? This arrangement only lasts until lath April, and the right hon. Gentleman says he has chosen that date because the M.I.C.U.M. arrangements come to an end on the 15th April, and the experts of the two Committees will propably have reported by then, and we may be in a conference then and we may be able to make some new deal. I think the right hon. Gentleman said he did not reduce the levy to nothing, because he wanted a weapon with which to negotiate on that occasion. He thought he would not throw it all away, so he kept the 5 per cent. to have a weapon of negotiation. Which would be the better weapon—the 26 per cent. or the 5 per cent.? There was no necessity to throw that weapon away for two months, and I think this matter has been grossly mishandled. We are throwing away a weapon which would be of real value in the negotiations yet to take place; we are making the whole sacrifice ourselves, and we are not getting, as we ought to be getting, a very substantial sum in cash on account of German reparations.

Lieut.-Commander KENWORTHY

I notice the right hon. Gentleman who has just sat down is much more effective in Opposition when criticising others than he was when defending his own Government on the Treasury Bench. It was refreshing to hear his positive statements, his constructive suggestions and his potent criticisms, when we remember his most unsuccessful efforts—apart from his own Department—when he was on the Government side of the House. In this Debate some points have been overlooked. I would particularly direct the attention of the Chancellor of the Exchequer to the fact that quantities of goods come into this country from Germany—what the right hon. Gentleman the Member for Colchester (Sir L. Worthington-Evans) referred to as "non-competitive goods"—in quite small packages. There is a large fancy goods trade, and a trade in scientific instruments, and so forth, and these goods do not come here in bulk but in parcels. They include new inventions and devices of various kinds exploited on our market for the benefit of our merchants, and the trade, which brings cheap goods to our people, is a valuable one. I am informed that on most of these packages which come into London and other ports merchants have to pay about 10 per cent. of the value of the goods under the present arrangements, for breaking bulk, packing and unpacking, and passing through the Customs. When it is said by the Chancellor of the Exchequer that the collection of this duty only costs £5,000 a month, we should remember that that sum represents what it costs the Customs to collect it, but nothing has been said about the cost to the English merchant. As I say, the average cost on the smaller parcels works out to about 10 per cent. When the goods arrive in bulk, or in much larger parcels, the percentage is not so high. It is said to be extremely doubtful, in the condition of trade with Germany, whether this 5 per cent. is worth collection I do not think, from what I hear from merchants and others who are right in the middle of the trade, that the game will be worth the candle.

Furthermore, there are the goods that come in not subject to this levy at all. Nevertheless, because other goods are in dispute, they have to be held up, and the merchants have to take their places at the end of a queue because the goods might possibly be liable to detention and fine or levy, and the whole import trade is hampered between this country and Germany. In France goods come in much more freely, and in Holland and other countries it is known that these duties do not apply, and reputable agents can always get the goods through the Customs without unnecessary delay, but because of this possible charge in this country, if the goods come from Germany there are delays, and losses, and impediments to trade. For these reasons, I am extremely sorry that my right hon. Friend did not, if I may say so, go the whole hog, and wash the whole duty out altogether. He says this is a bargaining point in his hands, but it is obvious that if the German Government has been able to defy us, and has thought it worth while to do so for the last five or six months, over this levy, what did it matter whether it was 5 per cent. or 26 per cent. or 90 per cent. of the value of the goods? If they could not pay, it was no use threatening them. If we have to settle these various questions of reparation, they are of such tremendous importance and are so complicated that this miserable little levy—which has brought in £18,000,000 in 2½ years, with tremendous inconvenience and hindrance to our trade—what I think I am justified in calling this wretched little levy, with miserable results, is not going to be any sort of bargaining point with Germany at all.

The right hon. Gentleman the Chancellor of the Exchequer said that another reason was that he would have had to bring in a legislative measure into this House. I rather think that the time we are spending on this discussion would have sufficed for one stage, at any rate, or possibly two stages, of that Bill, and I believe he will have to bring in legislative measures about this matter before we are through with it. This is not the last we shall hear of the matter. Hon. Members opposite have been touched on the raw by the action of the right hon. Gentleman, because one of their cherished barriers to trade has been removed. The right hon. Member for Colchester—I am sorry he has had to leave the Chamber—said, "Well, suppose there is a measure of Protection in this levy, I will shed no tears," and, of course, in saying that, he threw over my hon. Friend the Member for Farnham (Mr. A. M. Samuel), who wrapped a white sheet about him and told us that he was not bothering about Protection at all, that all that he was pleading for was that our Treasury should not be deprived of moneys that it was not getting.

For this reason we know that hon. Members opposite will keep this subject alive. They will not see any of the artificial barriers that have been put in the way of British trade by the two or three previous Governments removed without a good fight, and as they are apparently determined to spin out all discussion as long as possible, as we have seen in the last few weeks, this is not the last we shall hear of this matter. It is no use the hon. Member for West Woolwich (Sir K. Wood) shaking his head. He knows very well that his friends, at any rate, have spun out the discussions on their Supplementary Estimates in a most ridiculous way. This is not the last, then, that the Chancellor of the Exchequer will hear of this matter, and he might just as well have brought in a Bill—he would have had the support of my hon. Friends here below the Gangway—to repeal the whole business. The Measure was brought in by a Coalition Government, after all, and they were Protectionists, and it is only a nuisance to the merchants and traders of this country, and ought to be done away with. [An HON. MEMBER: "What about the working people!"] I suppose the hon. Member on the back benches opposite, who interrupts is going to talk about the flood of German imports that will came into this country if only this levy is taken away. [HON. MEMBERS: "They are coming!"] What did the right hon. Member for Colchester say just now? I took his words down, thinking they were extremely valuable. He said that the goods sent in from Germany come in at a price just below the ruling prices here at which they can make sales, and he told us that the German Government watched to see that that was done, that there was a control, and so on. I am not misquoting the right hon. Gentleman, and when I interrupted him—for which I apologise—when I asked him about this very dumping, about which hon. Members opposite are so frightened, he said: "We will talk about that another time, but not to-day.'

