INTER-ALLIED DEBTS.

HC Deb 19 July 1926 vol 198 cc913-94

Captain WEDGWOOD BENN

It is understood that part of the discussion this afternoon is to be devoted to an examination of the debt settlement which has been concluded between M. Caillaux, the Finance Minister of France, and the Chancellor of the Exchequer, acting on behalf of this country. Since the Agreement was signed, very important events have occurred in France, and it may be argued by some hon. Members that a Debate on the settlement to-day is futile or unnecessary on account of the fall of M. Briand's Government. It appears to me that, unless the Chancellor of the Exchequer is going to say that he proposes to negotiate a new settlement more favourable to the British taxpayer, this Debate is certainly necessary. If he says that these are the terms which he proposes to offer to the French Government and the French Finance Minister, if and when the new Government is established, I think the Committee would do well to take advantage of this opportunity, perhaps the only opportunity that they will have, of examining the terms of the settlement before they are finally ratified on our behalf by the Government. I admit that for one who is not expert it is a somewhat long task to examine financial documents of this kind, but I am very much encouraged by the speech which the Chancellor of the Exchequer made in the City only last week, in which he explained the principles of high finance in words of one syllable. Among the maxims—I must say the speech gave me great encouragement, and it must have given encouragement to millions—there was one which was particularly apposite to this Debate. He said: Pay your debts, pay them quickly, and let your word he your bond A very excellent maxim! It appears to me that the ordinary taxpayer, not the financier, when he reads those words and approves their high moral tone, will be inclined to ask whether the Chancellor regards them as applicable solely to the taxpayers of this country, or whether he intends them to apply to taxpayers and debtors in all countries alike. The ordinary individual observes that this country is a creditor to her European Allies to the tune of about £1,200,000,000 or £1,300,000,000, and a debtor to the United States for about £800,000,000 or £900,000,000, and, so far, the only thing that has happened is that we have acknowledged our own Debts, paid our own way, but we have not yet received any similar benefits from our own debtors.

The average taxpayer is beginning to realise this. He wants public economy for the relief of industry from taxation and the advancement of social purposes, but in the Budget there is that irreducible item of £300,000,000 for Debt services, and the ordinary individual is beginning to realise that part of this is due to the Debt incurred on behalf of those Allies. That being so, he feels that the question of public economy and a reduction of the Budget burden are wrapped up in a. proper settlement of the debts owing to us. He thinks, also, that a nation like ourselves, a creditor for this immense sum to the chief countries of Europe, is in so strong a position as a creditor as to be able to secure important advantages from that position. Let me take two illustrations. He sees that foreign tariffs are a great obstacle to the increase of the British export trade. He is told that a small duty on goods coming into this country would form a very valuable weapon by which to open the door of foreign markets to our trade, and he thinks that if a small duty would be of such immense value then, surely, a creditor's position, especially when such vast sums are involved, would give us a similar advantage. Yet the Chancellor of the Exchequer and the Government have done nothing to use the power which this country possesses as a creditor nation to reduce foreign tariffs and improve markets for British goods in any other part of the world.

He is conscious also that our greatest interest to-day is disarmament. It is not only a financial but a moral question. He observes that these countries owe us so much money. In the case of Italy we have remitted six-sevenths of the debt; in the case of France three-fifths, and he inquires whether any of the power in our hands has been employed in order to reduce armaments or to induce a desire to reduce armaments. He reads Mr. Houghton's report, which presents a picture of Europe at the present time, and he observes that on the very day when Count Volpi returns with his terms Signor Mussolini makes his speech about peace in the shadow of the sword. Nothing done, no advantage, no pressure to reduce what is undoubtedly a serious menace to the peace of Europe in Italian interference! He is told that we must leave a certain amount of our money in France, and that the French are building a big Air Force. The Secretary of State for Air tells us that we must leave our money in France for them to build an Air Force, and find fresh money ourselves because we cannot afford to let them have a bigger Air Force than our own.

The non-financial, the casual observer, sees these things, and wonders whether full advantage has been taken of our creditor position in order to obtain these undoubted benefits. It may be said, any settlement is a good settlement provided it is a settlement. What we require is to prevent the French franc going the way of the German mark, to stabilise affairs in France so that ordinary trade relations may continue and improve to the mutual benefit of both nations. Therefore, if the Chancellor of the Exchequer brushes aside the questions of tariffs and disarmament saying they are not in his sphere—and I must point out that he is negotiating not as Chancellor of the Exchequer, but as the representative of the British Government—I am sure he will not launch the same criticism against an examination of the settlement as a settlement. Is it a final settlement, and one which is going to give what the business world regards as the supreme thing—namely, a stable condition of affairs in France? What happened on Saturday in the French Chamber has made it clear that for the time being we cannot hope to see a settled state of affairs in France. What the outcome will be it is difficult to say, but from the point of view of the Chancellor of the Exchequer the fate of the French Ministry is clearly a point against his settlement because it leaves the situation unstabilised. Although we may settle with the French, if the French do not settle with the Americans on the basis of the Mellon-Beranger proposals, it is clear that France will not achieve that position of stability which it is our first interest to secure.

There is in this Agreement what is, in effect, a safeguarding Clause. The Chancellor of the Exchequer at Question Time, made a most remarkable statement—I do not know quite what to call it—a cautionary phrase, and one which I have never heard used by any one on the Treasury Bench before. He said that nothing he may say in Debate has any bearing on the meaning of the documents he intended to defend. That was the net result of his statement. There are two letters appended to. this Agreement. There is a letter from M. Caillaux to the Chancellor of the Exchequer, and a letter from the Chancellor of the Exchequer to M. Caillaux. But the Chancellor of the Exchequer has announced in advance that no explanation he can give can in the least affect the meaning of these documents. What is the use of control by the House of Commons, if there is such control, and what is the use of the Chancellor of the Exchequer being here to explain his documents? He might just as well have sent the Minister of Agriculture, the President of the Board of Trade, or any other Minister, because he says that nothing he can say can in the least affect the meaning of these two letters.

The CHANCELLOR of the EXCHEQUER (Mr. Churchill)

The Treaty stands on its own merits, and it is not affected by any statement made about it. The validity of the document rests upon its terms. I only pointed that out for greater precaution.

4.0 P.M.

Captain BENN

It means that the Chancellor of the Exchequer gives one explanation here and someone else another explanation elsewhere, and the question remains absolutely unsettled. The French explanation is a different one. The French newspapers explain it in a totally different way, and we are to get no satisfaction to-day because we have no power of amending it. There is, I believe, what is called a pari passu phrase on which he acts, and which I understand means that we do not permit the French to pay more to the Americans than they pay to us. It is perfectly true that in the temporary settlement made by M. Beranger at Washington, and in the settlement made by M. Caillaux with the Chancellor, the amount of cash, so the experts say, is about the same, but what a vast difference is made in the settlements of one containes a safeguarding clause, and the other contains no safeguarding clause. M. Caillaux, in introducing the safeguarding clause, was clearly of the opinion that he was securing a substantial financial concession. Therefore, the first point that arises on the safeguarding clause is to ask the Chancellor of the Exchequer whether he does not consider the introduction of that clause into the British agreement is a violation of the pari passu principle upon which he has hitherto acted.

The safeguarding clause provides conditions under which the French can cease to pay without defaulting. The conditions are not that the French can say "We have not the money, and we are not in a position to pay," but "Germany has defaulted." If Germany defaults, then apparently, as I read the letter, and no explanation that can be given can possibly allay any suspicions that I may have, because no explanation can vary the terms or meaning of the letters, France need not pay. As I understand it, the test is purely to be Germany's default. You may have a rich France able to pay and yet not willing to pay because she says that, according to the Caillaux letter, there being, default on the part of Germany, she is not called upon to pay the instalments that otherwise would be due. I cannot express an opinion as to whether or not the annuities under the Dawes Scheme are liable to be paid. They amount to £125,000,000, and this burden is put upon the backs of the German people. When the American Debt settlement was made, Mr. Bonar Law spoke strongly of the immense burden which was being cast upon the people of this country by the payment without any relief from other sources of the £33,000,000 which was the initial instalment. If £33,000,000 is a. burden which we cannot bear unaided, then you will see that £125,000,000 is a burden that Germany cannot pay unaided. I do not know whether she has the means to pay, or what the future may be in that regard, but, if she defaults at any time, then the whole of this settlement is reopened. One of the most remarkable features of the Dawes plan was that no term of years was set to the payments. I thought that was so, and I looked up the Debates and found that the hon. Member for Ilford (Sir F. Wise) raised the point at once. The Prime Minister confirmed the fact that there was an arrangement for payments for six years, but that there was no term of years set to the payments.

Sir FREDRIC WISE

Or to the amount.

Captain BENN

Or to the total amount. All that was settled was the initial amounts of the annuity rising to £125,000,000, but no term of years was mentioned and no capital sum to be discharged was named. This agreement with M. Caillaux does settle the term of annuities for the Germans to pay. It is not merely a French debt settlement, but also a German reparation settlement, because clearly if at any time within 62 years the Germans fail to pay the Dawes annuity, then the whole of the settlement with M. Caillaux comes to an end. Therefore, if we examine this settlement from the point of view of the man who says it is worth while being generous to France so long as we get this tiresome problem out of the way, we find, far from that being a justification for the settlement, on the contrary, the moment Germany defaults, it not only re-opens the question of the French payments, but —and this is its most objectionable feature—it brings us as joint creditors with France into a political quarrel with Germany. If Germany defaults to us, we can deal with that as a bad debt, and if France defaults to us on her own responsibility we can deal with that as a separate thing, but under this agreement, if Germany defaults, France defaults as well, and France and ourselves become joint creditors able to bring pressure to bear upon Germany to make her pay up.

That is the situation in which we found ourselves in January, 1923. One of the most unsettling features of this so-called settlement is that it unites us once again with France in bringing pressure to bear upon Germany to pay annuities which may or may not be within her capacity to pay. I have left out of account whether these big countries should continue for a series of years to raise and pay these immense sums of money which represent no transactions on credit. It seems to me, and I think the Chancellor of the Exchequer said so in the city, that within some reasonable period the nations of the world must come together and revert to the policy of the Balfour Note, namely, universal cancellation of these debts.

Mr. CHURCHILL

indicated dissent.

Captain BENN

That may come, but in the meantime, if the Chancellor of the Exchequer claims that he has settled this question, then I say, before he can claim that, he must answer the question put to him, and must broadly explain how far the safeguarding Clause is not likely at a most critical moment to vitiate the finality of the whole scheme.

Mr. HILTON YOUNG

A great deal of what was said by my hon. and gallant Friend the Member for Leith (Captain Benn) will meet with general agreement, but I confess that there was one passage in which he held out a prospect which will fill a cautious mind with consternation. I understand it to be his opinion that we should have made use of our position and influence as a creditor in Europe to intermeddle with the domestic politics of the debtor countries. I understand that it is really his opinion, for instance, that we should have made use of our position as a creditor of Italy to have persuaded our late Italian Allies to send M. Mussolini about his business, that, similarly in France, we should have made use of our position as a creditor there to enforce upon our French friends the putting down of so many squadrons of aeroplanes, and that, as regards all the minor nations, we should have intermeddled with them to the extent of altering their fiscal policy.

Captain BENN

is the right hon. Gentleman aware that the leaders of this new policy claim that right of intermeddling by what they call tariffs?

Mr. YOUNG

I am aware of no such thing. I am, however, fully aware that no suggestion could be more directly calculated to reduce Europe to confusion and to bring ourselves into hatred. If in private life my creditor were to come to me and say, " I will remit part of your debt if you will change your place of worship, and if you will put down your motor car," I know that I should send him about his business, and I believe that, is precisely what would happen if this attitude were to be adopted in the public life of international affairs.

There are two aspects of this question of debt settlement. There is the arithmetical or business aspect, and there another and far wider aspect introducing much greater considerations. If we take the question of the French Debt settlement merely on its business aspect, I do not think that it is possible to look upon it as, and I do not think its supporters would claim that. it was, a, brilliant settlement. The French are to pay one-third of what they owe, and, for as long as it is possible to foresee, we and our descendants will pay £24,000,000 a year on behalf of the French taxpayer. That is not a brilliant settlement.

Nevertheless, I believe ft is prudent, for this reason. We ought to concern ourselves more as business men—and I am dealing with the business aspect—with new business than with old debts. Truth to tell, of our two ledgers, our commercial ledger, the ledger of the nation as a great industrial unit, is of very much more importance than our ledger of public finance in which the taxpayers appears. If we are to compare Great Britain with anything, we ought not to compare it with a retired colonel living at Cheltenham upon his interest; we ought to compare it with a manufacturer to whom orders matter more than interest. For the benefit of trade it is clearly prudent policy to promote stability, and you can best promote stability in this region by promoting a settlement of these debts. the depreciation of the French franc is coming near to upsetting the apple-cart of European trade. It is a great danger. It is not only its immediate effect upon French trade. The depreciation of the French franc does, indeed, bring the French exporter into competition with us to our disadvantage, and it does, indeed, make it difficult for us to import into France, to our disadvantage. But that is not the real gravity of the matter. It is true, again, that the depreciation of the French franc has a sort of reflection on the Italian lira and the Belgian franc, disturbing the trade of those countries with us. Why it is so would take too long to explain, if anybody could explain it, and I do not think that anyone can exactly explain it. We only know that it is so by some sort of economic sympathy. The real gravity of the situation is the lethargy which the uncertainty of the future imposes upon the trade of Europe. People remember only too well the effect of the great crash of the German mark, and they feel that there may be a similar crash of the French franc. They fear, not only economic and commercial disturbances, but political disturbances in France, and a shaking up of that great system which is based upon the stability of France upon the continent of Europe. All these things are inimical to the progress of trade.

There is another thing worth a single observation. All this uncertainty based upon the depreciating franc reacts upon the opinion of the United States. What is much needed in order to get Europe going again upon a normal basis is the help of American credit, and American credit is withheld because of these unstable conditions. For that reason, there is the strongest motive of policy why at the present time we should do our share to help to check the fall of the French franc and to re-establish normal conditions. What has been done has not stabilised the French franc. We do not know whether the settlement is going to be accepted by the ensuing French Government, but we do know that a settlement upon some such basis is a condition precedent to the stabilisation of conditions by checking the fall of the franc, and we hope that the ensuing French Government will follow up the offer that has been made. Thus something has been done by means of this preliminary Agreement to restore French credit abroad. But not all has been done that might be done. I do not think that the warmest admirer and the most constant friend of France could honestly say that by means of such a settlement French credit is made as good as ever it was. It is not so. You cannot reestablish your credit as good as it ever was by a settlement of 6s. 8d. in the £. That is the first prominent feature. The second feature is this. If you want to reestablish your credit by a settlement of your debts, you must make your promises to pay absolute, and not conditional upon somebody else paying.

What was the nature of our settlement with the United States—that transacted by the Prime Minister? That it was an absolute settlement. There is the great difference, as regards the re-foundation of credit, between our attitude and that of France. We claim to receive from our debtors only as much as we pay to our creditors. The French agree to pay only as much as they receive, and in that way credit cannot be re-established. One might most earnestly say, if there were any chance of a voice being heard, to our friends of the French nation, "Do not miss the chance to re-establish your credit in this settlement by maintaining that safeguard clause, but strike it out, and so base your credit's restoration firmly." After all, this has to be remembered, that though we may agree to this settlement as being necessary for the checking of the depreciation of the franc, yet it is owing to the error, to the financial fault of the French, that the franc is depreciating, and that the settlement is forced upon us. it is because of errors of financial policy across the Channel that the position is brought about in which such a settlement has to be made. I think we may fairly contend, when we are discussing this settlement in our own Legislature, that such a settlement as this does impose upon the French State a most solemn and absolute obligation now to take all possible and all necessary means in order to rehabilitate its currency. It is an obligation which they owe to the rest of Europe in return for a favourable settlement in order to save it from those disasters which are implied in a catastrophe to the frane.

But this is an occasion of rather wider moment than even the 'settlement of this particular French Debt. It is the last of the great outstanding settlements of War debts which bad still to be made. As we hope that it will go through, and as it is the last of the great arrangements, things may perhaps be opportunely said now which it was not opportune to say before, when it was possible that by saying them an atmosphere might have been induced which would have been unfavourable to further settlements. What is the general position that has been created as a result of this debt settlement of ours? It is this: We have stood up to every obligation in its most severe form, on the one side of the book, and, on the other side, we have shown every possible lenity and consideration to those who owed us money. So it is. It was perfectly right to do that, because credit is the life-blood of this nation. In order to restore our credit, to re-establish it and to re-establish the credit of our customers, that was a sound policy. We have re-established our own credit by severity to ourselves. We have assisted to re-establish the credit of our customers by consideration towards them. But the resulting situation has certainly got in it elements that for the British taxpayer are somewhat grim.

