HC Deb 24 March 1926 vol 193 cc1233-95

I desire to take advantage of the opportunities which this Bill affords to call the attention of the House to the question of Inter-Allied Debts. It is rather remarkable, in view of the importance of this subject and its important effect on the financial position of this country, that the House of Commons has hitherto given so little attention to the consideration of the matter. There have been, it is true, perfunctory references to the question in the course of general debates, but I do not remember any occasion upon which the subject has been exhaustively discussed. It is still more remarkable that the Chancellor of the Exchequer in the exhaustive review he gave last week of the financial position of this country, made no reference whatever to the indebtedness of some of our Allies in the late War.

The CHANCELLOR of the EXCHEQUER (Mr. Churchill)

I was dealing with expenditure, not with revenue.


The right hon. Gentleman interrupts me to say that he was dealing with expenditure and not with revenue. By-and-by the right hon. Gentleman may discover that there is a rather close connection between expenditure and revenue. The right hon. Gentleman on that occasion expressed considerable concern in regard to the balancing of expenditure and revenue, yet he made no mention whatever of the fact that there is owing to us from certain Continental debtor countries a sum which, were it paid, would relieve the right hon. Gentleman of all financial embarrassment. For two or three years after the close of the War I believe that no communications took place between this country and her Allies in the late War in regard to these inter-Allied debts. Just over three years ago the United States of America—to whom we were in debt for loans contracted by us, but not for ourselves, during the War—addressed to the British Government a rather abrupt communication dunning this Government for the payment of those debts. Later, the then Chancellor of the Exchequer visited the United States and concluded a funding arrangement with that Government. Up to the present nothing, I believe, has been received on account of the debts, owing to us, unless the right hon. Gentleman a week ago received the first instalment of £2,000,000 of the Italian debt.


I did.


You did. Well, I think the right hon. Gentleman might frame that cheque and hang it in his room at the Treasury as a memento of his great achievement. As matters stand at present, we are owed about £800,000,000 by Russia, nearly £700,000,000 by France, £600,000,000 by Italy, and about £100,000,000 by the smaller European States. That makes a total of indebtedness due to this country of about £2,100,000,000. When the American dunning note, as I described it, was received by the British Government, the then Foreign Secretary, Lord Balfour, addressed a communication to our Continental debtors intimating to them that we were called upon to pay our debt to the United States and asking that they should give consideration to the payment of their debts to us, and he reminded them that our debt to the United States was incurred not for ourselves, but for others. The Balfour Note, as it has come to be known, is worth a moment's consideration, for it laid down certain conditions upon which the British Government would be prepared to treat with their Continental debtors. I have before expressed my own opinion that the terms of the offer in the Balfour Note were far too generous. But during the two or three years or more since that Note was issued, it has been accepted as the basis of British policy in regard to the treatment of these debts.

France, as I said, owes us just under £700,000,000, and Italy, £600,000,000. About half this money, roughly, was borrowed from the British investor at 5 per cent., and a little less than half was borrowed from the United States at that time, I believe, at 5 per cent. If we had payment of the interest upon the £1,000,000,000 borrowed from British investors and lent to Continental States we should be receiving £50,000,000 a year. We are paying annually to the Unitel States a sum of about £34,000,000, rising ultimately to £38,000,000, upon a debt which, under the arrangement, which has been made, will be liquidated in 62 years from the date of the funding of the debt. If we funded our own claims for War debts on the same terms that we are paying to America, we should be getting £84,000,000 a year from our continental debtors, and we should be paying a maximum of £38,000,000 a year to the United States. That would leave us with a net gain of £46,000,000 a year, which is equal to 11d. in the £ on the Income Tax. I especially commend that fact to hon. Members opposite, who never cease declaring that the present heavy Income Tax is one of the greatest handicaps from which British industry suffers at the present time. Under the Balfour Note we are not asking for that 84,000,000 but for £38,060,000. Under the terms of that Note we should be content to get from German Reparation, Italy, France and our other continental debtors, a sum sufficient to meet the annual tribute we have to pay to the United States of America.

The Chancellor of the Exchequer made two attempts last year to come to an arrangement with two of our Continental debtors, France and Italy. Those who have followed this great question somewhat closely will know what has been the attitude of the French public and the French Press, and the Italian public and Italian Press in regard to their alleged indebtedness to Great Britain. Their argument has been that these debts were contracted as a general obligation and should be shared out between the Allies in proportion to their capacity to pay and the wealth of each. They say that Great Britain is a rich country, while France and Italy are poor, and therefore Great Britain should shoulder the cost of the War. When the French Finance Minister returned home last year, after the arrangement made between him and the Chancellor of the Exchequer, there was a great outburst of protest in the French Press against the terms which had been arranged, and the whole of the argument in the French Press was that instead of France being a debtor to Great Britain, as a matter of fact Great Britain ought to be a debtor to France, because they contend that we have done very well out of the War.

One of the points made by them was that the British loans had been incurred in the form of war munitions and war materials, that the British manufacturers had made immense profits in this way. and that the British Government had appropriated a very considerable portion of those profits through a heavy Income Tax and by means of Excess Profits Duty. In regard to our debt to America, the Continental Press now tells us that Great Britain has actually made a profit out of the funding of our debt to the United States of America. We have been told that this has improved our credit and the pound sterling and cheapened the cost of imports; indeed, if I remember rightly, all those arguments were put forward in the exhaustive review of the financial position of France issued by M. Clementel about 18 months ago. If that be so, if we have made a profit, and if it has proved to the financial advantage of this country to fund the American debt upon the terms on which it was funded, then the moral of that is that France should be anxious to fund her debt upon the same terms.

It is alleged that we have gained by the funding of the American debt, and exactly the same argument has been urged by the Italian public and the Italian Press. There is a famous Italian economist, Senator Einuidi, who is a very prolific writer in magazines and newspapers, and he has written a great deal upon this subject. He says that England was enormously indebted to Italy, and he conveys the impression that Great Britain is guilty of sharp practice in asking Italy to pay. What is the case against France/ France owes us, with accruing interest, £700,000,000, and she has made no attempt to meet that obligation. The financial record of France, during the last seven years particularly, is one of the most discreditable records in the history of national finance. France made a claim which she submitted to the Reparation Commission estimating the material damage which had been done by the War at just under £3,000,000,000. It is very interesting to examine some of the items which go to make up that huge total. The average cost which she put in that claim for the destruction of peasant houses and workmen's cottages was £2,275, and she also put down an average of £1,170 for the loss of the furniture of those cottages. She estimated the damage done to her coalmines in the devastated areas at £80,000,000, which was far more than the total capital value of all the coal-mining properties in France.

Now let us turn to taxation. I know quite well, and I unhesitatingly admit, that it is rather difficult to make exact comparisons as to the taxation per head in different countries, because there are a number of factors which one ought to take into consideration; but still, a very broad comparison may, I think, be justly made. I remember giving an answer, when I was in office, upon this question, and I made that reservation, but I think the broad comparison is this: If we take that year, 1924, Great Britain was paying in taxation £718,000,000, and France was paying £235,000,000. The Bankers' Trust of the United States has issued—I do not know if hon. Members are acquainted with it—a very voluminous work upon this question of Inter-Allied Debts, in which this comparison is made: per capita, Great Britain is paying 50 per cent. more than France, and 100 per cent. more than, Italy. But another comparison might be made. If France were paying taxation, per head of her population, at the same rate as Great Britain, she would be taxing her people £340,000,000 a year more than she is doing at the present time.

That same work points out that at the outbreak of War the total capital wealth of France was £12,000,000,000, and that of Great Britain £15,000,000,000; and certainly, the capital wealth of France is not less to-day than it was before the War. She has been enjoying, during the time of our unparalleled trade depression, a period of unparalleled prosperity. Both her imports and her exports are much beyond the pre-War figures in volume—not merely in value; she has no unemployment; she has spent enormous sums in industrial reconstruction, as everybody who has visited France in recent years knows quite well. She has, I repeat, never faced the question of taxing her people to meet her national financial requirements. She had no Income Tax before the War, and her Income Tax now is perfectly farcical. According to the last return, there were only about 30,000 people in France assessed at incomes of over £1,000 a year, and only about 216 who were assessed at over £10,000 a year, whereas in Great Britain we have 25,000 people assessed at over £5,000 a year. M. Briand was quite right, therefore, in what he said when he met the fate, so common to French Ministers, of a defeat in the Chamber on this question of the refusal of the Chamber to levy this taxation. M. Briand said that the French people had an ineradicable indisposition to pay taxation.


I think he said. that that particular Chamber had.


Well, he might have, said that Chamber, but, in that respect, the Chamber were representative of the feelings and sentiments and disposition of the people of France. If France would tax her people as we are taxed in this country—it would not he necessary to tax to the extent that we are taxed in this country—she could very well afford to pay in full the debt that she owes to this country. The same is true of Italy. I think I remember a statement made by the Chancellor of the Exchequer, at the time of his negotiations with the Italian Finance Minister, about the prosperous condition of Italy. The trade of Italy is booming; Italy is becoming a very severe competitor of this country, particularly in the various departments of the textile trade; and, by permitting these countries, France and Italy, not to pay their debts, by imposing upon the British taxpayer the annual sums which these countries ought to pay, what we are doing, in effect,. is to subsidise, out of the pockets of the British taxpayers, the severe competition. of France and Italy against British goods.

We are now, as I have said, paying to America £34,000,000 a year, and that will rise to £38,000,000 a year. May I again translate that into terms of Income Tax, because the Income Tax is a matter of such touching interest to the Party opposite? The amount that the right hon. Gentleman has to find for the payment of the American Debt represents. 9d. in the £ upon the Income Tax, and will do for the next 60 years. Now, America is a friendly country, and I do not want to say anything which could be regarded as either disrespectful or disagreeable to that great country, but I want to put the facts. America entered the War 2½ years after the outbreak of war, and, during that time, she had been very busily and very profitably engaged in making war material for the Allies. The work on Inter-Allied Debts to which I have referred, published by the Bankers' Trust of New York, makes these two statements: American bankers, merchants and manufacturers, and transport interests, profited to the extent of over three billion dollars from French disbursements in the United States alone. 4.0 P.M

It goes on to say that during that time the Allied countries spent in the United States of America £2,400,000,000 upon war munitions. After two and a-half years America decided to enter the War. She did so, judging by all the statements that were made by President Wilson and other American Statesmen, in a great altruistic mood. In recommending the Congress to declare War, President Wilson said: We have no selfish aims to serve. We desire no conquest, no Dominion. We seek no indemnities for ourselves, no material compensation for the sacrifices we shall freely make. It was in that kind of altruistic mood that the United States entered the War. It was recognised that for some time she would not be able to do much by supplying men for the fighting front. She declared that the best service she could render to the Allied cause would be to act as the Allies' banker. In the official Bulletin issued by the American Treasury in connection with the raising of the war loans there, it was stated that the loans were essential to American intervention, not alone in a military way, but "for our economic protection and welfare." If it were necessary for the protection and the welfare of the United States of America to enter the War in 1917, it was equally necessary for her to do so in 1914. But for two and a-half years she had remained outside. She had profited greatly, she had vastly enriched her purse, and by delaying her entry into the War she had saved two and a-half years' loss of life of American soldiers. These are things which ought to be taken into consideration. It was generally agreed, and indeed stated—quotations in support of it could be furnished—at the time that this loan was given to our Continental Allies through us, that it was a gift by the United States of America as a sort of compensation for her late arrival upon the scene of battle. However, the bond is theirs, and, if the United States insists upon it, then we must pay. That burden of £38,000,000 a year will require to be shouldered by the people of this country for nearly 60 years more. America. has been much more successful than we have in regard to the funding of her foreign indebtedness. She has already funded 40 per cent. of that indebtdness.

I come now to the Italian debt, which amounts to about £600,000,000. At 5 per cent., and assuming that the money we lent to Italy was raised in this country—I will make a distinction by and by between one-half of the total debt and the other half, because the funding of our debt to America at a slightly lower rate of interest makes some difference—it means that the taxpayers' of this country are paying £30,000,000 a year upon the Italian debt. If that were funded on the terms that America has exacted from us, that is about 4 per cent. with interest and sinking fund, it would amount to £23,000,000 a year, and in 62 years Italy would pay £1,500,000,000. Somebody will have to pay that, and. if Italy does not pay, then the taxpayers of this country will have to pay. The right hon. Gentleman has concluded an agreement with the Italian Government. There is no provision in that agreement for the payment of a single penny of interest. Italy is to pay, upon the average for the next 62 years, £4,000,000 a year. That means that altogether she will pay about £250,000,000. The cost of that to us, as I pointed out a moment ago, funded upon the terms of the American debt, is £1,500,000,000. The difference between these two figures is the burden which for the next 62 years will rest upon the shoulders of the taxpayers of this country. That means that of the Italian debt Italy's payments will be about one-sixth, and the British taxpayers five-sixths.