No, Sir, the dumping bogey has been laid to rest by the speech of the right hon. Member for Colchester most effectively this afternoon. Do not hold that miserable turnip, candle, broom, and sheet up again here until the speech of the right hon. Gentleman opposite has been forgotten.

As to the exemption of certain classes of goods, his Government were always so much in favour of restoring trade, or so they said at Genoa and elsewhere, so why could not they exempt these merchants who were dealing in goods from Germany, such as dyes and chemicals? Why were not they exempted from this levy, when it was obvious in the last few months that they themselves were paying these sums into the British Treasury? The fact is, Mr. Entwistle, as you and I know—

HON. MEMBERS

Order!

Lieut.-Commander KENWORTHY

I am entitled to address the Chair. The fact is, Mr. Entwistle, as you and I know, that they hung on, during their term of office, to any little temporary barrier that they could be prevent the free flow of imports into this country.

The DEPUTY-CHAIRMAN (Mr. Entwistle)

The hon. and gallant Member must not associate me with his views.

Lieut.-Commander KENWORTHY

I apologise. It was not my intention, but hon. Members opposite rather took it up, and I did not mean that at all. They have hung on very desperately to any little artificial restrictions on imports, and they know it. The hon. Member on the back benches opposite, who interrupted me just now, is more politically honest in that matter than his own Front Bench, who have thrown overboard their theories for this Parliament, but he, apparently, has not. I disagree with him totally, and my only complaint of my right hon. Friend the Chancellor of the Exchequer is that he has not been a little more bold, and, throwing himself on the support he would have had from below the gangway here, removed this inefficient, and harmful, and irritating restriction on honest British trade.

Mr. HARMSWORTH

The late Government was always in this respect rather prone, to delay coming to decisions, and a great deal of criticism can, no doubt, be directed against them from that point of view, but there is also another extreme, and that is coming to a decision too hastily. After listening to the speeches this afternoon, I think the House is mostly in agreement that, whether it was right or wrong to reduce the reparation levy to 5 per cent., it was done in somewhat of a hurry and should have been considered before the final decision was taken. I think, further, that this House had a right to be consulted before the decision was taken. It was owing to a chance question by myself that the whole of the result of the negotiations came before the House, and had it not been for that question, we might still have been in the dark as to the negotiations having taken place. The Chancellor of the Exchequer never made a statement to the House on the point; he merely replied in the ordinary way to a question that was put on the Paper.

This question is much more serious in the eyes of the people of this country than the mere question of how much money is coming in, owing to the drop in the percentage, and I think a great many people will misunderstand the point of view which the Government is taking After all, whenever any question has been directed to this Government during this Session on the reparation question, we have always been told that we were to wait until the Reparation Commission had reported, and, consequently, we have never had a statement of the Government's intentions and policy in regard to reparation. One day, quite suddenly, they have negotiations with the German representatives in London, and come to the conclusion that the levy that exists should be reduced to 5 per cent., and, so far as we are able to make out to-day, they do not put up any bargaining point with the Germans whereby this country shall get any benefit from that reduction. I am sure a great number of people will take this as moaning that the view of the present Government is really rather unfavourable, to reparation coming from Germany, and, I think, whatever might be said on this subject, it must be universally held that the beat thing the Government could have done would have been to wait until the Reparation Commission had reported before coming to any decision.

I should like to protest strongly about this Debate only taking place on the Civil Service Estimates, and not, as it should have done, on an announcement by the Chancellor of the Exchequer that this levy had been reduced. It is an entirely new policy on the part of the Government. Going back, perhaps three years, to a time when the Coalition Government was at the height of its power, we had a great fight in this House to try and get more control over finance, and I remember that hon. and right hon. Members on the Labour benches were very insistent that this House should control all the new financial departures of the Government. I think it was only due to the House that we should have had an opportunity of considering the matter of this reduction of the levy, and I do not think it is sufficient excuse to say that the late Government did not come to any decision. That may be their fault, but that does not excuse the present Government from coming to a too hasty decision.

I could have understood the Government if they had come to the House and told us they had entirely done away with the reparation levy, but the thing that makes me suspicious is that they should have reduced it to 5 per cent. from 26 per cent. Is not this the real reason why they have reduced it, that if they had done away with it altogether, they would, have had to bring in a Bill to repeal the original Act which was passed? Purely to get out of that technical difficulty, which would have put them in a very difficult position, and might have meant the defeat of the present Government, they have merely reduced it to 5 per cent., which is entirely worthless either to the taxpayers of this country or the principle of the whole matter, so that they can make the present House pass a Vote of Censure on them for doing it instead of facing the House, bringing in a repeal Bill, and letting it go through its various stages.

6.0 P.M.

We have had many speeches as to whether Germany is or is not capable of paying, and there are so many different views on this subject that it is useless, I suppose, for anyone to point out their own view that Germany is still capable of paying some reparation, but it is obvious to me that the taxation in Germany is far less than it is here at the present time. You are merely trying to reduce the taxation in Germany, because this is a taxation on German exporters and industrialists. You are reducing taxation on the German industrialists and the German capitalists, merely to prevent the British taxpayer from getting money which is due to him in order that the taxation in this country should be lessened. If the Chancellor of the Exchequer could point out that the taxation in Germany was at the same level as in this country, and that German industries were being handicapped by that taxation, then I could understand the point of view that is being put forward. But that is not the case. It is notorious that the taxation in Germany cannot be compared with the taxation is this country, and that German industrialists do not even attempt to pay the taxation levied in Germany at the official level. When the Chancellor of the Exchequer points out that the industrialists in Germany cannot afford to pay this levy, I would suggest that he brings some facts before the House, at any rate, to try and prove his argument. I understand, as well, that Germany intends to compensate the exporters for this 5 per cent. levy. Would it not have been possible to compensate the exporters up to the 26 per cent. level? If it be possible to compensate up to 5 per cent., why should not the German Government be made responsible up to the 26 per cent., so that this country should get a sum of money that is worth having, instead of a sum of money so small that it is really perfectly useless?

