OVERSEAS TRADE [GUARANTEES].

HC Deb 09 April 1930 vol 237 cc2226-97

Considered in Committee under Standing Order No. 71A.

[Mr. ROBERT YOUNG in the Chair.]

Motion made, and Question proposed, That it is expedient to amend the Overseas Trade Acts, 1920 to 1929, by extending to the thirty-first day of March, nineteen hundred and thirty-five, the period within which new guarantees may be given under those Acts in connection with export transactions, and by extending to the thirty-first day of March, nineteen hundred and forty, the period during which guarantees so given may remain in force."—[King's Recommendation signified.]

Mr. GILLETT (Secretary, Overseas Trade Department)

In asking the Committee for an extension of the period during which the Export Credits Guarantee Department may go on, I should like briefly to review the previous history of the Fund, and also to say a word or two with regard to the Report of the Committee presided over by Sir Otto Niemeyer. The Export Credits Department was started originally with a view to assisting the export trade of this country, although it was continued at a later period with the special object of attempting to find work for the unemployed. It had three stages, and it is important that I should briefly refer to them, in order that hon. Members who may not be familiar with its history may understand one or two points that are mentioned in the Niemeyer Report.

The Export Credits Department was set up in 1919, and the first scheme was based simply on the actual advancing of money for the purpose of helping the sale of goods. The experience was somewhat unfortunate, and the losses were rather heavy. In 1921, the first guarantee scheme was brought into existence, and it continued for five years. Under that scheme, guarantees were given up to the extent of 100 per cent., but recourse to the exporter was retained to the extent of 57½ per cent. In the whole of that period of five years, the amount of money guaranteed was only about £6,000,000, and the scheme began to show signs of having accomplished the work it had undertaken, but it induced the Government at that time to consider whether there were not aspects of the guarantee scheme that might very usefully be continued, and I think it was the hon. Member for Farnham (Mr. A. M. Samuel), when he occupied the position of Secretary of the Overseas Trade Department, who appointed a Committee under the chairmanship of the right hon. and gallant Member for Ripon (Major Hills), to consider the whole question of credit insurance work. That Committee reported in 1926, and in that year the present scheme as we now know it came into being.

I might remind the Committee that credit insurance in this country, and, in fact, in all countries of the world, was at that time quite in its infancy, and indeed to-day it is still in a stage which might be called experimental. This scheme, which was started as a result of the Report of the Hills Committee, was copied by several countries on the Continent. Briefly, it is a system of insurance by the exporter in this country sending his goods abroad. A sum of money is to come to him from the overseas importer, and, if he wishes, he can insure that a certain proportion of that money can be entirely relied upon. In order to do this he approaches the Export Credits Guarantee Department and lays before them the proposal which he has to make, with particulars of the goods that he is going to sell, and the period within which he will be receiving the money from the overseas importer. If he is successful in his application, the Department may agree to guarantee up to 75 per cent. of the face value of the transaction that he is undertaking.

There is one very important point which has to be borne in mind in connection with this scheme, as compared with any other insurance scheme that there may be in this country, and that is in regard to the time when payment is made in connection with any losses that have come about as the result of the transaction. Practically all the transactions now undertaken by the Department are carried out on the financial side by means of bills, and, therefore, it is fairly simple, having the date on which the bill is going to mature, to know exactly the time when the liability will first accrue.

Mr. ARTHUR MICHAEL SAMUEL

Is the insurance now done entirely by covering the value of the bill? Must there be a bill?

Mr. GILLETT

As I understand it, in practically every instance the financial side of the transaction is carried out by means of a bill. I was going to say that, when any question of default arises, naturally the Department becomes technically liable for payment. The general idea of insurance is, of course, that the person insured is only going to receive payment for what has been lost. In some cases the process is simple. For instance, when a person's life has been insured, it is only necessary to prove that he is dead and the payment becomes due; and, similarly, in the case of a fire, it is fairly easy to judge what the actual loss is. But when you come to loss of this kind, and are asked to insure a sum of money that is going to become payable in respect of a business transaction of this kind, the question naturally arises as to what the actual loss is. Suppose that the sum is £1,000, that the Department has guaranteed 60 per cent. of it, that is to say, £600, and that the acceptor of the bill has defaulted. In such a case the Department pays almost at once, as soon as the necessary investigation has been gone through, which takes only a few days.

Hon. Members who are not acquainted with the working of these insurance schemes might think that that is only what would be expected, but as a matter of fact there is no other insurance business at the present time that does pay as rapidly as the Government scheme, and that is one of the fundamental differences between the Government scheme and any private company that is doing this kind of business to-day. A private company, while recognising its liability, says that it must be satisfied that the sum of money is really lost, and any hon. Member who has done business abroad, and has been so unfortunate as to have debts due to him abroad, knows perfectly well that it is one thing to know that a firm abroad has defaulted, but it is quite another thing to know when it will be possible legally to say what payment, if any, they will be in a position to make; and, until you have arrived at that position, you cannot say what the final loss may be. That may be a matter of months, and as often as not it is a question of years.

To any firm, however large and substantial, it is important, and to a small firm trading with a small margin of capital it is exceedingly important, to know whether on a certain date, or within a few days afterwards, they will receive for certain that sum of £600, or whether they are to be told that they will have to wait for months, or it may be for a year, before receiving any part of it. I lay stress on this, because it is really one of the most important aspects of the Export Credits Guarantee Scheme as it concerns the business community of this country. Many houses, both large and small, have taken advantage of the scheme.

There is also this added advantage. Under the Contract B scheme, instituted at the time when the right hon. Gentleman the Member for Chorley (Mr. Hacking) was Secretary of the Overseas Trade Department, a document was drawn up by which it was made possible for the exporter in this country, who had arranged to have such a payment guaranteed, supposing that the payment was not going to be made for two, three, or four months, or even longer, to sign what was known as the Contract B form, in which he authorised the Department to pay over to his bankers the money that he was to receive. He was then able to go to his banker and ask him if he would make an advance upon this sum of money, which the banker knew perfectly well would be coming to him under the authorisation of Contract B, from the British Government. Anyone who considers the advantages of such an arrangement can see how beneficial that Contract B scheme has been to those who have been making use of the Department. When you look at the figures, you see the success of the scheme in the considerable increase that there was in 1929 compared with 1928.

I apologise for explaining a technical term, but in the House, and perhaps more particularly in one or two newspapers recently, statements which have been made from this bench in regard to the Export Credits Guarantee Department have not been fully understood because of the technical terms that have been used in giving answers to questions. I was asked recently what was the number of applications which have been received from a certain country. The word "applications" can be exceedingly vague, in view of the fact that two firms in making applications might have the same piece of business in mind and, further, an applicant might think the business he was going to undertake would be worth £10,000, but when he really got down to it he might find it was only £5,000. Therefore, as any figures in regard to applications would be so vague and unreliable, we have taken the line that it is not desirable to make public statements, simply because they might be entirely misunderstood, and undue importance might be attached to them by people who have not heard such an explanation as I am trying to give now. I referred just now to the case of a man who comes to the Department wishing to do a deal involving £1,000. He asks the Department how much they can guarantee. Under the powers of the present Act we can guarantee up to 75 per cent. The amount usually varies from 60 to 75 per cent. Therefore, supposing 60 per cent. is taken, the Department becomes liable for £600 out of that £1,000. If that has been agreed with the exporter, we speak of £1,000 as being the contract and £600 is the liability. Speaking of contracts, for the first nine months of this scheme ending March, 1927, £365,000 was the amount of business done; for the first full year ending 1928, £2,455,000; for the next year, 1929, when the new contract B had come into being, the figure rose to £4,283,000 and last year to £5,661,000.

Mr. R. A. TAYLOR

Do these figures represent the liability of the Department?

Mr. GILLETT

I regret that I have not managed to make it quite clear. These figures I am giving are the contracts; in other words, going back to my illustration of the man who is selling £1,000 worth of goods, they represent not the £600 but the £1,000.

Mr. W. J. BROWN

Will the hon. Gentleman clear up one point? He gave the figure for 1929 as £4,283,000 and said the figure for last year was something in excess of £5,000,000. That seems to be two different figures for the same year, as 1929 was last year.

Mr. GILLETT

The financial year ends on 31st March. What I meant by last year was the year up to 31st March, 1930. The only other thing I wanted to mention in connection with last year was the fact that it included Russia, and the amount of contracts entered into with Russia was £1,305,000, all on short term.

Passing to the next stage in the life history of the Department, it was in 1928 that the scheme came under some criticism from the Estimates Committee, who finally recommended that an expert investigation into administrative expenses should be made. They recommended that the premium should be increased and that there should be commercial accounts. This recommendation was so far carried out by my predecessor that he appointed a small Committee to investigate the whole enterprise. I should like to say a word in regard to the three points on which they laid emphasis. The difference between the Government accounts as they are ordinarily kept and commercial accounts in a concern of this kind is that previously we only provided a direct cash statement. In Government accounts as they were being conducted before this Committee made this recommendation, if you asked what were the accounts for this Department you simply had them on a cash basis. That meant that premiums were coming in, but no reserve was being set aside for the liabilities which the actual fact of the payment of the premiums have really involved. We have adopted that, and we are much indebted to Sir William Plender for the help he gave to the Department in drawing up the new system. The accounts which have so far appeared are only up to March, 1928, and they show a loss of about £16,000. One of the great difficulties of drawing up any accounts to deal with a fund of this kind is that you have nothing to go upon, and no figures upon which you can base your estimate as to what your loss is likely to be. Insurance companies have had years of experience, but there is nothing to go on in regard to this special work and, therefore, we have to make estimates which are somewhat in the nature of guesses as to what the actual loss will be. On that account, therefore, I think it is really better that the accounts should not be made up until probably a year after the actual time.

Mr. LEIF JONES

Why has the hon. Gentleman only got the accounts up to March, 1928? The Appropriation Account up to March, 1929, gives figures about export credits which seem to be complete.

Mr. GILLETT

I was talking of the commercial accounts which will be found in the Blue Book, and not the ordinary accounts which are still going through. The Committee hoped the previous schemes would be entirely dissociated from the present scheme. That we have done, but when they ask that they should be entirely dissociated from the Department, that is impossible. In considering how the work of the Department might be made more efficient, they suggested the appointment, of a small executive committee. We are by law compelled to have an advisory committee. It is now suggested not that the advisory committee should be done away with—as a matter of fact that could not be without an Act of Parliament—but that a small executive committee should be formed. They said: We are of opinion that this end would best be served by a small executive committee of three members, whose functions would be analogous to those of a board of directors. In a word, we should desire to see the executive committee in a position to conduct their experiment with full responsibility for its direction and subject only to the rendering of commercial accounts in the form which we have recommended. Anyone who read that recommendation must have recognised how very sweeping it is. There is no reference whatever in the report, as far as I remember, to the position of the Minister and his responsibility to Parliament if powers were granted literally on the lines that the recommendation has laid down. I do not believe there is any precedent for the suggestion if it were laterally interpreted. At the same time, possibly it is not intended to be quite so sweeping as the words in black and white would imply, and it was not intended that the Minister should not have power to intervene. However, in accepting the proposal my right hon. Friend has made it quite clear, first of all, that the ultimate responsibility of the Minister to Parliament must remain entirely. It is essential, if the Minister is to be responsible for what is taking place, that he shall be informed by the committee of what is going on.

6.0 p.m.

The difference is, that on many points the committee may come to a decision and go on with their work, but that the manager will keep informing the Minister what is taking place and the Minister will, of course, ask for further explanations, or express his disagreement with them, if he thinks it is necessary to do so. They will not necessarily wait until the ordinary procedure in Government Departments is carried out. There are certain matters on which the Committee are bound by statutory provisions, such as munitions of war and other things of that kind, with which I do not think that I need weary the Committee. There is also the relationship of the Treasury to such a committee. I think that I have mentioned that when guarantees are given, they are given by the President of the Board of Trade after he has had an opportunity of receiving the advice of the committee and after he has received the consent of the Treasury. It is very essential that a new committee of this kind must keep the Treasury informed of what they are doing. New problems have been suggested, new ways of managing the details of this organisation, such as open account, reinsurance, consignment business. All these matters are laid down for the new committee. In regard to anything they do on these lines, they will have to inform the Treasury in much the same way as I have suggested they will have to inform the Minister. It will, of course, be open to The Treasury to make any stipulation in regard to any proposal of that kind.

There is the question of the position of the staff under the new proposals. We have in the Department at the present time a staff which is mainly composed of the ordinary civil servants. On certain occasions during the last few years a few outside members have been introduced owing to their special technical knowledge. As far as the staff who belong to the Civil Service are concerned, they will remain in the same position. It is proposed to make this Department a distinct Department from the Overseas Trade Department but it will be under the Secretary for Overseas Trade, though not under the Comptroller-General of the Overseas Trade Department. The head of the Export Credits Department will report direct to the Minister concerned. The new staff and the staff of the Export Credits Department will be distinct from the Overseas Trade Department. It will have its own Whitley Council and also its own promotions board. I think that under those conditions there is no reason for the staff to fear that their position will in any way be affected.

We have asked Colonel Peel, the present chairman of the advisory committee, to act as chairman of the new executive committee, and I am very glad to say that we have received his consent. We have also asked Mr. Caulcutt, the deputy chairman of the advisory committee to act on that committee. Mr. W. R. Blair, one of the members of the Co-operative Wholesale Society central committee, and at present a member of the advisory committee, has agreed to serve, and also Sir Albert Bain, who is a well-known insurance broker. These four will form the executive committee.

Mr. R. A. TAYLOR

Will my hon. Friend explain exactly what will be the position of the advisory committee after this change has taken place?

Mr. GILLETT

The position of the advisory committee will be exactly the same as before, because many of the subjects which we hope the executive committee will undertake are subjects with which the advisory committee have not been concerned up to the present time. The work of the advisory committee has largely consisted of receiving the applications, considering them and giving a decision. Questions relating to the conduct of the Department and to making it more efficient, ordinarily speaking, have not been matters which have been considered by the advisory committee or considered as part of their duties. They are only supposed to advise on the actual applications and to say to what extent they shall be accepted or whether they shall be refused.

Mr. TAYLOR

And that function remains?

