HC Deb 05 May 1925 vol 183 cc797-835

Considered in Committee.

CLAUSE 1.—(Issue of gold coin suspended and right to purchase gold bullion.)

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


On this Clause I wish to refer to a. subject which was alluded to yesterday, but it was not very fully developed, and whether the right hon. Gentleman accepts our view or not I think it is a very legitimate view to put before him. The position is very difficult. It is this, that the Bank of England, when notes are presented, are not compelled to give coin in return, but they are compelled, if required, to give bullion in return


Over a certain amount.


It was suggested in Debate yesterday that it is unfortunate that the provision has been retained by which the Bank must buy bullion in unlimited quantities. It has been argued that it would have been advisable now to have abandoned that position and therefore to repeal Section 4 of the Bank Act, 1844. I wish to explain to the Chancellor of the Exchequer that on this point we have really good authority behind us, which I think he will admit in a moment. I should like the right hon. Gentleman to regard the course I am taking, not as an attack, but as raising a point which I hope he will seriously consider, and one in regard to which it might be possible and advisable to introduce a new Clause to carry out this proposal. The position is this: The reason why this is now advocated is that our position in returning to the gold standard is not going to be the same as it was before the War. We admit that we are now obtaining greater stability of exchange, but as a consequence we are giving up our control of our own internal price level. We are coming within the orbit of American influence, and we are affected by American fluctuations. There is considerable danger after the War in being tied to American fluctuations than was the case before, and, although this may be comparatively unimportant in America, it might be very devastating here.

At the present time America, at great expense to herself, is practically burying the gold of the world, and it is costing 1150,000,000 a year. A very slight alteration in her policy with regard to the reserves might suddenly lead to cheap money and a flow of gold into this country, again causing fluctuations in our trade here. A very important financial authority stated the other day that he did not think American finance was as experienced as finance in this country, and he thought something of the kind I have indicated was quite within the bounds of possibility. Therefore, this provision is proposed in order that we shall not be in such a situation that we should bound to be subject to these influences against our will. The proposal put forward is that the Bank should not any longer be compelled to buy bullion in unlimited quantities.

Now I come to a passage in the right hon. Gentleman's speech yesterday which is concerned with a very peculiar incident and one which I am not aware has had any previous precedent. The Chancellor of the Exchequer himself read a testimonial from an article by Mr. Keynes, but I think it would have very much interested hon. Members if, when he read that testimonal, he had satisfied himself with regard to the whole of the article. As a matter of fact, it is perfectly clear that that testimonial was written under a misapprehension. It is quite clear that this article was written before the Bill was issued, probably or: the strength of the Chancellor of the Exchequer's speech, and it was written under a complete misapprehension on the point which we are bringing before the notice of the Chancellor of the Exchequer. Mr. Keynes began his article by pointing out how exceedingly wise it would be to repeal Section 4 of the Bank Act, and he said if that were done it would secure us from many of the dangers to which this step is now subjected. He went on to say that since it had been done a great many of these objections had been removed. He said

: The Bank of England will not be allowed to give Notes for gold bullion at a fixed price. Thus our legal tender can never be worth less than its gold parity, but it may conceivably be worth more. It is a wise provision and protects us against other contingencies. The result of that paragraph explaining that provision was that he ended up with the testimonal which the Chancellor of the Exchequer quoted: If we are to return to gold the Chancellor of the Exchequer and the Bank have tried to do so along the most prudent and far—sighted lines which are open to them." If the Chancellor of the Exchequer has really read the whole of that article, I do not see how he could have quoted that testimonial without recognising the misrepresentation on which it was based. In these circumstances, perhaps he will see that this is a perfectly reasonable proposal, and that it will save us from many of the anxieties expressed yesterday. I suggest to him that he should consider whether the Government cannot introduce a New Clause to repeal Section 4 of the Bank Act, 1844.


Yesterday the late Chancellor of the Exchequer said he approached this subject with considerable trepidation and another ex—Chancellor of the Exchequer said something to the same effect. In these circumstances, it will be realised with what great diffidence I rise to offer a few brief observations. With regard to questions of high finance such as the gold standard, I have always thought that either the subject. is so difficult and intricate that it requires a long life study to speak upon it at all or that it should be considered from the commonsense point of view. I have been trying to examine this problem from the point of view, if I may use the expressive vernacular, of the man in the street. Hon. Members of the House have had opportunities in the last few months of listening to two very great authorities on this subject, Professor Keynes and Mr. McKenna—the former an international economist and theorist of world—wide repute, who is now endeavouring to put his theories into practice in the City; the latter a gentleman who has had great success in practice, and who is rapidly gaining the reputation of a theorist in these matters. I attended those two addresses and tried my best to understand them, and the two chief impressions which they left on my mind were, in the first place, that these two speakers were determined, by screens of enigmatic phrases and polysyllabic oratory, to prevent their hearers from discovering whether they themselves were in favour of a return to the gold standard or not; and the second impression that was left upon my mind was that, whatever the individual view of each of them in particular, they were at variance with each other. If such was their object, I think they were highly successful.

We have here two of the greatest living authorities differing on this subject, and not only differing, but both of them, I understand, have changed their views on the subject within the last six months; and, if these two eminent gentlemen cannot see eye to eye on this problem—if they not only differ, but have changed their points of view recently—what is left to the humble amateur? I think nothing is left to the poor amateur but to turn his mind again to the now long deserted and undisturbed realms of Bimetallism. Everyone will agree that a return to the gold standard was what everyone wanted. It was advisable; it was expedient; the only question was when it should be done. But no amount of saying that we ought to be on the gold standard, or that we want to be on the gold standard, would put us there. Nothing except this direct, imme diate action on the part of the Government would achieve that result. No amount of Coueism, no amount of saying that on every day and in every way the pound was getting better and better and nearer the dollar, would have put us on the gold standard, although the rapid rise in the value of the pound was, I should think, a good testimony to a Cone treatment.

The Act, however, which has made the trouble conies automatically to an end this year. If only that Act had not come to an end until 1926 or 1927, we should not have had to discuss this problem today, but, unfortunately, the Act does come to an end this very year, and, therefore, the Government had at this time to declare either one way or the other; and, if the advantages of the action they have taken are not very obvious, I suggest that the disadvantages of the alternative policy of not returning to the gold standard are very obvious indeed. May I give one? We should have had to state definitely that we, as a country, were not going to return to the gold standard. What would that have entailed I I understand that, in the first place, it would have entailed the withdrawal of that very large number of bank balances which are kept in this country, in London, and which do more than anything else to make London the financial centre of the world. Those balances, which have been left to fructify and increase in this country, and which are assisting our industry, would have been withdrawn, with the subsequent consequence that our exchange would have been depreciated; and, as we were informed yesterday, that would necessarily have made our debt to America more expensive, and we should have had to pay more for all the materials which we import into this country.

I think the moment was as favourable as any other moment has been in our past history, and, although the possible disadvantages, some of which we have heard today, may be considerable, I maintain that they are nothing to the absolutely certain disadvantages which would have accrued had we done nothing, which would have been tantamount to saying that we were not going hack to the gold standard. I realise that I am trespassing on the sacred realms of high finance, and I know that, unless one has a very large bank balance or a salary of £10,000 a year, or has written an absolutely incomprehensible book on economics, it is a grave breach of financial etiquette to trespass on these very difficult problems. I maintain that I am the disciple of no one of these impeccable pundits of pure finance. The phraseology which I understand and which appeals to me is, I fear, something on these lines, that today the pound sterling can look the dollar in the face without shame, and, in regard to that, I am reminded of a certain rhyme emanating from across the Atlantic, which runs as follows:

In beauty I confess I'm no star, There are others more handsome by far; But my face—I don't mind it, For I keep well behind it, It's the people in front get the jar. For a long time we have had to look at the unpleasant countenance of the dollar, but I am glad to think that today the pound can get up and sit beside the dollar on equal terms.