I regard this question and this Debate as the most serious since the present Government came into power. I myself, and a great many others on this side, were always afraid that this Government might have some influence upon it which was not entirely British. I have never been one of those Members who have asked questions about the Socialist International, because I could never credit that that body would have any influence on British people forming a Government. But if the Government are going to follow this policy, it will be open to Members in this House and to people outside rather to come to the conclusion, and to take the line, that there must be some influence which can make this Government come to an agreement with German representatives in London within about two months of their coming power, reducing that levy to 5 per cent., which is not worth having. There must be some policy behind it. I thought the speech of the Chancellor of the Exchequer was an extremely poor defence for reducing the levy. I do suggest that before this is done, this House requires further arguments in its favour, and I do hope we shall have, either an understanding from the Government and a defence of the Government, that can be taken by this House, or that there will be a Division to-night, in which some of us on this side, at any rate, can vote. I hope Members below the Gangway opposite will also show their feelings in this matter, first because we do not consider the House of Commons has been treated with proper respect, and, secondly, because we do not consider the Government, in taking this sudden decision, will meet with a favourable reception not only in this country, but in other countries, which may entirely misunderstand the attitude of the Chancellor of the Exchequer.

Mr. MOSLEY

I will not follow the hon. Member who has just sat down into his researches concerning the hidden hand which has actuated the Government in this matter. The hidden hand, in this instance, appears to have moved the Government to make a reform which insists that the German Government shall pay 5 per cent., instead of Englishmen paying 26 per cent. To that extent, therefore, the International hidden hand is coming out on the side of the British. The right hon. Member for Colchester (Sir L Worthington-Evans) assailed the Chancellor of the Exchequer very fiercely because in his recent negotiations with the German Government he did not get the full 26 per cent., as the right hon. Gentleman put it. But the right hon. Gentleman did not explain how, after the three months' pause, during which they considered the matter, he and his friends were prepared to compel the German Government to pay the 26 per cent. What was to be their method for bringing pressure to bear on the German Government to meet an obligation which they had repudiated? Were they going to march into the Ruhr, that lucrative method of getting reparation payments? Were they to use the air to bomb Berlin until their obligation was honoured? What method had the present Chancellor of the Exchequer of compelling the Germans to pay the obligation which they had repudiated? The right hon. Gentleman, in launching his criticism, should, at any rate, have outlined the policy by which the Government might have achieved his objective. But even supposing methods could be found to compel the German Government to pay this 26 per cent., does the right hon. Gentleman really think it was desirable to fling into fresh chaos the whole German system of finance, just at the moment when the Expert Committee was inquiring into that system, and devising schemes for its alleviation, and for putting the whole system of reparations upon a sound and proper basis?

Then the right hon. Gentleman went on to say that he was prepared to leave the 26 per cent. in force, even if the German Government continued to repudiate the obligation which they had undertaken, and he adduced in—as I thought—the most powerful argument which he brought forward the consideration that, in fact, not the British importers, but the German exporters were paying that duty, and the right hon. Gentleman argued that in competitive goods, as he named them, the German naturally got as big a price as he could, and sold only just under the world price. That appears to me to be the most powerful argument he brought forward, but he forgets the speeches of his friends. He forgets the speeches of the late President of the Board of Trade during the passage of the Safeguarding of Industries Act. He forgets the late Member for Chippenham, Mr. George Terrell, that respected Member of this House, with his eternal presentation of the woes of the pianoforte makers, the flood of cheap German pianos in our market at about half the current world price, the great flood of goods coming into this country, and necessitating at least a levy of 33⅓ per cent.—and they would have liked far more, so as to fetch them up to world-prices. The fact was, that in those days Germany was selling much under the world price, in order to conquer prejudice against her goods, and to make her position secure in our market. The whole case of hon. Members in favour of the Safeguarding of Industries Act was based purely on the contention that Germany and other countries were sending goods into this country at far below the world prices, and so, when the duty was imposed, and was not reimbursed by their own Government, the German exporters were able to put up the price, and make the English importers pay.

There was a point of some substance raised by my hon. Friends below the Gangway during the course of the speech of the Chancellor of the Exchequer, when he was subjected to a running fire of interruption. They raised, as I understand it, a distinction between the present arrangement and the preceding arrangement, in that during the preceding-arrangement there were definite means specified by which the German Government could reimburse their exporters, while in the present arrangement there is rather an anomalous discretion relating to an indefinite reimbursement at a later date. That, I understand, was the gravamen of the charge, and my hon. Friend the Member for Rusholme (Mr. Masterman) pointed out, as I understood him, that the Germans would not have any great faith in this reimbursement at a later date, and, consequently, would be inclined to treat the 5 per cent. as a protective duty, and raise their price pro tanto. That, I understand, was the argument. I imagine that the reason for the difference between the present and the preceding arrangement was that, under the preceding arrangement, the German Government was in a position to reimburse her exporters, but, at the present time, is not in a position to reimburse them. When her finances are put on a sounder basis, she will be able to honour this obligation of 5 per cent., and reimburse her exporters. But there are substantial reasons for thinking, as has been pointed out, that the 5 per cent. will not be treated as a protective duty, and that the price to that extent will not be handed on to the British consumer. But, to begin with, my right hon. Friend has read out the actual German decree inflicting substantial deterrents on any German exporter adopting that course. Difficult as it may be, although by no means impossible, to prove the presence of such a penalty as that, and the possibility of it being inflicted, should clearly be severe enough to deter any German exporter, for the sake of raising his price by 5 per cent., from adopting such a course.

Then, again, as my right hon. Friend proved very conclusively, German prices have recently approximated to, and even surpassed, world prices, which was an altogether new situation. If that be so—and the figures in that respect seem quite conclusive—it is impossible for the German now to add this 5 per cent. to the price, and to compete successfully in our market. That marks a very different condition from that which formerly prevailed. Owing to the conditions of exchange, and continual fluctuation, German goods could be put on the markets of this country at considerably below world prices, and it also marks an additional argument against the contention brought forward by the right hon. Member for Colchester, when he said the German exporter can afford to pay the 26 per cent. out of his extra profits, through the condition of the exchange. Now, if it be true, as it evidently is, that German prices have approximated to world prices, then a 26 per cent. levy is an almost prohibitive duty against German goods coming into this market.