Mr. GILLETT

It has to remain. It is part of the Act of Parliament. We cannot do away with it, as I have said, without passing an Act of Parliament. I hope that I have made it clear that these recommendations have been made with the object of reorganising the Department and to provide greater elasticity of method, but still to retain it under the control of the Minister, and, of course, under the appropriate control of the Treasury. Another recommendation of the Committee is that the scheme should be extended until 8th September, 1934. We have adopted the suggestion with one alteration. We thought that it would be more satisfactory if this corresponded with the financial year, so we have taken 31st March, 1935, instead of the date suggested. Another proposal deals with the suggested increase in premiums which the Estimates Committee has reported. The Niemeyer Committee consider them to be as high as is consistent with sound business. That is the scheme for the reorganisation, one might so term it, of the Department. We hope that under these proposals it may go forward to a period of still greater usefulness in the future. It requires to be better known. I believe that if it were better known in the country many more firms would take advantage of it. We have had much assistance from Chambers of Commerce and from many of the banks in the past, and I hope that we may count on their help and support in the years that are to come. I believe that if we receive their help and support we shall see a very considerable extension of this method, which, as the Niemeyer Committee explained, is a most interesting experiment and one which will prove of great help to the export trade of the country.

Mr. DOUGLAS HACKING

I am sure that the whole of the Members of the Committee appreciate the speech which has been delivered by the hon. Member and is grateful for the interesting historical sketch which he has given in connection with the various schemes of export credits undertaken by various Governments. I was particularly glad to hear from him the approval which he gave to contract B with which I had some concern when I occupied the position which is now occupied by the hon. Member. One thing which struck me as being of great importance was contained in almost the concluding sentence of the Minister's speech, when he said that he hoped that this last scheme would become better known throughout the country. I agree with that absolutely, but, unfortunately, sometimes our friends let us down. When I was at the Department I remember speaking on one occasion in a certain part of the country and advocating the contract B scheme. A man got up in the room and thoroughly condemned the scheme. He said that it was unsound and that he had not a good word to say about it. I was rather astonished to hear that, especially at a meeting of a chamber of commerce. When I came back to London, having found out the name of the individual, I made inquiries of the Export Credits Department as to who was this man and to what firm he belonged. It was found that he belonged to a firm which had used this scheme very extensively, and presumably the only reason why he had condemned it was in order to keep other people, his competitors, from taking advantage of the scheme. This is the sort of thing the Department is up against. It is unfortunate, but, I believe, it is one of the reasons why the scheme is not better known. I agree with the Minister that he and the Members of his Department should go about the country as much as they can telling the business community of the advantages to be derived from using such a scheme as he advocates.

The Financial Resolution which we are discussing is, as the hon. Member has said, founded on the recommendation of a committee of experts set up to inquire into this problem. That committee, as he rightly said, was appointed during the time when I was Secretary to the Department of Overseas Trade. I should like at once to thank Sir Otto Niemeyer, Colonel Peel and Sir William Plender for the great care which they have taken, the great patience which they have exercised, and for the splendid report which they have issued. There are, in fact, two reports. The first, in the form of an interim report, was a report made to me. The second report, in the form of a main report, was to the hon. Member. As far as the interim report is concerned, I do not wish to make many observations. I am very glad to see that the committee advocate the desirability of issuing commercial accounts, and the forms which are suggested in their report are most excellent. The forms are clear, concise and easy to understand, and in these respects they differ very much from the Treasury form of accounting to which we are accustomed in this House. The Minister spoke about these accounts, but I am not clear whether these accounts up to 31st March, 1928, have yet been published. I think he said that they were in the Blue Book issued by the Public Accounts Committee. Is that so?

Mr. GILLETT

I do not know whether it is issued by the Public Accounts Committee, but it is the Blue Book which contains accounts of this kind.

Mr. HACKING

Unfortunately I have not seen the Blue Book, and probably many Members of the Committee have not seen it. I think that it would be well if some other form of publication could be arranged so that not only Members of this House but people outside interested in this form of insurance might have an opportunity of seeing the position from year to year. I hope that the Minister will consider that suggestion and, if possible, that he will adopt it. The interim report, which many Members of the Committee have seen, was only made available a few weeks before the General Election took place, and there was very little time for the late Government to take any decisions thereon. I should like to know the decision which has been reached by the present Government with regard to the latter portion of paragraph 6 on page 4, where it says: That we (the Committee) consider that in the interests of simplicity and rapid administration the responsibility of the Accounting Officer at the Department of Overseas Trade should rest directly with the Export Credits Guarantee Department, without the intervention of the Accounts Department of the Department of Overseas Trade. I am not clear from what the hon. Member said whether it is the intention of the Government to accept that recommendation. If it is, I assume that it means that the Accounting Officer of the Department of Overseas Trade, who is also the Comptroller-General and probably one of the busiest civil servants in the country, would have to accept the responsibility for the accuracy of the accounts of the Export Credits Guarantee Department, without their being subjected to the scrutiny of his own Accounts Department,

Mr. GILLETT

We are cutting out the Export Credits Department from the Overseas Trade Department. That means that the Overseas Trade Department will have no longer anything to do with the accounts of the Export Credits Department.

Mr. HACKING

The accounting will be done by the Export Credits Department and kept distinct from that of the Department of Overseas Trade?

Mr. GILLETT

It will be an entirely separate Department.

Mr. HACKING

Accounting direct to the Treasury?

Mr. GILLETT

Yes.

Mr. HACKING

I am very glad to hear that. So far as the main report is concerned, I am glad to hear that practically the whole of the report has been accepted by the Government, because it is exactly what I would have desired had I been in the hon. Member's position. The examples which I will quote are not many. On page 9, the report says: The permanent use of State credit for the benefit of the particular private exporting firms whose applications may be granted does not seem to us desirable. The permanent use of State credit does not seem to the Committee to be desirable, and I am glad to note that the Government have accepted that opinion. I also like the system of commercial accounts and the separation of the new scheme since 1926 from the old scheme. I do not know whether any other Government Department is going to carry out the liquidation of the previous scheme, but I hope they are. That was suggested in the Report.

Mr. GILLETT

We were not able to adopt that suggestion.

Mr. HACKING

I think it would have been a good thing to cut out the dead wood, if it had been possible. Undoubtedly, the Department is burdened by losses that took place under the old scheme, but if what is suggested cannot be done, we must leave it at that. I agree, and I think the Committee will agree, that Contract B. should have a maximum of five years for the experimental stage. It is stated in the report that there is no institution at present offering identical facilities to those offered by the Export Credits Guarantee Department. I should like to know whether or not any institutions are moving nearer to the Government scheme. It is very important that they should do so, especially as the recommendation of this expert Committee is that, finally, private enterprise should take over this insurance. It is very important that these outside bodies should now or shortly move closer to us in all respects.

I like the idea of a small executive committee. I would have preferred to have called it a board of directors, but I agree that it should be subject to the responsibility of the Minister who, in turn, must be responsible to this House. I am very delighted that the Minister has been successful in persuading Colonel Peel to accept the position as chairman of the Executive Committee. Mr. Caulcutt is also an old friend of the Department, and I am glad that he has accepted a position on the Board. He has worked many years on the Advisory Committee. I am not certain whether this Executive Committee will have the sole power, choice, appointment and remuneration of staff in their hands, or whether that is going to be taken out of their hands and put into the hands of the Appointments Board. Perhaps the hon. Member will make that point clearer. The recommendations made in the Report on this point are sound. They are of the opinion that the staff must be chosen from people who have had a great deal of experience in this complicated subject.

I assume that this Executive Committee will be unpaid. I do not know whether it is a good thing that they should be unpaid, and I would not mind if they were paid salaries, because they have very important work to do and it will take up a great deal of their time. It is perhaps too much to expect that busy men possessing so much ability should give up so much of their valuable time to the State. I would not mind if they received remuneration fitted to their service. If, however, they are generous-hearted enough to do this work in an unpaid capacity, so much the better, and we must be grateful to them. I like the changes that I have enumerated for themselves alone, but still more do I welcome them because they are all changes in the general working of this scheme which are likely to facilitate the final transference of all this business out of Government control. It is the desire of Members of the Committee—it is obvious to anyone who has read the re- port—to make the Department an independent unit run on business lines and thus easy of transference in toto to private enterprise. I congratulate the Government on their acceptance of the principles and advantages of private enterprise, and I hope that the whole business of insurance against bad debts will be safely handed over and taken out of the hands of the State long before the maximum period asked for in the Resolution has expired.

I should like to make a few observations on the general scheme of Export Credits. We have not been told by the Minister whether the Department is now paying its way. The last figures that I have before me were issued in 1928, when there was a loss ratio of 60 per cent. to 70 per cent. on the premium receipts. That is, the premium receipts were used to pay all the bad debts up to 60 and 70 per cent., leaving 30 per cent. or 40 per cent. of the premium receipts towards paying the cost of administration. The balance of money was insufficient at the time, and there was loss in the running of the Department of between £18,000 and £20,000 a year, on a turnover of about £3,000,000 a, year. I should like to know whether the loss ratio has decreased or whether the administrative expenses are now less than the 30 or 40 per cent. which was left over when the loss due to bad debts had been taken into account. It will be interesting to the Committee to know what has been the largest amount of Government guarantee outstanding at any one time. It cannot be a very big sum especially when, as I understand it to be the case, many of these credits are not longer than for a period of about six months. I would also like to know what is the average percentage of Government liability as compared with the face value of the contracts concluded. In other words, what is the average proportion of risk which is borne by the Government? I should also like to know the average length of credit that is guaranteed. The Committee, on page 9 of their report, refer to the question of short credits. They say: The Committee think the scheme should remain one of relatively short credits. On page 8 they say: The major portion of business accepted has been for short credits, eg., up to six months. Does that mean, according to the recommendation on page 9, that the scheme is to remain one of credits only for periods up to six months? I doubt whether they do mean that. If they do, I think that it is rather too short, and that longer credit should be given occasionally.

Now, I should like to turn to our old friend Russia. The hon. Member, in speaking on this subject on the 5th February, used these words: If Russia desires to raise credits in this country, a settlement with the City on the various debt questions and other questions that still exist and are awaiting settlement is a fundamental necessity."—[OFFICIAL REPORT, 5th February, 1930; col. 1980, Vol. 234.] That bond may have been kept in the letter for I recognise, especially after having read the correspondence to which the hon. Member made reference, which appeared in "The Times," the difference between insuring a British exporter against non-payment of debt by Russia, and the actual granting of credit facilities to that country itself. It is, however, quite clear that Russia derives indirect benefit by the purchase of British goods, otherwise she would not buy them. Some of the goods which she wants would not have been supplied unless there had been in existence this export credit system. Further, if Russia fails to pay—she has not failed up to now, I admit that, quite frankly—the British Government would be bound to accept responsibility for a portion of her bad debts. Surely, that comes very near to financing Russia. Although the Government have not broken in the letter the bond they have given, I maintain that they have broken it in spirit. When we were in office, we refused these facilities because we felt that until Russia had recognised and discharged her obligations to British nationals, no financial assistance of any kind should be extended to her.

Mr. W. J. BROWN

You are not granting assistance to her; you are extending it to the British exporter.

Mr. HACKING

She has derived benefit. She would be unable to buy certain goods had it not been for the facilities that have been granted. Certainly, to that extent she has derived benefit.

Mr. BROWN

Would the hon. Member prefer that she should be able to buy them in Germany or America?

Mr. HACKING

That is not the point The point is that she has derived benefit owing to our extending this scheme to include Russia. There is no doubt about that.

Mr. MUGGERIDGE

The exporter gets the benefit.

Mr. HACKING

The exporter gets the direct benefit, but Russia gets indirect benefit, otherwise business would not be done by Russia in this country. I do not recollect the exact amount of debts which are still due to this country by Russia, but I know that one single organisation, the British Union of Russian Bondholders represents over £25,000,000 of claims against Russia. There is no suggestion of any likelihood that there will be any repayment of that sum. I should like to thank the hon. Member for his explanation in regard to certain technical terms used in this House. He admitted that the House had been misled by the use of these terms, and he very briefly quoted an illustration. On the 10th March of this year he stated in this House that 144 definite proposals in respect of exports to Russia involving £3,142,000 had been approved up to the 4th February. The impression created in the minds of certain hon. Members, and certainly on people outside, was that the actual amount of risk undertaken by the Government was the huge sum of £3,142,000. The secretary of this British Union of Russian Bondholders assumed that that was the Government's liability. In fact, that was not even the face value of the contracts concluded. The face value of the contracts was £719,000, and, therefore, only 23 per cent. of the large sum mentioned by the secretary of that association. I am glad the Secretary to the Overseas Trade Department has given the explanation, and I hope that in future he will insist upon his civil servants giving him answers in plain and simple language so that there can be no confusion in anyone's mind.

I asked the hon. Member a question as to the amount of trade done with Russia during the past month, and he told me that the face value of the contracts was £585,277. That is larger than the trade done with all other countries put together. That amount was £414,503, so that more than half the total volume of business done last month was with Russia. I should like to know the average length of credit granted to Russia and the average length of credit granted to other countries. It is strange if longer credit is granted to other countries than to Russia, because it means that the Government put less trust in the Russian Government than they do in individuals in other countries without Government assistance. Then, what are other countries doing in the matter of guaranteeing their exporters against non-payment of debts by Russia? I have seen rumours in the papers, and perhaps they are even more than rumours, that Germany is drawing in her credit facilities; she is reducing the total amount outstanding at any particular time. I hope the Secretary to the Department will make inquiries and find out exactly what foreign countries are doing. If it is a fact that they are not granting the same facilities to Russia, he should find out the reason, and, if it is a good one, act accordingly. I hope the hon. Member will never forget that, although there have been no losses up to the moment, when the crash does come, if it does—and things are not so rosy in Russia at the present time—we lose everything because all the trade is done with the Russian Government. It is not like dealing with individuals in other countries. If we continue this trade with Russia we should certainly never have more than a limited sum outstanding; never more than £500,000 at the most, as the Government's share in the risk which is run.