I cannot believe—in fact we had direct evidence yesterday bearing on this fact —that the Chancellor of the Exchequer, however resourceful, courageous, ingenious and independent he may be, would have taken a serious step of this kind without the advice of the officials at the Treasury and the officials who manage the Bank of England; and I, personally, as the humble amateur who, perhaps, does not understand very much about this question, am perfectly prepared to accept their decision in the matter. Moerover, there is this further point. Supposing we were to continue to have a managed currency, who would manage it? It would be the officials at the Treasury and the officials at the bank of England—the very people who today are advising the return to the gold standard. That being the case, I accept, as I have no doubt, the majority of Members of the House will also accept, the decision of the Government with respect, humility and confidence


I do not propose to detain the Committee for more than a couple of minutes, because said all that I have to say on the general question yesterday, hut I rise just to support what is suggested by my hon. Friend the Member for Keighley (Mr. Lees—Smith), and to ask the Chancellor of the Exchequer to give considera tion to the point that my hon. Friend has expressed, and, in particular, to say, with regard to Mr. Keynes, that Mr. Keynes has expressly asked me to point out that the article in which he wrote that commendation was based upon a misunderstanding. That was the point upon which I endeavoured to interrupt the Chancellor of the Exchequer yesterday, but I was unable to put it owing to his refusal to give way.

On the main issue there are three possibilities upon which the provision which my hon. Friend has suggested should be inserted, namely, the repeal of Section 4 of the Bank Act, might become operative. It is conceivable—I do not think it is likely —that the Americans might bring into effective use all their surplus stock or gold, and might thereby raise the level of prices. That might be done to such an extent as very seriously to jeopardise thu stability of prices in this country and all over the world. Another possibility is the discovery of some mine of gold very much more rich in its yield than any that we have. A third possibility, which may appear fantastic, is such a discovery in the realm of chemistry as might render it possible to produce gold on an absolutely unexpected scale. I regard all these possibilities as exceedingly unlikely, and I would remind the Chancellor of the Exchequer that, on the last Amendment on the Financial Resolution, he also regarded it as exceedingly unlikely that we should need to exceed the £60,000,000. "Nevertheless," said the Chancellor of the Exchequer, "in order to be quite sure that we are on the safe side, why limit the amount?" The same argument seems to apply to this case. It may be that any one of these suggestions is very unlikely to happen, but, if it were to happen, would it not be worth while


: I trust the hon. Member is not going to give a dissertation upon the possibilities of alchemy.


I have just finished; I was only working up to a final conclusion. I say that the possibilities are exceedingly unlikely, but I see no reason why the Chancellor of the Exchequer should not arm himself now with the necessary powers in order to be able to keep prices stable in whatever unexpected circumstances might arise.


I desire to make a few observations on one point which Ido not think has yet been discussed, atany rate in my hearing, namely, the suspension for the present of the issue of ordinary coin which is referred to in Clause 1 of this Bill. I do not at all dispute the wisdom of it as a purely tem porary Measure, but I want to press up on the Chancellor of the Exchequer that his skilled advisers seem rather blind to the factthat the whole basis of the value of gold is the human taste for using it as co in. If people once cease to use it as coin, the whole basis of the value of gold will be changed. It is that demand for gold as coin which is the main element in the demand for gold at all. There is,of course, also the demand for it as or nament, but that is, comparatively speaking, a small matter. If you once change the inclination of human beings,or if you suppose it to have been changed by the use of paper currency during the War and so on, to such an extent that they are no longer inclined to use coin,then the whole demand for gold in the world would be very considerably diminished, while the supply of gold would remain unchanged, and the balance between the supply and the demand would be on a very much lo wer level of value than at present it is. No doubt for a time that would not apply, because for a time the traditional value of gold would continue—people would go on thinking they liked gold even when they had forgotten for what particular reason they used to like it. If it really be true that the experience of paper during the War has changed the taste of civilised mankind and made them prefer paper notes to gold coinage, as a matter of fact as soon as people begin to adjust their ideas the value of gold will very considerably change, and it will become a very much cheaper metal, because you will not go on 5.0 P.M. with anything which is really so absurd as the provisions of this Measure, in which great hunk so gold are to be carried about, provided the are hunks. That is as absurd as if you said the basis of your currency is to be woollen stuffs, but they are never to be in a form in which they are to be available for human use, but always in the form of bales for the store. If you made wool the basis of your currency it could only be a satisfactory basis if it were sometimes made into coats and trousers. Otherwise the desire to use wool would expire, and people would wear coats and trousers made of paper or some other substitute, and you would no longer make wool the basis of your currency. That is as true of gold. I heard the late Chancellor of the Exchequer say, on the authority of Ricardo, that it would be a good plan to have a paper currency permanently with gold as the basis of it. That is really impossible. It there is no use in gold as coinage you do not have the human desire for gold which lies at the root of the value of gold. Gold ceases to be so valuable as it was before. I press upon the Chancellor that consideration, that you must not postpone permanently, or for a large number of years, the use of gold as coinage if you propose to keep up the value of gold. If all the civilised countries in the world were going to use paper instead of gold, the value of gold would he affected. Its value would fall, the chief advantage of gold, its relative stability, would be destroyed, and the whole purpose of restoring the gold standard would be vitiated. I hope we shall go back to the wisdom of our ancestors and in a year or two restore specie payments in the ordinary way. It is a wise policy, and one that is justified by experience. But the conception that you can permanently dissever the use of gold coinage from a gold standard is a fallacy.

Lieut. — Commander KENWORTHY

: There are three ways of approaching the discussion of a Bill of this kind. One is as an expert, in which category I presume the hon. Member who opened the Debate will appear; another is the position of philosophic detachment, as exemplified by the Noble Lord who has just resumed his seat, and the third is as a Member of the House of Commons who seeks information. I think this Bill is of much importance, and I wish to put one or two questions in that character. I do not think it should go through without a certain amount of questioning, particularly as to the provisions of the first Clause. With regard to paragraph (a), dealing with the question of notes not being convertible into coins on demand—this of course touches what the Noble Lord has spoken about—is it intended eventually to discontinue Treasury notes and to issue a Bank of England £ note and a Bank of England 10s. note? I should like to have some statement as to the Government policy, if they have a policy on the matter. I suggest that the 10s. note might eventually be dropped. It is proposed that when and if we get back to a gold coinage the 10s. piece shall not reappear. I think it will be agreed that the power of the Bank of Scotland in the past to issue the well—known Scottish £ note has been of advantage to Scottish industry and commerce. I believe it will be a great advantage if we have a Bank of England £ note more or less permanently as a means of exchange. At any rate I am inquiring as to what the Government policy is on the matter. Is it intended eventually to amalgamate the Treasury and Bank of England note, and is it intended to issue a Bank of England £ note? This is referred to in the Report of the Committee presided over by the Foreign Secretary, and I should like to know whether the Government propose to carry out its recommendations in that respect.

With regard to paragraph (c), I am not satisfied with the short answer given, perhaps rather late in the Debate, by the Financial Secretary to the question I raised yesterday as to the putting into the hands of the Bank of England alone of the monopoly of having bullion coined into sovereigns. I do not think that is altogether necessary. I do not yet see the reason for it. In his answer the right hon. Gentleman said, we want all the available gold which people are possessed of arid wish to dispose of to be brought into our gold reserve, and if we are not really establishing a gold coinage it is a waste of time to mint it. The possessor of gold can tender it to the Bank of England and have it paid in at a fixed rate, and in that way we shall reinforce our gold reserve. The gold reserve will be in bulk or in the form of sovereigns. I do not see any objection to one or the other. Suppose Jones or Brown takes gold, as he has the right to do at present under the Bank Act, 1870, to the Bank to have it coined into sovereigns. Eventually those sovereigns will come back into the banks. They may be used in circulation for some time, but he cannot export them without a licence. Why should he not have the right of having bullion coined? Why can he only sell it for paper to the Bank, and why should this monopoly be placed solely in the hands of the Bank of England?