The certainty of the situation is that in a few years we shall be paying £38,000,000 a year to the United States. What have we to set against that? I take the calculations of the Chancellor of the Exchequer. There is a possible, ultimate, credit item against this £38,000,000 of £33,500,000, based upon his assumption that Germany may pay three-quarters of the total reparations due under the Dawes settlement. Yes, but what is the feature of that account? It is this: That our own payments are absolute and immediate. They have already begun. What we are to receive is ultimate or hypothetical. It has not yet begun, and it may not begin unless things go better than at present seems possible. That is a grim situation, and there is that other feature of it which is so difficult wholly to bear with that patience which should be shown in such high affairs—that all this burden that we are bearing, we are bearing upon a bill that we backed for our Allies. We are not bearing it for any direct advantage that we have had ourselves. We are in the rather ridiculous position of an innocent who is called upon by some harsh creditor to pay up on the bill which he has backed for his friend.

Then we turn to the other side of the picture—to the United States. I certainly do not think it is useful or helpful in these Debates to exacerbate feeling by dwelling upon inequalities of sacrifice, but still the facts remain. They cannot be put in a better or more vivid manner than they were by the Chancellor of the Exchequer in the last Debate on this subject, when he said that within a short time all the money that is being received and paid for reparation will be drawn away to the United States and go into the pockets of tile United States, very largely at our expense. That is the situation. I do not think it serves any useful purpose not to say, at any rate once, that in that there is something amiss. What is amiss is this—that throughout we have looked upon these debts as implying something more than merely commercial debts, but in the United States they have been looked upon as implying nothing more than a strictly commercial basis. It may be said, and it is said as part of the United States case, that great remissions of debt have been made, and since great remissions of debt have been made by the United States it cannot be justly charged against their policy that throughout they have regarded the debts upon a strictly commercial basis. I do not think that that answer is a good one. Whatever remissions of debt have been made, have been made on a basis which is as commercial as the actual extraction of the debt, the basis of ability to pay. No commercial creditor extracts from his debtor more than he can pay, for that would mean the debtor's bankruptcy and that there would be nothing for the creditor. The remissions made on that basis have been made in as commercial a spirit as the actual enforcement of the debt.

That treatment of the debts has its implications. We have to present the citizen of the United States with an alternative, and it is this. Either in coming into the War the United States had with us a common cause, a common motive, and a common ideal. If they had, then it was right and necessary that there should be some community of interest, a pool of interest; and if there was such a community and pool, in the right and in necessity, then it is impossible to deal with such debts, contracted under those conditions, on a strictly commercial basis. What is the converse? It is this: That if you do deal with War debts upon a strictly commercial basis, that implies that there was no community of resources, in right or necessity, and, if that be so, then the implication must be that the motive of the United States in coming into the War was not a motive of a common cause and common interest, but a mere mercenary motive of selling her services to the Allies. Which was the truth? Well, we know that the truth is that the United States came into the War because she had a common cause with us and common ideals. Her interests, her sense of humanity, were outraged by the submarine campaign. Her most important headings of national policy were outraged by the interference of the Germans in Mexico and in South America. But, greater and deeper than that, she came into the War because of her deep sense that the vital principles of democratic government and of liberty were at stake.

If at this time there is a body of opinion in the United States which insists upon the strict commerciality of War debts, surely they are doing the gravest historical wrong to the reasons for which the United States came into the War. They are misrepresenting the true spirit of their great nation. It will be recognised that when we in this country for once in a way, upon a rare occasion, say this about our post-War financial relations with them, we are doing it in no spirit of appeal for compassion or pity. We have our difficulties, we have the vast expenditure of wealth, far greater than that of any other nation in the War, and the immense consequential difficulties in our million and a-quarter of unemployed; but we are prepared, and we shall ever be prepared, to face direct obligations. It will be a very evil day when any British Minister goes cap in hand to the Government of the United States and asks for remission or for more favourable treatment of these War debts. It is not for more favourable treatment that the matter is worth expressing, but for the sake of Anglo-American relations, which cannot be expected healthily to flourish in the future unless it is recognised on the other side of the Atlantic that there is a case, and a strongly felt case, as to the moral implication of these matters held in this country, which must not pass entirely in silence.

There is a little rift in the lute of Anglo-American relations. It is a rift that has been made by a small minority in the United States, as we believe, who make of the ledger a bible and of commercialism a god. We know that that is not the real feeling of the United States. We know that in course of time the true heart of the people will express itself. But in the meantime, there is the situation to be faced. One tie of friendship and understanding between the two countries has, I think, been a little loosened. It is the tie that might be the strongest of all, the tie of common memories of the War. It has been a little loosened, and it only remains for us to tie others- stronger elsewhere—if that field of friendship has been constricted, to enlarge fresh fields of friendship elsewhere, lest we drift apart. It is quite certain that the two Continents cannot do without each other. A great allowance has to be made on the one side for the pride of youth in the new world, and on the other side for the pride of age in the old world. When all these allowances have been made—and we must constantly make them—the truth remains that no race of humanity can possibly disregard the common, moral sense of all mankind. We learned that lesson in the War; we learned it in the example of the terrible downfall of the military Empires which tried to disregard the common moral sense of all mankind. If there be a small section in the United States that has not yet learned it, we may be confident that they will be taught it by their future, as we in Europe have been taught it by our past.

Mr. SNOWDEN

The right hon. Gentleman the Member for Norwich (Mr. Hilton Young) justified the Agreement on the ground that it was much better to look after new business than to look after old debts. He expressed the opinion that this was a just and prudent settlement, and based that opinion on the hope that the terms of this settlement might help France to re-establish her financial position. If the right hon. and gallant Gentleman hopes that the Agreement made last week in London is appreciated by the French people or is likely to have any effect at all in bringing the French Government to realise the seriousness of their position and the absolute necessity for taking drastic steps to improve it, I am afraid the hopes of the right hon. and gallant Gentleman have no real foundation in fact. There seemed to me to be one or two inconsistencies in the speech of the right hon. and gallant Gentleman. He admitted that this debt agreement is a composition with our debtor representing about 6s. 8d. in the £, and then he went on to say, a few sentences later, that the way to establish one's credit was by paying one's debts. I do not think the credit of France is likely to be established or that the credit of France stands higher to-day than it did a week ago, because of the Agreement that was signed last week. I think the Chancellor of the Exchequer probably appreciated the speech of the hon. and gallant Member for Leith (Captain Bean), who introduced this topic, more than the speech which followed it, for I cannot believe that the Chancellor of the Exchequer looks upon this Agreement with any satisfaction.

I spoke at some length upon this matter some months ago, and on that occasion I used rather severe language in regard to the agreement which had been made 12 months before. I remember that upon that occasion the Chancellor of the Exchequer, following me, said that his official position prevented him from giving expression to similar sentiments. The right hon. Gentleman appears to be in the position of the clergyman who, owing to his holy profession, was prevented from expressing his feelings in strong language and paid a layman to do it for him. The Agreement made last week does not differ very materially from the Agreement which was made with the same French Finance Minister 12 months ago. It will be remembered that when the Chancellor of the Exchequer spoke on this matter some months ago, he said two or three matters had been left over for further consideration. These matters have been considered and settled—on paper at any rate—in the Agreement signed last week. The total amount which is to be paid by France spread over a period of 62 years remains the same. The payments during the last four or five years have been fixed on an ascending scale. The Chancellor of the Exchequer said that a suggestion had been made to him 12 months ago by the French Minister, that the payments by France should be dependent upon the receipt of reparations from Germany. The right hon. Gentleman expressed himself, on that occasion, as being strongly opposed to such a condition. It is quite true that no such condition is embodied in the text of the Agreement, and I fear I do not take that very serious view which the hon. and gallant Member for Leith appears to take, of the two letters which have been exchanged between M. Caillaux and the Chancellor of the Exchequer. We know why the French Finance Minister insisted upon these letters. He had to take something back to France to save his face; something that might help to secure a ratification of the Agreement by the French Chamber, but I do not regard the letter which has been signed by the Chancellor of the Exchequer as being in any way binding on any future British Government.

Mr. CHURCHILL

indicated dissent.

Mr. SNOWDEN

No, not binding to this extent, that a future British Government would be under any obligation on account of this letter. Of course, they would be under an obligation to consider the matter, but I do not regard the Chancellor of the Exchequer's pledge as being an obligation upon any future British Government to make the failure of German reparations a reason for a modification of this Agreement.

Mr. CHURCHILL

Obviously future British Governments are bound by the Agreement and by the letter if the Agreement is finally ratified by France. They are bound by both, but they are not bound beyond that.

Mr. LLOYD GEORGE

They are not bound to modify it.

Mr. SNOWDEN

I think the right hon. Gentleman himself in the second sentence of his letter says: His Majesty's Government must maintain the position that the settlement which we have arrived at of the French war debt to this country depends like that debt itself, on the sole credit of France. Then the right hon. Gentleman goes on to say that in the event of the failure of German reparations the British Government of the day would be prepared to consider any representations which might be made.

Mr. LLOYD GEORGE

But not to modify.

Mr. SNOWDEN

I think it is most important that this statement should be made that while a future Government might be under an obligation to consider representations which were made by France for the modification of the Agreement, British Governments would not be bound to modify the Agreement.

Mr. CHURCHILL

indicated assent.

Mr. SNOWDEN

I think it is most important, that that additional safeguard should be made clear. The Agreement which the right hon. Gentleman has made fails to satisfy many of the conditions which have been laid down by himself and by previous British Ministers. I am quite sure the right hon. Gentleman will not contend that he is maintaining by this Agreement the principle of the Balfour Note. The right hon. and gallant Gentleman who preceded me quoted certain figures which were given by the Chancellor of the Exchequer when he spoke a few months ago. Taking an Agreement under which we were to receive at the outset £4,000,000 a year, and assuming that that agreement with France matured, they would pay us £12,500,000 a year and we would get from German reparations a figure which was fixed by the Chancellor of the Exchequer at £15,000,000. The Chancellor of the Exchequer is very sanguine if he thinks Germany is going to be able to pay reparations which will give to this country, whose percentage is 26, a sum of £15,000,000 a year.

MT. CHURCHILL

That would be our share of three-quarters of the full Dawes annuities.

Mr. SNOWDEN

That does not change my view in the slightest. I am sure nobody thinks it is possible either for Germany to pay a total sum of £125,000,000 a year, or that such a sum could be sent across the exchanges without upsetting the whole financial arrangements of Europe. If our share of German reparations were £15,000,000 a year, we should get about £33,500,000 a year, and we should he paying the United States £38,000,000 a year, and so, if France paid us, if Italy paid us, if our smaller debtors paid us, then the right hon. Gentleman, by this arrangement, is not carrying out the principle of the Balfour Note. He is not getting from our Continental debtors a sum which would be sufficient for us to pay the debt which we owe to the United States. Further, he insisted in many of the Notes which he has addressed upon this debt question—and he somewhat emphatically identified himself with it when he spoke a few months ago—on what he calls the pari passu principle. That is to say, that no one of out. Continental debtors must give more favourable terms to others of her creditors than she is giving to us. That principle has been,. I was going to say, flagrantly violated, but it has been violated to a considerable extent in the settlement which the right hon. Gentleman has made with Italy and with France. This is quite clear when we come to compare it with the settlement which has been made by America with Italy, which has been ratified, and the Agreement recently reached in Washington between the French Minister and the American Government which still remains unratified by France.

Let me give the House some figures. I hope I shall be able to make them clear. Take our French Debt. Deducting the gold, the amount of the French Debt is £600,000,000. Under this Agreement the total payment which will he made by France to this country over a period of 62 years will be £775,000,000, which is a little more than the capital amount of the Debt. Take the French Debt to America. It was a little more than ours—£680,000,000. Under the American Agreement, France is to pay on an original debt of £680,000,000, over a period of 62 years, a sum of £1,370,000,000. That is to say, America is going to get twice as much, including interest, as the original amount of the Debt, or of the Debt at the time the Agreement was made, We are getting under this arrangement only £175,000,000 in 62 years more than the amount of the Debt at the time of the Agreement.

I know the Chancellor of the Exchequer may say that a bird in the hand is worth two in the bush, and that the amount that we shall get from France, if this agreement be carried out, gives us more the first few years than America will get under the French-American settlement, That is quite true, but it is not very much of an advantage. We, in the first five years, will get under this agreement with France, provided they pay, £40,500,000, and America will get £32,000,000, but after the first 15 years the amount that France has to pay under the American agreement rises very rapidly indeed. Exactly the same thing applies to the Italian Debt. The Italian Debt to Great Britain was £550,000,000 and to the United States it was £420,000,000. The Chancellor of the Exchequer settled with Italy for a total payment of £254,500,000 over a period of 62 years. What is the bargain which the United States have made with Italy, a bargain which, I believe, has been ratified by the Italian Government? We are getting less than half of the total sum that Italy owes to us; America is getting £495,000,000 on a debt of £420,000,000. It is quite true again that in the first few years we get more than Italy pays to the United States under her agreement with America. In the first 15 years we are to get £61,000,000 from Italy, and America gets £38,000,000, but in the second 15 years, while her payments to this country remain the same, she pays to America £82,500,000, in the third 15 years she pays to us £61,500,000 and to America £135,500,000, and in the last 17 years she pays to this country £71,000,000, and to America £239,000,000.

Now America is getting from France, may I repeat, or will get from France if France pays, under the American-French settlement, more than twice the amount of money that France owed to the United States, and America is getting from Italy more than Italy owes to the United States. We are getting from Italy less than half the amount of her debt, spread over a period of 62 years. How can the Chancellor of the Exchequer say that he has made a good bargain? How can he say that he has carried out the principle that he himself has laid down, that there must be equal treatment between all the creditors of these debtor countries? The Chancellor of the Exchequer gave to the "Times" newspaper after the visit of M. Caillaux to this country in August of last year a very definite pronouncement.

Mr. CHURCHILL

Not to the "Times" alone.

Mr. SNOWDEN

It says it was given to the correspondent of the "Times"

Mr. CHURCHILL

And to all the other correspondents.

Mr. SNOWDEN

Then the right hon. Gentleman had a sort of mass meeting, I suppose?

Mr. CHURCHILL

Yes.

Mr. SNOWDEN

This is the statement. His Majesty's Government have from the outset made it perfectly clear that any arrangements which .lied: can conic to with France must be governed by the principle so often declared that they must receive from France proportionate and pari pussu payments to any she may eventually make to the United States in the settlement of her War Debt. It would be no service to Europe, already so previously stricken, if the sacrifices of one creditor of France merely conduced to the advantage of another. Any agreement which could be entered into between Great Britain and France at the present time could, therefore, in this respect, he only of a provisional character, pending the outcome of other negotiations. I wonder what the right hon. Gentleman will say. He certainly has not adhered, either in the Italian Debt settlement or in the new agreement with France, to the conditions which he laid down so emphatically in that communication, and it is important to remember that the Italian Debt settlement and this new agreement with France were made after that declaration had been given by the Chancellor of the Exchequer. I shall await with interest this afternoon to hear what justification he has for having departed, and having departed to such a great extent, from a principle which he himself says has been so often declared. The Chancellor of the Exchequer certainly cannot be congratulated upon his success as a financial negotiator. He is a very poor hand at striking a good bargain. He simply crumples up every time that he comes into close contact with the representative of one of the Continental debtor countries.

What happened a year ago? He first of all laid it down, in regard to the French payments, that the sum was to be £16,000,000 a year. Then M. Caillaux came over, they had negotiations, and the right hon. Gentleman finally reduced the figure to £12,500,000. But, as he said, in another of his statements to the Press, he had agreed to reduce the figure to £12,500,000 on the distinct understanding that that payment was to be upon the sole credit of France, and the question of reparations from Germany was ruled out of consideration altogether. Nearly 12 months passed, and France did not ratify the agreement. They changed Finance Ministers about half-a-dozen times in that period. Now M. Caillaux comes over and interviews the Chancellor of the Exchequer again. He does what one of the previous French Finance Ministers with whom the Chancellor had negotiations failed to do—he has succeeded in inducing the Chancellor to give way upon every one of the three points that were left over in the negotiations 12 months ago. He has given way on the pari passu principle, he has given way on the Balfour Note, and he has given way upon insisting that the payments should be begun by £12,500,000 at least.