I want to refer to the granting of credit facilities in connection with munitions of war. The hon. Member has told us that it is contrary to the Act of Parliament. Will he consider an Amendment of the Act in connection with munitions of war such as ships, guns and ammunition and other material? It is quite true that the late Government did not grant credits in such cases because we also were bound by the Act of Parliament, but I maintain that times are changing and that with all the conventions and treaties in existence it is more difficult for any country to succeed in the race in armaments. Warships and other materials of war for foreign countries are now actually being constructed here. This has been the case for years past. They are always constructed under licence from the Govern- ment, and it is only a small step forward to give credit facilities in such cases. It will be specially justified if the grant or refusal of such assistance makes the difference to our obtaining or losing orders for one of our depressed industries. I hear on good authority that Italy is giving this kind of financial help to her shipyards to build ships of war not only for Italy herself, but also for sale to Greece and Turkey. In the interests of employment at home we must be on the look out, and it will be well worth considering whether we should not extend credit facilities to include ships of war. [An HON. MEMBER: "Battleships for other countries, but not for Russia."] If these ships have to be constructed on any case, why should we not construct them? That is the whole point. I would never suggest that battleships should be constructed here if they could not be constructed elsewhere, but if they would in any event be constructed elsewhere, then in the interests of employment I see no reason why we should not construct them here and find employment for our shipyards where there is so little employment at the present time. Let me come now to the actual terms of the Resolution. We agree with the maximum extension contained in the Resolution. We agree that the term should be extended to 1935 for these new guarantees and we do not, therefore, propose to resist the Resolution. I hope, however, that it will be considered as the maximum, and that it will be found practicable to hand over the whole business of credit insurance to private enterprise long before the limit of five years is reached.

Mr. RUNCIMAN

The speech delivered by the right hon. Member for Chorley (Mr. Hacking) reminds me of the story of the parson who prayed that there might be no shipwrecks for the coming week, but if there were, then let them be near our island. The right hon. Member is in favour of general disarmament, but if battleships are to be built he would like them to be guilt in this country. Let us hope that one of the outcomes of the existing Conference may be that we shall be able to sell some of them second-hand.

Mr. HACKING

That would not find employment in our shipyards.

Mr. RUNCIMAN

I should be prepared to sell them to those Powers which have no seaboard. I am not sure that credit facilities are wanted or would be very useful for that purpose. The inquiry which we are now conducting into the affairs of this Department has enabled the hon. Member the Secretary to the Overseas Trade Department to give us a lucid account of its life and disclosing its internal organisation. As far as I gathered from what he said and from the report of the Niemeyer Committee no one need be afraid of this Department competing successfully on commercial lines with outside organisations which do business in the ordinary way. The department does not make ends meet or such is to be inferred from the report of the Comptroller and Auditor-General who points out that not only have the premiums been inadequate for the purpose of making ends meet but that no allowance is made in the departmental accounts for the use of officers who are not in the credits department at all but are really seated elsewhere. If all the charges were brought in it is clear that there must have been a loss in the year 1928 and in 1929. That loss is not due to any abnormal claims made on the department. It is due to the very heavy departmental expenses. Out of a total gross income of £32,000 no less than £26,900 went in salaries, rent, rates, travelling expenses and staff expenses alone. The ordinary working expenditure of the department absorbed no less than 92 per cent. of its gross income.

I am constitutionally averse to State trading and I regard this as an example of the way, when the State begins to trade, you find it extremely difficult to make ends meet. No persons in control of private enterprise need be at all nervous of a department which has to spend 92 per cent. of its gross income in salaries, staff, etc. The truth is that the department itself is an experiment, as the Niemeyer Committee described it; and they were quite right. We do not know how it is going to work out. Sufficient time has not yet elapsed to enable us to say whether the claims on the department are going to absorb more than the premiums which have been paid for the insurance of the risks. It would be impossible for us to say that we have enough data to justify the department being closed down, and the right hon. Gentleman the Member for Chorley has made it quite clear that for his part he would regard the closing of the department as somewhat premature. He is looking forward to a further period of life being granted in order to show whether it is going to fulfil the objects for which it has been created. That is the object of the Secretary to the Department. He desires that it should be given a further lease of life in order to see whether under its new constitution it will be able to serve British industry and commerce, and do so without throwing any charge on the general taxpayer. In so far as that is his object I am heartily with him. I believe the scheme ought to be given a further and fuller trial under its new constitution, then we shall know much better where we stand.

The House need not be at all mystified on the subject of account keeping. The simplest accounts in the world are those of the British Treasury. I know that many people do not think so as they wade through our Blue Books and our Estimates; but it is true. We work on the simple system of putting in the cash we receive and the cash we pay out, but, of course, that kind of account keeping would never do for an account like that of the export credits scheme, where you have liabilities spread over long periods. You have to provide journal entries. There is not a journal entry in the whole of the British Treasury. They do not know what it means, as far as British Government accounting is concerned. They have only a cash book. The sooner the new system is adopted for assisting what is a commercial Department, the better for the knowledge with which the hon. Gentleman conducts his business and the scrutiny which we can exercise over the Department.

With regard to the directorate, I do not think the hon. Gentleman need be at all afraid of granting a considerable degree of discretion to his three directors, or whatever they may be called. It is essential, if the business is to be conducted well, that it should operate quickly. That, I believe, to be one of the objects of having three men who are devoted to this work and who will each day of the week be able to pass or turn down the credits, so that traders may know exactly where they stand. The Minister is to be congratulated on having obtained the assistance of three excellent persons who can be counted on, not only for their skill, but for complete impartiality. That really is one of the things that we must keep in mind in all these Government trading concerns. It is very easy for partiality to be shown for one set of views or another, or for one set of individuals or another.

In the speech of the right hon. Gentleman who has just spoken there was the very remarkable instance given of a member of a chamber of commerce decrying the whole system and yet himself, through his firm, having full advantage of the system. That is the sort of thing which obviously the directors must guard themselves against. It is essential that they should be men of unimpeachable integrity and men who are above suspicion. They ought to be above suspicion not only in respect of individual accounts, but also in respect of separate countries. Why should they show any prejudice, as I fear the right hon. Gentleman who has just spoken did on the subject of Russia?

I would like to say a word or two about the department's attitude to Russia. In the first place one must dissociate in one's mind the debt obligations of Russia and the way in which they can be met. I believe that the total amount certainly the largest amount I have ever heard attributed to Russia as debts to outside creditors, is something under £250,000,000 sterling. That has nothing whatever to do with this department; it, does not even touch the functions of this department. It is really a matter which concerns those who lent money in the past to the Russian State in its various forms, to the old Tsarist Government, to the intermediate Governments which were swept away after the War; to municipalities which used British money for the equipment of their towns with sanitary arrangements, waterworks and trams and to railway companies for the extension of railways and so on. If you take that total lump sum, you can divide it again into its various categories. For instance there are the debts incurred by the old Tsarist régime, those which were incurred by the Government itself. I can imagine them being treated together in one category. Then there is another lot which refer to the time after the War, when there were short and transient Governments. We unfortunately took one side and showed our partiality, against British national interests as it turned out. That is another category. Then there are the advances made—

The DEPUTY-CHAIRMAN (Mr. Dunnico)

The right hon. Gentleman would be digressing a long way from the subject before the Committee if he followed that line of thought.

Mr. A. M. SAMUEL

On a point of Order. I submit that we must discuss what limitations, if any, should be put on the Financial Resolution, and as the policy of the Resolution depends very much on whether we give the guarantees in this country or that. I submit, with great respect that you might stretch your permission and give us an opportunity to deal with the operation of these export credit guarantees in the widest possible way.

The DEPUTY-CHAIRMAN

It is not my desire to interfere in any way with the discussion of the reasons why we should or should not give credit facilities to trade with Russia on strictly commercial lines. I was afraid that the right hon. Gentleman was about to discuss whether the subsidising of expeditions to Russia was wise or unwise. That question certainly cannot be discussed.

Mr. RUNCIMAN

I would not infringe your Ruling in any way. I am satisfied with having been allowed to give that general introduction to the discussion of the credits granted under this scheme in Russia. I was pointing out that all these debts are matters of the past. The way in which they will have to be dealt with must be settled in the City of London or in Berlin and Paris, and by those who may be asked to lend money in future. I have no doubt that they will put their feet down very firmly and say, "We lend no money until you acknowledge an indebtedness about which there can be no question." But that is not the problem of the Minister. His is an entirely different problem. He is asked time after time, by manufacturers and exporters from this country, to grant facilities to them. It is true that in granting these facilities to them he must of necessity be giving some benefit to Russia, but since when has it been our standard in this country that we refuse to trade with those with whom we disagree in politics or religion or anything else, because it may confer some benefit on them?

How much has the Minister so far given to Russia? The total figure cannot be very large. The total liability in 1928 was just over £1,750,000 for every country, and the total liability up to 1029 was under £3,000,000. The total now cannot be very large, and it represents a comparatively small amount of material. That is the point I want to get at. I am not really concerned with the moral question of repayment by Russia, and the Chairman would not allow me to discuss further the matter of loans. That is a separate problem altogether. The Chancellor of the Exchequer may have to consider conditions if at any time he is asked to guarantee a Russian loan, and I hope that he will think once, twice and many times before he involves this country in a guarantee. The question here is whether you will get an order from some Russian department, a department of State or not, and give employment to our people here, and give profit, I hope, to the concerns which conduct the operations while running the risk of the Russian department refusing to pay up in due course.

There are two safeguards against that. The first is that the Minister is to follow the advice given by the advisory committee, namely, that they should be short-term credits. That, of course, at once cuts out a very large number of the transactions with Russia which are in prospect at the moment. The Russians have succeeded in placing orders for tractors in the United States and have received years of credit. Locomotives are being built now in American works and the Russians again are receiving considerably longer credit than we can grant here. Very fortunately they have not been buying much in the nature of textile machinery abroad, but have bought nearly all that they require in Lancashire. There the arrangements made have been very simple and have not led, I am assured by those who are at the head of affairs, to the lose of a single £100.

That leads me to the second safeguard, that of experience. The present Russian Government may have ideas that we do not hold with regard to past debts. Their moral standard may be entirely different from that of the City of London. But so far as current transactions are concerned, I have yet to hear of any bad debts being incurred. From what I can learn, the Russians have been paying up properly and punctually the amounts due. One is bound to say that in all fairness. In commendation of the prudence of British business men, these contracts and supplies, partly paid for in cash and partly on deferred payment, were not entered into by men who were unaware of the risk, but by men who knew what they were doing. Perhaps I may recount my own experience. I have never sold anything to Russia, but I have had boats under charter to Russia, and the Russians have paid up every penny just as punctually and completely as though the vessels had been chartered to an American or French or Italian merchant. That experience ought to encourage others to go into the same field.

We are sadly in want of work in this country and cannot afford to put any customer on one side. It would be a thousand pities if the Department could be urged not to grant these facilities to Russian transactions wherever and whenever they are advised by the Committee that they can on their merits be granted. Let them not allow the prejudice of politics or country or anything of the kind to enter into the matter. This Department has still to prove itself, but it cannot prove itself successful on a small turnover. It must have a much larger turnover if it is to make ends meet and perform any considerable service to the industry and commerce of this country. I, therefore, urge the Minister not to be too nervous in dealing with the matter because of political pressure from outside. One method ought to dominate all these transactions. The Minister should take them on their business merits and allow no other consideration to creep in.

Mr. R. A. TAYLOR

I would congratulate the right hon. Gentleman who has just spoken on his very clear and lucid statement of the trading relations between this country and Russia. His speech was in striking contrast to that of the right hon. Member for Chorley (Mr. Hacking), which amazed me. I thought that sentiments of the kind expressed by the right hon. Member for Chorley were completely out of date. I never expected to hear from the Con- servative Front Bench the argument that in order to provide employment we should build battleships and manufacture munitions of war and export them to other nations, possibly to be used for the purpose of killing British seamen and soldiers. I never thought that I should hear a statement of that kind from a right hon. Gentleman who, while he is willing to do that, is quite unwilling to allow this country to send to Russia the tractors, the oil engines, and the excavators that are necessary for the development of that country and its peace and prosperity.

Mr. HACKING

The hon. Member must be aware that we are manufacturing munitions of war to-day in vast quantities for foreign countries.

Mr. TAYLOR

The right hon. Gentleman suggested that the credit of the State should be used for that purpose, and that is entirely different from manufacture under ordinary and normal conditions. I am astonished that these observations should have fallen from him.

7.0 p.m.

Mr. HACKING

I want the hon. Member to realise that the present Government are giving their blessings to these ships being manufactured at the present time. All that I am suggesting is that it should be extended to include more rather than less.

Mr. TAYLOR

Apart from that explanation, it is true that the right hon. Gentleman is willing to use the credit for the purposes which he indicated.

Mr. HACKING

In the interest of employment.

Mr. TAYLOR

That was not thought to be an appropriate purpose of the Overseas Trade Acts by Members in previous Parliaments, and I am astonished that the right. hon. Gentleman should oppose the granting of credits for British exports to Russia, in view of the enormous losses that have accrued to the State, not as a result of the existing system, but under the scheme of advances which began about 1919. I believe it is a fact that under that particular scheme on a total transaction of £1,750,000 we actually sustained a loss of £1,100,000. That was not the result of careless administration by an inefficient Labour Government. That was the result of administration by a Government of which the right hon. Gentleman was a strong supporter. It is true that considerable losses were made under the second scheme which operated from 1921 to 1926, but those losses have nothing to do with the existing situation and with the question as to whether or not it is a wise thing to extend the operation of the Overseas Trade Credits guaranteed under those Acts for another five years.

This Financial Resolution raises, in my opinion, a question of vital policy so far as the Labour Government are concerned. I will not go over the ground covered by the right hon. Gentleman who spoke from the Liberal Front Bench when he pointed out how very expensive the work of this Department is in relation to the total turnover. But, even assuming that the later figures given by the Minister of some £6,000,000 a year, even taking that maximum figure, that is only a very small proportion indeed out of the total volume of British exports, which I think amount to about £725,000,000 a year. There is in the Estimate this year an increase of £39,000 in the amount required to liquidate guarantees, and it raises, in my mind, the question whether it is right and proper that this princip1e of using State credit and fixing the charge on public funds should be continued. It is certain that if this Department is to develop into a really useful part of our general credit system there must be substantial changes of policy and of control.

The right hon. Gentleman the Member for St. Ives (Mr. Runciman) twitted us on this side of the House with using the figures relating to this Department as an example of what happened when the State went into business, bat I would respectfully point out that you have a situation in relation to this Department where the experimental work has resulted in a considerable loss to public funds and where the operations of the Department have been deliberately confined and kept within such limit that it is impossible to get a sufficient premium income to pay the costs. In looking through the report presented to Parliament in December last, I find that the chairman of the Committee expressed the opinion that the permanent use of the credit of the State for the benefit of particular private exporting firms whose applications might be granted does not seem to us to be desirable. If you have the control of a Department of this kind by people who frankly state their definite opinion that it is not desirable that the credit of the State should be used in the direction intended by the Act, you cannot expect your Department to grow into a really useful service—

Major HILLS

To what Committee's Report is the hon. Gentleman referring?