I should have thought it was desirable to encourage people to use gold coinage and let it be brought in gradually. I take it the policy of the Government is, if and when they can, eventually to get back to gold coinage. [An Hon. MEMBER: "Why? "] The immediate reason is that if you actually have gold coins you cannot inflate with such facility as you can by the use of the printing press. As long as you have only a paper currency it is possible to get hold of the printing press and to inflate to any extent. I do not say that this Government, or a later Government, or any other Government, would do it in the immediate future, but there would' be that danger existing, and the only safe way of maintaining a gold standard is to get back to the circulation of gold coins. [An Hon. MEMBER: "It breaks down when a crisis arises! "] In the War it is true we called in gold. Then it formed an extra reserve of gold and strengthened the currency. That is another reason why you should have gold coins. That is mentioned in the Report of the Committee presided over by the Foreign Secretary. We ought to have some statement on the point. It has not been stated from the Treasury Bench whether it is the policy of the Government eventually to get back to the use of gold coins.


I am sure we need not add to our labours by embarking either upon a discussion whether this Government should declare its policy in regard to going back to a gold coinage or not, and still less embarking on a discussion of the unseen foundations which constitute the intrinsic value of gold. [An HON. MEMBER: "Why not? "] For the very practical reason that we cannot possibly afford to go back to a gold coinage at present. There are 250,000,000 reasons against it. That sum of money, which would diminish our national wealth and credit, would be absorbed in a return to gold coins. It would mean a very heavy and altogether unwarrantable expense. We can get on quite well for internal purposes without embarking upon the reversion to a gold coinage. Everyone would like to feel sovereigns jingling in his pocket again, and I think myself it might be possible that a certain element of personal frugality and self—denial would be stimulated by business being transacted in gold coins. People would be more chary of breaking into a sovereign than of merely passing over a Treasury note. But let the hon. and gallant Gentleman and the Committee dismiss from their minds any prospect of this state of things being realised in the lifetime of the present House of Commons. We cannot afford it. We have a much longer journey to travel on the road of retrenchment and rigorous economy, saving every penny we can in every quarter, before we are able to restore our finance and our prosperity to its pre—War level. Therefore, I shall not attempt to deal with the argument of my Noble Friend, who made, as he always does, such an interesting incursion into the Debate, further than to say that I think it very doubtful whether be was not expressing a fallacy under the belief that he was propounding a truism. I do not believe that the virtue, the reputation and the intrinsic value of gold depends solely upon its use as coinage, but as a common standard to which all paper transactions can be referred for its value, its use is apparent.


Would the Government encourage the gradual return of a gold currency alongside a paper currency?


It is not possible to encourage a gradual return. You have either to say Bring in all these paper notes to the bank and we will give you sovereigns for them," or you have in one way or another to prevent that happening. The moment you begin to put gold into circulation you cannot tell where you will stop. For nearly 10 years no gold has been used in circulation, although there has been no law to prevent notes being exchanged for gold. That has been due, first of all, to the patriotism of the country in time of war and, secondly, to the habit which has grown up upon that foundation. I do not believe that it would be safe at the present time—that is my advice—to open the door to the turning of notes into coin, because you cannot tell where it would stop. It might become very popular and you might be exposed to a very heavy drain. I think there may be occasions when, even after the passing of this Bill, anybody who is in need of a moderate number of sovereigns for any special purpose for which he can give good reasons would be able to get them. Broadly speaking, these are not issues which are directly raised by the present Bill.

The hon. Member for Keighley (Mr. Lees—Smith) raised the question of Mr. Keynes' opinions. I should be very sorry if I have done any wrong to Mr. Keynes' opinions. I read the very striking sentence in his article in which he said that although a return to the gold standard was ill—judged, if we were going to return to it this was the best way to do it. I read that not as applying to any one condition, but to four or five important conditions which have regulated us in what we have done. I read it as applying generally to the course we have adopted. If Mr. Keynes has informed the hon. Member, or any other hon. Member, that his approval was only based upon his belief in the supposed repeal of Section 4 of the Act of 1844, whereas there is no such repeal in the Bill; if that is his position, then it is perfectly clear that His Majesty's Government, will have to go forward without the approval of Mr. Keynes, and we shall have to do our best in the face of that loss. If I have in any way done violence to Mr. Keynes' opinions, let me make my proper acknowledgment and excuses to the Committee.

On the merits of the question raised, I have been advised that it would greatly weaken the reality of our return to the gold standard if we repealed this provision of the Act of 1844.What is our position? It is that the bank will deliver gold to whoever demands it and tenders legal currency, and it will buy gold from whoever presents it, at fixed prices which are known, published and declared. It will do both these operations to an unlimited extent. It is said, although the hon. Member for West Leicester (Mr. Pethick—Lawrence) admitted that it was extremely unlikely, that gold might be forthcoming on an absolutely unexpected scale. Supposing that gold could be made by some automatic or chemical process as easily as we can make dough; supposing a great mountain of gold is suddenly discovered that has been hitherto overlooked on the earth's surface in the various searches which have been made

for geographical and natural purposes; supposing enormous quantities of gold were hurled upon us, poured upon us from every quarter; supposing through any of these causes we were being smothered under an avalanche of gold, I say without hesitation that we should have to legislate. I hope the Committee will now give us this first Clause, because we have other Clauses which require discussion, and it would be well to spend our time as conveniently as possible in the discussion


The right hon. Gentleman has given us an example of the very thing which earlier in the afternoon I feared. Whenever he leaves the larger question and tries to give an explanation on points which are certainly not clear to the Committee, he does not give a full explanation. He has not given us an explanation of the reason why Paragraphs (a) and (b) are inserted in the Bill. As I understand it, Paragraph (a) puts an end to the right of the individual to go to the Bank of England with a five—pound note and to get five sovereigns for it. The right hon. Gentleman has not shown that right up to the present time that right has been abused. Paragraph (b) puts an end to the right of a person possessing the Treasury one—pound note to go to the bank arid get a golden sovereign for it. Why should it have been necessary to put an end to these two rights of the individual? They have not been abused. I have no such fear as that expressed by the Noble Lord (Lord H. Cecil). I do not believe that the sovereign coin will become so popular as to drive the paper sovereign out of existence. In Scotland the two things circulate together, and they have just as keen a sense of the value of money in Scotland as we have in England

For a great many purposes paper money is much more convenient than coin. Let me give one example. For carriage it is very much more convenient. In some parts of the world where the British one pound note is the popular currency, no man sending his ship abroad would think of sending £500 with which to pay port disbursements in golden sovereigns. He very much prefers sending the money in paper. Although there is a certain happiness which accrues to any man who jingles the sovereigns in his pocket, there is no doubt that for ordinary convenience the paper pound is a very popular piece of money. If the right hon. Gentleman feared that there was going to be a sudden change because of the passing of this Bill, and that people who have been perfectly satisfied with the one pound note were suddenly going to go back again to the golden sovereign, I daresay it would be necessary to safeguard our gold standard against that very sudden drain.