On the broad question, although I quite agree there is a weighty argument for the removal of this duty altogether, yet I cannot help thinking there is also considerable argument for making this a temporary arrangement until the 15th April next, when the whole matter will come under review. It is, to a certain extent, a weapon in the hands of this country in the great bargaining that must take place over the whole sphere of European relations, and reparation in particular. I might also point out to the right hon. Member for Colchester, when he says the 26 per rent. levy is a greater weapon, surely 5 per cent. which the German Government is honouring is better than 26 per cent. which it has no intention of honouring, and, at any rate, this is a flexible levy. It is an amount which, I understand, can be altered from time to time, and can be restored to its former position if occasion arises. Therefore, I cannot see that my right hon. Friend in any way weakens his hands in putting the thing on a practical and proper basis. So far from doing that, I think he is considerably strengthening his position from the bargaining point of view. In view of the temporary nature of this expedient, in view of the sittings of the Expert Committee, and the likelihood of a general review of the whole situation, I must say, in the circumstances, I think that my hon. Friend has made the very best possible bargain.

Mr. SANDEMAN

I have listened to a good deal of talk to-day, and a great deal of it appears to me to have missed the point. The point we want to get at is: what is the result going to be of taking off this 26 per cent. So far as I can see it is going to strike the working people straight away. I happen to know about one or two things pretty well, and I am going while I am here, to try to make a point of only talking about what I know. What I really do know about is, in the first place, something of the jute trade, and I want to give hon. Members just a little information about what the effect of this is going to be in that trade.

In 1921 we began first of all to feel the effect of competition in the jute trade. I have got the figures here which show how this importation has gone up. In 1921 jute yarns were imported to the amount of about 19 tons; in 1922, the figure was about 255 tons, and between then and 1923 it went up to 763 tons. I refer to the jute trade in Dundee, and I should have thought that some of the Members from Dundee would have been here to talk about the subject, but they evidently have not thought it worth while. I do think it is worth while, for the present position now looks like short-time in the yarn trade, and that means a great many spinners being put off, and a great deal of unemployment in consequence. Now we come to jute cloth. That began with 6,600,000 square yards in 1921, going up to 13,000,000 in 1922, while in 1923 it was 35,000,000. What do these figures mean in our trade? They mean that one of the very biggest works in the town will have to be stopped. I do not believe that you could open these works now even if you wanted to. If we had some reduction of the amount, I think we might be able to hold the German competition, but if what suggested is taken off the jute trade you will probably find that the trade will go away, and the Germans will keep on increasing.

My figures are different from the figures of some other hon. Members, but so far as I can see from them there is something like 25 per cent. difference between the selling price of our manufacturers and the selling price of the Germans. What is happening? This 25 per cent. in question is going into the merchant's pocket, every penny almost. I have done a great deal of selling of these goods myself, and time and again I have gone after very large orders. I have been told that I have been too late, that there was a difference of 1½d. per bag. This difference went right into the pockets of the manufacturers, and the consumer got no benefit at all. Hon. Members below the Gangway on the other side must know that perfectly well. With a great deal of money standing idle our workpeople cannot be fully employed. Then comes along the question of the turnover of the money. These importers are turning over their money with very few hands employed, whereas we employ people in hundreds of thousands. We are not getting the help we deserve. We are now more or less in a state of standing still. I consider that the Government by reducing this levy from 26 per cent. to 5 per cent. is distinctly prejudicing our work, and certainly affecting, in our trade, 30,000 people. I cannot stand and see that going on without raising my voice against it.

Captain BERKELEY

The hon. Member who has just sat down has made, as I understand, his maiden speech, and I should like to offer a few words of congratulation. I do not wish to detain the Committee more than a few minutes in order to put a point on which I need more light. I refer to a statement made by the Chancellor of the Exchequer. If I understood the Chancellor of the Exchequer—and I do not think I misunderstood him—what he said in reply to the hon. Member who suggested that this reparation levy should be kept as a bargaining asset to persuade Germany to reduce, or possibly take away, the tariff wall which she has built up against our trade, unless I completely misunderstood, the right hon. Gentleman said that to ask Germany to reduce her tariff in our favour in return for such concession would be in effect to reduce Germany's capacity to pay. I am bound to say that it seems to me that that is an economic statement that requires a certain amount of further investigation before it can be accepted. If you produce an enlargement of trade between the two countries, why should it reduce Germany's capacity to pay? If you bring about an enlargement of trade between Great Britain and Germany you put money into the pockets of British manufacturers, and British workmen, and you put money into the pockets of the German manufacturers and the German workmen, because you are building up a state of trade between them and one of two countries in the world which at the present time may be said to be stable—this country and the United States. If you put money into the pockets of the German manufacturer you benefit the German workman. You are not taking away from the capacity of Germany to pay; you are increasing it. I would beg the Chancellor of the Exchequer to reconsider his attitude, not only from that point of view, but also from the point of view of our own unemployment problem. After all, the question of reparations, important though it is, is immeasurably less important than the relief of our own unemployment.

The trade of this country with Germany before the War was put at a very high figure, and might very well assume the same proportion to-day if measures are taken to encourage it. Indeed, before the collapse of the mark it had taken a very large turn for the better. It is not only a question of the existence of German tariffs that retard our trade with Germany. There are also a number of prohibitions against importation which operate most detrimentally, and those also should be made a subject for bargaining, either with the specific reparation levy, or with the general question of our reparation claims. I beg the Chancellor of the Exchequer to consider whether he cannot at this forthcoming Conference—which he tells us is to take place in two months—take the whole question of our reparation claims upon the German people and utilise them as a bargaining asset for the purpose of bringing about easier trade relations between the two countries. I am rather inclined to agree with those critics who have said that a 5 per cent. reparation levy is not a very formidable weapon to utilise for bargaining, although I fully appreciate the logic of the hon. Member for Harrow (Mr. Mosley) when he points out that it is better to have 5 per cent. paid than 20 per cent. not paid. That is perfectly true. While the gross receipts do not total more than, as I estimate, to about £1,750,000 a year from the 5 per cent., assuming it to be paid in full, it is not really a bargaining asset of any great magnitude, but if the Government were prepared to take into account in bringing about a reduction of the tariff walls of Germany and this country, not only this specific reparation levy, but also very large claims which under the Spa Agreement we have upon the German people, as a whole, then I venture to believe that something really effective can be done towards the relief of unemployment in many industrial centres of the country.