I know the difficulty of the Chancellor's position. I think hon. Members will agree that I am not to-day at all vicious with the right hon. Gentleman. I have not said one bard word about him. I want this afternoon to be helpful, and to see if anything that the House of Commons can do can strengthen his hands in dealing with these recalcitrant debtors. But the right hon. Gentleman, commenting upon this agreement with the Italian Finance Minister, said that the settlement could not be judged by arithmetical calculations. It is just by arithmetical calculations that we must judge it.


Not wholly.


It cannot be. wholly judged by arithmetical calculations. Italy is paying a paltry £4,000,000, and the British taxpayer, as I say, will have to pay in these years £1,250,000,000. Let me turn to the French debt and the provisional agreement that the right hon. Gentleman made with M. Caillaux last August. The right hon. Gentleman a week ago, in reply to a question I put to him, told me that he regards that agreement as still standing. There is very little evidence that the opinion of the Chancellor of the Exchequer is shared by the French Government. They appear for the time being to be busily engaged trying to raise some £30,000,000 or £10,000,000 in order to, balance their budget. Now what was that agreement? It was to be £12,500,000 spread over 62 years. One point was never made clear. It was never made clear whether the payment of that £12,500,000 was to begin at once or whether there was to be a moratorium. M. Caillaux, on his return to France, said something about a moratorium until 1930. That, however, is not a material point. It was to be £12,500,000 for 62 years. We are paying on the French debt £35,000,000 a year, provided by the British taxpayers. Again, translated into terms of Income Tax, that is over 7d. in the £. Over 62 years, on the French debt, we shall pay £2,100,000,000, or £1,300,000,000 more than we are going to get from France.

This is the position in regard to the Italian debt and the French debt. Taking the French debt at 5 per cent. over 62 years, we shall have to provide £2,100,000,000 and we get £800,000,000 from France. That leaves our loss on the French debt over the 62 years, on the terms of the provisional agreement made last summer, at £1,300,000,000. Now suppose we take the Italian debt on the American funding terms. In 62 years, we shall have to provide £1,500,000,000 for the service of the Italian debt. We get £250,000,000, and we lose £1,250,000,000. Taking the two together, we shall on the Italian debt and under the provisional agreement with France have to provide—the Exchequer of this country will have to provide—in addition to the receipts from these two countries on account of the loan, £2,500,000,000 in 62 years. In other words, the Italian debt is going to coat about 5d. on the Income Tax, and the French debt an equal amount. That is about 11d. in the £. for these two debts, which is just about the figure at which the Income Tax stood in days before the War.

According to the Balfour Note, this country would be satisfied if it received from German reparations and from other continental debtors a sum of £38,000,000 a year. The Chancellor of the Exchequer will get £4,000,000 under his Italian agreement. If the French agreement be carried out, he will get, sometime, £12,500,000 a year. That is £16,500,000. We are getting about £10,000,000 from Germany. Under the Dawes scheme, if it matures, we may sometime get £20,000,000. But that is very doubtful indeed. Four million pounds from Italy, £12,000,000 from France, £10,000,000 from Germany—that is £26,000,000, so that when the £38,000,000 on the American debt matures, we shall, on these terms, be about £12,000,000 a year to the bad.

I want to ask the Chancellor of the Exchequer a question, and I hope, when he replies, he will give me an answer. He supplemented the Balfour Note by a Note which he sent to France, in which he said that there must be pari passu payments made by France or any of our continental debtors; in other words, if they made terms more favourable with one of their other debtors, we should expect to revise our agreement with them, so that we should get a proportionate benefit. I wonder if the right hon. Gentleman still stands by that condition, because I find no embodiment of it in the Italian Agreement. The right hon. Gentleman, no doubt, will say that he did the very best he could, but it is very difficult indeed to believe that he could not have made better terms both with France and with Italy. The settlement with Italy is simply trivial in the extreme. The right hon. Gentleman said that it was not merely a matter of arithmetic. There were other considerations to take into account. There is no doubt about it that political considerations had a good deal to do with the Chancellor of the Exchequer assenting to the Italian Agreement.


What about the Russian debt? Will the right hon. Gentleman give us an analysis of that?


A question was put to the Foreign Secretary to-day suggesting that negotiations might be opened up with Russia. Ever since this Government took office they have refused to open up negotiations, and if ever really practical negotiations were entered upon between Russia and this country I should advocate, as I am advocating now in regard to the French and Italian Debt, justice to this country before magnanimity to another country.

It is a pity—and I think everyone agrees with this—that at the time of the Armistice, and during the peace negotiations, there was not an all-round agreement for an all-round cancellation of these debts. America, of course, was the obstacle, but now that we have funded our Debt to America, unless the United States is prepared to annul that agreement, we are bound to make the best terms we possibly can with our own Continental debtors. No doubt in the course of this Debate the question will be raised of the difficulty of effecting transfers. No one knows better than the hon. Gentleman opposite (Sir F. Wise) that this question was most exhaustively considered, discussed and reported upon in the Dawes Report, and their conclusion is that up to a certain point, and within limits, these sums can be transferred without any injurious effect upon the exchange of that country or any dislocation of the trade of the receiving country. The Chancellor of the Exchequer will say, no doubt., he has done the best he could. It is no use him saying, and it is no use the French saying, and it is no use the Italians saying, they are unable to meet their obligations to a greater degree.

It will need a great effort to mobilise their economic resources, but it is high time the French particularly abandoned their inherent unwillingness to pay taxes. They have been presenting during the last few months a contemptible spectacle to the whole world, and the failure to tax themselves is bringing France to the verge of national bankruptcy. There may be certain temporary advantages, and one of the things that has been done is to wipe out about four-fifths of the French public debt, and in that process a large number of British investors have suffered very severely through French financial policy. I remember that M. Clementel, in the report to which I have referred, suggested a Dawes scheme for the treatment of Inter-Allied indebtedness. The crux of the Dawes scheme is the financial control of a country by its creditors, and if France wishes to avoid that unpleasant and humiliating experience she might secure the object of the Dawes scheme by her own effective control of her great resources. I said I desired that the purpose served by this Debate should be to strengthen the hands of the Chancellor of the Exchequer. The provisional arrangement made with the French Minister last year is, for the moment, so much waste paper. If the time comes when the French resume negotiations I hope the Chancellor of the Exchequer will not be bound altogether by the terms he made then. He would have sufficient justification for asking for their revision on terms which will do less injustice to this country. I began by saying this question was one of great importance to the taxpayers of the country. We have since the War made unparalleled sacrifices to maintain the fabric of our financial institutions. We have redeemed nearly £1,000,000,000 of our debt. We have maintained a far greater rate of taxation than that borne by any other of the Allies. I think, therefore, we are fully justified in asking that these debts should be funded upon much more advantageous terms from the point of view of this country than the Chancellor of the Exchequer has so far succeeded in doing.


The right hon. Gentleman has drawn attention to the remarkable fact that we have not, so far this Session, devoted any portion of our Parliamentary time to a discussion of the important and at one moment very timely topic of Inter-Allied War debts. I agree with him in that reflection, but it is no cause of reproach against His Majesty's Government. We follow naturally in the main the wish of the Opposition parties as to the subjects that should be set down for discussion. I have been ready from the beginning of the Session to deal with this question, and I am ready to do so to-day. Nor do I complain in any way of the tone and temper in which the right hon. Gentleman has couched his searching and critical remarks. He indulged, it is true, in some strictures on friendly foreign countries with which, even in so far as I might in a private capacity have some feelings of agreement, it would be impossible for me to associate myself during my occupation of a position as an official functionary. But I do not find myself in fundamental disagreement on any matter of serious principle with the right hon. Gentleman in many of the arguments he has used. I think, with him, that this question of debts ought to be treated, not in isolated discussion on this or that particular country, but surveyed as a whole. The right hon. Gentleman went back into the past, and I will follow him there.

There has been from the very beginning of these controversies a very marked difference of view in Great Britain and the. United States in regard to War debts. We have never taken the view that the cost of shot and shell fired in the common cause can be considered morally and sentimentally, whatever it may be legally, as on exactly the same footing as ordinary commercial debts. That has always been our position. It was the British position more than 100 years ago, after the Battle of Waterloo, and it is certainly the standpoint from which we first approached this subject. We said we were willing to cancel all debts owing to this country by our Allies, provided we were treated in a similar manner by those who were our creditors. That view did not commend itself to the great Republic across the Atlantic and, as the right hon. Gentleman has very truly said, we received more than one insistent demand to fund our contracted debt. This being so, we were, of course, bound to comply. Whatever views may be entertained on sentiment or on policy, the right of the creditor is indisputable. There can be no question of the lawful right of the creditor, or that the United States are entirely within their full legal rights in taking the view they do of contractual obligations entered into with themselves. We were forced, there- fore, to adopt a position different from that which our own instincts and historical traditions had naturally suggested.

We then come to the Balfour Note, under the administration of my right bon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George). I was always a sincere believer in the principles of the Balfour Note, and I was very glad to be able, in the first speech I made to this Parliament in my present office, to re-affirm it in the most explicit manner. What are the principles of the Balfour Note?


No advance without security.


I think the hon. Member may guess again. The principle was that we should not take or ask, not only in debts but in reparations, more than was paid by us to our creditors across the Atlantic. That was our principle. We adhere to that principle and, as far as possible, we are endeavouring to give effect to it. We have, in carrying out that policy, to take into consideration the capacity of the individual debtors to pay, and also what is fair and right towards individual debtors who make genuine and spontaneous efforts to redeem their obligations.

There is no difference about the general policy of the Balfour Note. The only questions which arise in connection with it in this country are these: Will it be attained; how far shall we fall short of it; have we taken the best measures to secure its attainment? On this I would like to make a general observation. Our critics must really make up their minds where they stand in the computation of the actual bargaining power possessed between debtors and creditors, when these are represented by great nations and States. You cannot put a great nation in. the County Court and levy a distress warrant upon its property, movable and immovable. On the other hand, every civilised State has an immense interest in obtaining from its creditors a full, free and honourable discharge from its contractual obligations. Without such discharge the credit of the debtor is gravely undermined.

As everyone is beginning to find out—without excepting in this connection even Russia, to which the right hon. Gentleman referred—the business of the modern world is conducted on credit. Money is only a token. Gold is only a guarantee used for the adjustment of margins. The great credit operations by which alone the wealth of the modern world can be sustained and augmented, and by which alone the concentrated population of modern times can be maintained in their present numbers, depends upon the use of credit, which exceeds ten-fold—perhaps twenty-fold—the actual disposable physical money: Therefore, the direct control of the creditor over the debtor depends upon the view of the debtor as to the importance to that particular nation of world credit.

We always have in this country our own unbroken tradition of never defaulting, which is reinforced by the consideration of practical interests to which I have referred. That is the power of the creditor over the debtor. That is the extent, the practical extent, of his means of collecting debts. The same critics who argue that we should have refused to pay our debt to the United States, are, when criticising the British Government, ready to argue that we can compel our debtors to pay us whatever we choose to fix as an appropriate sum. That is, inherently, illogical and even irrational. If we can repudiate our debts to others, others can repudiate their debts to us. If we can compel our debtors to pay whatever we think right, our creditors can compel us to pay them whatever they think right. Actually, therefore, the power of the creditor is limited, as I have said, not only by the debtor's capacity to pay, but by the debtor's view of the importance to him of world credit.

The right hon. Gentleman made a calculation, which he had, no doubt, carefully worked out, to show that the settlements which had been effected, and provisionally and partially effected with France, involved a permanent loss to this country of £2,000,000,000 in all. Then he preceded to speak of the sort of arguments that were used in France and Italy from their point of view, and how different it is from our point of view. He gave their public view of the different transactions which have taken place. We have to consider how far apart the view of the right hon. Gentleman—with his £2,000,000,000, additional which he says we ought to have obtained—is from the views of these other nations with whom we have negotiated and with whom we are still in negotiation, whose views he has put so clearly before the House this afternoon. In that connection, I should like to say that it is one thing to ask and another thing to get. It is very easy to make a demand for all you want. It is possible, perhaps, even to get paper agreements which do not command the assent of the debtor, or which are disproportionate, on any long view, to the debtor's interest as regards world credit. Such paper agreements may be found to be no more valuable than the actual signed contractual obligations which we at the present time hold and which are being continually renewed. Such paper agreements may look very well. They may raise a cheer. They may be hailed with a series of eulogistic leading articles, but in the end they will prove illusory if they transgress or exceed those practical limits which I have endeavoured to describe.