Mr. TAYLOR

The Niemeyer Committee. I want to ask the Minister one or two questions. I want to ask him whether it is the intention to add to the present membership of the Advisory Committee a sufficient number of Members of the House of Commons, or representatives of interests other than those of traders and bankers, in order to ensure that the real purpose which Parliament had in view when this legislation was passed shall be properly carried out. There is only one justification for these Acts, and that is that they will bring to Great Britain orders which, were it not for the use of the State's credit, would not in the normal course of business come to this country. The primary purpose of these Acts was to assist in solving the problem of unemployment and the bringing of orders to this country in order that men may be placed at work on the jobs to which they were accustomed. I think the change proposed by the Minister under which a small executive committee is to have even greater powers than is given to-day will render decisions of this committee in matters of policy even less likely to fulfil the purposes of the Acts than those which we have already. Parliament sanctioned the use of £26,000,000 to be outstanding at any one period for guarantees given under these Acts, and on 31st December last, according to an answer given by the Minister, only £4,820,000 had been used, leaving a total of £21,000,000 already sanctioned by Parliament which could have been used for the purposes of financing the export of British goods. Why was that sum not used? It was not used because perfectly sound applications which were placed before the committee, or at least before the officers of the Department, for I am satisfied that many of them never reached the Advisory Committee at all—[Interruption.] I am prepared to substantiate that statement if it is challenged. It has not been used because of the policy of the Administration and of the Advisory Committee in restricting the use of the credit machinery of the Department to short-term credits. I want to draw the attention of the Committee to the present constitution of the Advisory Committee. The chairman, Colonel Peel, is chairman of the National Bank of Egypt. Another member, Mr. Caulcutt, is a director of Barclays Bank. Then there are Mr. C. D. Seligman; Sir Edward Crowe, Comptroller-General of the Department of Overseas Trade; Mr. F. Goldsmith, manager of the National Discount Company; Major Hills, M.P.; Sir William Larke, of the National Federation of Iron and Steel Manufacturers; Mr. W. E. Preston, director of the Chartered Bank of India, Australia and China; Mr. E. R. Pulbrook, of Lloyds; Sir Gilbert Vyle, Chambers of Commerce; Mr. W. E. Wells, director of the Anglo and South American Bank; and the hon. and gallant Member who represents the Portsmouth Division (Captain Hall) and Mr. Blair make up the 13 members of the Committee.

I am not for one moment suggesting that the members of this Committee have not done their duty and considered fairly and squarely and without prejudice the applications that have been placed before them according to their point of view and according to what they believe to be the purposes of the machinery of this Department; but I would point out that the views expressed in the report to which I have previously referred, that the Department should be restricted to short-term credits, was not the intention of Parliament when the legislation was passed. It is quite clear that it is within the province of the Committee to grant as long as five years' credit for the purpose of assisting exports from the heavy industries, and in the depressed industries of engineering, shipbuilding, and so on, the normal nature of certain classes of transactions is such that credit terms of 18 months, two years, three years, or even five years are quite normal, and, unless Parliament had intended that credits of that length could have been granted under the machinery which was set up, it would never have given power to the Committee to go to that length.

I suggest that the greatest difficulty which is confronting those who are struggling with the job of maintaining employment in the depressed industries is the difficulty of handling business involving long-term credits on something like equal terms with their competitors. Therefore, I would ask my hon. Friend the Secretary to the Overseas Trade Department whether he contemplates any changes in, or additions to the membership of the advisory committee; whether it is intended that in future the maximum use shall be made by the advisory committee of the powers conferred by Parliament, and whether, in the future, credits up to five years shall be available for the heavy industries in all cases where the business is sound, and where such credits will promote employment in this country.

I have had to approach both the hon. Gentleman and the Lord Privy Seal from time to time during the last few months with regard to certain transactions relating to trade between this country and Russia. I hope that I do not suffer from a Russian complex. I do not prefer trade with Russia to trade with any other country, but I am concerned that the men in my constituency should get back into the factories, at the work to which they have been accustomed. If we can contribute to that end by means of trade with Russia, or with the Colonies or with the Dominions, or with any other country, then it is the duty of this Government, above every other Government, to make that contribution. I plead for this change of policy, not merely in relation to transactions between this country and Russia, but in order that these credits shall be available for bridging the gap between exporters in this country and markets, anywhere, in any part of the world. I am not pleading that these facilities should be specially extended to Russia, but it so happens that, before the War, Russia was the most important market for the output of the factories in my constituency.

As I say, I have had occasion to see the hon. Gentleman and the Lord Privy Seal on this matter, and I have placed before the House certain facts. I am glad to say that the resumption of diplomatic relations with Russia has already helped considerably in our Lincolnshire towns. The hon. and gallant Member for Gainsborough (Captain Crookshank), although one seldom hears him expressing any thanks to the Government, ought to appreciate this aspect of Government policy, because it has had the result of materially relieving unemployment in the division which he represents. In the city of Lincoln, a considerable number of men are at work, who would be out of work were it not for the Russian orders which are being executed in our factories. Of course, with the best will in the world, the number and amount of the contracts which can be financed out of the direct resources of firms are necessarily limited, especially when the firms are up against the fact that there is a credit barrage, operating through the banks, which prevents them getting normal accommodation on the execution of large orders for Russia.

I have been told, and I have every reason to believe that my information's correct, that it was impossible a few weeks ago to get Russian bills discounted at less than 18 per cent. in the City of London. That means that, wherever the orders extend over any considerable period, the rate of discount is so high that it is quite impossible to undertake the work. Immediately bills receive the Government guarantee, they become first-class negotiable securities, and that would enable orders to be taken which cannot be taken at the present time, not only because of the special difficulties in relation to the Russian market, but because of the general restriction on credit, operating through the banks, in the case of trade between this country and Russia.

I urge upon the hon. Gentleman to alter, at once, the conditions which are being imposed by the advisory committee upon which, as I have shown, banking interests are predominant. That committee declined to look at large scale contracts which could have made an immediate contribution to the solution of the unemployment problem. They declined to consider any applications involving more than 12 months' credit and, in general, their policy is not suited to dealing with large scale transactions in- volving say, contracts of £500,000 or £1,000,000, and those are the contracts which really make a contribution to the solution of the unemployment problem. I ask the hon. Gentleman whether he could not alter the system so that, without increasing appreciably the liability of the Department, he could meet the necessities of certain manufacturers with regard to financing this trade. I ask, for instance, whether a system of 10 per cent. on shipment, 10 per cent. at 3 months, 10 per cent. at 6 months, 10 per cent. at 9 months, 20 per cent. at 12 months, 10 per cent. at 15 months, 10 per cent. at 18 months, 10 per cent. at 21 months, and 10 per cent. at 24 months for machinery used in connection with mines and the equipment of electrical plants, with 75 per cent. covered by insurance, are not terms on which orders could be accepted, the Department seriously considering every proposition on its merits. I do not mean that there should be any wholesale dissemination of credit but that it should be possible to put up a definite contract, involving a definite sum, on those terms for the serious consideration of the Department.

Up to the present, I have not been able to get any satisfaction from the hon. Gentleman or from the Lord Privy Seal on this important matter. It would be folly of me to overlook the fact that the hon. Gentleman and his colleague have been in a difficult position in relation to this matter. We are all aware that negotiations have been proceeding with the Russian Government. We trust that those negotiations are nearing finality and that a settlement will be reached at any rate sufficiently satisfactory to remove the present financial barrage against Anglo-Russian transactions, and promote the growth of that confidence and good will in the relations between the countries which will automatically clear away many difficulties.

We are aware of the reactions of this question upon those negotiations, and it may be that the Government feel that in this respect they have a bargaining weapon with which they do not desire to part until they secure a settlement. If that is the reason why the advisory committee have been acting in the way I have indicated, we all hope that circumstances will shortly change and that that difficulty will be swept away. If, on the other hand, the Government are going to leave the position so that whatever their decision and their policy may be, an advisory committee of bankers is to determine what is to be done with monies voted by Parliament, not from the point of view of promoting employment but solely from the point of view of establishing a limited service which will not compete with private enterprise, then it seems folly to risk public money in forwarding such a purpose. We have lost substantial orders this spring because our own manufacturers have not been able to give competitive terms. I quote only two examples given by Mr. Metcalfe in the pages of the "Leeds Chamber of Commerce Journal" a short time ago: An order for 6,000 tons of steel products was refused a few weeks ago, although an earlier order for similar supplies had been executed here. The manufacturers on that occasion had granted deferred payments which they are now unable to repeat. Price, quality, workmanship, time of delivery were all acceptable to the purchasers, so that it was no question of obsolete machinery or high costs of production that lost us this business; it was solely because the makers could not take upon themselves the whole responsibility of granting the Soviet from three to five years' credit. The second case to which Mr. Metcalfe refers is in relation to a large order for tractors: The factory to which this business was offered is up-to-date in every respect. Thousands of pounds have been spent on testing these tractors, both in this country and Russia, and they were accepted as satisfactory to meet Russian requirements. Altogether, since January, Russian engineering contracts to the value of more than £3,500,000 which could have been secured by us, had credits been available have been turned over to foreign competitors. The credit barrage which is operating in this country and the vendetta pursued by the Conservative party against reconciliation with Russia, are having the effect of diverting employment from the factories of Britain to the factories of America and Germany. At the present time there are 900 Russian engineers in the United States learning the American technique and getting to understand American machinery, and there are 600 American engineers in Russia helping to lay the foundations of American technique there, and expanding the demand for American goods and machin- ery. Seeing that the Government have, in this matter, the support of a large number of Members on the other side of the House, I hope that they will insist that the intention of Parliament shall be carried out, that five year credits shall be available, and that they will discharge their responsibility from the point of view of putting every available man back to work at the job to which he is accustomed.

Major HILLS

I had the honour of being chairman of the committee which drew up the scheme at present in operation and I am a member of the advisory committee. Both the export credit scheme and also the advisory committee, have been attacked in this Debate from two angles. My right hon. Friend on the Front Bench accused the committee of going too far, and the hon. Member for Lincoln (Mr. R. A. Taylor) thinks it has not gone far enough. I would ask him to bear certain things in mind. The first is that, either you are going to guarantee everybody who asks for a guarantee, or else you are going to act on some principle and some system. Secondly, there is the fact that the insurance of credit is a new and a difficult field of operations. The insurance of credit would have been thought fantastic a few years ago. It would have been thought that credit was a thing that nobody could possibly quote a rate about. The whole field of insurance credit is a new field, and its exploration is due partly to the efforts of the Chairman of the Trade Indemnity Company, and partly to the work of the Overseas Trade Department.

You cannot say, as the last speaker has said, that you must only consider the amount of business that you would create in this country. You have to consider some principle on which you can guarantee credit. All the applications coming before the advisory committee are considered on their merits, and I want to assure the House that there is no sort of prejudice owing to the constitution or the customs or the Government of Russia. Secondly, the Department does not exist to make profits, but also it does not exist to make losses, and the principle is, as I think the last speaker would agree, that it ought to pay expenses and impose no loss on the taxpayer.

I want to say one word on the speech of the right hon. Member for St. Ives (Mr. Runciman), who quoted the criticisms of the Comptroller and AuditorGeneral. I think those are criticisms on the accounts closed on the 31st March, 1929. I do not think we have yet got the Comptroller's criticisms on last year's accounts, for big changes were made last year, and I hope now that the premiums will about pay for losses and expenses and that the whole business will about balance. Anyhow, that was the intention of my committee.

May I just say one word about those two committees? First c-f all, I was chairman of a committee about three or four years ago that formulated a new scheme, and I had the assistance of some very able friends indeed. We drew up a scheme, which is now in operation, and I should like to remind the hon. Member for Lincoln that the loss incurred was not incurred under this new scheme at all. It was a very serious loss, but it was an old loss, old history, and was incurred when the system was quite different from that which now prevails. Secondly, I want to say a word about the advisory committee. The last speaker suggested a change. He may be right, but personally I do not know where you would find a better committee. I do want the House to be satisfied that every single application is considered on its merits, and when you have to consider guarantees for the payment of a debt or the credit of the importer, you must go to people who are accustomed to that sort of business. I do not see how you can get outside that. The hon. Member says there are more bankers on the committee than he cares to see. I do not know. I have worked with them, and I have found them extremely reasonable people, and it must not be forgotten that the banker has the great advantage that he has means of getting knowledge in foreign capitals that no other business man has got.

I want particularly to stress the debt that this country owes to the chairman of the committee, Colonel Sidney Peel, and the vice-chairman, Mr. Caulcutt, for they have carried on the work of the committee and have also done a large amount of work between times to expedite the decisions that the committee gives. I think this House has to make up its mind whether it wants the business conducted on the lines of about balancing, or whether it wants to take risks for the sake of encouraging trade or increasing employment here.

Mr. R. A. TAYLOR

What justification is there for the Act at all unless a risk is taken?

Major HILLS

Risk means that on balance you lose a certain amount of money. How much do you want to lose? If you want to lose money, it is quite easy to do so. The Act was for the encouragement of employment by taking what I conceive to be the business risk of the insurance of credit. It is for the House to decide, and if Parliament likes, it can risk its money, and it will certainly lose its money, for there is nothing in which money is more easy to lose than insurance, but I put it to the Committee that the scheme on which we are working is a proper scheme on which to work, and if a better committee can be found, I shall be glad to be told its constitution. I do not think we can find a better. I want to say that I do not think the House always appreciates the immense amount of public work that is done by bodies of this sort, composed entirely of unpaid, busy men, who are giving their own time. All that they come in for usually is criticism, and I want to say a word of commendation of the admirable work that they have done. It is a job undertaken entirely from the wish to serve the public and the State. and I want to see that they get fair play.