There is a great deal to be said for using our gold in more economic ways than in coin, for the golden coin has worn out. The wastage of the coin has been considerable. Was that really the reason that the right hon. Gentleman had for inserting this paragraph in the Bill? Was it because of the wastage of the gold in use, or was it because he feared that if this Bill became law there would suddenly be what was not the experience during the last few years, a run on the golden sovereign in preference to paper money? If that was the reason, the right hon. Gentleman ought to have explained it to the Committee


Why should I have explained it to the Committee I was answering certain specific points raised in the Debate. I was not giving a dissertation on gold coinage. Among the points raised, I was not asked why paragraphs (a) or (b) were put in. I could easily have said why. The reason is simple. Although the public have abstained in war time and since through the habit contracted in war time from making inconvenient demands for gold from the Bank, although they had the right to do so, I have no guarantee that that would continue in the face of our public declaration that we have returned to the gold standard. I was by no means sure that in certain quarters parties who are opposed to this policy and interested in stultifying this policy might not by publicity or in other ways encourage a demand upon the Bank for sovereigns which at this moment, when we need our gold reserves in a compact form, would have been highly inconvenient. After careful consideration, and after consultation with the banks throughout the country, we decided that it was advisable not to continue the present process, and that it was far better that in these circumstances what had long been the practice and habit of the country should, for the time being at least, become its law


I am obliged to the right hon. Gentleman for that statement, but I would remind him that the point was put in a specific question by my hon. and gallant Friend the Member for Central Hull (Lieut.—Commander Ben—worthy). He put the question in almost the same form as I did, and perhaps a little more tersely. The point that has been elucidated by the right hon. Gentleman is one which the Committee had a right to expect. I presume that when lie right hon. Gentleman is explaining the return of the go1d standard he is not going to think it incumbent upon him merely to answer questions put to him and to leave unexplained a very important matter like this which affects not only every tradesman, but every individual.

I think the right hon. Gentleman is perhaps a little too apprehensive about public opinion. Public opinion in these matters is not so easily influenced by mischievous people, or even by mischievous journals. We have become. so accustomed to dealing with large quantities of paper money, and it has become the habit of such large numbers of people that I do not think they are likely to change their habits out of mere caprice. The right hon. Gentleman in making these changes is showing, for the first time in this transaction, a slight lack of faith in his own policy. He has been bold in every other respect, but here he has shown a slight nervousness, which is not one of his characteristics. It would have been better for him to have left this alone. There would have been no leakage, and no serious harm would have been done. I doubt very much whether he gains anything by this new provision in his Bill.

As far as the supply of gold is concerned, there is much more likely to be a shortage in the world than an oversupply. Whenever we suffer from an undue shortage or an undue supply the House is quite capable of giving the necessary support to any Chancellor of the Exchequer who asks for fresh powers. We do not need to anticipate that. Nothing is likely to happen in the next 23 or 25 years which will upset our currency policy. The best way of dealing with the currency of this country, inside as well as outside, is by taking the bold course of showing that we have complete faith in our own strength, and that our currency is not likely to suffer by what happens outside

CLAUSE 2.—(Power for Treasury to borrow for exchange operations)

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


I desire to draw the attention of the Committee to the general policy which is raised in Clause 2. Borrowing for exchange operations is a very third—rate financial expedient. It is an expedient which was applied in war when we were hard put to it, and it is the kind of expedient tried in France. Although we have had a great deal to learn from France in other matters pertaining to civilisation, we have nothing to learn from France in financial expedients. One of the reasons why unemployment has been increasing in the past few months, is because sterling has been over valued on the foreign exchanges, and that largely because of speculation created by the anticipation that we were going back to the gold standard in this way. It is because the pound is worth more in terms of foreign currencies than in terms of goods and services in this country that our export traders are in such great difficulties. There is a good deal of statistical evidence that that is so. Statistical evidence was given by the Financial Secretary to the Treasury in reply to the hon. Member for West Leicester (Mr. Pethick—Lawrenee) the other day. Other statistical evidence is also available.

At the present moment the unsheltered trade of which we hear a great deal is unsheltered chiefly because of the external value of the pound, and our export trade finds great difficulty in getting foreign orders. We cannot quote competitive prices in foreign markets owing to the exchange handicap to which we are subject by the very high valuation of the £ in the foreign exchanges. My objection to this Clause is that it tends to perpetuate that state of things, and to prevent the possibility of any speedy remedy for it. You are going to endeavour to maintain your exchange at an artificially high level by borrowing. You are going to pay your way by borrowing instead of exporting. That is how you are going to balance your account if you can call it balancing. I submit that that is thoroughly unsound finance, and I have not yet heard in Debate any satisfactory justification of it.

Furthermore—and this is the final point that I wish to put on the general question—borrowing' in order to maintain the exchange is essentially unsound, because in the end you have to pay back more than you borrow. I would like to know from the Chancellor of the Exchequer what the arrangements are for payment in respect of Pierpont Morgan and tho other persons with whom he has been in negotiation. Whatever he is going to pay, the position will be the usual one of borrowing and spending if the borrowing process becomes necessary. If there is no borrowing this argument falls to the ground. Let it be remembered that just as this borrowing may relieve our exchange at the moment, and may enable our exchange to be maintained at a higher rate than that at which it would be maintained apart from the borrowing, there will very likely be subsequent and stronger pressure in an opposite direction on the exchange, because your exchange will then be burdened not only by payment of a capital sum, but by repayment of interest.


I made it perfectly clear in the Budget speech, and also yesterday, that we do not intend using these credits except in the last resort. T agree with what has been said by the hon. Member who spoke last as to the unsound character of a policy which relies upon such credits at the very time when you are trying to stabilise the exchange. It is, I might say, a contradiction in terms, but we were advised, having regard to the conditions attending the transition and the risks attending the movement from one state of affairs to another, that it would be a valuable insurance to call into being these credits on the other side of the Atlantic, and a warning to speculators to have this immense credit behind the British exchange. It is as a precaution, not as a necessary measure of stabilisation, but as a contingent precaution that this policy has been adopted, and it was considered that it was an essential part of the method for resuming the gold standard. As to the provision which has been made for this the Federal Reserve Bank has promised to lend 200,000,000 dollars to the Bank of England on the credit of the British Exchequer, but no commission arises there. Therefore the interest referred to by the Financial Secretary to the Treasury will only come into play, if and when, and according as, the credit is required. So far as our negotiations with Messrs Morgan are concerned, those are limited to 100,000,000 dollars, on which 1¼ per cent. commission will be paid during the first year of the credit, and, if the credit is not used, half the amount will be payable in the second year. That is to say, there will be £250,000 payable the first year, and half that the second year, or £375,000 in all. But I regard this as in the nature of a precaution against dangers and difficulties which we do not believe will arise, and which we de not believe are so likely to arise, because of the precautions which we have taken.


I think that the Chancellor in his reply hardly dealt with one rather important question which was raised by my colleague behind me. That was as to the effect of the Chancellor's operations on employment in this country. I feel very diffident in intervening in this Debate on the gold standard, but I do so as representing an area which is rapidly becoming a famine area, because it simply cannot export the heavy steel which it makes, because it finds itself blocked in nearly all the markets of Europe, not because its work is not as good as ever it was, but because it is competing against other countries where the exchange is rather more depreciated. For example, we have very heavy competition from Belgium, in Asia Minor and the East, as against the products of the North—East Coast. I would ask the Chancellor whether in making these arrangements he has not had in mind much more the needs and the interests of the big financiers of this and of other countries, who are making an extraordinarily good thing, it seems to me, out of our return to the gold standard, and forgetting very largely that we do ultimately depend upon our export trade for keeping our people at work. It seems to me that these unsheltered trades are going to be attacked by the change in two ways. First the Chancellor's gold policy will not enable them to export their goods, and it will therefore create unemployment, and then the Chancellor's insurance policy comes along and says, "You people coming for unemployment benefit have got to be told off." There is this point. We are debating here a certain policy that is going to make it increasingly difficult for our people to get work, and going to make it increasingly difficult for us to export our goods in order to obtain what seems to me to be this very expensive luxury of a gold standard. I feel that we are paying a very high price for the smiles of the financiers of America. Looking at the matter from the point of view of common sense, however charming it may be to see the flirtation between the dollar and the pound, the question of getting our people to work is a much more serious one, and I would wish that the Chancellor of the Exchequer had given much more careful consideration to the point raised by the hon. Member

Clause 3 (Short Title)ordered to stand part of the Bill.