With these general observations, let me come to the actual field of War debt payments and War debt collection by Great Britain. I am not considering in this field the different points that arise in regard to reconstruction debts or relief debts; I am dealing only with War debts, and what I have said applies only to War debts and their special position. We have undertaken to pay what the United States so insistently and incessantly demanded. That involves upon us a charge of £33,000,000 at the present time, rising in, I think, seven years to £38,000,000. That is to say, putting it broadly, we have to pay, the British Chancellor of the Exchequer and his successors in a long line have to pay, about £100,000 a day every day for more than three generations to the United States.


And we won the War!


That is a stupendous operation. To transfer, to pass that immense sum continuously across a frontier, across an ocean, across the Exchange, is one of the most stupendous tasks and burdens ever undertaken by any country in the whole financial history of the world. That is one side of the picture.

Now I turn to the Balfour Note and to what has been our attitude towards our Continental debtors. I do not wish to impart any heat or arty controversy of a disagreeable character into the discussion, but here I must say that in this task of obtaining the beet possible terms from our Continental debtors we have been compromised and hampered by the attitude of both the two great Opposition parties in this House. In the first place, we have the declaration of the Leader of the Liberal party, Lord Oxford, in 1921. All these statements are read abroad. Every word that is said in these Debates on these topics is studiously read abroad, and, if it is of a nature favourable to the claims of a foreign country, it is not forgotten. It forms a definite part thereafter of their controversial and argumentative case.


As universal as Charlie Chaplin.


I hope the hon. Member will allow me to proceed, without interruption. What did Lord Oxford, then Mr. Asquith, say on 26th October, 1921? The first thing is to get rid as between the Allies in the late War of their indebtedness one to the other. Wipe it off the slate it will be none the worse in the long run. In August, 1922, he said: If I were Budgeting in would write them off. He was referring to the debts of our Continental Allies. They are not good debts, not from any want of honour or good faith on the part of those who incurred them …they are not in a position to redeem their obligation. To remit, in my opinion, is not an act of magnaminity in the least. It is an act of good business."—[OFFICIAL REPORT, and August, 1922; col. 1752, Vol. 157.] In the same speech he spoke of the United States not having any obligation, moral or even sentimettal.''—[OFFICIAL REPORT, 3rd August, 1922; col. 1753, Vol. 157.] to induce them to remit their debt or any pare of it to us. That is a very hard doctrine. It is idle to suppose that a declaration of that kind, made by an ex-Prime Minister, an ex-Chancellor of the Exchequer, a man of European and world-wide reputation, the undisputed leader of one of the great parties in the State, can be made without playing its part in subsequent events and international discussion. Then there is the view, the well-known view, of the Labour party. Again and again they have said that they are against the collection of war debts. A statement was made by the right hon. Gentleman the Member for Seaham (Mr. Webb), the late President of the Board of Trade, which was quoted by the Prime Minister in the opening Debate of this Session, and never since contradicted.


Yes, he has contradicted it. He says he is incorrectly reported.


Does he say that he never said anything at all to the "Tribuna" newspaper, or does he say that the "Tribuna" newspaper has misrepresented what he said?


He denies what he is reported as having said in the "Tribune." Newspaper.


I was quite. unaware of what the hon. Member for Stirling (Mr. Johnston) states until this moment. Naturally, I accept what is said on behalf of the right hon. Member fey Seaham at once, and I will drop my argument on that point; but why is it left to the hon. Member to make this correction after all these weeks have elapsed? Here is a statement of the utmost importance, which, if it were true, would unquestionably be admitted as having hampered the negotiations, and which would unquestionably have stultified the official Opposition in this House in regard to this question. The utmost publicity was given to the quotation by the Prime Minister, who used it in the most formal way in the opening Debate of the Session. The whole House heard it and cheered and laughed at it, and the right hon. Member for Seaham, after all these weeks, has never taken an opportunity of correcting the Prime Minister or of informing the House that the statement was one which did him great injustice. However, that is settled, and we know now that that statement is denied. Therefore I will not attempt to dwell upon it any more. But I do not think it will he denied on the Opposition benches that the general attitude of the Labour party, declared again and again, has been unfavourable to the pressing of these War debt claims.

Mr. SNOWDEN indicated dissent.


Then am I to understand that at the present time the Labour Party is fully associated with the Balfour Note? I understand that if there is any complaint it is, in the words of the right hon. Gentleman, that the Balfour Note is too generous. It certainly is very generous, and I think to that extent we are in general agreement.

Now let us see what we have done in the process of collecting these debts. The right. hon. Gentleman mentioned, in the first place, Russia. He said Russia owed us £800,000,000. Russia has repudiated her War debts as well as her civil debts, but, perhaps this is not the last word that we shall hear from Russia. Things are changing in Russia. The importance of world credit to that vast community is dawning upon the rulers of that country. We do not abrogate any of our claims, but this I do say, that if at any time the initiative in raising this question comes from Russia we should not treat Russia with less consideration than we have treated other debtors.

Now I come to Italy and to the Italian debt settlement. I could a little contrast. the attitude of the right. hon. Gentleman and his party in regard to the debt position towards Italy with the extremely tolerant and almost oblivious attitude which they have adopted towards Russia. And then all that we have heard about France surely has another application. France, which bore the brunt of the War and which has proposed to make an honourable debt settlement with this country, was held up by the right hon. Gentleman as being guilty of having the most disgraceful financial record in history, or words to that effect. I will not push the application of those words to a conclusion which would undoubtedly irritate hon. Gentlemen opposite, but this I will say that they ought to follow a definite principle in regard to this attitude towards these debts. They must not attempt to deal with these debts on the basis of likes and dislikes and say, "One form of government or movement we admire, therefore we will say nothing about debts. But another form of government we dislike, therefore we will immediately extract the uttermost farthing." That is not a principle upon which any advantageous course of action could be taken by His Majesty's Government.

The Italian capacity to pay has been considered by our experts to be about one-third of that of France. That is the broad calculation which we have made. The right hon. Gentleman quoted some Italian professor with whose name I am not familiar. He described how this professor said he really thought that, if we looked at matters truly, we should find that England owed a debt to Italy, and that Italy owed nothing to England. That is not the view of the Italian people or of the Italian Government. They have an entirely different view. They have accepted the view which we take, that their capacity to pay is one-third of that of France, and they have agreed to pay us £4,000,000 a year for 62 years, and they have agreed to pay that, not contingent on the reparations which they may receive from Germany, but on the sole credit of Italy itself. That is a point to which we attach a great deal of importance. No political consideration of any kind entered into the fixing of this sum, except that genera! political consideration to which I have referred, namely, the long friendship between Great Britain and Italy, unbroker at any time in the history of the two, countries. That and our comradeship in the War—both these considerations were certainly borne in mind by myself and by my colleagues in the Cabinet. But no political bargaining, interest or engagement of any sort or kind was entered into at any time or at any point during these negotiations and discussions.


And then the organ-grinders went home!


I really hope that those who are reporting this Debate will not carry some of the hon. Gentleman's observations and interruptions to foreign countries, because they give an altogether inadequate view of the heights of wit and humour to which he can at times attain. One of the questions that has been raised is: how does the Italian debt settlement compare with the settlement which Italy has made with the United States; how is it comparable on the pari passu principle? Of course, when we made the settlement with Italy, we had before us the settlement that had been effected between Italy and the United States; therefore no condition about pari passu required to be inserted such as was agreed upon in the negotiations with M. Caillaux. But how does the Anglo-Italian settlement compare with the American-Italian settlement.? If, you look at it as a purely arithmetical calculation, there is no doubt that Italy is paying what by present values is proportionately a much smaller sum than she has agreed to pay to the United Stages.

But you must bring into these matters other considerations. The payment which Italy is to make to the United States begins by being a very small sum indeed, and for many years the payments remain on a very low level. It is not until 20 years have passed that the aggregate pal meats which they will have made to the United States become bigger than the figure which they will have paid to us, making allowances far the pro rata calculations. When you get to the sixtieth year, immense payments will be made by Italy amounting, I think to £16,000,000 in a single year, to the United States. It just depends what your general view is and whether you take the long view of all these War debt agreements and arrangements. If you are quite sure that three generations hence these immense payments will be made by the Italian people and by other debtors all over Europe to the United States, then, of course, it is undoubted that our bargain is r of so favourable as is the one which the United States have effected. If, on the other hand, you attach more importance, to the payments which are to be made in the first 20 years, then we may say that we have fully maintained the principle of pari possu.

There is another criticism which has been made about the Italian debt settlement. It is this, that France would use the terms granted to Italy as a means of re-opening the basis of agreement reached with M. Caillaux in August last. But that, criticism has already been disposed or by the declarations which are reported to have been made by the new French Minister of Finance, M. Raoul Péret. He has stated that I correctly interpreted the position when I said that we regarded the Caillaux arrangement as a binding one, and that it is on that basis that he will proceed when he is able to visit us.


That agreement has never been ratified.


If my hon. Friend will bear with me, I will explain a little more about the agreement. M. Péret has said that it is on the basis of the August agreement—a partial agreement which did not cover the whole held—that the Government of which he is at present a member, and of which M. Briand is a member, as he was of the Government in which M. Caillaux was Finance Minister, it is on that basis that they are willing to resume negotiations.


Will the right hon. Gentleman kindly tell us what the agreement is?


That is exactly what I am going to do, because I think that this is the moment. When the August negotiations were completed, M. Caillaux left here with the intention of returning in a very short time to consider outstanding points, and therefore it was only necessary to state the main principles of the agreement which was reached, namely, the discharge by France of her liabilities by 62 annuities of £12,500,000 on the sole credit of France. That was the basis of the agreement. But there were three points—one at least of which presented, and still presents, a difficulty—which were outstanding and which we were to have dealt with, if M. Caillaux's ministerial life had been spared, in a subsequent discussion. The first of these points related to the exchange. It was that a certain elasticity should be given in making payments, that a year's delay or something of that kind might be allowed if it could be shown that the passage of the payments over the exchange unduly compromised the exchange. [Interruption.] There is something here to be discussed, and neither from the French nor from the British point of view does it afford any foothold for hilarity.

5.0 P.M

Colonel WEDGWO

How could it possibly fail to affect the exchange even worse if the £12,500,000 were postponed for another year, so that it became a question of transferring £25,000,000?


The right hon. Gentleman, I think, is confusing different parts of the argument. I am not now dealing with the date on which payments are to begin. There was a proposal by France—I am telling the House what were the outstanding points—there was a proposal that a certain elasticity in the dates of payment should be allowed. There is in the arrangement between Great Britain and the United States a provision for a certain elasticity, on exchange grounds, in the payments, and we have inserted a provision of that kind in the Italian Agreement. But the elasticity asked for by M. Caillaux seemed to go beyond that, and we did not arrive at a form of words which seemed satisfactory. The second point was this: The full figure, £12,500,000, was not to be reached until 1930; it was to be reached by a series of steps. That is what M. Caillaux calls a moratorium, but in our discussion it was called the échelle, or ladder, by which payments were to advance until they reached the full figure. We had our view of what those payments should be, and we put our view before the French Minister. He neither accepted it nor rejected it, but I was left under the impression that, if everything else were satisfactorily adjusted, there was not likely to be any serious difficulty upon that point. It was part of the arrangement that any sums that are not paid in the first five years are added to the subsequent annuities, so that the central position of 62 annuities of £12,500,000 a year will be unimpaired.

Then there was the final point of difference and one which certainly presents the most serious difficulty. We had assented to so low a figure as £12,500,000 as a basic figure of the annuities, on the understanding that it should be upon the sole credit of France and not contingent upon reparations. There was a certain alternative proposal, under which a small portion would have been contingent upon Dawes annuities, and the rest upon the credit of France, but the French Minister held most strongly to the view that, in the event of a total failure of German reparations, France could not be expected to continue these payments. That seemed to us to take away on the one hand what we had stipulated for on the other band. I must not underrate the serious nature of this difference of opinion. It is unsettled at the present time. On the other hand, the contingency is not one on which one need anticipate—the contingency of the total failure of Dawes reparations—but still that remains a very definite obstacle to the conclusion of this agreement.


The right hon. Gentleman did not make it clear that that also included France's payment to the United States of America. We did not stand alone on that part of the controversy.


I am not speaking about France's payment to the United States. I am speaking only of what the French Minister said, that he could not give assent unless there was some protection for France in the event of a total failure, or practically total failure, of German reparations. But still, while this difference appeared to be a serious one, it is not one which we believe would prevent the effecting of a speedy and satisfactory agreement. Then, of course, there was the provision about which the right hon. Gentleman asked me, which we call the pari passu provision—that if France made an arrangement subsequently with the United States, on the War Debt, which was more favourable than the one which she had made with us, our arrangement was to be improved in our favour accordingly and proportionately. So much for the arrangements with France. I hope to see the discussions renewed at an early date. The House will readily understand why it is that I have not been able to carry the matter forward in the six months that have elapsed. We have also made certain settlements with minor Powers, particularly Rumania. Some of these I have announced to the House; I read out to the House a long list of all the different settlements that we had made, but some of them related to debts which were not of a purely war character.