The right hon. Gentleman on the Front Bench talked about the transfer of this Department to private enterprise. I stand, if I may say so, half way between the view that my right hon. Friend expressed and the view expressed on the benches opposite. I do not think you can. I think the conditions are quite different from the conditions which would operate in a commercial company which insures credit. In the first place, we are limited to one special trade, export trade, and we are limited to the export of British manufactures. The other great company, the Trade Indemnity Company, can guarantee all credits, for import or export of foreign goods, trade between two foreign countries, and so on. It can guarantee all sorts of credit, and I do not think that any insurance company would take over a business so limited as this business is. I have always seen the very great difficulty in that, and I think there is a middle ground, a "No man's land" between what the commercial company would insure and the risk that is uninsurable. I think there is a middle ground which the State can very usefully hold, and that the State can insure risks that a bank would not take and yet avoid insuring risks that would be too risky. If you are to have this sort of business—and it has helped our trade in the past—I think it must be carried on by the State. I do not think that private enterprise could or would do it

Just one word about the period for which the credits run. We have power to give long-term credits, but, on the other hand, the Act is experimental, the ground is unknown ground very largely, and I do not think it would be advisable to go too far in giving credit of the very extended period of five years as suggested by the hon. Member opposite. I think you have to go slowly, to make sure of your ground, and to proceed always on the assumption that you do not want to lose money, that you want to guarantee all the credits that you can as long as you believe that at the end of the year you will about balance. I do not think you should go too far in these long-term credits.

I want to reinforce a suggestion that comes in the report of Colonel Peel, Sir Otto Niemeyer, and Sir William Plender. With regard to delays in dealing with applications, it is not the fault of the Department or of the advisory committee, but it lies in our constitution. We have a committee that meets every Wednesday. They cannot meet more than once a week, and important eases have to go before them. In certain cases the chairman and the Department settle the matter for themselves, and then it comes up for confirmation by the committee afterwards, but all the more important cases go before the advisory committee. Supposing a case is investigated, that takes some time, and then it comes before the committee, we will say, to-day, but it may be that some of the members want further information. It then has to go back and wait till next Wednesday, and that means a delay in many cases. The report of these three gentleman advocates an executive committee of three, who would, I suppose, sit almost continuously. Anyhow, they could be got together at any time, and that would mean a very great saving in time. I am perfectly certain, for many reasons, that that would be a very great improvement. It would expedite matters, it would mean that the three members were continually in touch with all the demands for credit that came in, and it would mean that they would get control of the whole of the business and have it in hand once a week. I believe that would be a very valuable reform.

Lastly, I want to say a word about Russia. I have on previous occasions in this House pleaded for the extension of the Export Credits Guarantee Scheme to Russia before it was so extended. I do not see why, given proper conditions, we should not give credit to exports to Russia. I want again to assure the Committee that in the committee's considerations only the business aspect of the transactions is borne in mind. The Committee has been criticised, but after all, it is a committee of business men, and they are accustomed to judge all matters on business lines. They approach this matter on business lines, and I do not think that any body, however constituted, could possibly judge it otherwise. If you had not a solid rule that business risks should be the deciding theory, you would set out on a sea where there is no shore, and the only end would be the exhaustion of the £26,000,000 credit which this Department is allowed to pledge. I believe that there is a great work before this committee, and that they are doing a great work. They are helping British trade and will help it more in future. I should much regret any change of the system on which this Department is run and which before credits are granted does not regard the risk which would be incurred.

Mr. PRICE

I listened with interest to the right hon. and gallant Gentleman the Member for Ripon (Major Hills), and I agree with him that this House should decide whether it is fair to take a risk in this matter of export credits, because undoubtedly a risk must be involved in extending credits beyond what has hitherto been the custom. I listened also to see whether he could give any reason why the scope of the Export Credits Scheme should not be extended beyond what it is now, and I was disappointed that I did not hear a sufficiently reasonable reply to the criticisms of my hon. Friend the Member for Lincoln (Mr. R. A. Taylor). Any advance of the Export Credits Scheme very largely depends upon its elasticity. If we look at the Report of the Niemeyer Committee we see something which very much impairs its elasticity. The Report says on page 8: The major portion of the business accepted has been for relatively short credits. e.g., up to six months. On page 9 it says: We think the scheme should remain one for relatively short credits. Long credits involve entirely different risks, and it is not, in our view, desirable that such applications should in general be entertained. The situation in this country is too serious, particularly in our great northern industrial areas, to take the matter in that sense. We have to take risks in dealing with the terrible problem of unemployment, and those who, like myself, have the honour of representing constituencies where 12 per cent. of the adult population are in receipt of either unemployment benefit or outdoor relief, naturally feel that, in anything which would tend directly or indirectly to stimulate our export trade, we must take risks. This Committee would not be doing its duty if it did not do so. The Niemeyer Committee Report quotes figures of guarantees which have been given, and the total comes to only £4,000,000 a year; the total of our export trade is £725,000,000, so that the guarantees amount to a very small and almost insignificant sum. The reason why it is so necessary for this scheme to be extended to apply to longer term credits than has hitherto been the case is that there are countries with whom we have commercial relations who are not in a position to pay cash down, or even to have short-term credits for large orders for constructural engineering goods. It is a different thing when we are dealing with commercial relations between this country and a highly industrial country on the Continent, but when we are dealing with undeveloped colonial areas, and countries like the South American Republics, Eastern Europe, Russia, the Balkans and so on, these countries are not in a position to pay except on long-term credits. That is even more the case in regard to Russia and Eastern Europe than in regard to the South American Republics, because there there may be companies operating, such as railway companies, which are owned and controlled from London, and there is not the necessity for long-term credits. In Russia, the Government are attempting a great industrial reconstruction of the country. How far they have succeeded it is not for us to say, and it is not for us to inquire into the political and economic theories of the people who are controlling that country, but where it is a question of the business in which our unemployed problem may be partially dealt with, the question does concern us whether we can push our export trade into that country.

The Government there are not in a position to pay at very early dates, because they are using all their energy and surplus economic wealth to develop the country. Consequently, we must extend our credits at least two years, if not more. Losses of certain orders have been quoted owing to the absence of credit, and I have heard of the loss of an order of £600,000 worth of trawlers, which would have come to this country if the firms concerned could have got two years' credit. Therefore, I plead for greater elasticity in the interests of the credit scheme. I would like to refer to the indirect effect upon world markets generally of the lack of long-term credits to Russia. There is no doubt that the absence of these credits stimulates the Russian Government to pay for their imports by pushing their exports as hard as ever they can, at a time, too, when we have falling prices on the world markets, and over-production in certain important articles of raw material. I know that that is the case in the timber trade. The Russian Government are increasing their export of timber, and trying to export 750,000 standards this year, which is 250,000 standards more than last year, and this at a time when the markets of Europe can only with difficulty absorb what they imported from Russia and the Scandinavian countries last year.

The effect, therefore, of not allowing Russia to receive these credits is bound to be to make more acute the deflation of prices, and the general trade depression, which have come about owing to a number of causes, and which in this case is being made still more acute by excluding Russia from long-term credits. I hope that the Government will apply their minds and energies to solving this problem as soon as possible. I do not wish to say a word which would make their task more difficult, for I understand that negotiations are going on, and we all hope that they will meet with success. I hope, therefore, that what I have said will help to strengthen their hands.

Mr. A. M. SAMUEL

I must offer my congratulations to the hon. Member for Whitehaven (Mr. Price) on his skilful speech. He has no doubt been in the export trade, and knows what he is talking about in regard to Russian trade. I notice that there are other hon. Members taking notes, including the hon. Member for Dartford (Mr. Mills) and the hon. Member for West Wolverhampton (Mr. W. J. Brown), and it would be very instructive and helpful if they would oblige us by telling us their views, so that we may know what is the mind of Members on the other side in regard to the export credits scheme. I do not propose to deal now very much with Russia; I hope to deal lightly with it at the end of my remarks. It is within the knowledge of the hon. Gentleman, the secretary of the Overseas Trade Department, that he and I sat on its advisory committee for some years, and that I had charge of this scheme for three years as Secretary of the Overseas Trade Department. Therefore, I have nothing in my mind that is hostile to it. My right hon. Friend, who was the last Secretary of the Department, and I are almost godfathers of the present scheme. Therefore, such observations as I have to offer can have no purpose other than to strengthen it, and we shall be assisted by the views of the hon. Members for West Wolverhampton and Dartford, who both represent industrial constituencies.

8.0 p.m.

The hon. Member for Lincoln (Mr. R. A. Taylor) used the expression that there is a credit barrage, and he quoted some statements made by Mr. Metcalf. If I did not misunderstand him, he means that Russian buyers—that is the Russian Government—cannot purchase from us goods which we wish to sell, in order to put our people into work, because there is a credit barrage up against them; a clog owing to a lack of credit. There is not a word of truth in that. I do not impugn the hon. Member's truthfulness, but I impugn his judgment. [Interruption.] I am making no personal reflection on his truthfulness. Here is a synopsis of the figures of Russian trade over the last two years. In 1928 we bought from Russia goods to the value of £21,500,000, and Russia only took from us goods to the value of £4,750,000. She therefore had an unexpended credit here of £16,750,000. What is the good of the hon. Member saying there has been a credit barrage? Here is ample credit with which Russia could buy of us.

Mr. R. A. TAYLOR

Would the hon. Member apply the same argument to a country like Denmark?

Mr. SAMUEL

I should apply it to every country's balance with similar figures. You cannot break the laws of economics, or deny the amount of credit.

Mr. TAYLOR

The hon. Member knows perfectly well that in a country like Russia there has to be a longer credit period for all her imports owing to the absence of accommodation abroad, and, therefore, when I say "a credit barrage" what I mean is that orders are being lost owing to the refusal of financial facilities similar to those that have existed in Germany and exist to-day in America. They are being lost because there is a financial barrage against Anglo-Russian trade.

Mr. SAMUEL

I am sure the hon. Member will not take offence if I give an answer which Dr. Johnson would give: "Fiddle-de-dee!" Russia sold to us goods to the value of £21,500,000; we owe Russia £21,500,000 and we are willing to pay. Russia takes goods from us to the value of only £4,750,000. We in Lincoln and Norwich and Manchester were ready to sell them goods to the value of the credit balance amounting to £16,750,000. What did Russia do with that credit? She could have taken it either in money or in goods. She took it in cash, or exchange instead of in goods. What is the good of deceiving the people of Lincoln by telling them that there was a credit barrage? She had £16,750,000 to spend here and did not. In 1929, we bought from Russia even more than we bought in 1928, and for the greater part of 1929 the hon. Member's own Government were in office and were giving Russia the benefit of the Export Credits Scheme. We bought of Russia goods to the value of £26,500,000. Why did they not buy goods to the value of £26,500,000 from us? They bought goods to the value of only £6,500,000. There was £20,000,000 unspent by Russia, £20,000,000 which Russia could have used in buying goods from us. What has she done with that money?

Mr. PRICE

Has not the right hon. Gentleman heard of triangular trade between three countries, and not just trade between one country and another?

Mr. SAMUEL

No, I have never heard of it, although I once wrote a book on bills of exchange. They took the £20,000,000 of credit, and, by a system of triangular exchange, used it to buy goods in Germany or America instead of buying them here. That is the answer I do not wish to be polemical, and I do not say they have used the money for propaganda. I will put that question aside. They used this credit. which they might have used to buy agricultural goods in Lincolnshire, which is the hon. Member's county, or boots and shoes in my county of Norfolk—

Mr. R. A. TAYLOR

rose—

Mr. SAMUEL

No, I really cannot give way.

Mr. TAYLOR

But you are making statements reflecting on my honour.

Mr. SAMUEL

No, I am making statements reflecting on the hon. Member's judgment. But I will leave the Russian matter there.

Mr. TAYLOR

Will the hon. Member permit me?

Mr. SAMUEL

If the hon. Member tries to get away with the statement that there is a credit barrage, all I can say is that either I am crazy or that he is ill-informed.

Mr. TAYLOR

You will not tell that to the manufacturers in Lincoln

Mr. SAMUEL

I am a retired manufacturer myself. I have been to Lincoln. I addressed a meeting there. I have been in business and have watched firms trying to sell to Russia, and I had to administer this very scheme for three years as Secretary of the Department of Overseas Trade.

Mr. TAYLOR

rose—

Mr. SAMUEL

No, I cannot give way again. Let us analyse the White Paper. There is an unexpired period of 18 months. It was provided that the guarantees should be given "before the 8th day of September, 1931." The Government are proposing by this Resolution, which we are not opposing, to extend the period until 1940. The scheme which is now being operated is the one which I helped to start in 1926. I went all over England advocating it; it was taken up and brought to fruition by my right hon. Friend the Member for Chorley (Mr. Hacking). I am therefore in complete agreement with the scheme. Let us examine this White Paper and see what the scheme is aiming at, in order to understand what safeguards should be imported into it before it is renewed. As I have said over and over again, and as was said by my right hon. Friend, we were not anticipating that this would become a permanent branch of the Government service. What I wanted to do was to get the scheme well launched, to let the country see what a system of insurance against bad debts in the export markets was capable of; to let exporters see that they could get financial aid if they applied for it; and after a period to let the Great British insurance companies come in and do the business and eventually take the scheme off the hands of the Government and administer it. The House must be very careful to see that we are not being committed to establishing a permanent Department for administering a trading scheme in a manner which was never intended when the scheme was first started.

The scheme, as we intended it, was to be an insurance against bad debts in the export markets; in other words, to guarantee the credit of overseas buyers. An overseas buyer comes here and says, "I want to buy some tractors, or some boots and shoes, or some cotton, but I must give a bill for them as I cannot pay for them now." He wants to live on the "O.P.M. system"—on other people's money—a system which has been very much overdone. I was brought up in an old family firm in a large provin- cial city and we should have been horrified to deal on a five years' credit system. We never asked for such credit for ourselves, and if a customer had asked for five years' credit we should have said, "This man is living on overdrafts." A five years' credit system is quite wrong—even a two years' or a one year's credit system would be. The proper credit is 90 days, for no man can tell what will happen to him after six months. A man ought to be content with three months' credit. The five years' credit system advocated by hon. Members opposite is unwholesome and uneconomic.

Mr. TAYLOR

That was your scheme.