Bill reported, without Amendment.

Motion made, and Question proposed, "That the Bill be now read the Third time "


I have no intention of opposing or delaying the passage of this Bill, but there is one point which I desire to put before it finally becomes law. Our objection has been mainly the fear that this transaction may result in placing this country in the position of either having to reduce its prices or lose what it retains of the markets of the world. The point that I wish to put to the Chancellor of the Exchequer is: Did he consider this alternative policy in endeavouring to restore the gold standard? Admittedly, the American Government and financial authorities were anxious that we should go back to the gold standard. That is shown by the fact that they have met us by offering to give us a credit of 200,000,000 dollars. It is admitted that the Governor of the Bank of England went to America to arrange terms by which this transaction might be carried through. Was this position put to the Government of the United States and the financial authorities: "You are anxious that we should go back to the gold standard. If you will call into play some of the gold which you are at present keeping without using in the vaults of your banks, you will bring about a rise in price level in America, and thereby will bring about automatically a return of our exchange to its pre—War parity. If you do that we will agree to go back to the gold standard. If you do not do that you are forcing upon us a return to the gold standard which can only be achieved by a further deflation, which in the present condition of our industries will cause further unemployment." I would ask whether the Chancellor of the Exchequer put that proposition to the Governor of the Bank of England and asked him to put it to the American Government and financial authorities before taking this step? A second question which I would put is this: Is it part of the understanding today that some slight measure of the same kind will actually take place in the United, States?


A slight measure of what?


Is it a portion of the arrangement that the American financial authorities will do something of that kind, that is, that they will bring into active operation some of their gold reserves, and thereby bring about that slight increase in American prices which will obviate the necessity of our having to reduce our prices in order to keep the exchange at parity? I want to know how far he has done that. If I thought he had done that even secretly, and that that was going to happen, it would remove a very large part of the anxiety which I and my friends feel.


Before the Debate ends, there is one more question which I wish to put to the Chancellor of the Exchequer. It is a very simple question. We are all, or very nearly all on this side of the House, rejoicing at this Bill. Some of us have been particularly rejoiced at the last statement of the Chancellor of the Exchequer, that reasonable people going to the Bank and showing good cause why they should be given small sums in gold, might, at the option of the Bank, very probably get them. Does the Chancellor of the Exchequer regard this as the excellent beginning of a great end, when we shall some day—all dangers of corners in gold and rushes on the Bank being over—get back to the happy old state of affairs before 1914, when we shall once more have the clash of the gold scales on the bank counter, giving pleasure to the ear, instead of waiting for long minutes while the bank accountant spends time in counting out 237 or 542 Bradburys twice over? Are we to look forward to the time when we shall have the good old gold standard back and no longer see an anæmic St. George of impossible anatomy endeavouring with a very inadequate weapon to cope with a dragon whose anatomy in equal ways suggests that he is not very competent for the ends for which dragons are made, since his legs are much too short for attack and his body too stout for his legs to bear, and his general appearance that of a most inoffensive creature?

I long for the day when the Treasury Notes shall all have disappeared, when no longer will one have a Treasury Note that has been to the butcher and bears on its corner the mark of a bloody thumb, suggesting some awful story of Sherlock Holmes, nor the Banknote that has dropped into the butter pot, nor the Banknote that has been folded into sixteen by a lady and put into a small nurse, nor one that has been rammed into the pockets of the drover at the market and appears as a crushed mass All these are:esthetic horrors to which we are daily subject, not to speak, in addition, of the Treasury Note that sails through the window of the railway booking office and has to be retrieved by the booking clerk. When the good old sovereign comes back all these evils will be over. Will the Chancellor of the Exchequer promise us that there is a, good day coming? I do not ask for it now, but will he, if he can, help it? He is a very bold man. Will he tell us that we can look forward to the day when we shall have the good old sovereign circulated once more?


I want to preface my few remarks, as others before me have done, by the statement that I do not pose as an expert in currency. I can at least observe. I want to echo the fears of some of my friends that this is a continuance of the policy of deflation begun some years ago with such disastrous effects in this country. The moment it was known that the Coalition Government proposed to, back the policy adumbrated by the Cunliffe Committee, we have had in this country nothing but continual slump, and the curious thing has been that great economists have noted that during the course of the slump the shares of the Bank of England have enhanced in value by £90 per share, and that the value of the shares of the various banks making up the Big Five have also advanced proportionately. It is curious to note that during this period, since deflation began, when this country has been passing through an unparalleled period of depression, when bankruptcy has faced thousands and thousands of our traders and unemployment has been knocking at the doors of millions of our workers, when millions of our people are still unemployed and poverty and penury are the lot of more than one cares to think about. the bankers of the country have reaped a richer harvest than ever before in the history of banking institutions. So big have their profits become that they have attempted to do the best they can to cover them up by proceeding with the most palatial buildings that architects could devise for the purpose of carrying out their operations.

I am aware that yesterday the Chancellor of the Exchequer said that there was no question of a conflict as between the bankers' policy and the traders' policy. But the right hon. Member for Carmarthen (Sir A. Mond), speaking for the Federation of British Industries, flatly contradicted that statement, and said that the Federation of British Industries viewed with alarm the course that the Government proposes to take. It appears to me that this is nothing but a continuation of the policy of undoubted piracy that was begun by the financiers some years ago. If it had been pointed out or recommended, at the time when this Cunliffe Report was adopted, that the debts of the country were to be scaled down, one could have understood it. Mr. Bonar Law declared in this House, when Premier, I believe, that one of the results of deflation had been that the National Debt was in effect increased from

£8,000,000,000 to £16,000,000,000, and as a matter of fact that the rate of interest, owing to the fall in prices, had risen from, roughly, 5 per cent., to practically 8½. per cent. During the course of this deflation, of which this is a continuation, workmen have had their wages reduced by £700,000,000 per annum in this country, and they have been told that they could bear the reduction because prices were falling and the purchasing power of money was rising. If it is good for the workman to take lower wages because prices fall, why is it not good that a lower rate of interest should be paid on an inflated debt. After all, the interest is used for the purpose of commodities just as wages are. That is a question which deserves serious consideration.

It appears to me that the Government have rushed this question. Instead of announcing, as they did, that a return to the sterling standard would take place the moment that the Chancellor of the Exchequer announced it a few days ago, an inquiry should have been set up, and at least the period should have been deferred for some little time in order that we might have taken stock as to whither we were tending. I suppose there will be no Division on this Motion, but I want to enter my protest against the policy that is being pursued. I protest against the policy of financial grab that is pursued. If the scaling down of the National Debt had been in accord with the deflation of currency, the Debt would have stood today at £4,000,000,000 instead of £7,500,000,000. But there would have been no report from the Cunliffe Committee if that had been the case, because it was a bankers' committee and not a traders' committee. Another thing which I have heard with some consternation this afternoon is that it really matters whether we have gold or paper. An hon. Friend has declared in favour of a return to gold at the earliest possible moment. I remember that in the first week of August, 1914, this metal, which is now regarded as the most stable thing on which to base a currency, or the one thing that would stand the test, was the one thing that ran away the moment that a crisis came. Instead of finding that gold was a stable thing, we found it was the weakest thing that it was possible to imagine. It had to be replaced with paper, not based on gold so much as upon the fact that the working men of this country were going to work the next morning.