Mr. CHURCHILL

There was never any suggestion that they should begin at once. It was always understood there would be a lapse of time, and exactly that arrangement was proposed by me a year ago.

Mr. SNOWDEN

And now the right hon. Gentleman has given way in regard to the debt resting upon the sole credit of France, in the Note which he has exchanged with M. Caillaux. Therefore, the Chancellor of the Exchequer in these negotiations has been beaten at every point. What is the effect of it? If all this were coming out of the pockets of the right hon. Gentleman, I would not complain at all, but he has done this at the expense of the British taxpayer. What does that mean? Our Continental debtors owe us £2,000,000,000. That sum was borrowed from the British taxpayers, and is part of our internal debt. We are paying 5 per cent. interest upon it. We are paying £100,000,000 a year upon it, every penny of which has to be raised from taxation. £100,000,000 a year is equal to nearly 2s. in the £ on the Income Tax. He will get, if this French agreement matures, £12,500,000 from France, he> will get £4,000,000 from Italy, and we will say about £2,500,000 from the smaller debtors; that is, less than £20,000,000 a year, because in this connection we must leave out any reparations that are paid by Germany. What we shall be getting from our Continental debtors on account of the £2,000,000,000 that they owe to us will be less than £20,000,000 a year, and the British taxpayer will be raising every year during these 62 years £100,000,000 a year.

But there is one other important fact that remains for consideration. At the end of 62 years, when Italy has paid that £250,000,000, or less than half the amount of her debt, and when France has paid practically only the capital amount of her debt to us, this country will not be relieved from the burden of that £2,000,000,000 of money which was lent to our Continental Allies during the War. We shall not have paid off this money. At the present rate of sinking fund we shall not pay off our internal debt for 150 years, and, therefore, during these 62 years, the British taxpayer will be finding something like £80,000,000 a year, and at the end of that time, when no further payments are received on account of these debts, still will have to continue to provide interest, and sinking fund upon what remains of the internal Debt. That is what the Chancellor of the Exchequer has done.

5.0 P.M.

The American debt settlement was a most unfortunate thing in this respect. It vitiated the whole situation in regard to inter-Allied debts. If it had not been for the American debt settlement, the door would have been open for the complete cancellation of all these debts, but when we were bound to pay to America for the next 62 years a sum of money like £38,000,000 a year, we were bound to look elsewhere to see if we could get something that would at least go a little way to meet the payments which we had to make to the United States of America. If it had not been for the American debt settlement, I believe the cancellation of all these debts would have been a, very simple matter indeed. A moment or two ago I said the Chancellor of the Exchequer was a very poor hand when it came to bargaining, but certainly that cannot be said of the United States of America.. Under their agreement with us, they are getting £38,000,000 a year and huge sums from France, Italy, and very considerable sums from the smaller Continental debtors. In 15 years' time America will be taking from Europe, if these agreements still survive, £80,000,000 a year on account of war debts. That means that it will take the labour of 320,000,000 workers in Europe to pay the annual tribute to the United States of America. America will be getting far more than in all probability Germany would be paying altogether in reparations 15 years hence. That is the position.

If it comes to that we are burdened with the whole of that, £2,000,000,000 of debt, and America, the richest country in the world—a country whose national income according to recent official figures is increasing at the rate of £2,000,000,000 a year and whose capital wealth is increasing at the rate of £10,000,000,000 a year—America who came into the War nearly three years after the outbreak of hostilities, will be taking the whole of the reparations made by Germany and not one of the European Allies will be getting a single penny. Well, that is a position that cannot permanently continue, and it is not to the interest of America that it should. 1 believe—I do not say there is a rapidly growing feeling—there is certainly a change of opinion taking place in the United States in regard to these debts. Senator Reed who is usually regarded as the spokesman in the Senate for Mr. Mellon has recently said that he expected the time would come when the European debtors would approach the United States and ask for some revision of the Agreement. I agree with the right hon. Gentleman the Member for Norwich (Mr. Hilton Young) that it would be much better that the United States of America should do the generous and magnanimous thing and not place upon this country the humiliation of having to come cap in hand to ask for a revision of the Agreement.

I think I have said about everything that needs to be said upon this question this afternoon. Perhaps I might add this. The right hon. Gentleman who preceded me justified this agreement with France by saying that it might help France. It would help to rehabilitate her economic and financial position. There might have been something in the right hon. Gentleman's argument if he had advanced it two or three days ago, but really it does look as if France is incapable of setting her own house in order. I have a suggestion to make, and, however disagreeable it may be, I am inclined to think that it will come to this: The whole of Europe has a most vital interest in maintaining the financial stability of France. One recoils from the prospect. of what would happen if the French franc followed the way of the German mark, and it looks like it very much. Therefore, proceeding on the assumption that France by her own efforts either will not or cannot establish her financial position, Europe will have to go to her assistance as the countries of Europe came to the assistance of Germany, Austria and Hungary. I am inclined to think it might eventually come to a Dawes Scheme for France, and, unless some such plan as that be adopted, I would not be disposed to give very much for the payments on even the modified terms which the Chancellor of the Exchequer has embodied in his Agreement with the French Minister.

Mr. E. C. GRENFELL

The Committee is dealing with a very difficult question to-day, and I think we are all united in wishing that a few days ago some scheme such as this would help France to recover her position. I am sorry to say I am somewhat in agreement with the last speaker. I do not. want to lose hope that France. will be saved from herself, but in the taking of such measures as those suggested I fear we shall be met with difficulties which we have not met with elsewhere. France is not only an extremely proud country but a victorious country in the late War, and the lessons the League of Nations has had to give to other countries could not be given to the country which considered herself the principal victor in the late War. But that it might have to come to some sort of arrangement such as was outlined by the last speaker, I am sorry to say I was forced to believe. It is impossible for a Government, or politicians, or financiers to prevent a people from eventually knowing the state in which the finances are and it has been for many years now, not perhaps originally the intention but in effect the result, that no one has dared to tell the French people 50 per cent. of the truth of their position.

I would welcome this solution of the French Debt if I thought it was going to have the desired result. But one of the first real problems to be settled is that any agreement between debtor and creditor must be so clear and so final that there can be no doubt as to what is intended. We should always be inclined to remit rather more of a debt than we thought absolutely necessary so as to give the debtors a chance to take hold, but there are one or two things in this Agreement which seem to me not to give the desired assurance of what we shall expect in the future. The Chancellor has stated that this was to be a complete cleaning of the slate between Great Britain and France—and I believe the Agreement is to a certain extent a cleaning of the slate—but the letters attached to the Agreement seem to me to make the Agreement of little or no value. Are these letters rightly understood by us? I am not quite sure they are, because though I may not have failed to hear what the Chancellor said, I certainly failed to understand what he meant. He had a question put to him from the other side. On this side I am afraid we did not understand the Chancellor's answer. We gathered that these two letters had been carefully drawn up by the greatest experts there were, but the impression left on our minds was that nothing could be said in this House in criticism of them. At the same time the right hon. Gentleman gave me the impression—wrongly, no doubt—that the experts were so clever that he himself was not prepared to understand the letters and was going to leave them to the experts.

Mr. CHURCHILL

My hon. Friend is raising a difficulty on a small point. The explanation is a very simple one. A great deal may be said in the course of the Debate, but the letters stand by them. selves; and, speaking for this House, what I am anxious to make clear is that nothing said in the course of the Debate will be quotable against this country at any future time should the question of the interpretation of the letters arise. That is my only object.

Mr. SNOWDEN

I want it to be definitely understood that, as far as I am concerned, and I think I can speak for my party, we are not in the slightest degree bound by these letters to concede such demands.

Mr. CHURCHILL

That is contained on the face of the documents themselves.

Mr. GRENFELL

If the House understands these letters and their intention, I will pass from them. I should like to refer to another point which the right hon. Gentleman mentioned, that is in regard to the question of the £53,000,000. I do not know whether anyone really understands that question. As far as I understood it, at the time that gold was sent over here, it was sent over for reexport. Is it perfectly understood that this gold has never been in the Bank of England or in the Treasury, but that it has gone to another place and never come back? How shall we he able to prevent the reopening of that question, as the French Minister has continued to do for the last two or three years? That seems to me to be a not unreasonable query. We are told that these things will be left entirely as they were before this Agreement in respect to certain matters, including this gold, but if, by leaving them as they were before, there is left any doubt in anybody's mind that we ought not to return the £53,000,000 which has been deposited with the British Treasury, then there is not an absolutely final settlement.

I think the agreement with M. Caillaux distinctly lays it down that there is no such final agreement as between the two countries. As 1 understand it, that £53,000,000 in gold has gone. It might originally have gone from France direct to America to be disbursed there; but it has in fact gone to America. It did actually come to England on its way to the United States. Now, as I understand it, at some future time, France may buy back that gold and it will be sent back to France. Io it possible, after the Chancellor of the Exchequer has strained every nerve to put England again upon a gold basis, that having handled this matter in a way of which we are justly proud, so that the £ can face the dollar and did so during the strike and even stare it out of countenance; is there, I say, after all this, any risk in the future of having to depart from that gold basis? To-day, in the strike, or lock-out, or whatever we may call it, we are losing the benefit of exports of at least 30,000,000 tons of coal and the result of the strike or lock-out is that many of our industries are idle and the adverse balance of trade against this country increases every day. That is a serious thing. It will be a still more serious thing if during the next three or four years the export trade of this country gets into a worse state than it is to-day, and we should keep on losing gold, and if once again the sterling were to fall as before. I should like in that case the Chancellor of the Exchequer to say whether, in the event of France becoming more prosperous, they could ask for the return of that £53,000,000 in gold, and only pay us in sterling.

I welcome the Agreement with M. Caillaux if it can be made sufficiently definite. I trust the right hon. Gentleman the Chancellor will not give way quite so much to the next Finance Minister of France, whoever he might be. Reference has been made to what has been termed the échelle or ladder of payments, but I am very much afraid that with each succeeding visit of a French Finance Minister we shall find more rungs cut away until nothing remains but a couple of bare poles. That will not be much good in settling our debt to America. In 1871 Germany thought by imposing a war debt of five milliards upon France that France would not be able to recover for a long time. France paid off this debt long before it was due. I believe France to-day to be richer in every way than in 1871. At any rate, France has increased her production of iron, steel, coal and fertilisers, and made herself self-sufficient and independent of imports. When she has got to the end of this process she will be the most self-sufficing country in the world. It may be that you twill find France in a few years able to dominate the world situation, helped by her arrangement with Great Britain.

Mr. RUNCIMAN

I congratulate my hon. Friend the Member for the City of London (Mr. E. C. Grenfell) on his return to the House. We appreciate what we have heard from him this afternoon. The apprehensions which he has expressed are those which are largely held by business men all over the country. We have been brought no nearer the restoration of confidence, or a greater degree of stability by the Agreement to which the Chancellor of the Exchequer has set his hand. We judge of this Agreement, not only by the Clauses in it, but by the two letters which have been exchanged. I was glad to hear my hon. Friend say that he would not under-estimate the value of those two letters; indeed, he regarded them, if I understood him aright, as dominating the whole Agreement. The Chancellor of the Exchequer, I think, agrees that his letter was penned quite explicitly. It is desirable to point out what these letters really mean. Up to the present we have had no interpretation, and the House is labouring under the disadvantage of having no statement as to what the agreement purports to be, or as to what the letters qualify.

Like other people, I have read carefully these letters again and again. The first thing that strikes me is that M. Caillaux does not use the same language as the right hon. Gentleman the Chancellor of the Exchequer. To begin with, M. Caillaux refers definitely to a " reservation." The whole of his letter is a reservation. He puts that reservation forward as one of the essential features of the Agreement into which he has entered. The Chancellor of the Exchequer, however, says that the settlement at which we have arrived on the French War Debt depends, like that Debt itself, upon the sole credit of France. That is not what M. Caillaux says. Which version to-day is the true one? Are we to be pinned to the letter of M. Caillaux or to the letter of the Chancellor of the Exchequer? It appears that the real reason for the matter being dealt with by the exchange of letters is that the Chancellor of the Exchequer and M. Caillaux could not agree to put their names to an additional clause as they did to other portions of the agreement.

There is a real difference in these two letters. Under these circumstances, I think the ex-Chancellor of the Exchequer was justified in saying he would have been a foolish man to have pinned himself to this agreement.. What does each letter mean? In the first place, the phrases which are used are quite indefinite. They have no technical interpretation, so far as I know, and, if one may take the English translation, they do not certainly provide us with any assured position as to the future. For instance let us take M. Caillaux' letter. There are in it the words "cease completely," referring to the German reparations. What does "cease completely" mean? Does it mean, if there has been default in one year, that thereupon you have to say they have "ceased completely"? Does it mean that there must be default year after year in order to say that they have "ceased completely"? How long has the default to go on in order that you may say that the payment has "ceased completely"? Suppose there is default one year and resumption of payment the next I Are we, then, to say they have not "ceased completely" There is nothing to tell us in either of these two letters what is meant by that dominating phrase.

We come to the next point, namely, to "reconsider" if the payments have ceased completely—whatever that may be. What does "reconsider" mean in this letter? Does it mean that the payments from France to England are to be held up? If so, how long are they to be held up? Are they to be postponed during the default of Germany with her reparations year by year, or for how long? Does it mean that they are to be held up altogether until a new Agreement has been negotiated? Every one of these questions ought to be answered. I venture to suggest to the Chancellor of the Exchequer that there has not been a. less definite financial document in our time—so indefinite that it gives us no guidance for the future and will also give very little help to the successor of the right hon. Gentleman. So far as I can understand it, it does nothing more than leave the French Government free in the future to deal with this subject very much as they please.

Finally, there comes the question what is meant by "reservation"? Does "reservation" merely mean that the whole subject is to be re-discussed? If so, on what basis? Is that discussion to go on for an unlimited time, with an unlimited number of Ministers, and on entirely undefined conditions? M. Caillaux's letter I have no doubt was intentionally not too definite. It was left vague. I do not blame him for it. It suited him to be vague. The Chancellor of the Exchequer has done nothing to make clear what is vague except in his own letter to say that we can rest this on the sole credit of France. That is exactly what M. Caillaux has not said. Indeed it appears to me to be contrary to what he has said. In these circumstances we can only look to the two letters which are appended to the negotiated agreement. I join in declaring with my hon. Friend the Member for the City of London that these two letters really dominate the whole transaction. Under these circumstances, I think we must acquit the Chancellor of the Exchequer of playing the part of a Shylock; rather would I suggest to him that he would be better termed a vendor of rose-coloured spectacles.

Mr. J. JONES

An Antonio!

Mr. RUNCIMAN

The whole of this transaction is only another illustration of the position into which we get by these international debts. The payment of these immense sums of money from one nation to another over a long period is well nigh impracticable. As to the right hon. Gentleman, he has endeavoured to make some sort of a bargain. The French themselves have not tackled their own financial position with anything like the same courage as the people of this country. Those in authority have not told their own people, especially the peasants, the truth about their financial position, and on top of that there comes an entirely unreal agreement which means—one can really gather nothing definite—that we are discussing to-day a document which may or may not be ratified by the French Chamber, but will, whether we ratify it or not, certainly be of little benefit to this country, and may at any time be thrown out by one of the parties concerned.

I know how easy it is for him to be apprehensive about the accusations that he has not make a good bargain for this country. I do not think he has made a good bargain for this country. No doubt he did his best, but his best is producing little or nothing. Would it not have been much better to face the international situation over a very much larger field, and with the application of those large principles of which, at times, he has such a facile command? I will tell the right hon. Gentleman what I mean. In dealing with the American Debt the right hon. Gentleman might, as a good many other people have done, have discussed the figures, the terms, the period—the elements of a purely financial transaction. It was carried through by the Prime Minister, and he has approved it and it has up to the present been all to the credit of this country. But there are other elements passing through the minds of the American Government and the American people. They are rather shy about allowing their bonds to play any part in European antipathies; not that they are shy about being involved in French credit or German credit or Dawes plans, or whether or not we can make transfers, but they have a sentimental interest—it may be nothing more than a sentimental interest, but it is a very powerful interest—in the limitation of armaments. The right hon. Gentleman is quite as capable of stating the case for disarmament as any one of his colleagues, or any Minister in Europe, if he cares to do so. If he and his Government had concluded a programme on effective, even on aggressive lines, for military disarmament in Europe, there would have been a considerable change in American opinion ere this.