Mr. SAMUEL

I was never in favour of the five years' period. A customer who takes your goods and cannot pay till the end of five years is a very dangerous man to trade with. What was this scheme introduced to secure? It was introduced to increase our export trade. The Minister will bear me out, because he was my colleague on the advisory committee many years ago, when I say that very many applications for credit facilities were lodged with us and accepted, but were not afterwards taken up. We considered them, though the hon. Member for Lincoln would have the House believe the advisory committee intercepted the applications. [Interruption.] I took down the hon. Member's words: "There should be a change in the personnel of the committee. Their policy is unsuitable for contracts. They decline to consider applications. Their policy was unsuitable." He asked for a change of personnel, and implied that the conduct of the committee was unsatisfactory. Often and often we were asked to give facilities and we offered facilities. Later we asked, "Why do not the people who asked for and were granted these facilities come to take up the credits?" and we were told that they had failed to get the orders. It is no use firms saying they cannot get business because they are unable to secure credit facilities or saying that this scheme is not administered efficiently. It is willing to give credit facilities to warrantable schemes, but the business is not secured because the goods are often found to be too dear. The tenders were too high in some cases.

Mr. MILLS

That is not true.

Mr. SAMUEL

The Minister knows that as well as I do.

Mr. MILLS

May I make an appointment with the hon. Gentleman—

The CHAIRMAN

Order!

Mr. SAMUEL

The scheme has shown that there is no clog on the export trade owing to the lack of credit facilities—I am not talking about Russia—and the Minister himself can confirm that we are losing business because our goods are too dear. I am not going into the reason why they are too dear, but it is a point which the Lord Privy Seal ought to bear in mind in connection with his efforts to find work for the unemployed. It is not owing to lack of credit facilities. The working of the scheme has shown that the public want credit facilities to be available and it has shown that they can be given, and, what is more, it has shown the great insurance companies that the public are anxious for these facilities. But there should be certain safeguards. The 1926 scheme has now been working for four years, and that is a long enough period to enable us to see whether the risks we are taking in the countries where we are taking them are warranted. We ought now to review the position, to plot out the world, and to see in what areas we have lost money, why we are losing money there and whether the premiums charged are suitable for the risks we are bearing.

Hon. Members must remember that we can buy business too dearly. There is such a thing as doing a pound's worth of business and paying two pounds for it. We bought £200,000,000 worth of export business in Mexico, all of which appeared in the Board of Trade returns of the export trade, and we have lost every shilling of the money. We held the loan securities for the goods that went out, and were reflected in the Board of Trade returns. We rubbed our hands and said, "Well done! Look at our Board of Trade returns!" But those goods went out as gifts. Loans were raised here to pay for those exports; credit was thus given to Mexico for them. We subscribed loans and so gave employment to the workmen who produce the goods, and those who subscribed the loans held the paper. But instead of the loans yielding interest we have seen to-day, in answer to a question on the Paper, that every penny of the money which was subscribed is now lost. The goods thus went out as gifts. As I say, we can buy business too dearly, if under this scheme we are giving credit to certain countries and are making bad debts. Moreover, bad debts in those countries are made by traders who are not taking advantage of these facilities, and we ought to know what the losses are. We must estimate the value of trade with a country where we suffer large losses by bad debts.

When we come to the Sound Reading of this Bill, I am going to ask what has been done with credit facilities connected with Rumania? Has what we have done been justified? Can the Secretary to the Overseas Department tell us what are the losses shown in all our credit guarantees between this country and Rumania. Can he tell us what are the losses by default of obligations, for which the Overseas Department has given guarantees in respect of goods exported by British exporters to Rumania. Perhaps it would be better to decline taking further risks. Is the business on balance a loss or an even balance, if not a profit? The same thing applies to another country with which we do a large amount of business. I am sorry to say that I have heard that the amount of trade defaults in Brazil has been very serious. I have also heard, and I hope it is not true, that the nett result of our general export trade to Brazil has been very bad, that a large amount of bad trade debts have been made with Brazil.

It is a well known fact amongst fire insurance companies that sometimes a company finds it is an advantage to withdraw from a certain area. I was brought up in the City of Norwich Where we have one of the biggest insurance companies in this country. I have been told that for instance it has paid a company to cease writing risks in America, and for the same reason it may pay us to adopt that policy of export credits with certain countries. There are countries where our export trade can be bought too dearly and for that reason we should cease writing Government credit risks in the areas in which we are making undue losses.

As for Brazil we buy a great deal less commodities from Brazil than she buys from us. Brazil is a rich country and very friendly towards us. She is anxious to buy from us, but Brazil is badly organised commercially, and our commercial developments with that country are also bad. Brazil buys £19,000,000 worth of goods from us, and we only buy about £3,000,000 from Brazil, and that uneven balance ought to be put right. We might use our Export Credits Scheme to stimulate our exports to Brazil, of a less risky character. To accomplish that we should induce the great British firms, who have invested £300,000,000 in Brazil, to place their orders for railway and electric plant with this country. At the present time those companies buy elsewhere. Those great companies, fostered, supported and financed by British capital in Brazil, buy their railway and electrical plant elsewhere, and we export to Brazil a very small percentage of such goods from this country. A development of this kind would stimulate the purchase by us of Brazilian products, and so create Brazilian credits here.

There is another method by which we could put right any adverse balance in our Brazilian branch of the export credits balance sheet. The hon. Gentleman might take steps to make arrangements with the Brazilian Government and exporters by which we could take more beef and more cotton, more iron ore, manganese and fruit from Brazil. More exports from Brazil would enable Brazil to buy more largely from us, and at the same time would tend to correct the risk of loss by reason of our giving credits to exporters to Brazil. I am very interested in the credits scheme. The hon. Member for Lincoln represents a district which is the centre for agricultural machinery manufacturers, but the hon. Member did not tell us that the agricultural machinery people had accepted large Russian orders under our Export Credits Scheme.

In 1928, we were told about the large number of people who were out of work, and that if the Tory Government would only open up export credits with Russia we should be able to put unemployment right. We were told that there were 140,000,000 people in Russia who wanted to buy 140,000,000 articles. The whole thing has ended in smoke. Let us look for a moment at the exports. I have had the figures taken out purposely. Our exports to Russia in 1928 for January and February were about £900,000. Our exports to Russia in 1929 for January and February were £825,000, but in 1930 for the same months the amount was only £1,500,000—just £600,000 above the 1928 figures. There is nothing in those figures to confirm the view that the opening up of trade with Russia is likely to put our unemployment problem right. This £1,500,000 worth of goods could all along have been bought out of the £20,000,000 of Russian 1929 credit unspent here.

Mr. PERRY

May I draw the hon. Member's attention to the Report of the British trade delegation of the boot trade which went to Russia, and came back with the prospect of an order for 3,500,000 pairs of boots, but we were not able to get credit to carry out that order?

Mr. SAMUEL

I know all about that, and I am surprised that the hon. Member for Kettering (Mr. Perry) should speak of it. I know that the Northampton boot trade asked for credits amounting to £3,000,000 for boots and shoes for Russia. They went to see the Chancellor of the Duchy of Lancaster and he turned the request down. That was not done by a wicked Tory Government, but by one of our plutocratic demagogues who refused the credit those people wanted and merely told them that they should rationalise their trade. That was the only satisfaction the Northampton people got in response to their application for export credits to the Chancellor of the Duchy for 3,500,000 pairs of boots.

When I was Minister for Overseas Trade, I was badgered by hon. Members for export credits to restore the export of herrings to Russia. I had heard a great deal about the export of herrings to Russia, and how the poor herring fishermen had been deprived of their markets. I spent a fortnight of my summer holiday addressing meetings at Fraserburgh, Buckie, Lossiemouth, and making inquiries at another place the name of which I have forgotten—I think it was either Cullen or Macduff. I pointed out to them that, although they had not sold salted herrings to Russia, that was no fault of the wicked Tory Government or of the wicked Minister for Overseas Trade, namely, myself. I pointed out that Russia had plenty of credit with which to buy those herrings—sufficient to buy all the herrings that ever swam in the sea all that year—if she liked to use her credits. I showed what nonsense it was for anyone to tell the fishermen of the North of Scotland, or of Yarmouth or Lowestoft, that this reopening of export credits with Russia would put matters right in regard to employment.

Look at the figures. How much have export credits for Russia helped the herring fishermen? The Trade and Navigation Accounts for 1929, page 82, show that in 1927 the value of the herrings sold to Russia was £155,000, and, in 1928, £74,500. [An HON. MEMBER: "That was after the Arcos raid!"] Now that this God-sent Socialist Government has come in, with all the facilities for export credits, the value of herrings sold to Russia in 1929 was a trumpery £22,000. What good have export credits done here? In 1928, January and February, we sold £74,500 herrings to Russia, and in the same two months of 1930 only £84,000 after resumption of diplomatic relations. This whole question of Russian trade is a chimera, and the sooner the Socialist party wake up to it the better it will be for them and for us all. As my right hon. Friend the Member for Chorley has said, sooner or later—it is no use prophesying, but we are entitled to our opinions—there will be a financial disaster in Russia. When it may be I cannot tell; I do not know. I am not going to hazard an opinion about the present system of government there. Probably there is nothing to supersede it, and it will go on. But, as surely as the dawn comes, economic disaster will come; you cannot break the laws of economics. As Lord Passfied, then Mr. Sidney Webb, said to one of his own supporters in this House from the Front Bench opposite, you cannot break the law of supply and demand; if you try to do so, it will break you. What will happen in Russia will be this, and even now it is to be seen in operation. If the present system of extreme Marxian Socialism goes on, sooner or later Russian finances will come down from economic exhaustion, and then Heaven help the man who is caught in the door when the door slams.

It is true that the Soviets have never yet defaulted on their obligations to our firms, but it is like a game of musical chairs. You have 14 people and 13 chairs. The music goes on and then suddenly stops, and one man has to sit on the ground. Sooner or later it will be found that, if the Russian financial system continues as it is now, it will stop and then come down from economic exhaustion, and then some one will have to sit on the ground with Russian unpaid bills. If you take risks in Russia, you will have to do exactly what the fire insurance people do with regard to the Wood Street area. There is an area in the City upon which the great insurance companies will only take a limited amount of insurance. I agree with my right hon. Friend that when that time comes we may be face to face with a loss through our risks materialising. Let it then be the case that we have not too much risk running in Russia. At the present time we have the taxpayers' money risked in Russia to the extent of one-third, or even two-thirds, of the export credit guarantees. That is too large a proportion, and the hon. Gentleman should say whether he proposes to take so large a risk again.

Finally, I want to draw the attention of the Committee to the humiliation of the Labour Government. As I understood it, it was said, either by the Foreign Secretary or by the Prime Minister, that they would give no British guarantee of credit to Russia. British credit to Russia was in 1924, I think, one of the causes of the fall of the Labour Government. Let me remind them of this: Suppose that Greece or Austria came here, as they have done recently in the past, and tried to raise a loan, it was necessary for Great Britain to guarantee the bonds. Thus, when Greece and Austria have raised loans, Great Britain and other countries have put their names on the bonds, and what was the effect? Great Britain with other countries lent their credit and enabled Greece and Austria to raise loans in London; we and they guaranteed the credit of both Greece and Austria.

The Prime Minister and the Foreign Secretary have declared, here and in other places, that they were not going to guarantee the credit of Russia, but now they are put in this humiliating position, that they have eaten their words. Russian paper cannot be discounted in the markets of Britain. Let Russia buy as much as She likes, and the more she buys and pays for the better I like it. She buys certain things and needs long credits. But the paper or instruments of payment that the Russian Soviet gives to the British exporters, in return for goods, cannot be melted or turned into money with which to pay wages and buy raw materials, because those who are willing to lend money—bankers, bill discounters, and others—are not willing to lend money on or discount bills which bear only Soviet Russian signatures as acceptors. What has been the result? It is a humiliating thing. Great Britain, through the Export Credits Scheme, has put her name upon and guaranteed the credit of those Russian instruments, for without that guarantee of the British Government no money could have been raised upon the instruments by the export traders for wages or raw materials. That is to say, if English words mean anything, the British Socialist Government has guaranteed a short loan to Soviet Russia by guaranteeing Russian credit under Export Credits.

Mr. MILLS

The hon. Member for Farnham (Mr. A. M. Samuel) has spoken with a great deal of assurance, but has not said a single word in relation to the Report which is in the hands of Members of the House. Listening to his long diatribe, one would imagine that he was just making a few casual remarks about Russia, but at every fifth Second or so he returned to the subject, and one would imagine that the overseas credit operations conducted by him and by the right hon. Gentleman for whom he has such a great fondness were such wonderful success that there was no need to say any more on the subject, except to speak of the betrayal of British honour by the Labour Government. How does that square with the Report which every Member of the House has in his hands? It is a confession from beginning to end that the so-called advisory committee has never functioned, that not one-tenth of the hon. Members opposite know anything at all about the details at the orders that have been put before the Committee by great industrialists.

The hon. Gentleman is very fond of misquoting, and of reading half truths into statements made on this side of the House and, when challenged, refusing to answer. I will make this challenge to him. If he will make an appointment to meet the managing director of the biggest firm of engineers in Great Britain—a gentleman with a wide and extensive knowledge of every other engineering works in Britain—I will guarantee that that gentleman will give him evidence from a firm of international repute, who have works in all parts of Great Britain, three of them in the Dartford Division of Kent, which I represent, who are willing to trade with Russia, who are anxious to get orders from Russia, whose prices are right as compared with American prices, but who have not the financial facilities behind them that our great competitors have in the American market, who are paying higher wages.

If the argument means anything at all, it means that the overseas credits scheme was good, but that we are losing trade because we are too dear on account of the fact that English wages are too high. That is what you mean, but you have not the courage to say it. I challenged the Duke of Northumberland himself, that great protagonist of die-hard Toryism, in 1923, and my challenge has never been answered by any of his kinsmen in this House or by himself in all his diatribes in the "Morning Post." He has benefited to the tune of thousands of pounds by exports of coal to Russia, which were paid for on the nail, and I will give the hon. Gentlemen the name of the export manager in Blyth in Northumberland — Aaron Walton. Although the Conservative Government in 1923 brought pressure on him, not to carry on those financial commitments, the undertaking was carried out to the letter by these trading concerns in Russia. After all, there are Members in the House who represent great industrial centres in the Midlands, Wolverhampton and Birmingham, where a very great industry has been built up sending out all kinds of manufactured articles to the inhabitants of the Cannibal Islands. I do not know whether they ask any questions whether the missionaries are eaten before sunrise or after sunset, but I believe an extensive trade is carried on. But it seems to me you have only to mention the word "Russia" in this House and it is immediately assumed that we are attempting to sink the whole system of British credit by trying to do something which is of itself immoral because we dare to mention it.