I can speak with personal knowledge of trading affairs in my own constituency. There, the lace trade is something about which I have had to address myself to the House more than once, though not at this Session. The lace trade is in a position of unparalleled depression. It is a trade which depends as to 75 or 80 per cent. upon exports. Prior to the War, although I believe the export of lace, as distinguished from plain nets, was less in amount, the export of plain nets was of the annual value of something like £1,000,000; yet at the present moment—though things might have altered in the last few days—there is a prohibition, not a tariff, but a prohibition, against the importation of plain nets into Germany. The plain net manufacturers of Nottingham, who, before the War used to send their net to Plauen are unable to do so, because of the prohibition. I believe I am right in saying that there is also a prohibition against any importation of lace whatever into Germany because it is regarded as a luxury. I have heard that there is some suggestion of removing that prohibition, and that it is intended to replace it by a very high scale tariff. I would impress upon the Chancellor of the Exchequer that in that trade alone there are something like 30,000 to 40,000 men unemployed. These people used to derive employment from that trade. They derive it no longer. This is only a small trade by comparison with the great trades of the country, iron, and steel, and engineering. A great measure of relief could, I believe, be obtained from the distress in Nottingham if negotiations could be opened with Germany to make possible the entry of these goods into the German Republic at this moment. I am sure that that is the case with other trades.

The DEPUTY-CHAIRMAN

The hon. and gallant Gentleman must restrict his criticisms to the importation of goods into this country.

Mr. W. GREENWOOD

The Chancellor of the Exchequer said that this was a weapon which could be used.

Captain BERKELEY

I was rather led away by the latitude allowed to the Chancellor of the Exchequer, but I will confine myself to the terms of your ruling. The Chancellor of the Exchequer, on his own showing, has a weapon which he proposes to use for bargaining purposes, and I ask him to utilise that weapon, not so much in the direction of obtaining increased reparation payments, either in cash or kind, but to use those bargaining assets in the direction of promoting a freer trading intercourse between the two countries.

Sir F. WISE

As a back bencher perhaps the Chancellor of the Exchequer will excuse me if I say that I cannot quite congratulate him on his defence of this Motion. If an agreement has been made such as that which has been mentioned by the Chancellor of the Exchequer, it should, I think, appear in some White Paper, and we should not have to go and endeavour to get the Board of Trade Journal. I think it is an important point because we cannot always buy that journal, even, I believe, in the House of Commons Vote Office. I entirely agree with the hon. Member for Thanet (Mr. Harmsworth) when he stated that this is hardly a proper occasion to discuss reparation. Personally, I feel that while these Committees are sitting anything said here might be misinterpreted in some way or another. When the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) brought in this Bill it was the only way at that time, and even at the present time, of getting any reparations for Britain from Germany. I felt greatly honoured when he discussed it with me, and I gave him my opinion that the only fault I could find with regard to the 26 per cent. was a possibility of inflation or increasing inflation in Germany. I feel now that that is the main point the Chancellor of the Exchequer has to contend with, and I believe that is why it has had to be reduced from 26 per cent. to 5 per cent. I do not think this point has been mentioned in the Debate.

I do not quite agree that 5 per cent. is the right figure, and I feel confident that now Germany has gone to the rentenmark that more than 5 per cent. can be paid by that country. There is this tremendous inflation in Germany, and what has it done. It has practically wiped out all fixed charges of industries and internal debt in Germany. That is what our manufacturers have to contend with now, and that is one of the dangers of the future. The hon. Member for Thanet referred to taxation in Germany. What he said is quite true, as it is not so great as it is in this country, but German taxation is only in marks. We do not want marks here. My main point is that there is only one fund from which German reparations can be paid, and that is the external exports of Germany being greater than the imports into Germany. I want the Committee to realise that that is the one point to study when you are considering the capacity of Germany to pay. In Germany last year her imports were greater than her exports, but you cannot take the German figures with any real reliability, because you are unable to decide whether those figures include the Ruhr.

The case of France has been mentioned and if anybody studies the reparation figure for the first six months of 1923 they will see that France through the Ruhr has received even less than we did on the 26 per cent. levy brought in by the right hon. Gentleman the Member for Carnarvon Boroughs. In the first six months of 1923, France received through the Ruhr £16,000 in cash and £642,000 in kind. We have done better than that on the 26 per cent. levy. I hope other countries will follow our example and introduce Bills so that they may receive a percentage on the exports of German goods. I feel that the capacity of Germany to pay at the present time should not be criticised because I feel confident that nothing of a derogatory nature should be mentioned in case it might affect any policy now being laid down by these Committees. Again I appeal to the Chancellor of the Exchequer to look into the position of the rentenmark which has altered the position of Germany, and although Germany may be forming another Bank and also organising another new mark at present and also remembering that the rentenmark is at a premium compared with the pound I think that more than 5 per cent. can be paid at the present time.

Mr. LLOYD GEORGE

My hon. Friend who has just sat down has, in the course of a very short speech, made a real contribution to the discussion of this problem. I think he has focussed the attention of the Committee on the real issue. I regret very much some of the speeches that show an inclination to convert this into a debate on tariffs. If this duty is protectionist, then, in my judgment, it fails. If it has to be paid by the importer here, and if it has the effect which a tariff necessarily must have, in our judgment then it fails from the point of view of making Germany pay reparations. It is because I think that in the vast majority of cases—there may be exceptions—Germany did really pay that I think it was a contribution towards the payment of reparations to us. If the Government had considered the cases referred to of non-competitive goods, where undoubtedly Germany probably put the duty on to the cost, and if the Government had readjusted matters in order to meet cases of that kind so that the payments would come out of German pockets, that would have been a perfectly fair thing to do.