Now let us see how matters will work out in future on the basis of the Balfour Note. We expect to obtain £12,500,000 from France. We have a firm undertaking from Italy of £4,000,000. We estimate what may be collected from the minor Powers at, say, £2,000,000. If Germany pays three-quarters of the full annuities under the Dawes scheme, which seems to be a perfectly prudent and reasonable basis on which to found ourselves, that will be £15,000,000.


Three-quarters of the maximum.


Three-quarters of the c maximum. Therefore, on this computation, which is a reasonable view of what may be obtained in the near or not two distant future, we should be receiving £33,500,000 a year. We are at present paying £33,000,000 a year to the United States. Probably by the time that all this is fully gathered in, we shall be paying the £38,000,000, or be within a few years of having to pay it. There is a gap, a margin, which perhaps some day Russia may be anxious to At and rate, there is a place for her. In surveying the situation as a whole, whatever may be said about our paper claims, I do not think that we are so far from having achieved the principle and objects of the Balfour Note that we can regard our declarations in that respect as having been nugatory. We might easily at an earlier period have reached a less favourable conclusion.

There is only one more remark which I wish to make, and that is on the general future of these debts. It is a very remarkable fact that at the present moment the amount that the United States is receiving from Europe under arrangements which have already been made is approximately equal to the whole amount of reparations which Germany is paying. But the distribution of the receipts from Germany and the payments to the United States is entirely different. The bulk of the receipts from Germany go to France, who at present is making no payments on account of her War debts, and the bulk of payments to the United states are made by this country largely out of our own resources. But the day is coming at no great distance when this situation will undergo an obvious modification. When France as well as Italy has funded her debts, both to this country and to the United States, and when the minor Powers have all funded their debts, then it is quite clear that the United States will be receiving, directly and indirectly, on her own account from reparations, from Italian sources, balanced against reparations, from British sources, from French sources through British hands, from Italian sources through British hands—by all these various channels, indirectly or directly, America will be receiving by far the larger part, at least 60 per cent., of the total probable reparations of Germany, and the first reparations, the first 60 per cent., as it were, which will be payable by Germany. That is the last thing I have to say on this subject.

It seems to me an extraordinary situation that will be developed—that by all these chains and lines and channels, the pressure of debt extraction will draw reparations through the different channels from the devastated and war-stricken countries of Europe, which will flow in an unbroken stream across the Atlantic to that wealthy and prosperous and great Republic. I believe that these facts will not pass out of the minds of any responsible persons, either in the United States or in Europe.


I believe it is customary for a new Member, in addressing the House for the first time, to claim indulgence, which is readily and heartily accorded. There is a tendency to approach this matter from the commercial side rather than from the side of other considerations which have been dealt with by the Chancellor of the Exchequer. I think the word "debt" is probably the reason why we have all got into the habit of looking on War indebtedness as entirely a commercial transaction, whereas it seems to roe that there are many qualifying considerations which take it entirely out of the category of commercialism. We in this country are, perhaps, more to blame than those in other countries for that state of affairs, because we have had in these matters great experience which has not been accorded to those newer countries which have achieved their greatness entirely by industrial and commercial means and have only the commercial side of the question presented to them. Our experiences in regard to money advances to other countries for the purpose of prosecuting a common war are many and varied. They go back, I suppose, to the time of Elizabeth. In any case, there is no doubt that grants of money to our Allies in various Continental wars were in the beginning treated purely and simply as grants and not as debts. The making of grants to Continental Allies has been defended many times in the House of Commons. It was defended in early days on the ground that we could do better for the common cause by putting our money into a pool than by using it to send our own soldiers to the Continent in days when it cost £1 to keep a Continental soldier in the field, where it would have cost at least £2 to keep a British soldier in the field. At the beginning of the Napoleonic Wars we gave our Allies grants of money, or subsidies, or gifts, or whatever you may call them, and there was no question of indebtedness. Towards the end of those wars we found ourselves under heavy financial stress and we endeavoured to turn one of those grants—that to Austria—into a war loan, and just about 100 years ago in this House we were discussing how best to drag out of our former Allies this money which we called a debt. We found it impossible to do so, and in the end the debt, so-called, was practically cancelled.

The experience of those days is very largely the experience of to-day. No matter to what terms your allies may consent under the pressure of war and of national necessity when they are fighting for their lives, once the war is over, both victors and vanquished are equally exhausted financially, and it is impossible that they should pay. Therefore, I would look upon the question of inter-Allied indebtedness as one which is not in any way a commercial question. There are many instances to support that view. Of these numerous instances I will quote but one. At the beginning of the War, Russia made an attack in East Prussia in order to divert German troops from the Western Front, She did not particularly want to do so, but she did it, and the result was she met her fate at Tannenberg and suffered enormous losses including, I think, the whole of her artillery and munitions. She did that in order to give us time on the Western Front, and she had to be re-equipped with weapons of war which were supplied by the Allies. That being a bookable transaction was charged against her, and to-day forms part of her War indebtedness.

I think if it had not been our misfortune to need the aid of the United States in the War, we should not be here to-day discussing War debts. America has had no experience in these matters, and she treated the subject, as one would expect from a nation of commercial people, on a commercial basis. She did not understand that great declaration of which I am sure every subject of this country is proud—the Balfour Declaration—which said that no matter what anyone else might do, as far as we were concerned we should not enter into any series of transactions to drag out of our War Allies money which had been expended in the common cause, and that we should only require the debts owing to- us to be met to the extent to which we had to pay to the United States of America. I am sure none of us can think of that Declaration, that attempt to remove the paralysing influence of War debts from human effort, without a feeling of pride. It is fitting, however, that the question of the complete cancellation of the War debts should be raised by Great Britain rather than by those nations who have not been able so far to meet their obligations. I know that in saying so I voice the overwhelming opinion of my fellow countrymen, and also a very large and influential body of opinion in the United States, representing the best class and the best type of the people there. It is a feeling which is growing, and anyone who goes to the United States will corroborate what I say. The opinion is growing, not only there but all over the world, that now the War is over and we are in times of peace, it is time we gave up fighting on these financial matters and got back to normal conditions.

If America were less prosperous than she is to-day, one might have a certain amount of diffidence in suggesting that she should do anything which might, perhaps, injure her. But an examination of the figures shows that America is well able to agree to a complete cancellation of the War debts. The figures of the American export trade for the five years ending June, 1914, were 11,000,000,000 dollars; for the five years during the War up to 1919 they were 29,000,000.000 dollars; and for the five years up to 1924, when Europe was endeavouring to struggle back to peace, they were 25,000,0001100 dollars. Therefore, the expansion of trade of the United States during the 10 years of War amounted to no less than 33,000,000,000 dollars, or more than one and a-half times the entire United States debt. In other words, the export trade of the United States grew up like a mushroom in the night, fertilised and nourished by the bloodshed in Europe. Tae economists are all agreed that war indebtedness benefits no one, and injures equally the lender and the borrower. If we agree with those who have made this subject a special study, it is obvious we cannot continue these payments to the United States without doing great injury to ourselves and probably in the end equal injury to her industries.

It seems extraordinary that this question has not, been more thoroughly understood by the United States. After all, the United States claims to be a nation o ideals, but her action in laying under tribute the nations of Europe is paralysing oar industry here and keeping us in a slate of impoverishment. The prosperity which we find overwhelmingly in the 'United States, is measured by the impoverishment of the nations of Europe. In other words, the former prosperity which was distributed throughout Europe is now focussed in the United States. It is extraordinary that such a great nation, whose people have proclaimed time and again that they are idealists and wish to benefit humanity, should consent to the placing of this embargo upon our happiness. Again, the United States has not taken the share which one would expect a great Anglo-Saxon community to tike in the restoration of peace and prosperity in Europe. I refer to her objection to taking part in the constitution of the League of Nations. The League of Nations is the result of the inspiration of one of her great statesmen who proclaimed it in noble words,. But his follow countrymen have left it to Great Britain and other nations to translate those words into deeds. It is a great pity from the point of view of humanity in general, that the United States has failed to do her share in endeavouring to banish war and all its calamities, and, incidentally, I might remark, to banish for ever the profits of neutrality.

It has been said—with what is in my opinion a great deal of truth—that we were from the beginning fighting the battles of the United States in the late War. From the beginning, it was inevitable that the United States would have to come into the War, but she made no preparation. It might be argued that before America came into the War we were fighting her battles, but however that may be, there is no doubt that after she came into the War, we were fighting her battles, and for one long year or more we held the position before she was able to put her troops into the field. That fact has not been recognised by the United States in the claim which she has made for her debt. Thousands of lives were sacrificed on the altar of United States unpreparedness during that year. She had plenty of time in which to prepare, but she made no move, and when War was declared, she had to stand by for that year idly and impotently—however great her goodwill—while we fought and held the field. Now we are asked to make an agreement which means that unborn generations in this country will pay to unborn generations in America, money which was borrowed and expended in order to fight the battles of the United States of America. I will not quote the words, already familiar, of President Wilson and of Mr. Secretary McAdoo, who declared times without number what would happen if Germany succeeded in the war that she was making upon them, but I will conclude by repeating that for a whole year after the United States came into the War we fought her battles, and if she spent money in the common cause, we scent the lives of the flower of our troops. We sacrificed thousands of lives for her, and there is no justification, in my opinion, for the United States demanding the return of the money contributed by her towards the common cause. As well might we ask the United States to return to us something which is infinitely more valuable than money, the lives of our fellow-subjects given in her defence.

Lieut.-Commander KENWORTHY

I am sure the House listened with great interest to the maiden speech of the hon. Member for Wimbledon (Sir J. Power), but although it was a maiden speech, I am bound to say that in it there was a great deal of the sort of talk which does infinite harm in other countries. The same arguments which the hon. Member used in order to reproach America, have been used by the French to the Chancellor of the Exchequer. The French say that the whole brunt of the War rested upon them, because we did not at the outset introduce conscription. I regret that this sentimental whine should be made, especially by an hon. Member belonging to the Conservative party, which is supposed to be so strongly nationalist and patriotic, standing four-square to all the world. I listened to the hon. Member's speech with great pleasure, much as I disliked the sentiments he expressed, but when he talked about America keeping us impoverished and putting an embargo on our hapiness. I felt that surely that sort of inferiority complex did not represent the views of the greater number of the Members of his party. It certainly does not represent those of my own party, and I hope the hon. Member's expressions will be taken at their proper value in the United States of America. Thank heaven, we can still hold up our heads and we do not need to plead for mercy! For that reason, I have consistently recognised that the Prime Minister could have done no better when he made the settlement at Washington. I have information from the United States through relatives and others, and I learn that sentiment in the United States at the time was such that I do not think any better bargain could have been made. The right hon. Gentleman the Member for Colne Valley (Mr. Snowden) I thought wasted a lot of good powder and shot in scolding another nation. We do not get any further forward by drawing attention to the delinquencies of the French taxpayer. My criticisms are not directed against France, Italy, the United States of America, or Russia. My criticisms, such as they are, are directed against the right hon. Gentleman the Chancellor of the Exchequer. He talks about the pari passu arrangement that Italy was to make, the pari passu treatment of this country by its debtors. I am quoting his words in answer to a question put by the hon. Member for Peckham (Mr. Dalton) on the 17th November, but I wish he had taken into consideration the rate of payment of this country to America when in his negotiations with Italy he was asking payments from Count Volpi.

I cannot understand what he meant. when he said this afternoon that there were no political considerations and no political bargains in connection with this Italian settlement. I took his words down, and they took me very much by surprise, because I have here a verbatim account of the declaration that the right hon. Gentleman gave, with much more freedom, I may say, as in most cases, to a party of journalists than he does when he addresses this House. We always get a good deal more information from his speeches outside, whether about the Budget, or debts, or anything else, than if he is speaking inside this House. He addressed a party of 40 to 50 journalists on the 27th January, and I quote from the report which appeared in the "Manchester Guardian." The same appeared in the "Daily Chronicle" and a number of other reputable newspapers. He was excusing himself for this remarkably lenient arrangement come to with Italy, an arrangement which, I really think, shocked public opinion in this country and surprised all observers very much indeed. He made certain excuses at the time of the settlement though he did not to-day, and he thought it necessary then to make some explanation, and he said to these journalists: At the time of the imminent entry of the Ruhr, very considerable offers were made to Italy which carried with them, subject to a number of conditions which have not been fulfilled and are not operative, the principle of virtual cancellation of the overwhelming bulk of this obligation, and although it was not ever argued by Italy that anything of a legal nature or of a definite final nature had taken place, yet at the same time I have felt bound to consider what has happened in the intervening period, and which found no parallel in Italian-American relations—a factor which should reasonably be borne in mind. Is that no political consideration? I asked the Prime Minister whether any such considerations had been present, and I must say he took the same view as the right hon. Gentleman has now taken.