One can easily understand the attitude of the American people and the American Government. They would say at once, if asked for a remission of Europe's debt: "How do we know that what we have remitted will not be used merely in order that you may extend your Votes for the Army, the Navy or the Air Forces? What part shall we be taking in the pacification of the world if we merely place at your disposal, larger stuns of money than you could have anticipated would have been available? " If the right hon. Gentleman wishes to make a new gesture and to do it effectively he can, I am sure—not now, I admit, but in course of time; while he is in office—play a prominent part in making disarmament an important part of the policy of this Government., and if it plays an important part in the policy of this Government, that may have a profound effect on the policy of European Governments, for, after all, European opinion is led very largely by what is thought and done in this country. If the right hon. Gentle- man cares to take a bold line there, I venture to say that he will not have to bother about niggling agreements in future with those who have been our Allies or those who may be our creditors. He will, by facing the whole situation anew, with a new system of budget-making in Europe, be assisting not only our own financial situation, but the whole stability and solvency of European Governments, and he will be able to make an advance, and not on financial lines alone, which will be greatly to his credit. It may be that these considerations are not purely financial, but as he knows, no one better, financial considerations and sentiment are very much interwoven, and I trust he will not altogether despise the hint he has heard, not for the first time, as to the way in which America may be approached.

I should be the last person, or one of the last persons, in this House to suggest that we should go down on our knees to America to ask for any modification even of the Agreement under which we now labour, but do not let us despair altogether of the American Agreement finding revisers, and not only on this side of the Atlantic. The payments to America. may not be altogether fur her good. There is one clause in the American Agreement which is already causing a good deal of disquet in the United States, and I admire the Prime Minister's foresight for having inserted it. It is the Bullion Clause. Those payments of bullion to America may have a disturbing effect on her finance, and it is quite possible that in years to come America herself may wish for a termination of this Agreement almost as much as we should wish for it ourselves. When that time comes we can do something by way of taking a lead in disarmament proposals in Europe to satisfy American sentiment, and lend countenance to her desire to do something towards assisting one of the greatest moral movements of the world.

Sir F. WISE

I entirely agree with the right hon. Gentleman the Member for West Swansea (Mr. Runciman) in the difficulty of the problem of carrying out these different international transactions. One might almost say they are untried factors, because there has never been such large inter-allied debts in the whole history of the world. I agree with him that something new ought to be placed before Europe and the United States of America, and I feel it might easily come from our Chancellor. I believe he would obtain credit for any new proposals in the shape of the cancellation of debts. Our debt to the United States is rather different from the debts owing by other countries, because, as my right hon. Friend the Member for West Swansea knows, the British Empire has the largest production of gold in the world, and in London we have the market for gold, and we can send gold across the Atlantic in payment of our debt to the United States of America. That is a great advantage, and one which other countries have not got. I entirely agree with my hon. Friend the Member for the City of London (Mr. E. C. Grenfell) in regard to Clause 7, which deals with the £53,000,000 of gold. It states in Clause 7 that this is open to a further settlement, which means that this is no definite settlement of the debts between ourselves, France, Italy and so on. I do not agree with the right hon. Gentleman the Member for Colne Valley (Mr. Snowden) that the Chancellor of the Exchequer was beaten at every point—I think those were his words—because 1 agree with the settlement made by the Chancellor except for Clause 7, and except for the letters, which are most important and are very difficult to understand.

The right hon. Gentleman the Member for Colne valley discussed the larger problem of the £2,000,000,000 which this country was owed, but I feel, saying it with all due respect., that he does not realise the difficulty or impossibility of the transfer of this amount, although it may extend over 62 years. It can only be transferred in goods. If we eliminate gold and services, these international payments can only be made by exports, including invisible exports, being greater than imports. The only other way is by the creditor nation investing money in the debtor nation, which is what America is doing at the present time by buying up German securities and investing money in Germany. Since the issue of the Dawes Report, the United States have invested in Germany about £200,000,000. Of course, that helps Ger- many's credit, and she can make her Dawes payments as long as the creditor is investing' in her country. That gives her currency in New York and the debts are paid accordingly. In a speech at the Mansion House last week the Chancellor of the Exchequer said he was doubtful whether anyone had mastered the mysteries of finance. I can quite understand that to anyone who has not been in finance all his life there are great difficulties in dealing with these intricate problems, but, very nearly, it all comes down to a question of supply and demand. Whether it is a question of getting your rate for a Bill or whether you are granting a loan, it very nearly all comes down to supply and demand. The hon. and gallant Member for Leith (Captain Benn) was kind enough to refer to a previous speech a mine when I said that there was no amount mentioned in the Dawes Report and no duration of the loan. I remember criticising it in the House. I could not understand any business men making a bargain of that sort, even with Germany, or believe that the Dawes Scheme could ever be carried out when we come to the larger payments in 1928 and 1929, or a, few years after.

It is quite impossible for any business men to think that a large sum of £125,000,000 can be easily transferred across the border. By next September the Dawes Plan will have been working for two years. Up till now it is more or less a test period. There is a moratorium going on at the present time, and it is in the transition stage, but when we come to 1928 and 1929, and the £125,000,000 has to be paid, I feel confident that before that date some alteration may be made. Indeed, I do not think I am very far wrong in saying that an alteration has already been made in the Dawes scheme. About a fortnight ago the Reparation Commission allowed the Reichsbank to issue 100,000,000 marks in Treasury bills, which was not in accordance with the Dawes Report. The alteration has already been made, and it is only a case of time, I contend, when the scheme itself will be altered.

With regard to our debt to the United States of America, its payment entirely depends on our keeping the market for gold. As long as we can keep the market for gold our payments can be made, but what would have happened in 1925 if we had not had the market for gold? We paid the United States of America £10,000,000 in gold on account of that debt. If we had not had the gold, we should have been compelled to go to them, cap in hand, and say, "I am very sorry, we cannot carry out our transactions. It is no fault of our own. Our Budget balances, and we are doing fairly well, but we cannot transfer the money across the water." The Fordney tariff kills any big attempt on our part to get goods into the United States. In 1925, too, we were lucky that the price of rubber was so high. We sent large quantities of rubber across the border, and that helped to pay the debt, the balance being paid in gold.

The amount Italy owes us this year is £4,000,000. The lira exchange is about six or seven times more than the gold value. Think what that means to Italy. Yet the Chancellor of the Exchequer, in the agrement with Italy, allowed Italy to have the call on £22,000,000 Of gold. similarly to the arrangement made with France. I criticised it at the time, but a back-bencher does not get much reply from the Chancellor of the Exchequer. I do not complain, but I like to put my views forward, and I know it is a weakness for this country to give an option to Italy to take that gold from us, and there is sure to come a time when we shall actually want it in this country.

With regard to France, the French financial position is the crux of this Agreement. We have cancelled 63 per cent. of her debt to us. I welcome that, because these debts have to be paid in goods, but I think that if I had been making the bargain the Chancellor of the Exchequer has made, I certainly should not have given to France that option on the £53,000,000 gold, and I should have taken an option on some of France's gold. France has £200,000,000 of gold and I feel confident that if France will only use that gold she would be able to get her credit back again and thus stop the headlong fall of the france which cannot bring prosperity and must only end in the ruin of the country. The exports of France are less than her imports, including visible exports, and there is no doubt that if this continues the franc will fall still further and go almost the same way as the German mark. Reference has been made to the arrangement for the French Debt with the United States, which I understand is not ratified by France, but I would like to point out that France has no safeguarding letter from the United States in the same way that we have given her as to the Dawes Report and payments, and I contend that it is a weakness on our part to have given that letter when other countries have not received it from us. If that is so, I really think it was a weakness on the part of the Chancellor of the Exchequer to give that letter to. France.

The whole problem of thess debts comes to the transfer of the money. The Prime Minister on Saturday—he was dealing with the coal position—said: The facts must be faced. You could evade some of the facts all the time and all the facts some of the time, but you cannot evade all the facts all the time. That is very true about the transfer of money from one country to the other. There are economic facts. Unless you have been dealing with these currencies as I have one does not realise the difficulties and problems of transferring money from one country to the other. The transferring of these large sums may demoralise your currency. The amount due to the United States of America over the 62–years period is £3,000,000,000. Anybody who thinks this amount can be exchanged into the necessary dollars cannot really know very much about the financial transfer currency position. There have been many discussions and many conferences, but the transference of the money really does not appear to have been discussed. Statesmen and politicians can arrange matters such as we are dealing with to-day, but they cannot really deal with the transference of this money. I feel confident that if the transference was understood and realised by the big magnates—I am sure it is realised by the hon. Member who represents the City of London—that the suggestion made by the right hon. Gentleman the Member for West Swansea for a. reopening of the inter-Allied debts would be considered by the Chancellor of the Exchequer. There is also one other point as far as Britain is concerned. There have been discussions with the Chancellor of the Exchequer and conferences on the question of the capacity to pay. I contend that, as far as this country is concerned, capacity to receive is almost as important, if not of more importance. Supposing France was giving us a larger amount than £4,000,000 a year. It would only mean more goods coming in, and that might mean more unemployment, and we want to get the men and women back to work which is fruitful for the benefit of this country.

In conclusion, may I say that although I am pleased with a portion of the settlement in regard to France I am very disappointed with these two letters which have not been given to other countries and I am more disappointed that the Chancellor of the Exchequer has given France the benefit of option on £53,000,000 of gold. I feel that Britain has set a fine example to the whole world in giving up large amounts of debt which is really literally due to us. We depend to a large extent on the United States of America which is fat and is getting fatter, and I do think that something reasonable in the shape of the suggestion made by the right hon. Member for West Swansea that things might be altered would be a benefit to the peace and prosperity of this country.

Mr. GILLETT

I have listened with great interest to the speech made by the hon. Gentleman who has just sat down, more especially in regard to what he said about the transfer of these debts. They are the things most likely to injure the arrival of goods from one country to the other and this is interfered with by the erection of any kind of technicality. The hon. Member for Ilford (Sir F. Wise) put before the House very clearly the fact that if you want to pay any of these debts there must be a possibility of certain goods being transferred. Some of these countries, whilst asking for these large sums to be transferred to them, are erecting tariff walls which make it difficult for the goods to be sent from European countries in payment of these debts.

With reference to what has been said about the letters, I confess that I have a certain amount of sympathy with any Chancellor of the Exchequer who attempts to deal with this problem, because undoubtedly the French people are passing through such a trying time that the French Ministry is not in a position to negotiate on this question, and any French Minister who comes over here is thinking more of what the effect of the negotiations in London will have upon the temporary political position in Paris as we have seen during the last week or two. What has been done here recently in that respect has been something intended to win votes in the French Chamber, but it is impossible to negotiate between two countries when one is in such a serious position as the French Government is at the present time.

I do not want to say anything that would seem to be unfriendly to the French people, because we recognise the great sacrifices France made during the War, and anything this country can do to assist France in her difficult time of reorganisation I am sure every hon. Member would be only too glad to do. At the same time we have to bear in mind that we are passing through difficulties ourselves, and even before the present stoppage in the coal trade we were faced with nearly one million unemployed. We see trade going on in France where there is less unemployment, and naturally people ask when they look at the seeming prosperity of France whether it is not possible for them to make a contribution for the repayment of the French Debt which would have its effect upon the taxation of this country. Many of us are aware that in this inflation of currency France, like Germany, will have to pay for the financial policy she has pursued during the last few years. When we turn to the negotiations, I should like to ask why those negotiations had to take place at all at this time. Surely it would have been wiser to have intimated to the French Minister that it was not desirable to have any negotiations at all at the present time, and he might have been asked to postpone his visit until some other time.

When we consider what has been actually arranged it seems to me that the meetings are hardly justified. I confess that I have not seen the difficulty in regard to the two letters in the White Paper to which some hon. Members have referred. I agree with the criticism that it is a pity that those letters ever came into existence, and it is a pity that the conference was ever held. Reading these letters, the meaning seems very clear to me. We have seen the Chancellor of the Exchequer withdrawing one condition after another, and he said that the Dawes payments are quite distinct. We never know before any settlement is made what the exact terms of the settlement may finally be.

6.0 P.M.

When we turn from this problem of the European debt and look at these countries every hon. Member should ask himself this question: How is our industrial system ever going to be continued if great European wars are going to take place? With industrialism and militarism, how are those countries going to exist side by side, because the financial system is going to collapse utterly if we continue the military system of the past. With our vast expenditure in the past, there is no doubt that our financial system could not survive another great war. There is no doubt whatever that, as far as the people of the United States are concerned, one of the reasons why they insisted upon the payment of the war debts by European countries was that some of them felt that if they did not pursue this policy European countries would only spend the money piling up armaments. One hon. Member said, "Why should we ask questions of this kind of those who owe us money?" The French people, however, are engaging in military operations in Syria and other parts of the world. Why should not that expenditure be saved in order that we may be repaid some of the money that is owing to us? I can think of another illustration. I put a question this afternoon as to the amount of the Greek Debt, and the Chancellor of the Exchequer replied that it was about £20,000,000 sterling. The position at the present time, as far as Greece is concerned, is just the same as that of any of these other countries. Greece is hardly able to pay its way. Why might not we have made representations to Greece in regard to limitation of the armaments of that country? We did, however, absolutely the reverse, because we sent out a naval mission to reorganise the Greek Navy—in other words, we were practically encouraging the expenditure of money on armaments in Greece, while at the same time we were asking Greece to make an arrangement for the repayment of £20,000,000 sterling which is due to this country. It seems lo me that that is an illustration of the

way in which we face up to this problem of European debts. I cannot help thinking, as I look at the tragedy of Europe to-day, that some of these problems will have to be considered at the same time as the problem of debts, and the nations will have to ask how long this can possibly be permitted.

Look at the position in Europe to-day, and ask what victory has meant to the victors in the last Great War. France was one of the victors; Italy was one of the victors; Belgium was another of the victors. Look at their financial system to-day. It is true that those who were defeated have paid the penalty, but the financial loss seems to be almost as great upon those nations that were victorious in the Great War as upon those who were defeated. The result is that Europe to-day is in a semi-bankrupt condition. It has not even learned the wisdom of, and is unwilling to, face up to the one great problem, the problem of disarmament, without which we are never going to get any settlement of the debt problem. We in this country have faced up to our burden of debt. The result is exemplified in our unemployed and in the state of our industry to-day, and I confess I wonder how long we are going to be in a position to carry the burden of debt that we are bearing at the present time. It raises questions which every thinking man is going to ask, and which are closely connected with the problem that is before this Committee at the present time. Until we have an answer to these questions, we are never going to solve our debt problem. It seems as though the War had left neither the victors nor the vanquished in Europe anything but a mountain of debt and the memories of their dead.

Mr. ALBERY

The right hon. Gentleman the Member for Colne Valley (Mr. Snowden) made a very forcible statement at the end of his speech. He put very strongly the position as it is represented at the present moment by our indebtedness to America, and I hope that that will have very wide publicity. At the same time, most of his argument was directed to showing that the present Chancellor of the Exchequer had made an extremely bad bargain. Personally, I am always rather sorry to hear the word "bargain" used when we discuss these inter-Allied debts. I think "settlement" is a much better word. Although the right bon. Gentleman gave a great many figures, there were certain facts which he seemed completely to leave out of account. One has to remember that, in endeavouring to arrange these international settlements certain definite attitudes have been taken up by the different nations concerned. We, for our part, after the War, openly declared that we intended to redeem our promise, that we intended to honour our word, and to pay whatever sums we had undertaken to pay. But, among all the nations which took part in the War, with the sole exception of the United States of America, we were the only nation that felt able to take up that attitude.

France and Italy said what practically amounts to this: "We also desire to pay our debts. We acknowledge our debts, but we are unable to pay." Germany, owing to the heavy burden which was put upon her as the result of the War, practically decided to go through the bankruptcy court. That is practically what Germany has done. Russia repudiated her debts altogether. It seems to me that in negotiating the settlement of a debt with, on the one hand, a solvent country as the debtor nation, and, on the other hand, a debtor nation which pleads inability to pay, it is hardly possible to expect that anything like similar conditions can be arrived at. As regards the settlement which we have made with America, I differ rather from the remark made by, I think, the hon. Member for the City of London (Mr. E. Grenfell), to the effect that it would be infra dig. for us to re-open the matter of our payments to America. It seems to me that, from the moment when we expressed our determination to do our best to pay, there is no indignity whatever in pointing out to that country at any time which may be opportune that the settlement which we made, because of the bond we had given, was, nevertheless, in all the circumstances of the case, an unfair settlement. We stuck to it because we said we would pay, but. we never believed that it was a fair settlement, and we do not believe that to-day. Therefore, I cannot see any reason why at any time that may be opportune we cannot take up that question again and put it to them, when they are, perhaps, in a better frame of mind to understand our point of view that the settlement was, in fact, not a fair one after all.