That really was the basis of the credit of the country and the way in which the War was carried on. Now, because of the alterations that took place during that period, we are faced with enormous debts which will become automatically bigger because of the policy that the Government is adopting. I protest against the policy. If there were a Division I would go into the Lobby cheerfully and vote against any further deflation or any return to the gold standard. I do not believe that gold as a currency is at all equal to a scientific currency operated, not by private bankers who are interested in raising the value of their shares and the piling up of profits, but credit based on the nation's credit scientifically controlled by the State.


I wish to ask one question. I understand that we have two options in America, one with the Federal Reserve Bank or Board, and the other with Messrs. Morgan. Would it be possible to carry out the full option with the Federal Reserve Bank and save Messrs. Morgan's commission? I put that question to the Chancellor of the Exchequer as a business man. The commission is 1¼ per cent., and it runs into a rather large figure for the first year.


I certainly would be the last to intervene in this Debate because of any claim to particular knowledge of this most important and intricate question. I was very much taken with the phrase used by the Financial Secretary to the Treasury when he described this business as a mystery. It was a mysterious business which he was endeavouring to explain. It suggests to my mind the conjurer who carries through some very clever tricks, and very few of his audience know how they are done, though everyone knows that they are done. That is how I feel in this case. With all due deference, I feel that the Chancellor of the Exchequer would appreciate that reference, from the point of view that he does exercise with considerable dexterity the part of the conjurer. The right hon. Member far Hillhead (Sir R. Horne) stated yesterday, as a Member with a very specialised knowledge of the subject, that if he said all that could be said on this proposal his speech would take hours. That state ment intensifies my view that there is something wrong about this business. I tried a member of the Ministry yesterday. I asked how matters stood and what he really thought.He held his hand above his head and said,"By God,I swear this is the best thing we can do!"That was intended to have a 6.0.P.M considerable imperssion upon me. Still we discussed the matter in detail. My views run largely on the lines indicated by the hon. Member for Merthyr (Mr. Wallhead). When we view the present situation from the standpoint of the real active producers of wealth in the country, it must strike every reasonable mind that the system upon which we are operating financially does not work out in the interests of those who are making that contribution to the wealth of the nation. I wish to introduce an excerpt from a paper which formerly, at any rate, had a very considerable appreciation of the Chancellor of the Exchequer, namely, the "Dundee Advertiser." That paper has more than once expressed a very definite view of this matter, and I ask the House to contemplate the expression of opinion contained in the following passage

: For our part we become more certain every day that while there may be times and circumstances in which it will be to our advantage to adopt the gold standard, our present wisdom is to hold on our course. There are two lines of reasons for it that appear to us decisive. We have annually to pay to America a tribute of £35,000,000 and we must pay it by purchasing dollars. The easier the terms on which we can do it the better. At present, with the fall in the value of the gold dollar, the terms become easier every day. Therefore, we should avoid any action which will raise the value of the dollar. If we can do anything to accelerate its fall we should do it. There are good authorities who believe that if we go on our course the exchange will go to six dollars to the £ yet and that will be equivalent to reducing the debt by a third. We can assist the process by pumping gold into America in payment, thereby accentuating the gold inflation now bringing the dollar down. But if we re establish the gold standard and the free market for gold the instant effect will be to send the dollar up by vastly enlarging the market for the gold now glutting the vaults of the American banks. If gold was made as valuable as it was in 1914 the payment of the American debt would cost us nearly 40 per cent. more than it does and if we restore the British free market for gold we shall take a big step in that direction. There appears a view which, notwithstanding the specific references made by the Chancellor of the Exchequer to other nationalities and Dominions following in this course, shows that after all the real driving power in these cases is one and the same. It is the financial power in each central nationality which is driving on every Government including our own, and, in fact, the "Advertiser" specifically states that this is what is happening. The Chancellor of the Exchequer is being guided in this matter by the financial strength of the country. If we consider the situation as it existed in the course of the War we know that a handful of individuals represented the financial strength of the country, but those who represent the financial strength of the world can deal with the world as if it were a small village. There we have the governing factor by which the nations of the world are being driven, and the argument produced in this article is that while our policy is endeavouring to get more consonance with the policy of the American nation, that the two nations in this matter really have interests at variance with each other. That was controverted by the Chancellor of the Exchequer in his elaborate statement. He believes this change will work out beneficially.

The one thing about which I feel satisfied is that although the right hon. Gentleman the Member for Hill head expresses the view that there will be an improved situation in certain phases of our commercial life, for the body of the toilers the position is thoroughly adverse. We are not in safe hands. We are not in the hands of those who would guide the policy of our Government and of other Governments with a view to the common weal and to the mass interest but we are in the hands of those who would guide that policy for class interest of which we hear so often. That class interest is denied by hon. Members opposite, but its existence is transparently evident. We have heard the Prime Minister say that we should not have all this talk about class interests and that we should all stand or fall together. In this connection we do not stand or fall together because while a policy of this nature is followed, you can have on the one hand the strengthening and buttressing of a numerically weak but financially predominant power, while on the other band the mass interest is weakened and set aside. That is the view which strikes one very keenly in considering the wonderful picture drawn by the Chancellor of the Exchequer in his Budget speech. The right hon. Gentleman told us that what was required was dealing with the weak, the struggling and the suffering, and one could almost see tears being shed on the other side for those who have gone under. Where do they come in under this proposal? Is the Chancellor of the Exchequer here and now operating in this business conscientiously, with no other aim or object than that of finding the requisite sustenance and help for the weak to the widow and the orphan and the unemployed? There is one central point for the Chancellor of the Exchequer to consider. It is the financial power which uses our Governments and the members thereof as puppets, and that is the position as it stands today.


I intervene in this Debate with some trepidation, because, like most other speakers, I do not profess to be an expert in these matters. But I should like to say how much I welcome the step taken by the Government in returning to the gold standard, and how cordially I applaud all the safeguards with which they have hedged round that very difficult operation. In the course of this Debate the point which struck me most forcibly was the inconsistency of the attitude of the opposition on this question. The leaders of the party opposite, as represented by the late Chancellor of the Exchequer, appear to desire to have the best of both worlds. They cordially welcome the principle, while they condemn the way in which the operation is being carried out. If I may quote from a work known to all of us in our youth, it is the old case of

Jam yesterday, jam to—morrow, but never jam today. At the same time while they are welcoming the principle, we have statements by many members of the party which they lead condemning that principle. There is no doubt that the hon. Members for Merthyr (Mr. Wellhead), Peckham (Mr. Dalton), and the hon. lady the Member for East Middlesbrough (Miss Wilkinson), have condemned the principle. If they say that the effect of returning to the gold standard and the restoration of our currency to parity of exchange, is going to bring about unemployment, then they are frankly and openly advocating inflation. You cannot say you are going to deprive people of employment by putting your exchange on a parity, without indicating that the lower the rate of exchange is the more employment there will be and the logical conclusion of the arguments of hon. Members on the Back Benches opposite is that we should pursue a policy of inflation similar to that pursued by other countries on the Continent. If they are prepared to follow up that policy logically, we on this side will be very glad to challenge them upon it when the results of the present operation are more clearly seen in a year or two years.

While this subject has already been very fully discussed, one point has been brought out in the Debate which I should like to emphasise. The right hon. Baronet the Member for Carmarthen (Sir A. Mond), for whose business experience and ability I have the very highest admiration, contended that the banking interest and the trading interest of this country were opposed on the question of returning to the gold standard. It has even been said in this House, by Members of the Labour party, that it is to the interests of the banks that there should be a high Bank rate and high rates for money. That is a point of view which I, for one, most strongly dispute. Bankers do not make any higher profit when the Bank rate is high than when it is low, because bankers' profits are represented by the margin or difference between what they allow on deposits and what they charge for loans, and that difference is not greater when the rate is high than when the rate is low. Moreover, very large profits are made by financiers and the banking interest during a time of fluctuating exchanges. It is not the bankers and financiers who lose during a time of fluctuating exchanges, but the traders, and those profits would cease under a stable currency, which would be infinitely better for the traders. It. is quite absurd, however, to suggest that a return to stability and the necessity for occasionally increasing the Bank rate can bring any extra profit to the bankers.