Those considerations related to the past. Those were quite properly taken into account, but no bargain for political support or international support in the future was entered into.

Lieut.-Commander KENWORTHY

I see. When the right hon. Gentleman says he made no political bargain, he means only in the future, and we are to understand that there were political considerations in the past. That is quite a different thing, but that is not what he said just now in answering the right hon. Member for Colne Valley. But if there were no political considerations for the future—and I am very interested to hear that; apparently the negotiations between the Foreign Secretary and the Italian representatives were in a vacuum and had nothing to do with these debt negotiations at all—then I must say there is still less explanation for his extreme leniency to Italy. I thought his agreement with France was unfavourable, highly unfavourable, to this country, but when the terms of the Italian settlement came out, I thought we had done rather well out of France in comparison. Might I ask the right hon. Gentleman if there is no sort of consideration for this country at all in exchange for forgiving Italy about 60 per cent. of her debt, because that is what it comes to? Are we to have no sort of consideration for out trade with Italy? Did not the right hon. Gentleman attempt in any way to get the barriers against our trade in the shape of tariffs lowered, or is he so much in love with tariffs, now that he sits on those benches, that he dare not even suggest another country lowering them?

Is he aware that the Italians are building a very great mercantile marine at the moment—subsidising it? I am not criticising them—they have a perfect right to do it—but when he talks about the Italian capacity to pay, is he aware that that is being done to the detriment of our shipping, in this way, that our shipping is being discriminated against in Italian ports, and to-day it is almost impossible for British ships to take Italian emigrants even to a British Dominion, but that they must be carried in Italian ships? Did he allow all this sort of thing to pass while he wiped out great blocks of the Italian debt to us? Good gracious! The right hon. Gentleman can talk about sentimentality and the Italian comradeship in the War, which we all appreciate, and he can say that you cannot assess the value of shot and shell supplied to fight our battles. He can talk, as the hon. Member for Wimbledon, in his very interesting maiden speech, talked, but while he is recognising these things and wiping off these great blocks of debt, does he ever think of the British commercial men and the British shipping companies which are trying at all costs to get trade somehow? Cannot he get us a little something in exchange for these very generous surrenders of the taxpayers' money? The right hon. Gentleman has, I am afraid, made an extraordinarily hard bargain for us, and he, at any rate, is so recognised to have done in Italy. The comments in Italy on the morrow of the settlement were extraordinary. May I quote a paper, friendly, I am sure, to the right hon. Gentleman, namely, the Giornale d'[...]llalia, a very well-known and important paper in Italy That paper said: These figures represent an indisputable triumph for Italy, greater even than she obtained at Washington when it is remembered that our debt to Britain exceeds our American debt by one-third. Others talked of a great victory for Fascismo, and I suppose it, at any rate, was some comfort for the right hon. Gentleman that the Fascist system had proved so successful, even in negotiating with him. I think that altogther, however much the Italians may congratulate themselves on this bargain, we have little upon which to congratulate ourselves, and I consider that the British taxpayer has been shamefully let down by the right hon. Gentleman. I am, however, glad to find that he does not share the opinion of the right hon. Member for Colne Valley when the latter said that the agreement entered into with M. Caillaux was not worth the paper upon which it was written. I think that was an extraordinary thing for an ex-Cabinet Minister to say, standing at that Box, and I hope that some correction will be made. We surely are going to keep the French to that arrangement that was come to, subject to the modification described by the right hon. Gentleman. I would not be surprised, however, if the French demanded a paring down of their figures, in view of the extraordinary settlement come to by the right hon. Gentleman opposite with Italy, but as things are I hope that we, at any rate, will insist on their keeping to that arrangement, unfortunate and unsatisfactory as it is from our point of view.

I hope nobody will think that I criticise this settlement with Italy because of the form of government in Rome. That is entirely a matter for the Italian people, and if they like to tolerate a system of government which would not last 48 hours in this country, that is entirely their affair, and it is not for us in any way to complain. In the same way, if Italy chooses to subsidise her shipping, to discriminate against our mercantile marine, and to erect tariffs against our goods, she has every right to do it, but why on earth did we not use this debt as our legitimate bargaining weapon to get some of these tariff walls against our trade lowered and, at any rate, to get decent treatment for our merchant ships? The same thing applies, to a great extent, to France. I do not join with the right hon. Member for Colne Valley in his strictures on France. It is not our place to scold the French people at all, but when we are discussing the very great sums owed to us by France, represented by French Treasury bills, I think we have a right to ask for fair treatment for our commerce. When we treat the French Treasury generously with regard to these debts, I think we should ask for something in return, and if it is impossible to get some concession with regard to our commerce, could we not ask for some political support in some of the projects that are necessary for this country? The Chancellor of the Exchequer has been called out of the House, but I would ask the Under-Secretary for the Foreign Office if, in return for these very generous settlements with France and Italy, in comparison with what we have to pay to America, we have secured any support in the forthcoming Conference on Disarmament? It would be perfectly legitimate to have got some promise of agreement with us to support our point of view in the forthcoming Disarmament Conference.

I cannot refrain from mentioning to-day that, while France is saying that she cannot pay more and she has been forgiven great blocks of her War debt, she is to-day building more submarines than the German Navy ever had building at anyone time before or during the War. We cannot overlook these facts, and I must repeat that I consider that the most vital interests of this country have been betrayed by the present Government in forgiving these great quantities of War debt without securing any corresponding advantages or concessions to us. I have taken this occasion to criticise what has been said by the right hon. Member for Colne Valley in one or two particulars, but I must say how much I admired his marshalling of the figures, and I do not wish to refer to figures at all in consequence. It was a most able summary, if I may be allowed to say so.

I must refute what the Chancellor of the Exchequer found it fit and proper to say in regard to my Noble Friend Lord Oxford. The right hon. Gentleman tore one or two sentences from a speech made by Lord Oxford in 1921, and held those words up to the ridicule of the House. Lord Oxford did say that it would have been better—I have not his actual words, but they will be within the recollection of the House—to have expunged all inter-Allied debts. Who really quarrels with that? That is laid down in our own official Notes. The Balfour Note has been quoted, and in that Note it is stated: The policy hitherto pursued by this country of refusing to make demands upon its debtors is only tolerable so long as it is generally accepted. Lord Oxford suggested an all-round cancellation, which would have been very much better. I heard the same sentiment, I think, from the hon. Member for Ilford (Sir F. Wise) on previous occasions, in previous Parliaments, but Lord Oxford was held up to derision because he said the United States was within its rights in demanding payment. Let me quote the words of the Balfour Note: With the most perfect courtesy, and in the exercise of their undoubted rights, the American Government have required this country to pay the interest accrued since 1919 on the Anglo-American debt, to convert it from an unfunded to a funded debt, and to repay it by a sinking fund in 20 years. The Balfour Note recognises the right of the United States. and the Chancellor of the Exchequer does not hold up Lord Balfour or the Cabinet which approved of that Note to derision, but he tears a sentence from the context of my Noble Friend Lord Oxford's speech, and attempts to ridicule it. What Lord Oxford said should have been followed up by the present Government and by its predecessors. It is a great pity, as has been said already in this Debate, that this whole matter could not have been considered as one problem with all nations, debtors and creditors, sitting round a table. As that could not be done, and as we had to make a bargain, I think the Prime Minister was justified in making sure, and could do no other than make sure, that we should, at any rate, receive similar payment from our Allies. That has not been done. We had fancy figures given by the Chancellor of the Exchequer which approached within £5,000,000 the payments to America, bat there are so many conditions attached and the conditions given have been so extremely lenient, that I am afraid the gap is very much wider.

I must say a word on the Russian question. I have always understood that the Russian Government, in their negotiations with the late Government, in the Genoa negotiations, and at other times, haze never refused to discuss the question of their debts. I discussed the matter myself three years ago in Moscow, and I found there a disposition on the part of the most responsible of the leaders of the present Government in Russia to negotiate, this matter. I reported it to this House when I returned. The late Government made a Treaty with the Russian Government. They were defeated at the General Election. The present Government broke off negotiations. The Russian Government have asked in what way that Treaty is unacceptable to the present Government. As far as I understand, no reply has been made. May I ask the representatives of the Foreign Office on the Front Bench what objection is there to open negotiations through our Chargé d'Affaires in Moscow or in London with the accredited representative of the Russian Government?

What objection is there to negotiating? The present Government, surely, are not averse from international negotiations, judging by recent history. What harm would there be in sending a Note to the Russian Government stating why they object to the Treaty entered into, or, at ant rate, initialled between the late Government and the Russian Government? We could be no worse off, and we might get some equitable arrangement which would bring relief to our Treasury, and afford some means of getting settled debts owing to private citizens, some of whom are suffering very much indeed. We could lose nothing by it, and we might remove many of the present causes of friction. I am afraid political prejudice here does play a part, and it is reprehensible that that should be the case. The Under-Secretary shakes his head. If I may say so, he is a very broad-minded man, but he, unfortunately, is not the Foreign Secretary, not the, Chancellor of the Exchequer, not the Prime Minister. It is reprehensible, at any rate, that these negotiations have not been reopened. The present Government have been 18 months in power, and might have explored the ground to see whether some equitable arrangement could not have been come to, not for the benefit of the Russians, but for the benefit of our own people to whom money is owing, and for the. benefit of our trade.


The hon. and gallant Member for Central Hull (Lieut -Commander Kenworthy) stated that he thought the taxpayer in Britain had seen let down. I will endeavour to show him that I do not think the taxpayer has been let down. As far as tariffs, which he mentioned, are concerned, I agree with him. I think some bargain might have been made with regard to tariffs, especially over the Italian debt. The right hon. Member for Colne Valley (Mr. Snowden) gave many flowery figures, and I always enjoy listening to his speeches, but in no instance did he state how this money could be transferred from one country to the other. It is the most important problem of all. Even the Chancellor of the Exchequer never really went into those important details. I am sure the whole House is agreed that a solution of the international debt problem is most necessary at the present time, although it is indeed intricate and full of difficulties. Large payments between countries are really an untried factor. Nobody knows what may be done in the future, but in my estimation it will more or less turn on what happened in the past and the financial machinery of 1914. When that is set going again, you will find that the payments between countries will not be very much larger than they were in the past. The financial machinery of 1914 consisted of arbitrage, exchange, acceptances, the bill on London, and so on. It was that sort of instrument which kept the payment of money through exchange or goods between one country and another right, and on a level gold basis. The Chancellor of the Exchequer did refer to the period after Waterloo, and my hon. Friend the Member for Wimbledon (Sir J. Power) also referred to the war of over 100 years ago. More or less similar things occurred then as are occurring now. Austria owed Britain more than other countries. In the end the actual debt of Austria could not be met, and although Austria owed us round about £28,000,000, we were very pleased to settle for £2,500,000 by Austria giving the British Government bills on London.

But the main point to consider is how these debts can be paid. I eliminate gold, because there is not sufficient gold in the world, and I come down to two main points—and two points only. The first point is that in overseas trade balance, the exports must be greater than the imports; and the second point is the creditor nation investing money in the debtor nation.


Might they not pay also by service as well as goods?


I think we can eliminate service. Nobody wants Italians to come and work here, and nobody wants Britishers to go and work in the United States of America for the debt service.


You took them to France.


The Britishers did not go to France. We endeavoured to arrange something, but nothing was ultimately arranged. The main thing, however, is that although a country may balance its Budget, it still may have the difficulties and problems of the transfer of money from one country to another. The main thing to consider—and I am sorry the right hon. Member for Colne Valley did not mention it—is the problem of transfer. I was reading a speech by a Mr. Parker Gilbert, the Agent-General for Reparation Payments, only the other day, and he seemed to have some doubt as to this problem of transfer which will come in the future. I will read two lines of his speech. He stated: It would he idle to attempt to speculate on the possibilities of future transfer. Of course, he is dealing with the Dawes Report. But when you think that over a long period of 62 years there is a demand to transfer £3,000,000,000 across the Atlantic to the United States of America, it really appears to me laughable, and some definite alteration will have to take place before very long. America holds about one-half the gold of the world. I contend that, as far as our Debt to America, which was referred to by the Chancellor of the Exchequer, in 1925 is concerned, I believe that payment could not have been kept up if 'we had not been the largest gold producer in the world. When I say "we," I mean the Empire. The Empire produced 70 per cent. of the gold. In 1925, £10,000,000 worth of gold went to America to help to pay that payment, and if you think of our balance of trade, which last year was only £28,000,000, compared with £63,000,000 in 1924, the 28,000,000 is almost at its lowest ebb. That £10,000,000 of gold helped to pay our Debt to America. We have also been helped by the price of rubber, and, probably the Australian loan which we sent to America, because the voluntary embargo was on in this country; these items helped the problem of the Debt payment. But we are very different from other countries. We are dependent on our imports of food and raw materials from abroad. The Fordney Tariff does hit us very hard. I feel that America is bubbling over with fatness from the debts she is claiming from the Allies which fought with her in the War.