As has been frequently stated, America came into the War at a very much Tater date, and it was pointed out, I think, in the Debates on the Consolidated Fund Bill, that when she came in she was unable at once to send large numbers of soldiers and so she sent her money—in other words, she lent it. It seems to me, however, that from the moment you come into a war you become a partner in that war, and in that respect the position as between France and this country and America and this country is entirely different. France and ourselves shared the difficulties and the troubles of the War from the very beginning, and personally I should never consider any settlement that we could make with France, provided that it imposed upon her in relation to payment within her means, as being too easy. The United States came in at a. very much later date, and were at first only able to take their share in the partnership by providing money. I cannot help thinking that the day will come when that country will realise that the money lent for that purpose, once America was in the partnership, should be no less freely given than were the lives of England and France.

The only other point that I wish to touch upon is this: I have always wondered why it has not been possible for England and the United States of America to act jointly in making an attempt to settle with France her Debt to the two countries. In acting jointly, it seems to me that they ought to have made some reasonable offer, and that, coupled with that offer of settlement, there should have been some offer which would have helped France to put her financial resources into a better state. I frequently feel that in negotiating separately we have placed France in a very difficult position. It is more difficult to settle with a creditor when you have another creditor waiting for you round the corner after you have done with the first. I do not know whether it is too late now. I hope in any case that the settlement that has been made will eventually be made good, but, if it should fail, I should like to appeal to the Chancellor of the Exchequer to see whether we cannot approach the matter from the other point of view, jointly with America, and offer at the same time some assistance to that great country which, after all, was our very faithful and loyal Ally during those bitter years.

Notice taken that 40 Members were not present; Committee counted; and, 40 Members being present,

Captain GARRO-JONES

I am indebted to the hon. Member who called the count for providing me with an audience larger than I should, perhaps, have otherwise had. The hon. Member for Gravesend (Mr. Albery) said he was unable to understand why we did not act jointly with the United States of America in the collection of our debt from France. He appeared to think that it would be better and more desirable if we, as two creditor nations, were to co-operate in a settlement of debt problems. I have no authority or claim to speak on behalf of the United States of America, but, nevertheless, I think I am in a position to dissipate the hon. Member's wonder. The United States has consistently refused to act in co-operation with this or any other European country, and has rather preferred to take full advantage of its superior position, achieved because it came into the War half-way through, and was, therefore, in a much better financial position than ourselves to set itself on a pedestal and refuse to cooperate at any time with us or any other nation.

This country is in a position to speak plainly on these debt problems. So far as the financial position is concerned, we are in a worse position than any other country, but, so far as the moral position is concerned, I fail to see any reason why we should be mealy-mouthed in our criticism on these matters. I have always complained from my place here because this country has appeared to me never to take any notice of the propaganda that was being conducted by foreign nations, but always appeared to tolerate without reply all kinds of propaganda which came from France and the United States, never raising a voice on behalf of the claims of this nation at all. It has, therefore, been a matter of small surprise to me that our claims have gone by default while we have been compelled to meet all our obligations. So far as the Agreement which is now before this Committee is concerned, I am going to say, quite frankly, that it is a very unreal discussion of that Agreement in which we arc taking part to-day. I believe that the Agreement itself can be interpreted to mean two diametrically opposed things. I believe, further, that it will never be ratified by the French Government in its present form, and that this question of debts will never be finally solved until it is solved as a whole. In this connection one can almost use the phrase which has been used in another connection, "The debt problem is solved; long live the debt problem." Every time it is solved, it only comes up for settlement again.

I have said that we have allowed our claims to go by default. I have been reading during the last few days some of the statements made in the United States with regard to the problem of debts, and I find that no less an authority than Mr. Mellon, the Secretary of the United States Treasury, stated that: American loans to England were not so much to provide war supplies as to furnish sterling for home and foreign needs, and to save England from borrowing hem her own people. If that is true it is certainly news to me. I have made some small study of the problem, and I have always understood that these. borrowings were made to provide munitions for ourselves and for our Allies. This kind of statement has been made repeatedly during the last few years in the United States, and I should like to ask whether any single step has been taken in foreign countries to make our position known. In common with other Members of the House, I have seen leaflets and propaganda documents from France and other countries, including some very able documents emanating from the Italian Manufacturers' Association. Have we done anything to represent our point of view abroad at all? Then I noticed the other day that Mr. Ford, whose incursions into European politics have been somewhat unfortunate, made this statement: The only reason the United States could not cancel her war debt was that the effect on the creditors would be bad. They would probably only plunge into deeper debt. I will not say with what grace that comes from a gentleman who must derive a large part of his fortune from the amount he receives from British markets all over the world, but I should like to ask whether any attempt has been made to controvert that attitude of mind so far as this country is concerned.

It is not only America, however. The French Minister of Finance, M. Beret, has been making repeated statements in public to the effect that France is already paying large sums of money in settlement of debt. He stated, I think last May, that France is paying 120,000,000 dollars per annum in liquidation of her foreign obligations. That was a statement that struck me as being most inaccurate, and I should like to ask whether, if it is accurate, Great Britain has received any part of that sum at all. I do not think our attitude towards France in remitting three-fourths of the debt does us any good in this country at all. No one who has made any study of the French Press in the last few days can but be aware that there is not the smallest feeling of gratitude in France for the amount of money we have relinquished at all. I am not saying that is a reason why we should make our claims more rigorous. The suggestion I wish to make is that the core of this problem is not in France, nor in London, but in Washington. I have never been able to agree, though I feel he is a far greater authority on the subject than I am, with the hon. Member for Ilford (Sir F. Wise), who always says in these Debates that he doubts whether our capacity to receive is sufficient to enable us to receive this money from other nations. I look upon it in simpler and perhaps—though I hope not—in less accurate terms. If we can receive larger sums of money from our Continental debtors, or pay less to our American creditors, we are going to be able to reduce our taxation. That seems to me the primary effect of any alteration in our present debt arrangements.

Sir F. WISE

It is not money that comes over here. It is goods.

Captain GARRO-JONES

I am glad to have this opportunity of receiving some information from the hon. Member. Does he mean to suggest—because if he does not he is not controverting my argument at all—that if we ceased paying this money to America, and if we began to receive larger sums, from our European debtors, we should not be able to reduce taxation? I believe that would be the first effect were we to alter these debt arrangements in a manner more favourable to ourselves, that we should be able to reduce our taxation, and I think that is the first need of prosperity for our industry.

I cannot help feeling a little bitterness when I regard the attitude of the United States towards these matters. Take their effect on unemployment first of all. It is possible to regard unemployment in two ways. There is the theoretical student, who gets his Ministry of Labour returns every week and ponders over them in a. comfortable armchair. I am not saying he has any less realisation of the problem than other Members, but some of us, perhaps the majority of us, regularly go to our constituencies. I go to mine every Friday night, and I get a procession of men, and some women, whose life has no brightness or happiness or joy in it at all, because they have been out of work for the last four or five years. I know that is only a microcosm of what is going on all over the country, half a million on the official figures, and this suffering and distress are not confined to the labouring classes at all. I have a certain number of my own friends, and no doubt other Members have also, who have been accustomed, and are well qualified, to hold good appointments, but owing to the industrial depression are at their wits' end to know what to do and are beginning already to feel the pinch of want. No one who comes in close contact with the problem can regard with approval the attitude of the United States towards the debt problem. Mr. Mellon has also said common sense, and not sentiment or charity, has been the basis of the administration's financial policy to Europe. He also said a few months ago that America has extracted the most favourable settlement that she could obtain short of force. I do not know whether Mr. Mellon is proud of his achievement in that direction but it appears to me that the United States Government has been influenced too much by the parochial minds of the permanent officials of the United States Treasury. They seem to be altogether unaware of the growing feeling all over the world against the rapacity of the United States. I am not going to say anything unduly offensive about the United States Government, I think there is a good deal to be said in their favour, but in this manner there is small credit due to them. That same Mr. Hoover who a short time ago made a bitter complaint because the price of rubber to the United States was too high, has now been compelled to advise American manufacturers not to mark their goods "made in America" because of the unpopularity which that would bring upon them in the European market. I think if the people of the United States realise that and realise that whenever any figure of Uncle Sam appears on French platforms or at the Folies Bergeres or other places, it is greeted with loud hissing and hooting, they would not be entirely happy. Indeed we have every reason to feel that they are not feeling happy. I should like to read something that appeared a short time ago in a United States journal, because it expresses far more succinctly than I can my own views on this debt problem. This appeared in the "Manufacturers' Record" of Baltimore last year. Dealing with the debt problem under the heading "Do we not owe to the Allies more than they owe us?" it said: For two years the Allies had bought from us foodstuffs and munitions of war to an enormous amount at exorbitant prices. During 1913 and the first half of 1914 industrial depression of the severest kind was sweeping over the United States. It looked as though a large proportion of our industrial interests were beading for bankruptcy. We were having the largest number of failures recorded in our business history. That was just before the War. The War instantly created a tremendous demand from the Allies for everything we could sell, and almost overnight the nation turned from extreme industrial and financial depression to abounding prosperity. Literally our business interests were being fertilised by the blood of millions of soldiers who were dying on the battlefields of Europe. That I believe to be a sane and sound attitude to take towards this debt problem, and my complaint against this Government, as against its predecessor, is not that they were ashamed to go cap in hand to the United States Government, but that they have been ashamed to get up and make a plain statement before this House as to what they consider to be the true merits of this question. I am going to make it myself and say that unless the United States alters its attitude in this matter it will incur, not only the intense dislike of the whole world, but the intense disapproval of future generations of Americans themselves.

Captain EDEN

It is natural, and perhaps inevitable, in the course of a Debate such as this that there should be varied criticism of the actual contents of the Agreement which we are discussing. Once or twice to-day criticism has been more directed against some matters which have no direct concern with this Agreement. The hon. and gallant Gentleman who opened the Debate uttered a complaint which seemed to be that this country had not interfered, by virtue of the fact that it was a creditor country, with the internal politics of those that were debtor countries, and particularly with those countries where he, himself disliked the particular form of Government. The right hon. Gentleman the Member for Colne Valley (Mr. Snowden), whose speech lacked those exclamation marks in acidity with which he usually punctuates his speeches, complained, of course, that the Chancellor had made a bad bargain. I think the Committee will agree that if we who are here to-day could transfer ourselves next week or whenever it may be—some day I trust—when the French Chamber discusses this Agreement to that Chamber, we should then hear criticisms from them very similar in nature but different in point of view. They would complain that France is paying too much. But from whatever angle we view the Agreement I do not think there can be any doubt but that it is a step forward to have secured an Agreement at all, and our real regret' is that this, which should have been of real benefit to France and to her credit, should have come at a moment when she is undergoing another of her numerous political crises. That is a real misfortune which gives the Debate a tinge of unreality. I believe this subject should be regarded not solely, or indeed chiefly, from the point of view of a financial question. It is something far more than that, and its good or its ill should be assessed from a very much wider point of view. The solution of the inter-Allied debt problem is more even than a solution of a very complicated financial entanglement.

I do not think anyone can deny that of recent years, since the War, the indebtedness of the Allies between themselves, the indebtedness of France to us, and the lack of any final agreement, have been a source of irritation 'between those countries—continual irritation and pinpricks from day to day, to put it no higher than that. I do not suppose there is any Member of this Committee who has travelled in France in recent years who has not frequently noticed that France's indebtedness to us was a subject of anxious comment and conversation. We have had further illustration in this Committee to-day of the resentfulness which some hon. Members feel in regard to our financial obligations and the way in which they have been treated by the United States of America. Indebtedness —particularly unsettled indebtedness— creates friction. There can be no question that if we are to judge this Agreement rightly, we cannot do it only on the basis of hard cash, but also from the point of view of the effect it will have, not only on our relations with France, but also on our relations with other countries in Europe. That is the only fair and just way in which to judge the Agreement. It is very natural that there should have been irritation. It is not pleasant to owe money to, or to be owed money by, one's friends, find it is not pleasant for one nation to one money to another friendly nation. Financial arrangements of any kind between friends are more likely to irritate friendship than to cement it. It is a good maxim never to borrow money from your friends. It is far better to be in debt to your tailor or your dentist! The same argument applies equally among nations. It is a good maxim never if you can help it to borrow money from your allies. You had better borrow it from neutrals, or even from those who are or were your enemies.

The Chancellor of the Exchequer, when he announced this Agreement a few days ago, made an interesting additional announcement which is not in the Agreement, with regard to the terms which he had arranged with the French Government for compensation to British subjects and British firms who had suffered as a result of the War in France on account of enemy action. It would be of interest to the Committee if we could have some details of this particular agreement, and if we could be told, for instance, within what time the compensation is to be paid. I do not think it will be disputed that any country which accepts taxation from a citizen, be he of whatever nationality, by accepting that taxation, itself incurs certain obligations which it must ultimately discharge. I am glad that the French Government has undertaken that obligation, and that we have done the same. I take it that in our case the liability will not be anything like so large. It would be interesting to know what in each case the liability is estimated to be.

When we cast our minds back over the course which this country has persistently pursued since the Armistice in the matter of inter-Allied indebtedness, we have no cause to be ashamed of that policy. I do not think that all other countries can say the same. We have from the first refused to act as a Shylock towards Europe. We have refused to dun our friends and Allied nations, tied to us by every bond that should sanctify friendship, and I trust that that will always be our course. This indebtedness can only really be judged in relation to the cost of war in other directions. We in this country poured out treasure, not only of money, but of endeavour and of blood and limb. Our Allies did the same. It it not amiss perhaps for us to ret-all the fact that France herself in life and limb sacrificed an even higher proportion than we did. We can only assess this matter in relation to these other and far greater losses. The financial loss, serious as it may be, which will have to be met for more generations than ours, is only one part, and the least part, of the toll which war exacts from those who indulge in the evil. In that light, the Committee should judge this Agreement. We may not agree with every item in it. We may wish that more be gained for this country, or that there had been something of a contingent nature, perhaps, which would have been of use to us if ever again the subject of indebtedness is opened with the United States of America. In the main, I think the House will be glad that an Agreement has been reached and that a source of possible friction between us and France has been removed. By doing that, the Chancellor of the Exchequer, or any Government, which might have concluded this or a similar Agreement, will have given strength to the friendship which has endured for many generations between the two countries, and which we hope will gain strength and force in the years that are to come.

Mr. STEPHEN

I do not think one need be unduly critical of the Chancellor of the Exchequer with regard to this Agreement. As I have listened to the Debate, I have been thinking of the many things which have been said in the past, and some of the curious contradictions in the position of various hon. Members who have taken part in the Debate. There was a time when the allied nations, as victors in the struggle, were going to obtain such a tremendous indemnity from the defeated nations that all the victorious Allies would live happy ever after on the proceeds of their victory. As time has gone on these anticipations have been doomed to disappointment. Now we have come to the stage when the allied nations have been busy trying to come to some sort of settlement with regard to the financial problems with which they are faced. I look upon this Agreement as an attempt by the Chancellor of the Exchequer to do a good turn to a sorely tried French Minister of Finance. It has been suggested that the Agreement might be all right if it were not for the two letters that have been written, and the contradictions of the two letters. That may or may not be the case. Certainly there is a different stressing in the letters. In one letter one aspect is stressed and in the other letter a different aspect is stressed.

Some of the financial experts are a little distressed. As I read Article I, with regard to the years 1987 and 1988, I am rather surprised at the fears, the pessimism or the optimism of certain hon. Members as to what is going to happen in those far-off days. It seems to me that this Agreement is simply one further confession of the fact that these international financial problems are insoluble. There is also implied in this Agreement an admission of the failure of the social and political economy in each of the European countries. There has been a great crisis in France, with the franc going from had to worse. I have always taken a somewhat heterodox view in regard to these financial questions. It is on record that in a previous contribution to a Debate on this question, I suggested that the franc would go smash. I am surprised to-day to hear some hon. Members saying that they shudder at what is going to happen in Europe if the franc follows the course that the mark has taken. I do not shudder. I think the hon. Members who speak in that way will have much more cause to shudder when the pound follows the franc. I am convinced—I was right in my estimate in regard to the franc, and I believe I shall be right in my estimate in regard to the pound—that the pound will follow the franc. The Chancellor of the Exchequer seems amused at that statement. He will not be so amused if he is the Chancellor of the Exchequer when it does happen. He will then, possibly, look as worried as the 12 or 14 French Finance Ministers have been.