The point was raised by the hon. Member for Merthyr that the banks made enormous profits during the period of deflation. Does the hon. Member realise the hundreds of thousands of share holders there are in the great banks of this country and the hundreds of thousands of depositors? The people who made profits, if profits were made by the policy of deflation, were not those to whom he referred as the bankers—I do not know whether he referred to the individual directors or not—but the hundreds of thousands of depositors and holders of shares in the banks. I am quite aware that these people are looked upon with suspicion by hon. Gentlemen opposite, and so long as they look with suspicion upon those members of the population—whom they would harass if they had the power—so long will they fail to get the confidence of that class, and without the confidence of that class, even though they have the support of very large numbers of the working—class population, I do not think they will find themselves again in power. I thank the House for having allowed me to express my cordial approval of the policy of the Government in returning to the gold standard


I have listened to this Debate with a great deal of interest. I am interested in the question of the return to the gold standard, and, like so many others, I have been amazed at the complicated nature of the problems which this question presents to us. Consequently, I have waited before taking any part in the Debate, because I have been very anxious to be convinced, but, in spite of all that the experts in the House have said, and in spite of the exceedingly lucid statement, from the point of view of a layman, which the Chancellor of the Exchequer put before us yesterday, I still feel that there are a great many things that it is very difficult for the ordinary individual to understand. Having heard and read the speeches of hon. Members, however, I have come to the. conclusion that we at this time are making a very great mistake in going back to the gold standard. It seems to me that we are trusting rather to something material, and giving the guidance to something outside of reason.

Like the hon. Member for Merthyr (Mr. Wallhead), I believe it is far better to have a scientifically—managed currency than that we should go back to the gold standard. It seems to me that there has been a great deal of superstition and myth in connection with this whole ques tion, and that the Government is, in its policy, adhering to the doctrine of a myth rather than striking out boldly and seeking to put this whole question of currency upon a scientific basis. There are various things in connection with it that have amazed me. In connection with the credit that the Chancellor of the Exchequer has got as a reserve in America, I wonder if he could tell us, before the Bill leaves us, how much Morgans are going to get


I have already stated it.


I am sorry; I did not hear it. I heard his statement that there was a sum of £400,000 odd.


I will tell the hon. Member. There is 1½ per cent. commission on 100,000,000 dollars for the first year, and half that sum,if the credit is not used, in the second year, making a total of £375,000. [An HON. MEMBER: "And the Federal Reserve? "] The Federal Reserve have made a separate arrangement with the Bank of England, in which commission plays no part.


One of the things in this connection that amazes me is that we have our currencies and our credits arranged on such a basis that the British Empire, with its extraordinary resources and tremendous wealth, should be dependent upon a private corporation in America to keep it from getting into difficulties with regard to its currency. To me, that is an amazing position. if we go back to the gold standard, we are putting ourselves to a very large extent in the power of the grand magnates in connection with the provision of gold. All those countries that go back to the gold standard put themselves into the power of a very limited number of people who have got control over this commodity, gold. It seems to me there is something essentially unreasonable in the statesmen of the world putting their various countries into that position.

I do not suggest that the Chancellor of the Exchequer will have any answer to the next point that I wish to put, because it is in the nature of prophecy, and I quite agree with the old statement that you cannot answer a prophet, but I think that we are going to have, as a result of this return to the gold standard, a great increase in the amount of unemployment in the country, and I believe that the Chancellor himself has certain misgivings in his mind in this connection, because of the statement that he was making, when he was interrupted in the House the other day, that there was the necessity of seeing that people should not get into the dole habit. I believe that you are going to have a restriction of credit resulting from our going back to the gold standard at this stage, and that is going to mean a great deal of suffering among the ordinary working class folks in the country. To my mind, this question should have been brought into a real relationship with what is the greatest burden upon our industry at the present time. Sometimes hon. Members speak as if the great burdens upon industry in this country were the wages and the hours of the workers, hut, to my mind, the one great burden upon our industry is the tremendous load of debt that the country is carrying, and the tremendous burden of interest that the country has to find in connection with that debt.

I believe that we are acting most precipitately in going back to the gold standard. It is going to be a good thing for the people who are able to levy a toll upon the community, because of their title to money, that title which is theirs because of the loans that the Government have obtained from time to time. It is going to be good for all those people with a title to money, but I believe that the consequences to industry as a whole are going to be adverse in the extreme. I think the protests that were made in the course of the Debate about the way in which we were going to be shackled to American finance were thoroughly justified, and I do not think the Chancellor really made out any case at all, when he suggested that, instead, we were going to be shackled to reality. I do not believe there is any reality at all in this gold standard. I do not believe that it is anything more than a myth or a superstition, that the people in control of money have zealously fostered from time to time. When the War came, we discovered that we had to get away from a lot of the myths and superstitions, and we got away from the gold standard, but now we are going back to it, and it is going to mean that the people who did well out of the War, the people who profiteered and all those who have a title to money, are going to get their values improved, and that at the expense of a great and increasing amount of unemployment in the country.

If the hon. Member for Merthyr challenges a Division on this matter, I am sure there are a good many of us in this party who will go into the Lobby with him. Complaint has been made that so many of our leaders have accepted the principle, and agreed that it is advisable, at some time or other, to go back to the gold standard. Those of us who believe that there is so much that is mythical about this precious yellow standard would be willing to be convinced if we had seen the Government dealing with this great burden of debt previous to dealing with this question of the currency. Consequently, I think it is as well that a protest should be made, even at this late hour of the day, in connection with the action of the Govern ment, which, I admit, to an extent has been supported by so many members of our own party, sincerely and conscientiously, because they think, as the Government no doubt do, that it is in the best interests of the whole community.


We are today putting the coping stone on the great policy of deflation. This Bill, if passed, ends the controversy that has been understood by so few, and read by so many, during the last seven years. today we return to the gold standard. Depreciation ends, and inflation ends. If there is one thing that I object to more than deflation, it is inflation. Both are methods of juggling with the currency. Personally, I am a stabiliser, and I always shall be. We all know how easy it would be to cure unemployment for a time by inflating the currency. We have not done it. If we wanted to stop unemployment at once in this country, it would be quite easy to do. All that you would have to do would be to set your printing presses at work and let everybody in this country—man. woman and child—have a nice new "Bradbury" every Saturday morning. If you only did that, if we could only persuade the Chancellor of the Exchequer to be really generous with the printing press, there would be any amount of employment—for a time. Confidence in the Chancellor of the Exchequer would wane, I am bound to admit, but confidence in the Chancellor of the Exchequer has already been sorely shaken. However, we know quite well that inflation through the Government printing press, as practised in Germany, is no good. The question is, whether deflation is much better?

I said I was a stabilisero, and if I could believe that we were now genuinely on a parity with the dollar, and that we were stabilising today on an honest basis, I should say: "Go back to the gold standard." But that does not alter the fact that for the last eight years, in getting to a stable basis, in getting to dollar parity, the whole of that policy has been of enormous benefit to the rentier class in this country. I dare say we could not have helped it, but, for goodness sake, let us recognise it. Everybody who lent money, shareholders, debenture holders, preference holders, all the people with fixed incomes, have benefited by deflation. There is no doubt about it, and today deflation is alleged to have reached a point where we are on a parity with the dollar, and may safely stabilise on the gold basis. That may be so, but I am a little doubtful as to whether the real value of the £ today is accurately represented by the dollar exchange. It is undoubted that the financial influences in this country have had a great deal to do with the rise in the £ value. Anyone who has read day after day, as I have, the articles of the City editor of the "Times" will have seen what a constant push there has been towards attaining this dollar parity.