I come to the Italian Debt. There is a very interesting speech in to-day's "Times," made by the Chairman (Sir Felix Schuster) of the British-Italian Banking Corporation. It gives the position of Italy very clearly. The right hon. Member for Colne Valley, speaking at Burnley on the 29th January, said: He was sick and tired of the British Government being magnanimous to all their foreign debtors at the expense of the taxpayers of this country. The arrangement may sound rather small, but how was that debt made? It was made by sending goods to Italy. Italy owed us £600,000,000. It was £600,000,000 of goods that went across to Italy. it was War goods, but yet it was goods; it was not gold. It was not credit. It was goods, and how are they going to pay us? Is Italy going to pay us in goods? Supposing instead of Italy paying us £4,000,000 a year, we had made it £8,000,000 a year. Would it not have meant more Italian goods coming into this country? In 1925 we imported £19,000,000 worth of Italian goods. I contend that to increase that amount would mean more unemployment in this country. Is that advisable? Is that just to the unemployed? Do the taxpayers of this country understand it? I have a list of the goods which actually came into this country in 1925. Cheese from Italy amounted to the value of £802,000; silk piece goods wholly of silk (except apparel and embroidery), dyed or not dyed £2,000,000 odd, etc. More of their goods would come in if Britain demanded more, and more men and women would be unemployed. We have already received £2,000,000 from Italy. I contend that is settled by my second point, namely, the creditor country investing in the debtor country, and I take this from the "Westminster Bank Monthly Report" for March, showing the investment of United States money and English money in Italy. This monthly report states: The policy of obtaining support from abroad for Italian industries was steadily pursued; large blocks of Italian shares have been placed in London and New York, while at the end of February the announcement was made of an issue in New York of $21,000,000 bonds at 7 per cent., redeemable in 26 years, of the Italian National Credit Instituto for Public Utility Enterprise. 6.0 P.M

Does that not show my second point, that even this £2,000,000 which we had to receive is probably paid by British investment in Italian properties, stocks or shares? I contend—and the Chancellor mentioned it—that the great thing is the capacity to pay. It is in many respects the capacity to pay—but we are a peculiar country What I contend is of more importance—and I have repeated it before in this House—is the capacity to receive. If there is one thing this country and the House wants, it is employment for our men and women. If you look at it from the capacity to receive, I think hoe. Members will agree with me that it is essential that the amount of Italy should not be increased beyond the £4,000,000 a year, and I think the Chancellor of the Exchequer has made a good bargain so far as that is concerned. Where I criticise the Chancellor—and I am sorry he did not mention it in his speech, and I am sorry also the right hon. Gentleman the Member for Colne Valley (Mr. Snowden) did not mention it either—is in regard to the £22,000,000 in gold belonging to Italy deposited here. The Agreement in the White Paper, which gives us the particulars of the settlement of the War Debt of Italy to Great Britain goes into details. I do not think a good bargain has been made in respect of that. Why should we give up any of that £22,000,000; we are reducing the debt to Italy to a nominal £4,000,000 a year. The £22,000,000 in gold would be very valuable to us. It is here. We have got it. We could have used it. I contend that one way of using it would be to send it across to America to help to pay our debts there.

In regard to Germany, I think the right hon. Gentleman the Member for Colne Valley referred to the Dawes Report. The Dawes Report did not state the amount that Germany had to pay, and did not state the duration of the payment. Does the right hon. Gentleman for Colne Valley really think that, although £50,000,000 has been paid as the first year's reparation, Germany in a few years' time will be able to pay the full amount of the Reparation £125,000,000? How was the first payment made? The first payment was made by the United States and ourselves floating a loan to Germany. Seven-eighths of the first reparation payment was this external loan. I cannot help thinking that anybody Who looks at the figures of Germany must realise that that full payment in two or three years' time cannot be kept up. The old way Britain used to have of collecting reparations through the Reparation Recovery Act was, I think, right. It was a sound way. It collected the actual sterling here instead of having marks in the till of the Agent-General in Berlin. I never considered that was business so far as the payment of reparations was concerned, and so far as turning marks into sterling or dollars was concerned.

France is in a pitiable condition so far as her credit is concerned. One might say that her credit is one-fifth of what it was in 1914. She has no definite arrangement with the United States of America, and really no definite arrangement with ourselves, so far as I can see from the Chancellor of the Exchequer. Would it not be possible for the United States, France and ourselves to meet and consider the actual problem of her Debt solution; and if this problem was considered, could it not be carried further and consideration given to the whole international debts of Europe and the United States of America? Trade with France has been referred to by one or two Members. Well, it is not so good as it was. From January to July, 1925, the exports were greater than the imports. From August, 1925, to February, 1926, the imports were greater than the exports.

That is possibly owing to the inflation of the franc; but it shows that France will have greater difficulties in endeavouring to meet the amount of £12,500,000 which the Chancellor has suggested, because by these figures she will not be able to pay with her exports. This was one of the points I mentioned at the beginning of my speech.

I do hope that the Chancellor of the Exchequer and the right hon. Gentleman the Member for Colne Valley will consider that the whole of the National Debts is a problem of transfer. These problems, I claim, are concentrated in two points. The one is, that the exports must be greater than the imports, and the second point is, that the creditor nations can invest funds in the debtor nations' properties. This is the only real way payments of international debts can be paid. The Chancellor of the Exchequer gave us certain figures, from which, if they are accurate, it would appear he is still about £4,500,000 short of our payments. The more we receive, unless it is of the absolute necessities of life, the more it will lead to unemployment in this country. I sincerely hope the Chancellor of the Exchequer will study this problem of the transfer of money from one country to another, and I firmly believe the Italian debt has been arranged in a just and right manner, and not to the detriment of the British taxpayer.


This Italian debt settlement, which we are considering to-day, is one more nail in the coffin of the great illusion about the War. It is becoming increasingly clear to all intelligent people that war is not only a great disaster to the defeated but nearly an equal disaster to the victors, not only in respect of human life but in regard to the actual wealth of the country. This Italian settlement is one stage further in the deflation of the bluff that has been used by men in high positions during all these years. Just as the Dawes Report pricked a great deal of the bubble with regard to reparations, so this Italian debt settlement pricks the inflated figures in regard to the international and Allied debts.

The Dawes Report brings down the maximum to be obtained from Germany to about 20 per cent. of the figure originally given. This Italian debt settlement brings down the amount which we are to receive from Italy to something like 10 or 12 per cent. of the whole of the Italian debt. People who do not understand finance, adding up all the payments for the 60 years, would possibly get a different result, but from a financial point of view we are really, by this settlement, writing off from 80 to 90 per cent. of the entire Italian debt. That is surely the mountain being in travail and a little ridiculous mouse being born. But I am not quite sure whether even the ridiculous mouse will survive, and, if I understand the 'Chancellor of the Exchequer aright, he takes a similar view. In plain words, even this is not a final view in regard to the Dawes Report, or in regard to the Italian debt settlement. The Chancellor of the Exchequer, quite rightly, in my opinion, east very grave doubts as to whether, in either of these cases, the two sums contemplated would, in fact, be obtained.

We have heard a great deal in these controversies about the deflation of money. There is another deflation which has gone on, and that has been quite as important, and as essential, and that is the deflation of the extravagant ideas which were put forward from the beginning by those in charge of the affairs of this country, and every country in this matter. Mr. J. Maynard Keynes, in his introducton to his "Revision of the Treaty" makes this very cogent remark: It is the method of modern statesmen to talk as much folly as the public demand, and to practise no more of it than is compatible with what they have said. He goes on to speak of statesmen—or the politicians, as I should prefer to put it—treating the people as children are treated under the Montessori system. That system is for the public—the child—where he who contradicts this child will soon give place to other tutors. Praise, therefore, the beauty of the flames he wishes to touch, the music of the breaking toy; even urge him forward; yet wait with vigilant care, the wise and kindly saviour of society, for the right moment to snatch him back, just singed and now attentive. My complaint against Chancellor is in not preventing the statement of extravagant hopes and extravagant figures which the Government of which he was a prominent member allowed the people of this country to have sonic years ago. I think that in this country, owing, perhaps, to the wise financial reputation we have, we came to our senses a little earlier than they did in other countries. Both in France and in America the politicians still feed the people on extravagant ideas as to the recovery of vast sums of debt and reparations which, to a large extent in this country, we have already deflated, considering this view of reparations and the recovery of international debts to be extravagant and absurd.

Let me take the special question of Italy. In the first place, war debts are not on precisely the same footing as ordinary commercial obligations. The reason is that it is an entirely unreal atmosphere in which they are created. It is unreal fur two reasons. First of all, if a military point is to be held, and one of our Allies holds that point, and we supply ammunition, then that ally is debited with a debt. But, if, in addition to giving ammunition, you send along men—a much greater sacrifice—then there, is no debt which your ally incurs to you. That is one reason for time unreality of these debts.

The other reason is that the debts are incurred in war time when normal conditions of trade are in suspense. During the War, therefore, the sums obtained are on an entirely different footing to a debt incurred in the ordinary transact ions of peace.

Not only are war debts of a different kind from some of the debts incurred under other conditions, but it is not always worth while to recover the whole of the war debt in a similar way that it might be worth while for people to expect the recovery of commercial obligations. It is not worth while for several reasons. One is that if the people of a poor nation have to stint themselves and go to greater poverty in order to pay the war debts, the amount of ill-will that is thereby engendered is much more dangerous and injurious to the creditor countries than the loss of the small amount which they otherwise suffer. They have to pay in armies to insist on the collection of the debt, or to spend over the ill-will which is created, In consequence, I am one of those who hold that it is much wiser to come to a settlement which can be accepted con amore by the debtor nation.

Those are two good grounds for regarding the original views as extravagant. Now I come to one which is still more important, and which is in accord with the view of the hon. Member for Ilford {Sir F. Wise). International debts can only be repaid in goods, or services, which are really a form of goods. Payment in goods by one country to another upsets the delicate balance of trade. In the ordinary course of things there is a balance of trade, and goods pay for goods, but if we introduce, on purely financial lines, an entirely new and enormous figure of debt, and attempt to liquidate that through the ordinary economic channels, we are upsetting the normal balance of trade, and it is quite impossible for the debtor or the creditor country to digest the terrific changes which are produced by attempts to liquidate these financial obligations. More than that, these great debt, settlements upset the exchanges, and any large receipt of goods coming in the form of War debt interest must, therefore, interfere, with the manufactures of the receiving country.

Even that is not all the difficulty; and I wish to go at some length into a point that is often neglected. The effect on a country of trying to pay a large debt is to bring down the real wages inside that country. We have seen that happening in Germany. When it was first realised that Germany had to pay a great, debt to the rest of the world, we saw German real wages—not the nominal wages in marks, but the real wages—go down; and what have we seen again during the last few months, now that the Dawes Report scheme is arriving at a stage when some considerable amount of reparations may be expected? During 1925 the reparation payments were masked entirely by the new loans of America to Germany. Those new loans cannot go on year by year; but the payments are increasing. What, therefore, has been happening? In order to force a favourable trade balance in Germany, the German bank has put up the rate of interest and tried to force down prices in Germany in order to enable exports to take place. By doing so, it has dealt very great injury to the whole situation in Germany. A leading banker in this country told me only yesterday that there are 500 bankruptcies a week in Germany at the present time, and unemployment is well on its way to the 2,000,000 figure. Indeed, there are over 2,000,000 unemployed at the present time.

What is going to be the result of that In the effort to get into the world market, in the effort to find an additional £100,000,000 of exports, Germany has to cut prices, and the only way Germany can expect to cut prices indefinitely in that way is by cutting down the wages of the German working people. A cut in the wages of the German working people is going to react all round. It is going to be used as an argument in this country for cutting the wages of our workers. It is already being so used in this country. That is always the effect of a large debt settlement. If the Chancellor of the Exchequer had insisted on a very large sum coming from Italy, it would have had the same result in Italy that the payment of reparations has had in Germany, forcing down the wages of the Italian workman, and that in its turn would have been used to cut down wages in this country.