There is a first class issue involved here and that is whether we need to levy any contributions on Germany at all in respect of reparations. It is not a question whether you are going to levy the amount mentioned on the 21st of May. The total that comes out of this does not correspond in the least with that, but supposing reparations were confined to damages in respect to air raids, the sinking of ships, and the bombardment of houses, leaving out the more disputable part of our reparations, this amount would barely meet that claim, and if the Government are contemplating dropping this claim, I say honestly that I cannot see where they are going to get reparations out of Germany. That point was very fairly put by my hon Friend opposite. There is no method by which Germany can pay except by exports and raw material. There is a limit to what she can pay in raw material, but when you come to anything in the nature of gold payments it resolves itself into some kind of levy on exports. The alternative has been suggested very often of putting a duty upon the whole of the exports of Germany of 25 or 26 per cent. and putting it in the clearing house and distributing it amongst the Allies. That has not been imposed, but in the absence of that there is no other way in which this country can get its share of reparations. The Government would have received £9,600,000 according to their own figures.

Mr. SNOWDEN

That is on the assumption that Germany paid.

Mr. LLOYD GEORGE

I understood that, amongst other things the right hon. Gentleman did not know, that was one. He stated that he was not quite sure in one of the questions he answered. I agree if there are any goods where there is any doubt as to whether the German Government is paying in respect of them, the Government are perfectly right in readjusting the imposts to meet cases of that kind. Take, for example, scientific and surgical instruments. I can understand you saying we can propose to eliminate those because we are paying, and there is no point in collecting reparations from the pockets of your own people. That is the line which I took from the start. If my hon. Friends on the Labour benches had looked at the Bill they would have seen that there is a special provision for exempting things of that kind. If they have not been exempted by the late Government then the present Government could have exempted them, and their remedy was to deal with occasions of that kind, and not give away this valuable instrument for getting reparations.

You can get reparation out of Germany by handing over German produce for distribution amongst the Allies. You can get it in one shape or another by exports. There is no other way in which you can get any substantial contribution. That has been the contention which I have urged at many conferences, but, as my right hon. Friend will agree, we were never able to persuade our French Allies. They were under the impression that they could collect in marks and then convert them into gold—a perfectly grotesque assumption. If there were gold in Germany, then they could pay. Their gold has gone. If they had deposited securities abroad beyond what is necessary to create credits for trade, there would be a margin there; but, as everyone knows, the worse the credit of a country becomes the larger must be the deposits it makes abroad in order to enable it to trade at all. Therefore, the mere fact that they have larger deposits now than they had before the War is not necessarily a proof that they are doing it in order to defraud on reparations. It is because they cannot do business without practically doubling their deposits in other countries. There may, however, be a certain margin upon that, but, if there is, it is in the hands of people from whom you cannot get it.

Therefore I have always been of opinion that there are only two ways in which you can get reparation. The first is by raw materials like coal, timber, potash, and there may be a few other commodities; the other is by some sort of impost upon the exports of Germany, because the payment is then made either in sterling or in dollars. Anything which you collect in marks is perfectly worthless. We were unable to persuade our colleagues of that, and my regret is that the Chancellor of the Exchequer does not seem quite to realise that he is parting with a very formidable weapon for negotiation in the coming months. If the attitude which he has displayed to-day towards the German Reparation (Recovery) Act represents the spirit in which the Government are going into that Conference in April, then British interests will be completely surrendered. And this is what I dislike. In every Conference we have had, we have treated the amount recovered under this Act in exactly the same way as the coal and timber given to France and Italy and Belgium. We put it in the same category, and rightly so. This was our equivalent method of raising reparations. In the Cannes Conference, when we came to consider reparations in kind, there was an attempt to limit the amount, in order to give a sort of restricted moratorium to Germany, which would have gone through but for the fall of the Briand Government. This Bill, and the sum collected under it, was put in the same category as reparations in kind.

What has happened? Reparations in kind are still collected by France, by Belgium, by Italy, and the amount, has been refunded by the German Government. Our equivalent is practically abandoned. What I dislike is something for which this Government is not altogether responsible, but, I am sorry to say, some of my right hon. Friends on the other side. There has been rather a disposition to treat British interests as being secondary in all these negotiations. I protest strongly against that. I have never been opposed to abatements of the claims of the Allies against Germany, as part of a great general settlement. As my right hon. Friend knows perfectly well, the Balfour Note went very far, but the Balfour Note was the basis of negotiations. It was an effort to deal with the whole problem in the spirit of giving up claims. But we always said that, if claims are to be given up, the abatement must be an all-round abatement; it must not be always at the expense of Great Britain. The War cost us more than any other country as far as cash is concerned. In devastation it was not so great as the devastation of France, but indirectly it has been very great. It comes to hundreds of millions of pounds, and the devastation to our business, as everyone knows, has been greater than has been suffered by any other country. I protest against the new spirit, which seems to proceed on the assumption that England is to pay, but, when it comes to receiving, it must be some other country. It is always some other country. Britain pays America, but she is to receive nothing from France, nothing from Italy. [An HON. MEMBER: "There is nothing like cheek."] I claim civil treatment in this House. [HON. MEMBERS: "Hear, hear!"] We are to pay. If Germany cannot pay, very well; let there be a moratorium which is an all-round one. Let us examine whether Germany is in that condition. My right hon. Friend says she is in such a condition that she cannot possibly pay. No, she cannot pay us. She is to pay France in full. Everything goes to France, everything goes to Italy, everything goes to Belgium; but, forsooth, she has not the capacity to pay Great Britain. I object. We were equal in the sacrifices we had to make, and I think it is about time that someone should stand up for the rights of Great Britain.

Sir PHILIP LLOYD-GREAME

I certainly find myself in very much closer agreement with the speech just delivered by my right hon. Friend than with some of the speeches which have come from behind him upon this matter. Although the explanation which has been given of the arrangement into which the Government have entered—and which is, if I may say so, quite inadequately stated in the Board of Trade Memorandum and in the Treasury Minute—still leaves us in much doubt, both as to what the agreement actually means and as to what is to be the procedure to be followed, it explains enough to leave us in no doubt that it is an arrangement which is bad in principle and bad in detail. I do not yet understand how it is to be worked. With regard to arrears, they are to be paid in German bonds, which in some way, wholly unexplained, are to be adjusted to meet the incidence of the levy. How on earth that is going to find its way into the pocket of the English importer, much less into the pocket of the person who has bought from the English importer. I have not the least idea, and I do not believe the Financial Secretary to the Treasury has either.