Behind all the demands to settle the international financial relationships, there is also the fact to be taken into account of the domestic internal debts. I believe that every one of these countries which is saddled with these preposterous, ridiculous, post-War debts of thousands of millions of pounds will be in financial crisis until the debt is wiped out. During the War, Lord Birkenhead said that he believed the time would come when all the debtor nations would be forced to repudiate their National Debt. He said something like that. Ever since then, the European nations concerned have all been engaged in a very difficult struggle in regard to their financial arrangements. Suggestions have been made for the mutual cancellation of external debts. With regard to the internal debts, the suggestion has been to adopt a capital levy. No country has shown a disposition to accept any of these suggestions. The only way that seems to be possible is the inflation method. France is going to go through that, and we in our turn will have to go through it. There are indications that Italy, with its lira, and Belgium with its franc, are following that course, and I have no doubt that when America has settled with all the other countries, America will go through it, and we shall not be able to have the support of Mr. Pierpont Morgan, who came to our rescue when the Chancellor of the Exchequer was returning to the gold standard.

With respect to the two letters, it is an extraordinary position that the Chancellor of the Exchequer has given a warning that this country in the future is not to be bound by anything that may be said by himself or possibly the Financial Secretary to the Treasury in connection with this Agreement.

Mr. CHURCHILL

indicated dissent.

Mr. STEPHEN

I speak subject to correction by the Chancellor of the Exchequer, and if he will allow me to finish possibly he will find that I am quoting him correctly. He has said that these two letters represent the dominating considerations in connection with this Agreement and he wanted to make it plain to the Committee that no matter what was said here to-day, we in this country were committed to this Agreement, and anything that could be said by himself or the Financial Secretary to the Treasury, if it were counter to it, could not be of the slightest importance. I do not want to press the Chancellor of the Exchequer any further, and per sonally I do not thing it is of very much importance.

The French have said that if they do not get payments under the Dawes plan they will not be able to pay. They are looking at things from a very pessimistic point of view. The Chancellor of the Exchequer, representing this country, is not able to agree that the Dawes payments have anything to do with our debt to France. We have changed, and changed, and changed, and whether it is in these letters or not, whatever is in the letters, the financial circumstances of the future will determine whether the Agreement will have to be altered or not. Consequently, I am not in the same state of excitement as some hon. Members. It reminds me of the story of the Aberdeen picture house manager who came to London thinking he might be able to get some tips to help him to extract the baubees out of the people of Aberdeen. He went into a picture house, and the one thing that struck him was the notice, "People over 80 years of age admitted free." He thought it a fine idea, and when he got back to Aberdeen he posted that notice in his own picture house. He looked at it, and then his Aberdeen caution overtook him and he decided that he would change it a little, and the notice was: "People over 80 admitted free if accompanied by their parents." These letters contain something like the qualification which the Aberdeen picture house manager made. Believing that the franc is going to hell, and the pound is going after it, I do not lay any great stress on these financial arrangements. I believe the capitalist system is going, and as one who believes in Socialism in our time—I am not greatly worried about these arrangements, but if they make things easier for the time being I can welcome them.

Sir GERALD STRICKLAND

I rise to offer a few words of comfort to the hon. Member who has just sat down, and who has been prophesying that the pound sterling is going to depreciate the way of the mark and the franc. Be need have no apprehension in that direction, because the pound sterling has already been stabilised on a gold standard in this country. The return to the gold standard has perhaps escaped the lion. Gentleman's attention because if he wants to exchange paper for gold, instead of getting a pound at a time, he, has to expect an ingot worth about £400. There are other reasons why our sterling currency is not going down hill. This Empire is tile greatest producer of gold, of which the bulk is being raised in Australia and South Africa, and the principal owners of these mines are in England. Therefore, the flow of gold bullion into this country to support sterling is more constant and more certain than the flow of gold into any other country. The United States of America at the present time holds a larger accumulation of gold than necessary to support the credit of its paper money, but that is due to exchange operations and not to the productiveness of its own gold mines. But there is another reason why the hon. Member above the Gangway need not be apprehensive. Into this country there is a constant flow, not only of gold but of capital based on gold, of the accumulated savings of those who have worked and produced abroad and denied themselves premature spending. This accumulated wealth is coming to the banking house of the world from all corners of the earth. There is coming into this country, not only the much debated annual invisible income, but also a less debated and a very much larger invisible amount of transferred capital, which no statisticians have yet attempted to estimate or have succeeded in accounting for. Why do the accumulations on a gold basis come into this country? Why do the successful Americans, the wealthy Argentines and other foreigners who have made large fortunes outside settle here? Why the successful Colonials come to end their days in the old country? Why do the merchants from every nationality follow this example? Why do they bring their wealth based on gold to London? The reason is that the whole world knows that London is safe, and that there is no chance of the extreme Socialists coming into power in this country for at least the next generation. That is the reason why capital, seeking safety, is constantly flowing into this country to make our gold standard safe. The common sense of the English people, their traditions, their habits, and their adherence to religion, these safeguards which the Communists have been unable to shake, continue to give confidence to the whole world, and therefore to the stability of British sterling.

May I now say a few words on the more general aspect of debt accounting? The initial cause of our troubles with regard to these negotiations for the repayment of outside loans is traceable to a departure in war time from the sound previous policy of the British Treasury with regard to guaranteeing loans to foreign countries rather than lending direct. That policy, as exemplified in some of the former Egyptian and Turkish guaranteed loans, this country should not have lent to France and Italy when it had to borrow from America. America should only have had a guarantee. If we had guaranteed for Italy and France loans to be procurable by them directly from America, instead of having become an intermediate lender, our difficulties would not assume their present aspect. The policy put. forward by the Earl of Balfour, and which goes under his name for the solution of this problem by all round remissions, would have been a much easier one to push forward. That mistake of lending borrowed money has been made, and the consequences appear now to be irretrievable. How can we expect the French to pay? They are only likely to pay us in two ways; by gold or territory. They might pay us by exports, but that presumes that the balance of exports or of possible exchange is going to be sufficient. Of that, however, there is not any prospect.

But there is a worse difficulty. The French Government cannot get gold from its own people for the support of internal credit. The French Government is unable to enforce payment of taxes paid in inconvertible paper, and I want to ask the Chancellor what is the value of bargains made with such taxpayers and for them by Ministers who are constantly being made and unmade and constantly changed and repudiated? Will these bargains of fallen Ministers be worth anything unless the Chancellor of the Exchequer is able to tell us what he knows and believes to be the mentality thereon of the people of France? What does the Chancellor believe will be paid by the French? What does he believe the Italian people will he able to pay, and what does he believe the German People will be made to pay? These various promises are of very little use in adjusting the finances of this country and in helping us to make up our mind as to what we shall have to continue to submit to in the way of taxation apart from these promises. I believe the French people, if they wanted to pay—I am not questioning their intention— cannot pay in gold or exports and we do not want territory from them. In return for promises, what are we to expect? The sooner we realise that, the better for us and the fewer will be the delusive debates of this nature. At the end of the War we were in a position to say to France, "Together we won the War; we have spent so much blood and treasure in acquiring Alsace-Lorraine, of which we give our share to France, as a consequence that spoil of War at least should have been put to our credit." We gave that to France, apparently for nothing. What we should have asked for in return was a cessation of further intrigues and diplomatic action against our prestige and commerce in any corner of the world.

That would have been a valuable asset, almost as tangible as territory, and I submit that, as there is still time to get something for the credits we are discarding, we should ask France and Italy, in exchange for the hundreds of millions of pounds of English gold which we give up, to stop the undermining of our Empire and all intrigues which are contrary to our interests in the Mediterranean and the East. Such an assurance would he a substantial quid pro quo, and perhaps the only quid pro quo which French statesmen can promise in the name of their taxpayers with ability to perform for us at the moment. I hope, therefore, the Chancellor of the Exchequer will try to obtain assurances of practical value of non-interference by France and Italy, promises that can be fulfilled—namely, a cessation of intrigues and threats which impede the work of those who are British Imperialists, who have worked for the Empire all their lives and are appealing to others to do likewise. Where our interests overlap those of Italy or France, we should ask that there will be a constant manifestation of practical and real friendship and a scrupulous abstention from overt or secret action against us, as an acknowledgment of the stupendous remissions at the expense of the British taxpayer.

7.0 P.M

Mr. M0NTAGUE

The lunatic asylums of this country are filled with people who claim to be authorities on money, credits and things of that kind. As I am in no hurry to enter a lunatic asylum, I do not claim to be -a financial expert. As a layman, I have been interested in those speeches which contain what may be described by the fashionable world of to-day as innuendoes against America. The hon. and gallant Member for South Hackney (Captain Garro-Jones) quoted from a Baltimore paper, in which a writer admitted that America had been filling her pockets at the time that the soldiers were fertilising the battlefields of Europe. The idea that one derives from the speeches made on that subject is that the American is a bit less of a humbug than we arc. Why should anyone expect moral interest or sentimental interest from the Americans, who were not so directly affected from the standpoint of safety as Europeans and people in this country, when they are doing no more than the people of this country, to whom we owe the vast bulk of our national debt, did while the War was in progress? I remember during the War that the people in this country with money were called upon to do their bit, and it was regarded as quite a virtue that they should have done their bit during the War. They did. They lent their money at 5 per cent. or 6 per cent. I have yet to learn that these patriots, these people who asked the soldiers to go and defend the honour and integrity of this country, are more prepared to accept a farthing less off the interest on the money that they lent to their own country than the Americans are prepared to accept any less advantage from the present financial situation. It is a piece of humbug to talk about the Americans being any different from ourselves and the people of this country when it comes to finance, and especially War finance.

There are one or two other considerations which appear important to me. One consideration is that all through this Debate all the Members, with the exception of one, to whom I have listened have been discussing this question entirely from the standpoint of the taxpayer and the financier. There is surely another aspect to be taken into account, and that is the question of how far it is possible for this country to absorb the payments that may be made by Italy or France or other countries to us. I want to know where the working man comes in. I have recollections of the effect of reparation coal. We realise the position of the coal industry at the present time. One of the great difficulties of the coal situation is that we have lost our export trade owing to agreements with regard to coal obtained from Germany. It is rather an amazing thing, it is one of the things that one finds throughout the whole of the capitalist system, one of the absurd things of capitalism, that if we gain as a nation by accepting or retaining goods we do not pay for we are at the same time injured. That is one of those things that metaphysicians would call antinomies, which are second cousins to paradoxes. It is not the only absurdity of the capitalist system, but, absurdity or no, it is a fact that we have to consider, the fact that when we are paying to America we are not paying gold, we arc not wrapping un sovereigns or bullion in cotton-wool and sending them over to America in payment of our debt to her, but we are in the long run paying that debt in goods and those goods are made by British factories and British labour.

I know there are many other things to be said by people much more qualified than I ion on a subject of this kind. There is the fact that the whole of this Debate is proceeding with hardly a word being said as to the immediate or the ultimate effect upon British labour of accepting or obtaining large sums from other countries and not having to pay out such large sums to those to whom we are indebted for war debts. Some consideration should be given to that aspect of the case. Personally, I am not so interested in those financial considerations, which to me seem more like the clamour of a thieves' kitchen than anything else.

Mr. CHURCHILL

I said last week that I hoped that the settlement which had been reached with France would gain a measure of general approval from the House and from the country. Nothing that has happened since has in any way disappointed me. Certainly nothing that has happened in this Debate has led me to feel that there is any large, deep, strong volume of Parliamentary opinion marshalled in condemnation of the course which the Government have thought fit to adopt. The right hon. Member for Colne Valley (Mr. Snowden) in his speech stated quite truly that this debt settlement corresponds closely to the partial and provisional arrangement effected last year between M. Caillaux and myself. I then told the House that there were three outstanding questions. There was the question of the transfer clause, there was the question of the échelle, the ladder or moratorium, and there was the question of the safeguard clause. Now, in the period, almost a year, that has passed, these outstanding matters have been settled without alteration to the rest of the previous Agreement. They have not by any means all been settled, as the right hon. Gentleman suggested, to the disadvantage of this country. So far as the transfer clause is concerned, we were always ready to agree to that. We have inserted a similar provision in the arrangements with Italy, and we see no difficulty or inconvenience in that. So far as the ladder or échelle is concerned, the figures which I proposed a year ago to M. Caillaux—I gave him a confidential note in writing of what we had in mind—have in effect been agreed to for the earlier years. These have been settled in accordance with our views, a view I must admit from which at the time he did not express any marked dissent. Lastly, there is the safeguard letter.

Before I come to the safeguard letter, I should like to draw the attention of the Committee to the subsidiary and separate agreement which has been made about the compensation of British nationals and British firms domiciled in France whose property was destroyed either by the enemy gunfire or by the Allied artillery or aeroplanes. This was referred to by my hon. and gallant Friend the Member for Warwick (Captain Eden), who spoke earlier in the afternoon, and who expressed satisfaction that the Government should have been able after this lengthy period to effect a solution on this point. The French Government will treat the British sinistés as they are called, those firms or individuals who have been damaged, as if they had been French nationals. That is to say that they will compensate them for the value of the damage they have suffered as assessed in France. These sinistrés will receive, just like the. French nationals, either cash, i.e., francs, which have a value in France entirely different from what they have in exchange, or bonds. At any rate, whatever happens to the franc, these people will be paid the same as the French, The French Government has assured us that it will endeavour to deal promptly with these claims, which have been long outstanding. The estimate of the amount due is uncertain, but the French Government puts it at about 150,000,000 francs. I think it is satisfactory that that outstanding question should have been settled in this way.

I come to the question of the safeguard letter. It was the demand last year of M. Caillaux and the French Government that there should be a definite clause inserted in the agreement making the payments by France to this country depend upon the payment of German reparations. We have consistently declined to admit any such clause into the agreement. One of the reasons why we scaled down the debt payments of France to £12,500,000 was in order that these payments should rest upon the sole credit of France and should not be contingent upon, or directly proportioned to, the payments which France received from Germany. I am not for a moment going to conceal from the House that we have made a concession on this point, and one which, if all other things had been equal, we would rather not have made. Do not let us exaggerate this concession, or attempt to draw from it conclusions which are by no means warranted. The letters are, of course, to be read together with the agreement, and there can be no question of our receding from our responsibilities as described in those letters. I am asked what these letters mean. They mean what they say, and the language of these letters was, as 1 told the House earlier, naturally considered very carefully not only in the Treasury, but also by the Cabinet, which weighed the whole matter with close and prolonged attention. These letters undoubtedly give France the right, if there is a total suspension or a suspension of the payments by Germany to the extent of more than one-half, to raise the question of her capacity to continue to pay the annuities which are set out in the general agreement. That is what is intended.

In these circumstances, which we have no reason to believe will occur, France will be entitled to come forward and raise the question whether the annuities should not be modified, but we shall remain perfectly free to argue the contrary case, to argue that there is no case whatever for modification, if we are satisfied that the circumstances so warrant. We do not know what the circumstances may be five, 10, 13, or 20 years hence. We can form no opinion about that. It may well be that France will be as prosperous as my hon. Friend the Member for the City of London (Mr. E. C. Grenfell) anticipates, that her great wealth in minerals and her self-contained economic strength may have placed her in a position of great prosperity. At least we all hope so. If at that time failure in the payment of German reparations occurs, and France invokes this exchange of letters, it would be easy and open for us to argue, as we should do, that in view of her prosperous position and our much less prosperous position, and in view of the fact that we too were sufferers to a large extent from the cessation of German reparations, and indeed for our part were under the continuing obligation to make payments to the United States—it would be perfectly open to us to make all those points and to argue the matter out. Therefore, our obligation in the matter is only to admit that it may be reconsidered, we remain with the issue not prejudged, and we are perfectly free to measure the event justly and fairly according to the circumstances of the time.

It may be said that we might make our case, and that France might not agree with it, and, owing to that, she might make default in the absence of an agreement to the contrary. There is nothing whatever to prevent France taking that line, if she does not agree with us, at any time. There is nothing that can prevent a great nation from taking its own decisions in regard to payment of its obligations.