What are the facts with regard to wages in Germany and Italy? The official Labour Report states that wages in Berlin—real wages—are at the present time only two-thirds of the wages in this country, and in Milan they are only one-half the wages in this country. Already that fact is being used to damage the position of working people here. If the position in Germany and in Italy grows worse we are going to force down the standard of life of the working people in those countries even lower than it is, and that is absolutely certain to react on the workers of this country. I am going to quote another passage from Mr. Keynes—from an article he wrote recently in "The Nation." He said that the work of the Transfer Committee must. become more and more obviously, as time goes on, "a struggle to reduce the German workers' standard of life,"

It is because I take the view that, a. big payment from Italy to us in the shape of interest on the war debt is going to injure the standard of life of working people all over the world that I do not join in the attacks on the Chancellor of the Exchequer for this settlement. I think the actual reduction of the Italian payment to this country was, under the circumstances of the case, a necessary thing, but I would like to make it perfectly clear that in saying that I am speaking for myself and not in any way committing anyone else who sits on these benches. I was glad the Chancellor of the Exchequer expressed himself as willing to make a similarly reasonable settlement with Russia, and if he be really prepared to carry that into effect I do not see any reason why a settlement should not he effected except that the Russians have a considerable claim to set against ours owing to the action which he took when he was a Minister after the War, and lent Denikin a large sum to be used against the present Russian Government. That, of course, entitles the Russian Government to make a set-off against our debt.


The Alabama claim?


On the basis, as my hon. Friend says, of the Alabama claim. That in itself will militate against such a settlement of the Russian debt as will be satisfactory to Great Britain.

I entirely endorse what was said by the hon. and gallant Member for Hull (Lieut,-Commander Kenworthy) and supported, I think, by the hon. Member for Ilford, that the Chancellor of the Exchequer might have secured with regard to Italy, and should endeavour to secure in any other settlement, still more advantages from the point of free trade. Though I agree that it is perfectly sound to cut down the amount of interest, our doing so confers a great boon on the debtor country, and for that boon I think we are entitled to claim a quid pro quo; and more favourable terms for our trade might be claimed in granting such a great boon to another country.

In conclusion, I revert to what I pointed out at the beginning. I agree that this settlement is reasonable to-day, but what I object to is the exravagant views that were held and propounded some years ago. The right hon. Gentleman cannot escape from sharing responsibility for those views, because he was a member of the Government that went to the country at the General Election of 1918, when all that nonsense was talked about making the pips squeak, and when the view was held that in one way or another we were going to be repaid the whole cost of the War.


The hon. Member is doing me an injustice. I used none of that language. On the contrary, at Dundee in the Election of 1918, I stated the figure of £2,000,000,000 as being the maximum of the reparations which could be reasonably expected from Germany, and I have never departed from that figure in the whole period since.


I am very glad to hear what the right hon. Gentleman says; but I did not accuse him personally of being responsible for that statement. I said he, could not escape responsibility as a member of the Government which had taken that view. In this country the principle of joint Cabinet responsibility holds, and though the right hon. Gentleman may not personally have said it—and I quite accept his statement, of course, that he was careful to guard himself—yet he is responsible as a member of that Government for the views that were put forward, and which found embodiment in the Treaty of Versailles. It is in consequence of the views put forward then that we have suffered many of the miseries that have arisen since, and therefore, though I do not attack him about this Italian debt settlement, I cannot hold him guiltless of a great deal of the suffering through which we have passed, and through which Europe is passing at the present time.


The Debate this afternoon has roamed over a very wide field, hut it is not my intention to pursue it over so wide an area. In the speeches coming from both sides of the House, I have noticed a good deal of common ground in respect of the position which this country has been forced into, or has arrived at, with regard to inter-Allied debts. The Continental countries—our old Allies—which owe us money, are not taxing themselves to anything like the extent to which the taxpayers of this country are taxed. What, on the contrary, is the situation we find in the United States of America? As the right hon. Gentleman the Member for Colne Valley (Mr. Snowden) said, we assisted that country very materially during the 2½years before they entered into the War. In this country to-day there is a general feeling that the burden we are bearing in respect of inter-Allied debts is intolerable. Not only is that feeling present in this country, but it is present in the United States of America, and, I think, is growing. I read a very interesting statement the other day in the American paper, "The Manufacturers' Record," of Baltimore. They said: During 1913 and the first half of 1914 industrial depression of the severest kind was sweeping over the United States, and it looked as though a large proportion of our industrial interests were heading for bankruptcy. We were having the largest number of failures recorded in our business history. The War instantly created a tremendous demand from the Allies for everything we could sell. Almost over-night 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 battle fields of Europe. It is interesting to know that point of view is receiving some measure of support in the United States. After all, that is not a point of view which we control, and we have to leave it to America to settle that matter. Our debt to America has been funded, and we shall have to keep to the terms of the settlement. Our debt settlement with France is still very much in the air, but at any rate we can make some remarks about the Italian debt settlement. In regard to this debt settlement, I ask those who think the terms are unfair to this country, what is the practical alternative? If we do not come to a settlement now and decide to wait, what is going to be the effect of that policy? What can we do in the matter? Would any Member of this House think of suggesting that we should go to war in order to collect these debts? What is the practical proposition which hon. Members put forward if we do not agree to these settlements? The only alternative is definitely to present our Treasury demands for payment. That would cause a gradual diminution of the rate of exchange. We should lower the. rate of exchange in all those continental nations as well as incur great hostility, and in that way we should do ourselves a great deal of harm.

The right hon. Gentleman the Member for Coble Valley referred to Italian com- petition more particularly in reference to textile trades. It is a fact that owing to the low rate of exchange Italy is competing in the neutral markets of the world more and more with us, and, if by our action we were to run the risk of depreciating the rate of Italian exchange by presenting our Treasury demands, that competition would grow. I suggest that the proper procedure is the policy we are now pursuing; that is, endeavouring in the interests of British trade to get these debt settlements fixed up. There may be differences of opinion as to whether we could have got a little bit more or a little bit less, but those things are quite subsidiary to the main question of getting our Inter-Allied Debts settled in order that we may get on with our normal trade. I contend that this debt settlement with Italy is a very fair one. It is not only fair, but it is very generous to Italy, and I contend that we ought to accept it because it will do much to secure that peace in Europe which is so necessary for our industries.


I rather gathered from an interruption made by the Chancellor of the Exchequer a moment or two ago that he was priding himself on his consistency in regard to our reparation demands. The right hon. Gentleman declared in November, 1918, when he stood as a candidate for Dundee, that £2,000,000,000 was the maximum that could be taken from Germany, and he declared that he had never shifted his ground on that point from that time. It is quite a new claim for the Chancellor of the Exchequer 'to claim consistency, but in the speech he made recently he said that the method by which these reparation payments could be taken might be not to take ships from the Germans, but to make them build for us. What the consequences of that insanity have been to this country let any shipbuilding constituency representative bear witness. We find that the Chancellor, on the 30th November, 1921, three years later, speaking at a dinner given by the British Overseas Banks Association, said: He was delighted to see the steady, remorseless march of statesmen of all countries during the last few months towards financial sanity. The nonsensical froth, not only of politicians, tub-thumping at elec- tions, but of financiers and grave members of the judiciary about extracting £20,000,000,000 from Germany had reduced itself to a much more practical statement of our case. He rejoiced to see that the simple fact that the payment from one country to another could only be made in the form of goods or service had once more become recognised by the most enlightened experts ill different countries. We find the Chancellor winding up his speech this afternoon with a picture of the reparations from Germany flowing into the United States and leaving poor Great Britain out in the cold. On this question, no one seems to know where the Chancellor stands. We do not know whether he is an anti-reparationist or a reparationist, and probably he does not know himself. There is another group of beneficiaries to which I would like to draw attention, and they have not been mentioned this afternoon. We have had the beneficiaries in France, the United States, and Italy referred to, but nothing has been said about the exceptional treatment being meted out now by the Chancellor of the Exchequer to the beneficiaries at home. Let us see who they are. In 1914 we had the first War Loan issued at the rate of 3½ per cent. Then we had the second War Loan and the rate jumped up to 4½ per cent. interest, and the 3½ percenters were allowed to go on the 4½ per cent. basis. That comes to about £4,000,000 per annum extra in interest. Then we conic to the March, 1916, loan, when I find this advertisement spread broadcast by the Bank of England: If you cannot fight, you can help your country by investing all you can in 5 per cent. Exchequer Bards. Unlike the soldier, the investor runs no risk. Later on we find even the Press which supports the Chancellor to-night saying that if this sort of pandering to the investing public is allowed to continue, victory can be purchased at too high a price. The "Glasgow Herald" said: It has been said, and not without. truth. that it is easier to find men willing to risk their lives than to find capitalists willing to risk their money—except at a high price. On this reconversion of each loan as it came along at a higher rate of interest and allowing the previous investors to come on at the higher rate, the "Nation" of June, 1917, states that a huge proportion of the money loaned to the Government is inflation representing no real savings on the part of the bankers and financiers who have manufactured it. This means that when the War is over the propertied men in this country will be several thousand millions of pounds the wealthier. Let us see how some of these loans were issued. I will take the loan of 1918 which was called the Joy Loan. In this case they got £100 scrip for £85 of money, and they got 5 per cent. interest on it. And besides this the £85 counts as £100 for Death Duties. Another newspaper described this Joy Loan as follows: lf the rate falls to 3½ per cent. it will mean a gift of thousands of millions of pounds in the shape of unearned increment to -he investors out of the taxpayers' pocket, and this is, from the point of view of the English people, the most burdensome and vicious loan in English history. Then we had the Victory Loan. I find that in regard to this loan the Pearl Insurance Company issued an appeal in the following terms: For every £100 put into the Funded Loan, the State will pay at least £260. Then we find the same process going on in regard to Short Term Loans. The Exchequer ranges the rate of interest deliberately, wilfully and wantonly. In October, 1919, the financiers of London withheld money from the Treasury and compelled a rise of 1 per cent. in the interest at a time when the wicked railway men were being indicted as holding the nation by the throat and running away- with £15,000,000 per annum. I will not repeat facts which are well within the knowledge of every hon. Member here, or state how the rate of interest jumped from:3½ per cent. finally to 5⅛ per cent., but I would like to draw attention to what the Chancellor is doing now. Not only are these people taking from us £330,000,000 in interest; not only are they imperiling our trade and commerce in this way, but along comes the Chancellor of the Exchequer and two of his predecessors in office—not the last Chancellor of the Exchequer—and they actually take 2s. in the pound off the Income Tax of those investors.

Not only have these people had their financial clutch on the throat of the nation strengthened, but the right hon. Gentleman in his last Budget came along with the income Tax and gave them a considerable relief, and Super-tax relief in addition. Anything and everything, up to many millions sterling, the present Government and its capitalist predeces- sore have done to strengthen the grip of the financiers upon the nation's throat. There are many here who will remember what happened during the War. Two grocers, or two barbers, in the same street, were hailed before the tribunal, and the tribunal said to the one, "Go to the Front," and to the other, "Stay behind." The man who went to the Front had his business closed, he was ruined, and it may be that, in addition, he has come back with a wooden leg and is running about to the Ministry of Pensions endeavouring to hold on to a pension of 10s. or 15s. a week, if he has been lucky enough to get it. On the other hand, the financial class was bribed with increasing bribes to hand over their alleged credit to the nation in its hour of distress.

The late Mr. Bonar Law, with all these facts within his own knowledge, warned the nation of the difficulties we should have to surmount when we were compelled to pay back those pounds sterling; borrowed at about 11s. or 14s., at the rate of 20s. to the £. He said he was appalled at the prospect. Despite that, the present Chancellor of the Exchequer comes along and takes from industry and commerce funds to relieve these super-fortunate tributories of the National Exchequer, to reduce their Income Tax and Super-tax, instead of doing what some of the financial people in the City of London asked his predecessors to do, namely, to put a special tax upon these sheltered recipients of the nation's bounty. The present Chancellor of the Exchequer deals more generously with the bondholders in this country than he has dealt with the bondholders in Italy, the United States and France.

I agree with previous speakers that there are only three possible ways in which you can get an indemnity paid. One is gold, another is services, and the third is goods. Gold, for all practical purposes, can be wiped out; there is not the gold in the world to pay it. In the second place, you cannot take services. Try and bring over a flood of Germans to this country to work on the roads, at mining coal, or building ships, and you will have a bloody revolution. You dare not try it. Only the third way remains; and if you take your reparations in goods for which you send out no goods in exchange, you are going to smash your own trade and industry.

You have done that already. You did it in ships, in dyes, and in everything. I, for one, make no complaint whatever about the Chancellor of the Exchequer's treatment of allied debt payments from abroad, but I do attack him, our future generations will attack him, and the present generation, later on, will attack him for this, that he is deliberately pandering to the investing class in this country, to the bondholders who lent us their credit when pounds were worth 11s. or 12s.—someone says 8s., but I will take it at 11s. or 12s. Suppose that I lent £1 to the nation when it was worth 12s., that my interest was fixed by Statute, was fixed by guarantee, and that that interest entitled me to buy, say, a bag of potatoes. Now, by means of terrible sacrifices, by gold standards and otherwise, prices have collapsed in this country, and at the present time, with my interest on War Loan, I can buy, not only one bag of potatoes, but, perhaps, two bags of potatoes--I can buy more goods and more commodities. All taxation is finally paid in goods and commodities, and the lowering of prices has simply meant doubling the purchasing power of the investors in British War Bonds.