The hon. Gentleman must come up against the facts. Before he ceased his connection with Russia as Minister of Overseas Trade, before his chief gave political sanction to the burglary of the premises in Moorgate Street, there were buyings by the Russian Government to the tune of £92,000,000. I ask the Minister, in reply to that long series of allegations, to give a single instance of any default, even to the extent of 1s., with regard to the trading that has taken place between that country and ourselves. As against the hon. Gentleman's assumption of a superior understanding of economics and all the rest of it, let me ask him if he cares to put himself against the Leeds Chamber of Commerce? What did they say? What our manufacturers require most of all is some means whereby Soviet long-term bills, say from three to five years, can be discounted at a reasonable rate of interest and with not more than 30 per cent. recourse on the manufacturers. Early last summer it was officially announced that Russia had been included in the Export credits Scheme. Since then those firms who have tried to obtain long-term guarantees from this Department have found that the facilities offered are so slight and so difficult to arrange, and the interest charges so high as to be of little practical use. I am speaking now for a Division which is very hard hit in the matter of engineering employment. The firm of Vickers, which during the War employed tens of thousands of men and women in the manufacture of cartridges and machine guns and high explosive shells, are now turning out agricultural tractors, not only for the Russian market, but side by side with a stable annual output for the Russion market they can arrange their prices for the Colonial market, which is at present the monopoly of American manufacturers. We can give instances of work that can be found not for two but for seven continuous years. This vast country is an El Dorado very badly developed before the War under the Tsarist regime, but now open. I visited Russia in 1921 and went through it from the Polish border to the Asiatic border. On my return I said no one in this country, least of all the industrialists or the Government, seemed to be aware that the new economic policy had been in opera- tion and that commercial travellers from every other country in the world were there doing business, while our own people were still talking in terms of political prejudice.

Sir BASIL PETO

Is it not a fact that the new economic policy has been turned down and is not operative?

Mr. MILLS

No, it has not been turned down. Apparently it is necessary for hon. Members opposite to make themselves acquainted with the Russian situation. Practically every big industrial combination from the Baltic Sea to the other side of the Pacific, has got their offices and staffs hard at work. From my division, until the time of that burglary, there were going out from Vickers' works not fewer than 20 omnibuses every week, all ready fitted and painted, down to the name of the town to which they were going. All that stopped. That work has gone to France. Orders were going from every other town in Great Britain. The hon. Gentleman himself knows perfectly well the proportion of pre-War exports to Russia from Gainsborough and Lincoln, and that trade could come back here if we only had the opportunity.

I do not want to take up time. I have tried to be a faithful and loyal supporter of the Government. I have sat quiet hour after hour and month after month, because the idea is to try to get business through, but my constituents are out of work by the thousand. It is not due to the fault of the Lord Privy Seal but to the short-sighted policy of hon. Members opposite, who will not take any note of changing world conditions. There is no question that the world has changed. If only the people who started the War had any idea where it was going to finish, they might not have given the word "go," because outside this country the occupation of Kings has been scheduled in the list of dangerous occupations. Germany, Austria and other countries, including Russia, have gone west. The books in the Library will prove that the removal of the Tsar was not the work of the British Labour party or of the Bolshevists. It was the deliberate policy of the Allied Governments. It was the only condition on which the United States came into the War.

The CHAIRMAN

The hon. Member is digressing from the Resolution.

Mr. MILLS

I must apologise for attempting to get down to the historical genesis of the hon. Gentleman's prejudices. But I leave it at that. I only hope it will be borne in mind. I will repeat what the hon. Gentleman derided. If there are 150,000,000 people who only export raw materials and who need manufactured articles, it will want much more than his method of thinking to convince the electorate that the exchange of their raw materials as against our manufactured articles cannot be to the good of the country that we represent.

Sir B. PETO

I am sure the Committee will have realised that the hon. Member for Dartford (Mr. Mills) was not in any way responsible for prolonging the Debate on this question, because it was obvious that such a pressure developed in him that he had to find vent in speech here no matter what the occasion. I have only risen because I ventured to interrupt the flow of the hon. Member's oratory for one moment in asking him whether he was not aware that the new economic policy which he was, apparently, applauding, and which he regarded as a reason for export credits being granted in greater measure even than is proposed, was no longer the policy of the present administrators of Russia. He told me, in effect, that my intervention was nonsense, and that the new economic policy was still in force. I would only suggest to him that he should renew his acquaintance with Russia and visit it again from the borders of Poland to the Caspian Sea and then, I think, he would find that private trading has entirely been abrogated, and is a thing of the past. May I ask him to consider what is the effect of the granting of export credits on what I may term the old economic policy, the policy of paying your debts? If it is argued that the payment of debts is wrong, because they were incurred under some other régime, I suggest, whether a new economic policy be in force or not—I still maintain my opinion, which is very well known, and has been made amply clear in the public Press—that the real bar to the development of industrial exports to Russia is the fact that those who preceded the present generation of industrialists have been robbed of everything which they sent to Russia.

It is no answer to say, as the hon. Member for Dartford said, that certain people received immediate payment for the contracts which they made. I do not know whether the hon. Gentleman is a fisherman, but if he is, he will know that there is such a thing as ground-bait—something scattered in the water to attract the fish. I suggest that that is very likely the reason why we have had these prompt payments on the first transaction. Taking the trade done by this country in Russia in recent years as a whole, it has been some four or five to one against us. The Russian Government who are the sole arbiters and the sole controllers of all the export trade to Russia, have amassed immense credits in this country. In one recent year they amounted to no less than £13,000,000, not a penny of which was spent in purchasing goods to find employment for the people of this country. [HON. MEMBERS: "Why?"] These credits were used for buying goods made in other countries, because we are such fools that we cannot protect our own working classes and see that they have fair play. The hon. Member who moved the Motion on the Paper has my heartfelt sympathy, because it must be very hard and uphill work to try by export credits or any other means to develop the export of industrial products from this country, particularly to such a country as Russia, considering its past with regard to transactions in this country, and the fact that Russia and the Soviet Government feel that they can send any quantity of their products here and set up any amount of credit in this country, and that they can buy the very minimum of goods which find employment for our people. They can use these credits in other markets, and then come to the hon. Member on the Front Bench opposite, and ask for fresh credits to be set up under this export credits scheme.

Mr. PERRY

There is one point which I should like to bring to the attention of hon. Members. One has been interested in the direct conflict of opinion between the views of the right hon. Member and the hon. Member who have spoken from the Front Bench opposite. The hon. Member for Farnham (Mr. A. M. Samuel) rather minimised the possibility of doing trade with Russia. On the other hand, the right hon. Gentleman the Member for Chorley (Mr. Hacking), in his criticism of this scheme, pointed out, in answer to a question, that the amount granted or guaranteed during the month of March, this year, amounted to about £585,000 as against only £400,000 to all other countries. He rather stressed the point that too much credit was being guaranteed with regard to trade with Russia. I think it would be better if the right hon. Member and the hon. Member had tried to settle the difference between them. I hope that it will be a long time before we have again to listen to such an argument as that put forward by the right hon. Member for Chorley when he urged that in regard to the construction of warships or the manufacture of munitions of war it might be desirable to consider how far State guarantees could be used to secure those contracts for this country. It is bad enough, many of us on this side think, for munitions of war to be made in this country and then to be used by other countries against us. Maybe the right hon. Gentleman wants an object lesson. I would ask him to go to the town of Bedford, where he will find the usual war trophy, on which there is this inscription: Presented to the town of Bedford by the 5th Bedfordshire Regiment. Captured at Gaza. On reading it I imagined deeds of heroism by the youth of Bedford and the county in the capture of that gun. Then I walked round to the other side of the gun, on which I found this inscription in letters much bolder: Made by Sir George Armstrong, Whitworth & Co. That is bad enough, and I submit to the right hon. Gentleman that it would be ten times worse if the women whose homes have been rendered desolate by the War, and who have read that inscription, were also reminded that by such credits that gun had been transported abroad and then used against us.

Mr. HACKING

Does the hon. Gentleman suggest that that gun would not have been manufactured if it had not been manufactured in this country?

Mr. PERRY

I do not think so for a moment. It would be infinitely worse if the women whose homes have been rendered desolate had to think that British taxpayers' money had been used to guarantee the credits under which that gun was supplied.

Mr. HACKING

Is the hon. Member aware that the Italian Government is at present giving credit facilities to the builders of ships of war, and as a result many of the ships previously built in this country, and finding employment for people in this country, are now being built in Italy, and finding employment for Italians? If these ships are to be built, I would prefer that they should find employment for British citizens.

Mr. PERRY

The particular point I want to impress on the Committee to-night is in connection with the point to which the hon. Member for Farnham referred relating to the boot and shoe industry. The boot and shoe industry at the moment, like many other industries, is suffering from acute distress. Out of about 120,000 employéthere is an average unemployment of, roughly, 13 per cent. and only 75 per cent. of the productive capacity is being utilised. The boot and shoe industry throughout the country has been looking round for extended contracts. They found that the tariffs in Germany and Italy are practically closing those markets against us. They found also that in Paris, in Egypt, in Canada and in Australia the tariffs are making trade more difficult. At the same time, they are pressing upon the Government to continue their efforts not only in the direction of a tariff truce but also in regard to the reduction of tariffs.

The men who control that industry can be congratulated on having one of the most up-to-date industries in this country, and they have pressed this point of view upon the Government. Their representatives, who went on a British trade delegation to Russia, found that Russia, with a population of 150,000,000, immediately after the revolution was only producing 13,000,000 pairs of boots per year in her State factories, In the year 1929 the production from the State factories had increased to 40,000,000 pairs, while the village handicraft and other factories were producing an additional 35,000,000, making a total of 75,000,000 pairs of boots per year. The estimated need for Russia for the year 1930 amounts to 110,000,000 pairs of boots. These two representatives of the boot and shoe industry of this country were offered on the spot to take orders for 35,000,000 pairs of boots, provided that the usual guarantees could be arranged. They asked for the continuance of similar conditions for five years. The delegates came back to this country and took steps, through the usual channels, to obtain credits.

While supporting the extension of the period of the Export Credits Scheme I want to emphasise the need for greater elasticity in regard to administration. Sixty per cent. guarantees is hardly enough to meet the circumstances. Let me quote one case. An order was being sent to this country for £200,000 worth of nets for fishing purposes. An application was made to the Export Credits Committee, who were prepared to guarantee 60 per cent. or, roughly, £120,000, but the banks refused to allow the firm credit to the extent of the £80,000. The result was that the whole of the order was lost and it has been transferred to Germany. Those who control the boot and shoe industry of this country, particularly in the county of Northamptonshire, are anxious to press upon the Export Credits Committee that 60 per cent. of guarantee is not quite good enough, and that the six months' term is hardly long enough.

I appeal to the hon. Member who has charge of that Department that in the formation of the new executive some extended powers should be given to them in order to extend the facilities for British manufacturers, so that they may extend their trade with Russia. I am told that in the course of 11 years not a single case of default has occurred in regard to the payment of bills. I can assure the hon. Member for Barnstaple (Sir B. Peto) that our own co-operative movement has done hundreds of thousands of pounds worth of trade with Russia during the last two years, and not a single penny has been in default. I have heard of cases where the account has been met days before it was due. I should like to see more elasticity shown in the policy of the executive not only in the granting of credits but in the term of the credit; then some chance would be given to the boot and shoe industry to secure some share of this great potential trade with Russia.

9.0 p.m.

Mr. W. J. BROWN

Anyone listening to this Debate who had not in front of them the terms of the Resolution which we are discussing and the Report of the Committee appointed to consider the Export Credits Guarantee Scheme, would imagine that there was really a big fight going on between the two sides of the House. They would imagine that on this side we were sensible of the fact that there was available in Russia a very large potential market for British goods and that our Government and all the Members on this side desired to utilise the Export Credits Guarantee Scheme in order to make that market available. They would imagine from the speeches delivered from the other side that there was a profound determination on the part of hon. and right hon. Members opposite to prevent us from doing anything of the kind. I propose to look at the arguments which have been advanced from both sides of the House and to show that those arguments do not reveal a great conflict between the two sides of the House or, rather, if there is a conflict that it is confined to argument and does not bear upon the Resolution before the House. I propose also to show that there is no practical difference between the position occupied by the Minister to-night and his predecessor in office, in spite of the controversy that has raged between them to-night.

We are told from the other side that there are two main reasons why the Russian market should not be made available by means of the Export Credits Scheme. One reason given is that Russia ought not to require long-term credit and that if she does, there is something wrong. The second reason is that there is so heavy a financial risk involved in long-term credits to Russia and so great a probability of a Russian collapse that the risk involved is too great from the point of view of the British Exchequer. The criticism that Russia ought not to require long-term credit is a criticism which ignores completely the nature of the situation in Russia. When any predominantly agricultural country is engaged in the process of building up its own industry, such a country invariably turns to other and more developed parts of the earth for the necessary capital to do it. It was in that way that Australia, Canada, South Africa and other parts of the world have been developed. It was in that way that the Argentine, Mexico and some of the other places which have been referred to by speeches from the Front Bench opposite have been built up. If Russia were seeking to float loans on the London market for the purpose of carrying through her industrialisation programme there would be nothing sinister or significant whatever in that fact. The very fact that by our own financial policy we have made it impossible for Russia to float loans in this country makes it inevitable, if exporters in this country are to do business in Russia, that the State must come to the aid not of Russia but of the British exporter who does business with Russia. The first argument of hon. Members opposite will not bear investigation.

The second argument, as to the risks involved, is to me a curious argument. The late Financial Secretary to the Treasury referred to the losses incurred in Brazil. He was gravely doubtful of the value of the Rumanian business and highly condemnatory of what had happened in Mexico. But not one hon. Member opposite has been able to produce a single word of criticism against Russia and, indeed, the Secretary for the Overseas Trade Department frankly confesses that at no stage has the Russian Government failed in its obligations in regard to post-War contracts and loans. In regard to pre-War loans, are hon. Members opposite asking this Government to become a debt collecting agency for Russian bondholders in this country; and, if they are, is the Front Bench proposing to respond to that invitation? It will be a strange world indeed in which the first Socialist Government in England acted as a debt collector against the first Socialist Government in Russia in respect of loans contracted by the Tsarist regime.

Sir B. PETO

Is the hon. Member not aware that recognition of the Soviet Government and the reception of their Minister here was on two conditions; to stop propaganda in this country and in the Empire, and a reasonable settlement of what he calls pre-War debts?