Let me take another point of detail. I have a much more serious objection to make on the ground of principle. There is a provision that in future, if a German seller takes advantage of a British buyer by adding to the price the value of the levy, he is to be subject to a penalty and to forfeit his chance of getting reimbursement from his own Government. That is very nice in theory, but how, on earth, is anyone in Germany, much less anyone in England, going to be able to say whether the price which the German exporter has asked, and which has been accepted by the English buyer, includes the 5 per cent. levy or not? Anyone who sells anything, from a mouse-trap to a mountain, knows that what will happen will be that a price will be asked, and, if the English buyer cannot buy more cheaply somewhere else, that price will be accepted; and it will be utterly impossible for anyone in this country or in Germany to say whether that price included the levy or whether it did not.

Mr. MARLEY

It is the same with the 26 per cent.!

Sir P. LLOYD-GREAME

Exactly, but perhaps we shall get rather more quickly to the speech which the hon. Gentleman's leader is going to make if I am allowed to develop my argument. It is exactly the same with the 26 per cent., and that is why it is so fantastic to change the 26 per cent. to 5 per cent.

Mr. MARLEY

It is much better to get 5 per cent. than not to get 26 per cent.

7.0 P.M.

Sir P. LLOYD-GREAME

The hon. Gentleman will learn in time that the process of debate is at once more courteously and more conveniently conducted if one speaker speaks at a time. It is exactly the same here, and therein lies the fallacy of the whole argument advanced by hon. Gentlemen below the Gangway for a further reduction of the 5 per cent. What happens is that the German, having now found that he can get a certain price out of the English buyer and still undersell his English or his other competitor, is, in future, of course, going to get the highest price that he can possibly get the English buyer to pay. It is ridiculous to suppose that, because you take off this levy which has hitherto been made, and make a present of it to the German exporter—and that is the person to whom you are making a present of it—he is then to come to you, cap in hand, and say, "I am very much obliged to the Chancellor of Exchequer for relieving German industry of some part of that small measure of taxation which it has to bear, and, therefore, I am going most generously to give the full advantage of that by reducing the price at which I sell to the British consumer." Of course, he will do nothing of the sort. He will do what any ordinary business man would do in his position; he will get the best price he possibly can; and the net result is that you have merely relieved him of taxation without giving a farthing of benefit to the importer in this country, and still less to the consumer who buys from the importer, and to whom the goods ultimately go. The right hon. Gentleman has said that really we need not be afraid of this competition, that we must give more consideration to the German manufacturer, in effect, because German prices to-day are as high as English prices, and, therefore, we need not be afraid of the competition that we have to meet. Does the right hon. Gentleman deny that, whatever may be the actual statisticians' figure of gold prices in this country and in Germany, wages to-day in Germany are far below the wages which are paid in this country? The cost of production in a country is not governed by the figure which you can get out of the "Statistician," or out of the German corresponding paper: it is governed by the expenditure which the employer has to pay out, whether for material or for wages, in order to manufacture the article he sells. I was asking a man with great German experience who has just come back from Germany what the wages were, and he gave me the wages as being about 50 to 60 pfennigs an hour. I suppose that is the equivalent of 6d. an hour; and the German workman works 10 hours a day as against the eight or seven hours here. Does the right hon. Gentleman really suggest that the incidence of cost are equal in German industry and in our industry when a British workman is getting 1s. 2d., 1s. 4d., 1s. 6d. and more an hour and the German workman is being paid 6d. an hour and working very much longer hours? Not only so, but, as hon. Members will learn as they come more in contact with the reality of it, English industry is being taxed far more heavily than German industries are being taxed. English industry, also, is subject to the sinking fund and the interest charges on the heavy loans and other capital with which it is financed, and German industry has written off a very large part of that by the depreciation of its currency and the repayment of capital charges. All these reasons should surely make the right hon. Gentleman cautious in coming to an arrangement of this kind. He said there were circumstances which made it impossible to get present payment of anything more than the 5 per cent. Incidentally he is only getting the 5 per cent. by deferred payment. I think the right hon. Gentleman has made a very bad bargain. I am not saying that in a final settlement of reparations you will not have to reconsider the whole of this Act. I think you will; but do not prejudice your final settlement of reparations by a bad arrangement made for a temporary period. It is a bad arrangement. It is a far worse arrangement, on the right hon. Gentleman's own showing, than the French and the Italians and the Belgians have got with the German Government and with the German industrialists. A question was put to the hon. Gentleman the Financial Secretary in the House to ascertain what were the terms of the arrangement made by the German Government with the German industrialists to recoup the latter for the deliveries in kind—and they are very considerable—which are being made to the French and the Italian and the Belgian Governments. It is a far better arrangement than any made by the right hon. Gentleman. I will read the answer given yesterday by the hon. Gentleman the Financial Secretary. He says the German Government undertake ultimately to reimburse the industrialists: provided that such deliveries and payments are credited by the Reparation Commission to Germany on reparation account. In the meantime"— And this is what I would draw the attention of the Committee to— the mines are authorised"— Those are the mines which pay the reparations in kind— to set off the amounts thus due to them against Corporation Tax, Capital Tax, and Turnover Tax to the German Government. Why could not the right hon. Gentleman get the same arrangements for the reparation levy that the French, the Belgians and Italians and the Ruhr industrialists have been able to get? Why did not he insist on saying, "As long as that agreement stands for the delivery of reparations in kind to our Allies, we must have as good terms"; and those terms apparently are satisfactory to the German industrialists who are delivering reparation in kind. [An HON. MEMBER: "Would you go to Berlin?"] That is a ridiculous observation. The Italians, French and Belgians are getting those terms, and getting them quite easily. It is that kind of observation by the people who are the friends of every other country but their own, which prejudice British claims and British interests every time.