Despite that, the present Chancellor of the Exchequer and two of his predecessors deliberately come along and take from the taxation of this country sums of money amounting to 2s. in the £ on the Income Tax, to reduce the Income Tax and Supertax of these War Bond holders. I trust that Members in every section of the House will keep rubbing the Chancellor's nose in that fact. [An HON, MEMBER: "He will not care!"] He must care. The people of this country cannot go on bearing this burden while one section is thriving and fattening on the miseries of everyone else. It is the trade and industry of the country that keeps the country going, and if the rentier class, the investing class, are going to be allowed to double their income at the expense of the producing classes in this country, there will come a breaking point. It will be well for the Chancellor of the Exchequer to take thought in time, and, in his forthcoming Budget, to take steps, by way of a special tax upon War Loan Interest, to see that the grievances of which I have complained are, to some extent at any rate, remedied.


I would like, with the permission of the House, to try to deal with some of the remarks made by the hon. Member for Dundee (Mr. Johnston). His complaint this afternoon is not, as I understand it, against the Chancellor of the Exchequer or the debt settlement with Italy; it is that too high a rate of interest was in the first instance offered to investors who lent their money during the War, and he finished his speech by urging the Chancellor of the Exchequer, in his next Budget, to bring in some tax which would materially reduce the interest burden in respect of War debt. It does seem to me that we ought to get the proper perspective in matters of this sort. I do not accuse the hon. Member for Dundee of wilfully misrepresenting the facts in this House, but I want to draw the attention of the House to one or two points which I think hear upon his remarks, and which must be considered, not only by those in this House, but by people outside who have to deal with these matters.

It must not be forgotten that during the War one of the greatest anxieties which this country had to face was the provision of sufficient funds to carry on the War, and, if high rates of interest were offered in order to attract money with which to carry on the War, not only for ourselves but for our Allies, those high rates of interest were offered to attract, not only the limited amount of money available for investment in this country, but hundreds of millions of pounds which were subscribed from abroad. The question was, after all, a question of supply and demand. If we were to continue to do what we were doing during the War, namely, to finance, not only our own very heavy expenditure, but that of our Allies as well, it was incumbent upon the Government during the War to find the money on the best terms obtainable from all sources in every part of the globe. That is why, in my judgment, at any rate, and I am sure it is the opinion of financial authorities in the City of London, it was absolutely necessary that the Government should offer rates of interest like 5 per cent. on War Loan, such as they offered during the War. The hon. Member for Dundee has omitted to mention one very important fact, and that is that it was not the capitalist class who received the great advantage during the War in rate of interest on War Loan. Surely, he has forgotten that the class in this country who received the most remunerative rate of interest during the War were the small investors of this country, the workers of this country, who were asked to subscribe, and did subscribe, to War Savings Certificates, upon which they received, not interest at 5 per cent., which was subject to very heavy Income Tax and Super-tax, but interest at the. rate of 5¼ or 5½ per cent., free of Income Tax.


What was the proportion of those people?


The proportion was a. very considerable one. At least £20,000,000 was subscribed in War Saving: Certificates during that time. That is a matter which should be remembered when these points are being considered I would ask the hon. Member for Dundee and those who think with him to remember that it is perfectly futile to suggest to the Chancellor of the Exchequer that he should bring in a special tax on War Loan, and for this reason, that a very considerable proportion of the amount of 5 per cent. War Loan now outstanding—I believe it is nearer £300,000,000 than £200,000,000—is held by investors abroad, and, surely, the House will realise how impossible it would be for this Government, if they have any regard for the credit of this country, to impose taxation which would in effect be a repudiation by His Majesty's Government of their obligations to holders of British War Loan who are resident abroad.


Why reduce their taxis? Would the hon. Gentleman answer this question for me? Does he justify the reduction in the Income Tax on I hat money?


Most certainly; I think it can be justified, and very properly justified. It has been the reduction in Income Tax in this country, and particularly the reduction made by the Chancellor of the Exchequer last year, which has given the greatest advantage to the poor people of this country, to people with small incomes. I want to say a word about the Inter-Allied Debts. I am not going to suggest for one moment that the settlement of the Italian Debt made by the Chancellor of the Exchequer was anything but a good settlement, but I would ask the House to remember this: It has been stated in this House this afternoon by various speakers that payments can only be made by goods and by services. That is a profound truth; we must eliminate any question of the transfer of gold in any considerable quantity. I would ask the House to remember that it is a fact that Germany to-day is finding it increasingly difficult to meet the reparation payments which are due under the Dawes Report. I am not making that statement with any idea of suggesting that Germany is desirous of repudiating her engagements, but, undoubtedly, in my humble judgment, the time is coming when all the nations of the world will have to get together and reconsider the whole question of War indebtedness.

I do not wish to be misunderstood. I do not suggest that this country should in any way attempt to get America to let us off the bargain we made some years ago. I am one of those who believe that we ought to pay our debts, and that we. can pay our debts; but I do say that the time is coming—and it may be much nearer than many of us expect—when we shall all have to get together and reconsider the whole question of these inter-Allied Debts. So far as our obligations to America are concerned, I hope we shall never repudiate, or attempt to repudiate, the settlement that has been made, but it will have to be borne in mind, not only in Italy, not only in France, but in America, that if these debt settlements are to continue, and if payments are to continue 'Index them, the fundamental fact must he recognised that it is up to the nations concerned to see that those payments ale allowed to be made in the only possible way in which they can be made.

7.0 P.M

By that I mean that, so far as our payments are concerned, if they are to continue, there will in due time have to be some arrangement made under which, by the lowering of tariff walls, our goods and our services can go out to America to provide for the payments which we are obliged to make. Many people in this country, who think themselves qualified to speak on this question of war debts, lose sight of the fundamental principles underlying them and are too much in- clined to look at the question of how much a certain nation has promised to pay without examining the capacity of that nation to pay in the only way in which any nation can meet its overseas obligations. I hope these matters will be considered, and I am perfectly certain that His Majesty's Government have all these points in mind. I only rose to say that I entirely support the settlement with Italy made by the Chancellor of the Exchequer.


I think the last speaker has tried to argue too much and has stressed to too great an extent the amount of money invested by the small investers in War Loan in the War period. Surely no one in this House, who had any knowledge of finance during the War, can dispute the first great principle that those who had to finance the War made exceedingly well out of their financial transactions. In the second place, I would like to remind the hon. Member that that War debt was created to a, very large extent by an enormous creation of credit, the advantage of which fell to those who were in the fortunate position of being able to assist in the creation of that credit. Therefore, it seems to me that if we are referring to that side of the question, we should recognise that those who have made large fortunes out of the War can at any rate pay a large contribution at the present time to the cost of taxation due to the burden of that debt.

I should like to suggest to my hon. Friend, who opened this question, that the mistake he makes is when he thinks that the same set of people have benefited, for it does not follow that the present holder of War Loan necessarily made a profit. He suggests that they should be collected for special taxation. In the first place, no Government that I can imagine could adopt such a course, because of the prejudice it would inflict upon their own credit. I very much doubt whether he has fully recognised that at the present time the Government have something like £500,000,000 in Treasury Bills being tendered for week by week. Any question of the Government's policy on credit would inevitably lead to a very serious financial position, for any Government that tried to do what he suggested might be asked within three months to repay a large part of that £500,000,000. Where I do entirely support him is when he says that we are not imposing sufficient burdens upon the classes who did benefit by the War, whether they made their fortunes out of finance, or commerce, or in any other way. If that be his line, I entirely agree with him. It is on that principle that I believe the present Government are doing absolutely the reverse. They are lifting the burden from the shoulders of those who benefited from the War. It is for that reason that I sit on these benches as a protest against the Government's policy in finance, a policy which, while relieving Income Tax payers and Supertax payers of their burdens, is lifting the burden from those who made fortunes out of the War and leaving it to be borne, to a far greater extent than it should be, by the working-classes and middle-classes of this country.

The main subject this afternoon has concerned the relationships between the different countries in regard to debts. I would like to say one thing in reply to the hon. Member for Ilford (Sir F. Wise). He suggested that any repayment of debt must lead to unemployment. He almost argued that it was evil for a, country to receive any debt. I should like to suggest to the hon. Member that you can press that theory too far. Theoretically, I do not believe, if you can argue the thing out, that you can prove that a country is going to suffer by taking goods handed over to her. We make a mistake if we press the argument to that extent. I do not think you can prove that at the present time the United States have suffered from the £30,000,000 or £60,000,000 that so far we have paid to them. But if he refers to the transfer of goods to a certain country, for instance the coal that has been sent under the Dawes Report, I entirely agree that our trade is very seriously dislocated by the transfer of the goods, and you can actually say that unemployment has been created by those goods coming in, You cannot prove that, if we receive, say, £2,000,000 of Italian goods, and if it is possible to transfer those goods straight away to the United States in part payment of our debt, we are not better off to the extent that our Government has not to take £2,000,000 worth of goods at present in this country and send them to New York. Therefore, theoretically it is a mistake if the hon. Member for Ilford wishes us to believe that a country is going to be worse off because it is receiving goods in the form of debt payment; but, if he refers to the dislocation of trade, which is the point stressed by some of my hon. Friends, then entirely agree with them.

Passing from the question of how the roods are going to be transferred to this country to the point raised by my hon. Friend who spoke from this bench, it will be remembered that he referred to the hardship inflicted upon the country that is paying the goods, especially in the case of Germany. That seems to me to be a serious point, and it is the point that impresses me even more in some ways than the point raised by the hon. Member for Ilford, because it seems to me that you are placing a burden upon Italy and Germany and incidentally upon France, which is having the exact effect on the workers in those countries that my hon. Friend complained of. It is lowering their standard of life and to tint extent it is inevitable, though not perhaps at first, that we in this country and our workers, will suffer from the fat that we are pressing down the standard of living of the people in the countries of Europe. Therefore, for this reason, quite apart from any other, I look much more favourably upon any settlement of the debt problem that is going to make it, after due considerations of justice for the people of this country, as easy as possible for other countries to come to a settlement of these problems.

I agree entirely with the Chancellor of the Exchequer, and I wish, as he does, that it had been possible to have had no repayment at all either to this country or from this country to the United States. I do not think that the United States have enhanced their reputation by the insistence they have made upon payment from this country and from France and from Italy. I entirely agree that they are perfectly justified, but at the same time they would have made a great contribution to the settlement of the world if they had stepped forward and said that they were willing to forego their debts provided all the other nations were also willing to forego theirs.

There is one point in connection with this settlement which I especially wish to stress. We have looked with less satisfaction upon the settlement with Italy, because there is no doubt that the Italian Government does not meet with the commendation or approval of many of us who sit upon these benches. For that very reason, I want to take that entirely out of the question, because I absolutely agree with the Chancellor el the Exchequer that this is a matter which we ought not to take into consideration when we are considering a debt settlement. I should like him to impress that sentiment upon the hon. Members who sit behind him, because it is the very thing, to my mind, which the Government and the hon. Members opposite are doing in regard to Russia. In regarding the Italian settlement, I want to eliminate this question from our minds, and I hope that hon. Members opposite will face up to the Russian position in the same way as the Chancellor of the Exchequer recommended us to face up to the Italian settlement this afternoon, because until we settle with Russia eve are not going to get any further towards a real settlement in Europe. Sooner or later we have to come up to the Russian position. We have to face Russia in the Near East; we have to come in touch with Russia in regard. to problems in China and in that part of the world. We have in this House constant complaints being made because no assistance is given to opening up trade with Russia.. Even supporters of the Prime Minister have in the last few weeks urged that something should be done to try and improve the relationship between this country and Russia for trade purposes. When we accept this settlement which has been made with Italy, I would urge that they should take a. step forward and see if they cannot do the same thing with Russia, and bring about a settlement between this country and Russia.

The terms of this settlement are generous to Italy. You have only to read the report made by one of the Bank Chairmen who has been recently visiting Italy. Making all allowance for the fact that when you go to a country you often see only the things you want to see, that report, speaking of the conditions there, does confirm Italy's financial position. When we look at France, we see that it is in many ways in a far better position than we are. I believe there is hardly any unemployment there. It seems to me a strange thing that we have to be making these large concessions to them in regard to their debts. Of course, we know perfectly well that, in the case of France, the position is to a certain extent false owing to their monetary policy of inflation. In spite of these things, I believe it is a wise thing to try to come to a definite settlement on the best terms possible, and, in accepting the Italian debt settlement, I very much hope it will be followed by a settlement with the Russian Government.