Our object in coming to this settlement at this time has not been, as some have suggested, a desperate effort to save the franc and other foreign currencies from depreciating. I hope that the gradual clearance of these debt disputes and their passing into a state of settlement will be a favourable factor in the general recovery of Europe, but His Majesty's Government have sought to judge this matter entirely upon the basis of what would be in the best interests of this country, what we think the best settlement that we are likely to get, and what also conforms with our ideas of a fair settlement, taking all these circumstances, moral and material, into consideration. The question which the House should consider in this matter is whether it was to our interest to effect such a settlement at the particular moment last week, or whether we should have done better to have left the matter open, whether we should not have had a chance of making a better settlement in two or three years if we had left the matter in a quite unsettled condition at the present time. I admit that that is a very arguable question, and that there are some who think that perhaps it would have been better to have asserted our rights to the full, to have consented to no mitigation whatever of them, and in default of agreement by the debtor States to have continued to maintain our full claim unimpaired. But the Government did not take that view.

In our view the interest of this country, not less than that of Europe, requires a clearance of these matters from the field of inter-European discussion. Moreover, the position of these debts, as they continued unfunded, was continually deteriorating. Every six months £15,000,000 sterling, or £30,000,000 a year, was added to the French Debt. That sum increased every year as the capital was swollen by the arrears of interest. To allow such a debt to run on indefinitely without encouraging the debtor to fund was to cause a situation when figures would be reached so utterly absurd or so utterly impossible of being coped with, that a complete loss of the debt would probably have been the result in the end. Therefore, we considered that it was a high matter of public policy to arrive at a settlement within a reasonable time. We could have arrived at no settlement with France at this particular juncture, I am sure, unless we had consented to that exchange of letters, which, as I have said, offers to the French Government of the future an opportunity, in the event of the failure of the Dawes receipts, of raising the question whether the annuities should be modified or not. It would have been a great pity, when everything else was settled—I only put this question of the bitters before the Cabinet after all the other points were settled—for us to have allowed the whole Agreement to break down rather than have this exchange of letters.

As a matter of fact I do no b believe that the letters will in any way alter the actual facts of the situation as they now exist or as they may exist. I think it is highly probable that, whether letters had been exchanged or not, the default of Germany in regard to reparations would have led to demands for reconsideration of the annuities by our foreign debtors, who are also beneficiaries from German reparations. They would have raised the question at once, and we should have had an opportunity of arguing the matter with them. That is exactly the position created by the letters, but it is established in a form which meets the strongly-expressed desire of the French nation, and it is a question which we have settled in a manner which has certainly been regarded by them as a concession.

Now I come to the question of how far this agreement with France, and to a lesser extent the agreement with Italy, conforms to the so-called principle of pari passu, of which, I believe, I am the author. The expression pari passu was used and the principle propounded, not in order to set up a meticulous rule, but as a general guide for the policy which we had decided to pursue. It would have been absurd for us to have taken up the position that everything in the settlement between France and Britain must correspond exactly with everything in the settlement between France and the United States. That would not have suited the circumstances which exist between the two countries, or the interests of either Government. We are quite entitled to vary the conditions as much as we choose without violating the self-imposed principle of pari passu, as long as it can be shown that, taken broadly, taken globularly, the settlement is, broadly speaking, of equal value to the creditor countries.

Mr. WALLH EA D

The pill is equally nauseating.

Mr. CHURCHILL

Let us look at the Anglo-French settlement compared the Franco-American settlement. The right hon. Member for Coble Valley (Mr. Snowden) tested it by a very fallacious method. He took the original total of the debt; then he added up all the annual payments year after year for 62 years; and then he made a comparison between the two, and showed by these gross totals that Great Britain got a very much smaller sum of money from France than the United States would get, having regard to the respective debts. Obviously you cannot think of money without also thinking of time. Tine and money are largely interchangeable terms. The question which must be asked in regard to the payment of a debt is net merely how much are you to get, but when are you going to get it. It is not a matter of sentiment or of the opinion that you may hold as to the probabilities of he payments being made at very remote dates. It is purely a question of figures. I have had the figures worked out, and I will give them to the House. The French Debt to the United States, on 15th June, 1025, was £827,000,000. In that total are included not merely War debts, but post-War debts for very large quantities of stores taken over on a valuation by France from the American Army. On the same date the net Debt of France to Great Britain was £557,000,000; that is to say, excluding the £53,500,000 of gold, of which I will speak later. The present value of the French Debt payment to the United States on the MellonBérenger Agreement, calculated at 4¼ per cent., is £412,000,000, or 49 per cent. of the Debt. The present value of the French Debt payment to Great Britain, calculated at 44¼ per cent., is £262,000,000, or 47 per cent. of the Debt; so that the difference, measured by the test of figures, between the settlement we have effected with France and the settlement the United States has effected, is the difference between 47 per cent. and 49 per cent. Therefore, we have departed, if we have departed at all, from the principle, or the ideal, of pari passu, only to the extent of 2 per cent. There is no real argument about these figures; they have been most carefully studied, they will be made public now, and they can be canvassed and examined by the vigilant armies of financial critics outside this House, who scrutinise every statement which is made by the Minister responsible.

Practically, the two settlements, judged by present values, are equal in regard to the proportion of payments, but that is not everything. Although the French Debt to the United States, compared with the French Debt to Britain, is, as eight to five, payments will be made to Great Britain and the United States as follows: In the first five years the United States will receive £32,000,000 and Great Britain £42,500,000. In the first 10 years the United States will receive £94,000,000 and Great Britain £105,000,000. It is only after the 10 years that the United States Agreement pulls up, and over the whole period of 62 years effects this slight gain of 2 per cent.—of 49 per cent. as against 47 per cent. I do not think there is much to complain about in regard to that matter.

There is another fact which I should like the Committee to note—the modification of the American attitude towards the French Debt since the arrangement to which T came last year with M. Caillaux. When that arrangement was announced there was a considerable outcry in the United States against the extraordinarily lenient terms which we were accused of having accorded to the French, and the most strenuous assertions were made that nothing of the sort could be expected from the United States. However, the United States has negotiated an agreement with France, which France has not yet ratified, and that agreement, as I have said, judged by actuarial tests and present values, is substantially the same in every respect, except one which I am coming to, as that which we have negotiated. I think, therefore, we have been of assistance to the French, in leading the discussion of the French Debt with the United States into channels which are less onerous to them. If that should have been the result of the steps which we took, I, for my part, am heartily glad.

But it will be said: "Surely the safeguarding letters constitute a departure from the theory of pari passu?" I agree, in so far as those letters alter the solid facts of the situation and of the future; in so far as giving France the opportunity to raise the question of modification, in itself, in certain circumstances, alters the position materially— to that extent we have shown ourselves somewhat more conciliatory to French opinion than the United States have yet proved themselves to be, but one does not know how the discussion which is still proceeding between the French and American Governments will terminate. One does not know whether, in the long run, the French will be found to have accepted an agreement with the United States which has not, at least, the same slender safeguard from their point, of view as His Majesty's Government have been willing to concede; but however that discussion may end, I am satisfied that no material interest of this country has in any way been prejudiced thereby. Therefore, I make quite plain my contention that we have, throughout these arrangements, in regard to the settlement of France with Great Britain and the United States, maintained and achieved the principle of pari passu.

When we come to the Anglo-Italian settlement I must admit that pari passy is rather more difficult to explain. I quite agree, and I make no secret of it to this Committee, that we attached greater importance to getting substantial payments in the earlier years than we did to having written up on the tablets of the distant future some enormous pay ments to be handed over to our great grandchildren. We thought that, on the whole, it would be better to take a fiat £4,000,000 on the sole credit of Italy than to give many years in which there would be practically no payment, and have very large payments at the other end of the term. The right hon. Gentleman the Member for Colne Valley is not at all unconscious himself of the fact that this is an argument which is evenly balanced. It all depends on what view you take of these debts and of the settlements which are being made in rgard to them. If you believe that for three whole generations, taking each generation as 20 years, these payments will be regularly, strictly and punctually made, that no change will sweep across the world in that period and that no alteration in the views of different nations will arise in all that lapse of time, then, undoubtedly, so far as the Italian Debt is concerned, the Americans will have done better than we have done. If, on the other hand, you take the view that perhaps in ten or fifteen or twenty years you will have a revision and a. review of the whole of these relations arising out of the Great War, then in 15 years we shall have done better than the Americans have done with Italy. Of these two views, I am bound to say His Majesty's Government is inclined to the latter.

Mr. MONTAGUE

Repudiation and confiscation?

Mr. CHURCHILL

No; forgiveness and modification by general consent. I come to the point raised by my hon. Friend the Member for the City of London (Mr. E. C. Grenfell). I join with what was said by an hon. Member opposite in tendering him congratulations on his restoration to health, and on his presence here among us being marked by a speech which showed that his mental vigour has benefited by the repose which he has been forced to enjoy. My hon. Friend asked me about the gold Clause and what it means, and he put this argument to the Committee—that we have taken on the obligation to pay back £53,500,000 of gold to France, in return for £53,500,000 sterling, whenever she may wish to pay that sum. He said if things went badly with this country in the future; if we had a trade balance continually adverse; if we were driven off the gold standard; if the exchange with the United States went against us, and if sterling fell markedly below the value of gold, then, there would be a heavy loss to this country in delivering £53,500,000 of gold were it demanded. It would, indeed, be a serious matter if we had committed ourselves to any such obligation, but we have not clone so. It is not the case that we are bound by the agreement to refund £53,500,000 of gold against the repayment of an equivalent amount in sterling. We have no obligation to do that. Under the arrangements which have hitherto ruled, France was entitled to reclaim the gold only after the complete repayment of 'her debt to us. The Agreement of last week does not alter the status quo in any respect, but merely provides for a further Agreement before any repayment is made. We have, therefore, our hands entirely free in this matter, and, if any request is made to us at an inconvenient moment to pay back the gold in return for sterling, it is open to us to say, "We do not agree to do so. "That is perfectly understood. Obviously, if the exchange were in the condition which my hon. Friend has indicated as a possibility of the future, but which certainly is not a possibility which we consider to he at all likely—there is no reason why we should look forward and take such a despairing view of the future of our country—hut if, as I say, such a situation did occur, it is obvious that no Government would make an Agreement for the restoration of the gold at a period when it would be detrimental to our finances.

Sir F. WISE

Does the same arrangement apply to Italy?

Mr. CHURCHILL

I was just. coming to that. My hon. Friend knows the subject so well that he anticipates almost every thought which one has upon it. I was coming to that point, however, and for greater accuracy I have provided myself with a copy of the Italian Agreement. It is quite true that the Agreement with Italy is different. Italy has a right to purchase for sterling over a long period of years, in small parcels, the £22,000,000 of gold which she deposited with us. Clause 7 of the Anglo-Italian Agreement shows that the right to purchase that gold for sterling is spread in small instalments over a large number of years and, in cones- quence, even if there was an adverse exchange and sterling was at a disadvantage compared to gold, the fraction of loss which would be calculable on each of these instalments would be so small as not to be a serious burden upon this country. So that, whereas in regard to the French gold we have not committed ourselves in any way to restoring it against sterling, in regard to the Italian gold, in which we have conceded that principle, we have protected ourselves by stating that the repayments shall only be in small instalments over a number of years. I hope that is satisfactory to the hon. Member for Ilford (Sir F. Wise) and also to ray hon. Friend the Member for the City of London—I hope it relieves his anxiety and will cheer his spirits.

I would remind the Committee once more, in judging these matters, of the fundamental issue. It all depends on the view you take of the position of debtor nations as compared with creditor nations and the view you take of their relations. If you believe that the creditor has the power to exact whatever he chooses up to the utmost letter of his bond, then you may, of course, condemn the Government for not having demanded from their European debtors the full payment. But you cannot at the same time condemn this Government on that ground and condemn a previous Government for having submitted to the wishes of their creditor, in the case of the United States. Either a creditor has the power or he has not. If the creditor has the power in the one case, it is reasonable to argue that that power applies to all other debt settlements. As a matter of fact, it is not the creditor who has the power. Where it comes to transactions between nations, and you cannot recover by distraint from them, the debtor has the power. If the debtor chooses to face the lasting injury to his credit, to his future borrowing powers, and to his good name which follows from repudiation, or if the circumstances are such that the debtor has not the strength to meet his obligations, then it is perfectly clear that the creditor must defer to the decision of the debtor. It is no use scolding me—though I admit hon. Members opposite have not scolded me much—for not extracting more from France and Italy and the small Allied debtors, when all the time they regard it as perfectly reasonable and excusable that I should have failed totally to get one single farthing of the enormous debt of £800,000,000 which is owed to us by Russia.

A much more serious issue was raised by the hon. and gallant Member for Leith (Captain Benn) and also, to some extent, though in much more guarded terms, by the right hon. Member for West Swansea (Mr. Runciman), when the hon. and gallant Member complained of our not having succeeded in securing from European nations some reduction of their armaments or some reduction of their tariffs, under the pressure of our debt settlements. I am quite clear that it would be a most perilous departure from the paths of sound finance if one nation, finding another owing it money, endeavoured to use that debt, especially a debt contracted as it was in the conditions of war, as a means of invading the sovereignty of the debtor nation and interfering in their domestic concerns or in their national affairs, and the right hon. Member for West Swansea got on very dangerous ground when he suggested that we should deal with this question in a much larger spirit, and when he suggested, as far as I could understand it—if he did riot mean this, I do not know what he did mean—that we should endeavour to placate the United States and win their good will and induce them to think so highly of our conduct that they would reduce our debts if only we made reductions in our armaments; presumably, he meant in the British Navy. My right hon. Friend knows that we would not tolerate any interference in our affairs, even if we were not able, as we are able, to pay all our obligations whenever they mature.

My right hon Friend the Member for West Swansea fell into the usual error nowadays of wishing to have the argument both ways. He began by reproaching me for not being what he called a good Shylock. Probably I am not a good Shylock, but it is not reasonable to reproach me with that in one breath and the next moment use a lot of fine language about the folly of attempting to pass these immense sums across the exchanges, and so on. My right hon. Friend must make up his mind whether he is reproaching me for not having extracted much larger sums from our European debtors, or whether he wishes to stand forward on the broad Liberal lines of being a critic of these immense war obligations. He cannot press his arguments—at least he ought not to; I will not say he cannot, because he has done it, but he ought not—if he has a desire for logic and consistency.

I come, in conclusion, to the Anglo-American Debt settlement, which has been mentioned several times and about which I must say a word. The right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) is in his place, and undoubtedly he will deal with that arrangement, but no one had more power than my right hon. Friend on the morrow of the Great War. I do not say he could have succeeded, but no one had a better chance of getting this debt question on to a good foundation than he had. I am not criticising him at all. It is only that I do not consider that he is entitled to be very severe in his criticism. On the morrow of the Great War and the great victory, when President Wilson first came over to Europe, and all the comradelike sentiments were in all the breasts of the Allied nations, there was an opportunity, in my opinion, to plead for the principle of equality of sacrifice, which would take into consideration not only the money that had been spent, but the blood that had been shed, and also, on the other side of the account, the territory that had been obtained. I believed at the time—and I expressed my opinion in public at the time, though it did not influence those who settled the destinies of Europe—that that principle was one of the first importance which we should endeavour to achieve. But now that time has gone, and we have settled our debt with the United States, I do not think that it is any use our indulging in recriminations with the people or with the newspapers of the United States over that Agreement which we have made, but I must refer to the statement which is attributed to Mr. Mellon, Secretary to the Treasury of the United States, in the newspapers of this morning, because I think it would be a great pity if misunderstanding should arise on these points. Mr. Mellon is reported to have said, in a statement which, I understand, was a written statement: It must be remembered that England borrowed a large proportion of the debt for purely commercial, as distinguished from war, purposes—to meet commercial obligations maturing in America, to furnish India with silver, to buy food to re-sell to the civilian population in order to maintain the exchange. American loans to England were not so much to provide war supplies as to furnish sterling for home and foreign needs, and to save England borrowing from her own people. There really is a complete misapprehension of the facts of the case, and so serious is this misapprehension that it makes me almost doubt the authenticity of the passage which I quote. But what are the facts? We are only dealing, let the Committee remember, with the period after the United States came into the War. There were no loans before then between the Governments. Great Britain, like all the other Allies, spent vast sums of money in the United States an food as well as on shot and shell, but all the loans of the United States to the Allies were, by Act of Congress, specifically limited to the purpose of prosecuting the War. That was the language of the Act of Congress, and the United States Treasury required, and obtained, justification for practically all their advances to us, every cent of which was spent in the United States. Every cent was spent under the supervision of the United States Treasury in what was, according to their view, not ours, the furtherance and prosecution of the War, and every cent was spent in the United States. Between 1917 and the end of the War, that is, during the period of American intervention, we spent over 7,000,000,000 dollars in the United States, arid of that sum ire borrowed 4,000,000,000 dollars, and we provided the 3,000,000,000 dollars additional spent in the United States from our other resources. Against the 4,000,000,000 dollars that we borrowed, we spent over 1,500,000,000 dollars on munitions and over 2,500,000,000 on cereals and other essential foodstuffs, so that on these two heads alone, munitions and vital foodstuffs for the armies and for the populations, we spent a sum which equalled the whole sum that we borrowed from the United States.