Let me take another point. What is likely to be the effect of the arrangement which the right hon. Gentleman has made on the ultimate reparations policy? He said you must make arrangements of this kind because Germany had to balance her Budget in order to pay reparations. With the premise I agree. With what he has done I totally disagree. You will never balance the German Budget, and you will never get reparations, unless German industry is forced to submit to a measure of taxation at least as high, and higher, than that which prevails in Allied countries. This is not a question of Free Trade or Protection in the least. This reparations levy in fact was a taxation upon German industry for the purpose of paying reparations. By relieving German industry of that taxation to-day, apparently merely because they said they declined to pay more than 5 per cent., you are giving the greatest encouragement to the German industrialists to resist that taxaion which must be put upon German industry as part of the final reparation scheme.

You are doing something else, which I hope the right hon. Gentleman the President of the Board of Trade is going to watch with great care. One of the things which, when I was at the Board of Trade, I was most anxious about was the industrial arrangements which were likely to be made by French and German industrialists to the serious prejudice of British industry. What is the effect of an arrangement of this kind going to be on encouraging this sort of procedure? It ought to be the right hon. Gentleman's policy to watch these arrangements and negotiations, and to insist, both with the Germans and with the French, that, if such arrangements are to be made, English industry shall stand in as a partner on equal terms.

What is the effect of this likely to be on arrangements of that kind? You are practically saying to the German industrialists: "You say you can only pay 5 per cent. Very well. We are quite content to take 5 per cent." If they said they could only pay 1 per cent., you would be quite content to take 1 per cent. That is not the way to go and do business with Germans, who will get the best terms out of you they possibly can.

I hope that the right hon. Gentleman, with a view to the future, will see that arrangements of this kind are not made which may prejudice the whole industrial future of this country, not only in its own domestic trade, but in international trade relations. It is probably inevitable that with the world capacity of industrial production far in excess of what the world can absorb to-day, international arrangements must be made in industries. But if that be so, it is vital that our policy should be such as to ensure that British industries come in on our own terms. This agreement, which we even now only partially understand, is an agreement which helps no one in this country. It does not help the importer, and it certainly does not help the consumer. It does present injury to many. It makes a present of relief of taxation to the German industrialist, and prejudices our ultimate chances of reparation. On all these grounds I hope my hon. Friend will go to a Division and will secure a large number of votes.

Mr. LINFIELD

I am one of those who think that, on the whole, the Chancellor of the Exchequer has acted wisely in this matter, but I do not agree with every detail. I cannot get away from the fact that, after all said and done, at the present time, instead of the Germans paying reparations, it is the British traders and taxpayers who are paying them. If a better way could be found by which it could be made possible to enforce payment by the Germans I should be perfectly satisfied, and it was on that ground that I felt rather pleased that the Chancellor of the Exchequer has not thrown away the weapon altogether, but has retained it in his hands, so that, if necessary, and if possible, at some future date he might apply a larger percentage than that which he finds it possible to obtain at the present time. When this matter was first before the House in 1921, the then Chancellor of the Exchequer, the right hon. Member for West Birmingham (Mr. A. Chamberlain) informed the House that it was intended that these duties should be enforced by the whole of the Allies. He stated to the House in reply to a question by Mr. Bottomley: I have been authorised by the French Government to say that their Measure will be laid before the Chamber to-day or to-morrow. That has never been done. The Belgians have never enforced a measure of this kind; neither have the Italians. May I make a reference to the Act itself, and say to those who are responsible for this Measure that I think it worked very satisfactorily until last year? From the spring of 1921 until last autumn the Measure worked fairly satisfactorily. There were a few absurd anomalies, and a great deal was made of those; but, so far as the collection of money was concerned, it worked in a satisfactory manner. I believe we got some seven millions of money per annum, and that is an amount of money not to be despised. There were no very serious defects except those occasioned by the Customs House difficulties—a certain amount of delay and irritation, which always happens when you impose duties of that kind. Further, there is no reason to suppose that the German exporters increased their charges in those days. At all events that is my information. It was my pleasure and duty to introduce a deputation to the Chancellor from a section of the London Chamber of Commerce who were so hardly hit by this Measure. At that time there was no real serious difficulty. The real trouble arose in October last. The German Government's scrip was only negotiable at a very heavy discount and, as a consequence, the German traders began to extort it from the British buyer. I am quite sure hon. Members opposite, as well as hon. Members on this side, really have no desire to make the British traders' difficulties greater than they are and I ask them to put themselves in the place of the British trader. In some cases the imports ceased entirely because the price of the goods was already so high that they could not pay the increase. In other cases certain essential raw materials jumped up in price, thus hindering business. A few firms—I do not think there were many—looked round to find some circuitous way of getting the goods from other sources, and there were offers of goods even from the Irish State for which, if British traders were buying direct, they would have paid the extra 26 per cent. duty. Offers of goods were being made at a price less the 26 per cent. duty.

There is another point of view that does not seem to have been mentioned. All said and done, when the British trader or taxpayer has paid his money we are collecting 26 per cent. from him and we are liable to pay the Allies 75 per cent. of the money. They do not seem in a hurry to recognise their liability to us. We have had no payment from France to date and yet all the money we are paying does not go into the British Exchequer in relief of the British taxpayer. Out of the money that is being collected in this way from the pockets of the British taxpayer we have a liability to pay 75 per cent. of it to our Allies. When this Measure was before the House the hon. Member for Bury St. Edmunds (Lieut.-Colonel Guinness) seems to have shown very considerable foresight. He said in March, 1921: Unless the German Government recoups the exporter for the tax levied upon his goods, it is pretty certain that the German exporter will recoup himself by raising his prices and then, instead of it being an export duty paid by Germany, it will approximate an import duty paid by the British consumer."—[OFFICIAL REPORT, 14th March, 1921; col. 1107, Vol. 139.] This unsettled condition is very seriously affecting commerce. The traders who deal in these goods do not know what is going to happen. There is no stability. They find themselves unable to make contracts. Their travellers cannot quote forward prices. Hence on every hand there is unrest and unsettlement on the part of people who deal in these classes of goods. I know it has been said it is a very trifling matter, but there are very large firms in London who bring in German goods in fairly large quantities. You say they can get the money back if they re-export, but it often goes out in very small parcels. They get orders for different classes of goods. They have to collect them.

Whereupon, the Gentleman Usher of the Black Rod being come with a Message, the Chairman left the Chair.

Mr. SPEAKER

resumed the Chair.