I think we ought to have from the Chancellor of the Exchequer before we vote today some sort of insight into the financial operations which have brought about this dollar parity, and the cost of those financial operations. He told us, when he was opening his Budget, that he had bought in advance 166,000,000 dollars, or, roughly, the full interest in advance on our debt to America. He admitted at Question time that he had bought in advance, and that he already had in hand the whole amount for the December payment, although, under normal circumstances, it would not have been required until later on. He has bought dollars when the pound was low, and, as he admitted at Question time today, the country has made a financial sacrifice to acquire those dollars before they were definitely needed, and if he had bought them today, with the dollar standing at the price it is, he would have been enabled to buy much cheaper. Therefore, the country as a whole has been put to a considerable financial sacrifice. He could not tell me the figure, but he said that, if this sacrifice had not been made, purchasers of raw material during the fall would have had to pay more, and that the Exchequer has paid to save the pockets of the people who will buy the raw materials later on. If that be so, let us know roughly what we are paying for it. What we want to know is, what is the difference between the present price at which those 166,000,000 dollars stand—


I gave what was necessarily a very rough estimate to the House of the cost of the purchase of those dollars, but —the right hon. and gallant Member was not in his place at the time.


At any rate, it comes to this, that we have been paying considerable sums in order to restore the pound to a dollar parity, so as to effect stabilisation at parity. That is all very well, and it may justify us in coming on to the gold basis, but the proof of the pudding is in the eating, and we have got to see now whether it is a genuine parity, or whether, when this Bill is passed into law, we shall find our gold reserves melting away. Even today, the pound is standing below the dollar parity, so that there is a direct incentive to export gold from this country at the present moment.


The export of gold is determined by the gold point.


And the import of gold by another gold point. Parity must be the guiding factor, but directly a point is reached at which it pays to export to America, we may have a demand for the gold of this country. £30,000 was shipped the day before yesterday. If that goes on, or if it increases, the inevitable result will be that the Bank of England will have to put up its Bank rate in order to retain the gold in this country, and every time the Bank of England puts up its Bank rate, it becomes more difficult for enterprise in this country. Every time the Bank rate is put up, people in the building trade, who live on overdrafts, find it more difficult, more expensive, to carry on, and production is restricted. That applies to every industry in the country. Every factory that is putting up a new wing, or putting in new machinery, is checked by a higher Bank rate, and before the Government brought in this Bill, they ought to have been absolutely certain that there would be no risk of this increase in the Bank rate in order to secure the return to the gold standard.

The House will remember that only about two months ago the Bank rate was raised from 4 to 5 per cent. At the time many people thought that rise in the Bank rate was intended to assist the restoration of gold parity. It worked in that direction. Shall we have a series of further rises in the Bank rate in order to sacrifice the industries of this country to the fetish of the gold standard? As I say, the proof of the pudding is in the eating. We cannot tell whether the Chancellor of the Exchequer has chosen the right moment or not to get back to the gold standard, because nobody but he knows what operations have taken place in order to raise the pound to the level at which it stands today. If it has been at the expense of this country that gold parity has been obtained, then I fear there can be no doubt but that continued assistance will have to be given in the way of borrowing dollars, or in other ways, if we are to avoid the draining of our gold reserves and the consequent rise in the Bank rate which follows. The party to which I belong are not opposed to stabilising the currency. We are not opposed to getting back to a gold standard, provided no deflation is involved; but we are opposed to taking these risks, unless the Chancellor of the Exchequer is absolutely certain that there is no risk of the Bank rate being raised by reason of this Act of Parliament, and thereby the interest of the industries of this country suffer from an increased cost of that which is essential to production, and which we want to have as cheap as possible in order to make production as cheap as possible.


I want to say a few words from the point of view of one who has been engaged in productive industries for, at any rate, forty years past. I could not help feeling a certain response in my mind to the opening words of the hon. Member for Dundee (Mr. Scrymgeour). He claimed to have an open mind on the subject. He said, as a matter of fact, our financial system, in his opinion, always worked against the interest of the producing class. I do not propose for a moment to dogmatise on one side or the other, but I do view with suspicion any proposal, so far as the producers of the country are concerned, when I see it advocated by international financiers, the bill-broking and banking community. It makes me a little doubtful about the phrase the Chancellor of the Exchequer used yesterday, in which he said that the proposals in this Bill were not going to shackle us to the United States but to reality—a phrase worthy of the occasion, and no doubt happily chosen. But when you work it out, what does it actually mean? It means that we are shackled to gold. That is the reality in this Bill, and I want to be quite sure that we are not going to see the producing industries of this country shackled to international finance, and to those whose interests are purely financial. I am reminded of the old phrase, that there is nothing like leather. It is natural for people producing boots to think there is nothing like leather, and it is also natural for financiers to think there is nothing like gold. It is the raw material of their industry; it is that out of which they make their money, but it is not the raw material out of which this country makes its wealth.

We who have been connected with productive industries in this country for the past 40 years can recall well the alternate periods of boom and depression happening regularly at intervals, roughly, of from seven to ten years, and we can always remember that just when the factories got thoroughly well going, when employment was increasing, and the like, the Bank rate, by that mysterious process, the working of which we do not know, was invariably put up, and the boom disappeared and unemployment began. We have had these alternate ups and downs so often that we are forced to believe that they are something in the nature of cause and effect, and I think I am not putting it too high in saying that the producers in this country, while not opposed to the gold standard, regard this as a nostrum with a certain amount of suspicion, based on their own experience during a large number of years. It seems to me that whenever we had, as I say, a boom towards the end of the last century and the early part of this century, imme diately we had the Old Woman of Thread-needle Street, like the Fates of old with their shears, determined to cut it off and to nip it in the bud.

I would like to ask the Chancellor of the Exchequer if he is really convinced that the reactions to a rise in the Bank rate, which he mentioned in the House yesterday, are really the reactions that are most important to the producing community in this country. He said that it tended to prevent speculation, particularly in food. The recent rise in the Bank rate produced a cheaper 4lb. loaf, and it certainly produced a reduction in the price of Government securities. That, broadly, is perfectly true. A rise in the Bank rate, as we know from experience, also curtails productive industry, as it has again and again in this country, at the same time as it curtails speculation. I do not believe you can divorce the two things from one another. Speculation, no doubt, particularly in foodstuff, is not a desirable form of enterprise, but it is a form of enterprise, gone to seed perhaps, that you cannot check without checking productive enterprise 'also. I quite realise it may be said that a gold standard from the point of view of the producer has certain disadvantages, and we had better put up with the evils we know of, than go into the unknown evils which await those who believe in a managed currency. That may be quite true, but I think the Chancellor of the Exchequer has put it too high, in painting a picture of what will happen if only we have the gold standard, and, as the right hon. Baronet the Member for Carmarthen said, logically from the argument. of the Chancellor of the Exchequer, we ought to have a rise in the Bank rate every week

It is not on those grounds that we can support, as I certainly do, the decision of the Chancellor of the Exchequer. It is because, if we are to have a managed currency, we shall have a managed currency in every European country, and they will not be managed on the same lines. There is no international power which will say that you have to manage your currency in a particular fashion. Once you go into that, you have no stable means of exchange between one country and another. I do think that we ought very carefully to watch the operations of this return to the gold standard. It is just as well, perhaps, for the House to realise that it is impossible always to put the interests of the financier—which are not by any means always the interests of the producer—first, and to say that we should remain quiet because everything is going to be all right in the trade of the country once we return to the gold standard.