As to the special in stances cited by the distinguished foreign statesman whose name I have mentioned, there, again, it seems that he has been either misreported or misled. We spent on the commercial maturities during this same period only 354,000,000 dollars out of a total of 7,200,000,000 dollars which we borrowed or provided from our own resources, or rather less than one-twentieth of the total dollar expenditure for which we were responsible; and as to the silver loan for India which is referred to, that, as everyone knows, was treated quite separately from the War Debt, and fully repaid by this country in 1923. I hope I shall not be thought to have been wrong in stating these facts, because, while there is certainly a good deal of ill-feeling and resentment about all these questions connected with the repayment of War debts, it is very important that that resentment should not be increased by any misunderstanding of what are the actual facts of the situation.

I think I have answered the greater part of the questions put to me, and I would only, in conclusion, say that if we should succeed, as we have done on paper, by these settlements, if they should be carried out, and we should succeed in obtaining from reparations and from debt payments the sum of £33,000,000 a year after 1930, and have to pay £38,000,000 a year to the United States, that is a very much closer achievement of the principles of the Balfour Note than anything which would have been thought possible in the Cabinet which was responsible for the issue of that Note. It was a hope and an ideal and a policy and a principle, but that we should have succeeded in translating it into effective agreements which, if carried out, will so nearly as that balance the payments we have to make by the receipts which we obtain, is a fact with which—I speak for myself—I think we ought not to be discontented, any more than we ought to be discontented with the general policy which has guided this country in relation to the European debts. It is the old traditional policy of Great Britain and it is based on a very long view of the future of Europe and of our country in relation to Europe. Let us have some trust in time, and give time a chance to do its work, not only in the Old World, but in the New; let us so act that time will be upon the side of easier and wiser solutions than have yet been reached and than yet exist in the world in respect of the War debt payments; and let us have confidence in the teaching of facts, in the lessons of experience, which over a long period of years are certain, in my judgment, to produce immense alleviations of the situation which at the present time presses with iron severity on the warracked nations of Europe.

9.0 P.M.

Mr. LLOYD GEORGE

I would not Lave intervened at all, certainly at this hour, had it not been that the right hon. Gentleman very wantonly attacked me when I have not given him the slightest provocation. He said that, I presume in 1919, he delivered sonic speech in which he appealed to me to do my best to secure an agreement among the Powers in regard to these debts. Seeing that he was a colleague of mine, it appeared to be hardly necessary for him to deliver his speech when he could have met me, but my own recollection is that my right hon. Friend was too occupied with incurring fresh debts on a military enterprise to think of liquidating past ones. I have no recollection of this very wise suggestion which he made on that occasion. As a matter of fact, I think M. Clemenceau and I did approach President Wilson on that occasion, but President Wilson was not in a position, in view of the fact that there was to be a Presidential election in America, to enter into any negotiations on the subject. But I did approach him and press him.

Seeing that the right hon. Gentleman has raised the issue, he has put his finger upon the one mistake which has landed Europe in all this trouble, that is, the funding of our debt to America. It was done against the advice of the Prime Minister of the day, Mr. Bonar Law. That statement, has been made repeatedly in public, and it cannot he contradicted. That was the mistake. I am not going to blame the right hon. Gentleman, although I do not approve of the bargain he has made. He has had to enter into these negotiations with that blunder already made. It is a great misfortune that we should have had to discuss the debt settlement to-day, having regard to the trouble which has arisen in France since this Vote was put down, but it was too late to make other arrangements. I should have been in favour of postponing it but for the fact that this is not the first time the trouble has arisen in France. The right hon. Gentleman made this bargain a year ago, and now he has made the same bargain with the same Finance Minister a year later. Whenever the French are in difficulties in regard to payments, they change their cashier. That is what has happened on this occasion. You have to deal in France with this peculiar position, that you have great material prosperity—greater apparent prosperity than in this country. There is no unemployment and, on the whole, there is a balance on French trade. All the factories are going, new ones are springing up, and the account. I get from every part of France is one of new buildings, great prosperity, and, at the same time, this failure to pay debts.

The right hon. Gentleman says, time is a great factor. It is a year since we made this bargain and now, what has happened? He is very satisfied on the whole with his bargain. But let him look at the actual figures. There is, first of all, no agreement between us and the French. In regard to what has been done, the French take a view of the transaction different from that of the right, bon. Gentleman. The official communique to the French Press is headed: Payments of France conditioned by the Dawes plan. It is a communique sent out by the Quay D'Orsay or the French Finance Minster. That is not the view taken by the right lion. Gentleman. He says, "All we have agreed to is that if the Dawes payments fail, we discuss the whole situation later on." He has given us a figure relating to the operation of the payments to be made by France. He says, France pays 47 per cent. of the debt. That is not the view of France, which is a figure of 37 per cent. If that is the case, this is how we stand. The right hon. Gentleman is going to pay the United States of America 76 per cent. of her debt and we have been doing it for two or three years; France pays the United States 49 per cent. of her debt. France pays to us—when she does pay—37 per cent. Well, now, that is a bad bargain. It is not a question of Shylock, it is a question of a decent business arrangement. Italy pays 24½ per cent. to America, but to Great Britain 18 per cent. of the debt. There is a part in Mr. Mellon's speech which the right hon. Gentleman has not quoted in which he says that the United States has not exacted a penny of the War debt from any country except Great Britain. The only debt exacted from Italy is the post-War debt, which is a commercial one. We are not exacting anything in respect of the War and yet the whole financial burden has to be borne by Great Britain in respect of the War debt.

All I can say is that the thing has been thoroughly muddled from the first moment that agreement was made. It has been a great misfortune, but the right hon. Gentleman is not entirely to blame. What is the position in which he finds himself? We pay in respect of the debt which France owes us, as the right hon. Gentleman the Member for Colne Valley (Mr. Snowden) said, 6½d. in the £. We are going to receive ¾d. in the £. Ultimately we hope to get 26½d. in the £ while we are still paying 66½d. in respect of the very money we advance to France. This twopenny-halfpenny agreement is supposed to he a good arrangement when we have to pay all this heavy burden on debt to the United States. It is an arrangement which is a thoroughly bad one. It is quite true it is better you should have the best payment at the beginning, but we shall be getting gradually out of this trough. The whole of these years we have had nothing from our debtors. We have paid the United States the heavy sum of £33,000,000, when France is prospering and she has no unemployment, and Italy is being pointed to by the friends of Mussolini in this country as a country of prosperity, though when it comes to the question of debt they do not want that mentioned. Here you have this inconsistency, that we shall be receiving payments only after we have got through all our difficulties. While we have to face all these difficulties, we shall only he receiving 6¾d. in the £. The whole mischief arises nut of this settlement with America. I agree it is a great misfortune the whole of these debts could not he wiped out.

Mr. REMER

Why did, you not wipe it out?

Mr. LLOYD GEORGE

I? Will you tell me when and how?

Mr. REMER

I think the right hon. Gentleman is responsible for not making such an arrangement.

Mr. LLOYD GEORGE

In order to make an arrangement you have to get the creditor to agree. The hon. Gentleman, if he knows anything, knows perfectly well that we were in debt to America for £1,000,000,000, and we had to get the consent of America to begin with. That consent America would not give. During the whole time I was Prime Minister I was against entering into any arrangement and tried to secure a general arrangement that all the debts, including German reparations, should be wiped out. 1 think it was a very unfortunate thing that President Wilson was not in a condition at that time to enter into negotiations, because he had been stricken down. We were in a good position when the Balfour Note was written. There was £2,00000,000 due to us and £3,000,000,000 due to America, while there was £3,300,000,000 due from Germany. We were in a position of being able to go to America en quite equal terms. We were not going to beg them to let us off our debts. We said to the United States that we would wipe off all our debts if America would do the same. It would have been a mercy if that had been done. Up to the time of the Balfour Note and the negotiations we should have held-out and we had held out. We refused to do anything, and we were insisting on a conference, but in spite of the peremptory instructions by Mr. Bonar Law, this arrangement was entered into which has led to this manœeuvring and antagonism in Europe. The Chancellor of the Exchequer says a time. will come when all these countries will see the wisdom of getting out of it. That is a long way ahead, and we shall have solved our difficulties by then. But at this moment it would have been invaluable if that had been accomplished. The whole of the trouble was that we funded our debt without a general conference to clear up the whole situation. I do not feel, having regard to the difficulties with which the right hon. Gentleman was confronted, and the fact that he has to deal with a situation as .he. found it, that I can criticise him with the severity I should have liked. He had to make the best of a very bad situation for which he was not responsible. The Prime Minister is alone responsible for the muddle over the debt question.

Mr. WALLHEAD

I am driven to the conclusion that with all this debate on the debt settlement, there is connected a good deal of hypocrisy and humbug from the other side of the House. It is all very well to hear the statements, and the references to what might have happened in the past; but in 1919 the disapprobation came from the opposite side of the House; though, again, I think the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) has got to bear his share for the muddle which he now denounces. Whatever attempts he made towards a settlement in those days, he received no help from the opposite side of the House. The difficulty was that the party opposite, and the right hon. Gentleman himself, had so poisoned the minds of the people of this country against their enemy, Germany, that a reasonable settlement had become absolutely impossible. That stupid policy came from Press and platform, and was a great difficulty then. It is one against which we are now having to contend.

We are paying now for the sins and iniquities of the violent anti-German propaganda that was carried on immediately succeeding the Armistice. It is no use taking it out of the right hon. Gentleman the Member for Carnarvon Boroughs. I am not concerned to defend him, but I like to see a little fair-play, and I do not want to see hon. Members on the other side piling on the agony because they now agree, or seem to agree, with the settlement put forward by their so-called statesmen. The right hon. Gentleman himself was very rightly denounced by the Chancellor of the Exchequer when he spoke about the difficulties of 1919; but fancy the present Chancellor of the Exchequer talking about an early settlement in Europe on an honest and a decent basis! in view of the fact that, after the War, had ended, he was engaged in stirring up strife over the whole of the Eastern part of Europe because of his dislike for those in power in Russia. The same stupid policy is still permeating all his acts. I wish he were here Le hear what I have to say, for I should like him to know what I think, arid not only what I think but what people outside this House and this party, with whom I am associated, think.

The Chancellor of the Exchequer has done nothing whatever to bring about a settlement with Russia. He talks about the settlements he has brought. off. I do not call them settlements at all. He stands opposite and talks about Russia paying her debts. What are the settlements of which lie speaks? The idea of Italy getting off in the way she has done with 18 per cent. of her total indebtedness. and France who herself admits that it is 37 per cent. We ought to endeavour to get a settlement of the Russian Debt in order to alleviate our unemployment; yet we continue to he told that Russia has refused to pay her debts. That is a monstrous misrepresentation. The people who have stood out against paying until the last moment were Italy and France, and this after Russia herself had been asking that we might state what our terms were in order that they might consider the advisability of a. settlement of their debt.

The question of national sovereignty was spoken about by the Chancellor of the Exchequer. Again, that sits very badly on him. There is this outstanding fact that we have to face. We are making arrangements to settle the whole of these colossal debts at an enormous sacrifice to ourselves. The right hon. Gentleman has said something about considering the tender feelings of the people who owe these debts, but what of the English people, our own nationals, who have to pay? Ought we not to do something in this country to ease the burden of our own nationals, the burden of our own citizens, who hold the National Debt in their hands? Why should we let off everybody except our own people no matter how badly or how hardly pressed? We cannot get back more than three-farthings from Italy, while we ourselves have been paying 6d., and we are taking a few coppers from France. We are demanding the full pound of flesh so far as our own working classes arc concerned and they are worse hit than any other working class in Europe. Our working classes here are worse off than the French working classes who are well off; in fact the biggest import of France is alien labour for the purpose of assisting their labour and bringing about their enormous output. France is a tremendously rich country. The working classes there are well off, while on the other hand our working people are to be compelled to find an enormous sum of money to pay the debts of France, and Italy, and half the world beside.

The right policy would have been an all-round cancellation of debts. At the moment I suppose it was not possible! I refer to the years 1918 and 1919. I protest, and shall continue to protest, against our people here being compelled to shoulder the burdens of people who are far better off than themselves. We cannot obviously pay £300,000,000 off our National Debt without feeling it. It comes out of the production of the worker himself. One reason why our working people's wages are depressed and their standard of living coming down is because of the colossal amount they have to pay of National Debt, part of which is French and part of which is Italian. In the name of the working people I represent, and of the party, I protest against settlements of this description.

There is another thing in this connection, and that is the question of the relative value of the pound to-day as corn-pared with the pound three or four years ago. The difference makes a definitely heavier contribution from our own working people. While I am open to correction on this point— and I trust if wrong I shall be proved wrong—may I point out that the working people—and I come in contact with a few of them—that they alone practically are bearing the whole brunt of this burden. They arc hearing it all upon their shoulders. The policy of this country has been a devilish policy from the working-class point of view, and although that term may shock the ears of the Bishop of Durham, it is as nothing to the havoc which has been created in the lives of our own working class by the policy pursued by hon. Members on the benches opposite.

Mr. HANNON

Why do you refuse to protect British labour?

Mr. WALLHEAD

it would be entirely out of order for me to enter into the question of Protection. I have done my level best, by demanding a reduction in the rate of interest, to protect British labour from the exactions made upon it.

Mr. HARDIE

By usurers.

Mr. WALLHEAD

I have protested against the action of British usurers, as my hon. Friend remarked, in continuing to take 5 per cent., worth to-day 8 per cent. as compared with 1919–20. That constitutes an enormous burden for our people. I want protection to begin at home. The British working man wants protection from the home usurer, and I believe that when he is protected in that way he will look after protection for himself in other directions. Like charity, protection should begin at home. I know that in saying this I am straying from the subject under discussion, but the hon. Member for Moseley (Mr. Hannon) is always thinking of the foreigner —

Mr. HANNON

I am thinking of my own people.

Mr. WALLHEAD

You always think that the foreign working man, because he produces goods, is an enemy of the British working man. I say that foreign statesmen in Italy and France, in attempting to evade their responsibilities for debt, and putting it all on the shoulders of the British working man, are laying a burden on his shoulders out of all proportion to what he suffers from the competition of foreign workmen. I sincerely hope that before long we shall see on the Treasury Bench a Chancellor of the Exchequer who will begin to deal with our creditors in our own country, who will show some mercy to the people at home in respect of the heavy toll taken by our loan owners. France and Italy can be let off, and the. working people here are left to shoulder the burden, because nobody thinks of extending mercy to them. The reason for that is not far to seek. There is a sum of £300,000,00e going into the pockets of people here—

Mr. HANNON

Do you want to deprive British small investors of what is due to them?

Mr. WALLHEAD

The plea of the widow and orphan leaves me very cold indeed, because from figures supplied to us we know that fifteen-sixteenths of our National Debt is held by a very small section of the community. Economists who do not belong to my school of thought have told us that. The amount that goes to the working class as interest is relatively small, and I see no advantage in trying to save a few shillings for the working classes while allowing them to be robbed by home Shylocks, who will have their pound of flesh. That is where pro- tection should begin. If you begin the protection of British working men from the exactions of the home profiteer and the home financier, I will consider with you how we should protect ourselves against the exactions of the foreigner. We can join hands there provided you will begin at home first. Before very long some Chancellor of the Exchequer will sit on the Treasury Bench who will think more about the British working man and the burdens piled upon him than of allowing the foreigner the opportunity of escaping his burdens.

Question put, and agreed to.

Resolution to be reported To-morrow.

Committee to sit again To-morrow.