Mr. BROWN

I am much obliged to the hon. Baronet, and if what he says is correct, and far be it from me to dispute it, it all confirms what I was saying, that the difference between the two Front Benches is much more apparent than real. The real issue is not between the two sides of the House but between the people sitting on the Front Bench and those sitting on these benches. That is the only ideological clash in this House. For the rest of the House we have continuity of policy. Granted that the argument against the use of this scheme to Russia will not hold water, we have next to ask ourselves whether it is worth while for this country to utilise that market. I was in Russia rather later than the hon. Member for Kettering (Mr. Perry). I was not there as a Cook's tourist, for a week; I spent some months in the country. I found a tremendous continent, still nine-tenths peasant, engaged in creating a modern large scale industry, and requiring for industrialisation purposes and for the purpose of intensifying its own agriculture, imports on the widest possible scale from the rest of the world. I found that there were between 200,000 and 300,000 villages in that country, each village being the centre of an agricultural district, and in the whole of Russia, from one end to the other, only 8,000 tractor ploughs. There is room in Russia for something like 300,000 tractor ploughs, which we can make in England.

Within the last few weeks an attempt has been made to get 5,000 of these tractors made in this country by one of the largest engineering firms in England not a small struggling firm whose credit is not too good, but one of the largest engineering firms which was willing to undertake it and, indeed, had done a tremendous amount of preliminary work on the job. The offer was for an order of 5,000 tractors provided credit could be given for three years, and further, an offer was made of a similar order for each of the next three years. Altogether something like 20,000 tractors depended upon whether this question of credits could be arranged or not. That order has fallen through. Another order that has fallen through is one for something like 20 steam trawlers, a very big order from the point of view of the shipbuilding industry. One could keep the Committee half an hour with case after case where the business has fallen through not because our people do not want it, not, because our prices are too high, not because Russia does not want our goods, but because there is a 12 months' limit placed by the Department of Overseas Trade on the guarantee which is given under this scheme. May I remind the Committee that when the original Act was passed power was taken to give guarantees up to a period of five years. The late Financial Secretary to the Treasury expressed himself as against such long-term credits, but the House when it passed that Bill evidently had in mind that credits of that length might be necessary and desirable from the point of view of this country, and five years was provided in that Act. During the years when hon. Members opposite were in power the power given by that Act was not utilised. Of a total sum of £26,000,000 which was authorised we are still in a situation in which only about £5,000,000 has been utilised. Our own Front Bench cannot be expected to accept responsibility for that situation up to May of last year. But in May of last year we fought an election, and from every Labour platform we drew attention to the size of the Russian market and the failure of hon. Members opposite to utilise the machinery of that Act to make that market available. We pledged ourselves that when we were returned to power we would utilise that machinery.

The conditions governing trade with Russia and the circumstances under the late Government may be attributable to the personnel of the Advisory Committee which dealt with business under this scheme. The right hon. Gentleman has said that the members of the Advisory Committee are public spirited, unselfish seeking servants, doing honorary work for the State with a single eye to the good of the State. I am not going to suggest a word which conflicts with the description of the members of the Advisory Committee given by the right hon. Gentleman, but when you have a Committee which consists predominantly of bankers it would be more than human to expect them to forget that they are bankers, and when you ask them to operate a scheme which, in effect, provides an alternative source of credit to the banks it would be idle to expect a Committee of that description to operate the scheme in the way it ought to be operated from the point of view of the people of this country. It has taken nine months of pressure to get a Labour Government to put two Labour men on that Committee. They are still in a hopeless minority, and it has taken us nine months to get that change carried out. I do not know how much good those two solitary individuals will be able to do on the Committee, surrounded by an overwhelming majority of bankers.

But something worse has happened. The Government have accepted the Report of a sub-committee on the work of the Export Credits Scheme, and that Report proposes in effect the virtual supercession of the advisory committee itself. If English means anything, the real power of determining applications under this scheme hereafter will not rest in the hands of an advisory committee meeting at infrequent intervals, but in the hands of a small executive committee meeting at very frequent intervals. The acceptance of the Report means that. Of whom is the executive committee to consist? The chairman is to be Colonel Peel, a banker. Another member is Mr. Caulcott, another banker. The third member is Sir A. Bain, connected with insurance and banking. The only individual of the four who can reasonably be expected to bring to bear upon this problem the same point of view as would be brought to bear by Members on these benches is Mr. Blair—an admirable appointment—whose name is connected with the Co-operative Wholesale Society.

In the name of common sense I ask, how does a Labour Government expect to be able to apply a Labour policy through instruments of this kind? We are sometimes told that if we differ from the Front Bench we ought to express that difference elsewhere. This question of the utilisation of the machinery of this credits scheme has been raised at party meeting after party meeting. The response to everything which has been said in other places on this subject is the announcement that we have had from the Minister to-night, and that announcement is that he proposes to centre the power of administering this scheme in the hands of four individuals, one of them indirectly connected with the Labour movement and three predominantly connected with banking and insurance, and that he does not propose to remove the 12 months' limit upon the duration of guarantees given under the scheme.

Let me conclude by saying that the struggle between those who sit on these benches and those who sit on the Front Bench is not a struggle between those who desire Socialism and those who do not. The desires of the people who sit on this bench are much less ambitious. We are not asking the Front Bench to give us Socialist legislation. Our efforts are concentrated upon an attempt to get them to do some modest things—things which it is within their power to do, like altering the administration of this particular piece of machinery. If a Government, situated as this Government is, cannot muster up courage enough to over-ride a few bankers on an issue of this kind, can it ever function as an instrument of Socialism in this country, even if it has a massed battalion of supporters behind it?

In the last nine months the trade with Russia under this scheme has amounted to £1,305,000. Of that amount, not more than 60 per cent., or about £800,000, represents a possible liability of the Department. We have improved trade with Russia to the extent of about £1,000,000, and yet it is within the knowledge of nearly everyone who sits on these benches that the Russian trading agencies are authorised to place orders in this country to the tune of £20,000,000, provided that reasonable terms of credit can be arranged. It may be true that the Lord Privy Seal is not responsible for the recent upward rise in the unemployment figures. When we go to the country we may be able to pass that on to world causes. But there are some things that we cannot pass on to world causes, and some things for which we shall be held personally responsible. Those are things which are within the power of a minority Government, situated as our present Government is, and if it is not within the power or will of a minority Government to handle this kind of problem with some kind of courage and firmness, then for the life of me I find it very difficult to understand why we fought the last election.

This is continuity of policy carried to a point where the difference between the two sides is reduced to one of debating; there is no substantial difference of policy whatever. I urge upon the Minister that he should take his courage in both hands, that he should scrap the 12 months' limit, and that he should appoint four good Labour men for once in a way. We have appointed 36 committees since the Government took office, and I believe that not more than half a dozen of them have Labour chairmen. If you appoint capitalist agents to produce the reports of committees you will get capitalist reports from them. It is no good getting capitalist reports and then pretending that you are bound by the terms of the reports. If you care to put four decent Labour men in charge of this job, and give them power to abolish the 12 months' limit, you can carry out a greatly expanded trade with Russia and redeem one at least of the promises that were made to the country at the last election.

Mr. GILLETT

I propose, very briefly, to reply to a few of the questions raised in the Debate, and if there are any overlooked there will be ample opportunity to reply to them on the Second Reading. Questions were put to me by the right hon. Member for Chorley (Mr. Hacking). He asked for a further explanation of the arrangements in connection with the staff of the department. I had explained that that section of the staff which belonged to the Civil Service would come under the usual regulations of the Civil Service, and would have a Whitley Council and a promotion board consisting of some of the higher officials, in order to advise. The only other point raised in the Debate in regard to the staff was the question of special appointments. Perhaps it was not clearly understood that there have been a few special appointments from outside the Civil Service of men who are specially qualified to deal with work of this kind. The idea is that future appointments of that special character would be in the hands of the executive committee, but the appointment of members of the Civil Service would remain much the same as the present. The second question I was asked was, what was the maximum outstanding liability at the present time? The answee is £4,000,000. In reply to the third question, the liability is generally above 60 per cent.

Mr. HACKING

For all countries?

Mr. GILLETT

Yes, all countries. The fourth question was, what was the average length of credit for all cases? It is about six months. Hon. Members who are interested in the work of the Depart- ment might take note of that answer, because it gives them an idea of the policy of the committee, quite apart from the Russian question, as to the length of time for which this business should be done. As a matter of fact, I believe it will be found that if you take the average length of credit for all countries, you will find that the Russian credit figure is rather longer than the average.

Mr. R. A. TAYLOR

Is that for the same class of goods?

Mr. GILLETT

It may not be strictly comparable in that respect. The other point with which the right hon. Member dealt was the question of what was the ultimate goal of this Department. I did not deal with it in my opening remarks, because I thought I would not raise the question, and I rather wondered that the right hon. Member dealt with it at all, because one of the instructions which his Government gave to the committee was that they were to advise on the question how the transference of the business might be made into private hands instead of being under the control of the Government. As a matter of fact, the report hardly deals with that question at all. There is one passage which the right hon. Gentleman himself quoted, but he did not quote the two lines which follow immediately afterwards. The committee said: We do not think it is now possible to indicate the final form which this particular piece of financial machinery had best take. That was really all that the committee seemed to have thought it necessary to give to the right hon. Gentleman in order that he might have information as to how this transfer might be made into the hands of private concerns. As a matter of fact, suggestions are being made from both sides of this Committee that in dealing with these recommendaions it necessarily follows we have to deal with the same position as the right hon. Gentleman. My own personal view is that it is nothing of the sort, just as we find in the position which we have to face to-day that we have to support schemes of rationalisation, which it may be thought, and has been urged, are open to criticism. I, myself, when addressing a Labour meeting was criticised because we were helping towards schemes of rationalisation. My answer was that while it was essential, it did not necessarily clash with the ultimate ideals which we may adopt as to our final policy. I cannot honestly see that this would necessarily affect the question of whether some future Government may decide to retain the business in its own hands or do what the right hon. Gentleman wants to do, and hand it over to private concerns.

I look at it purely from the present position, and my belief is that a small executive committee would be likely to administer it more efficiently than the present one. I think my hon. Friend who spoke last misunderstood the actual work which we would ask that committee to do. We cannot delegate to it the work of the advisory committee, because the advisory committee has to be consulted under Acts of Parliament. We really want this Committee to consider a number of points dealing with the methods and the way in which the Department of this kind can be conducted. There are a number of technical points which have been under consideration, at any rate in this Department, but in regard to which we want to get a set of men who will devote their entire attention to the matter and express an opinion as to whether they think in this way or the other the work will be helped on. I do not see, as a matter of fact, that it would have any effect upon the actual decisions that are arrived at in regard to recommendations. for guarantees.

Mr. W. J. BROWN

I understand then, that the Government are accepting this report?

Mr. GILLETT

No, the hon. Member is making a great mistake in thinking that the Government are adopting the report as such. I tried to make it clear that we were making reservations. We have put in various restrictions as to the rights of the Minister and the position of the Treasury in order to guard the position of the Ministry and Treasury. I hope it will not be thought that this report has been adopted as such.

Mr. BROWN

I heard the hon. Member speak, in his earlier statement, of the reservations to which he has just referred, namely, the powers of the Minister, the Board of Trade and the Treasury. But these are paragraphs of the report which I should like him to say whether he is adopting or not. The report says: We are of opinion that this end will best be served by a small executive committee of three members whose functions would be analogous to those of a board of directors and at whose meetings the manager of the department would be present. This executive committee should have powers to decide all questions of policy falling within the province of the Act—such questions as re-insurance, the nature of the risks to be insured … the precise details of insurance policies to be issued and like matters.

Mr. GILLETT

I very much regret that I should have failed to make it quite clear that we are not proposing to appoint the executive Committee in the way that the hon. Member suggests. I thought this Committee understood that. I explained the position in regard to the Minister and the Treasury and the other points not referred to in any way in the report. These are the reservations which we have put forward in order to reserve a suitable amount of control in the hands of the Minister, which we feel is absolutely necessary. I said earlier that the suggestion to give powers to the executive committee to use the credit of the British people on the lines referred to was quite unprecedented, and I did not believe there had ever been a case in which powers had been given to private individuals in that way. I thought I had made it quite clear that we have not adopted it in the full sense.

There are numbers of other matters to which I will refer later in the Debate which will follow. The hon. Member for Farnham is one of the worst sinners, and I am not going to answer his questions because nothing would be more foolish than to discuss in this House the credit position of certain other nations. It may have been one of my misfortunes to have been born in a banker's family and to have been a banker for many years, but one thing I have learned is to use caution in dealing with credit. Therefore, I am afraid that the hon. Gentleman will have to remain unsatisfied so long as I have anything to do with this Department. I cannot congratulate the hon. Gentleman on the manner in which he twisted the statement of my right hon. Friend the Foreign Secretary in regard to a Russian loan. It is well known that at that time an embargo had been placed on this Department dealing with Russia, and my right hon. Friend the Foreign Secretary said then that we were not going to guarantee a loan to Russia. However much the hon. Member for Farnham may assume a simplicity in regard to financial affairs, I am sure that he knows perfectly well the difference which exists between a loan and anything of the kind that we are doing in this department. I can hardly imagine, now that we have taken off this embargo, that the reference of my right hon. Friend the Foreign Secretary could be understood as referring in any way to this Department.

Everybody knows perfectly well that my right hon. Friend did not refer to the work of this Department, and it is only one of the brilliant inventions the hon. Member for Farnham to suggest that he did so. The hon. Member apparently thought he could twist the terms of my right hon. Friend's statement. He did not say that my right hon. Friend spoke about a loan, but he used the word "credit" in order that it might seem to apply to the work of this Department, and that, I think, was hardly worthy of the hon. Member's position. At any rate, I entirely repudiate his suggestion. I say that what we have done and what my right hon. Friend desires to do is perfectly consistent with what was stated, and we propose to go on with those matters.

The only other matter to which I would refer is in regard to Russia. The Russian problem, referred to particularly by the hon. Member for Lincoln (Mr. R. A. Taylor), is only part of the larger question of long-term credits, and, if hon. Members will allow me, I would prefer to deal with that larger question of long-term credits when the Second Reading of the Bill is taken. I shall be very glad to do so then, and I think that will be a more suitable occasion. Indeed, I am not even sure whether you, Mr. Young, would allow me to deal with this matter on this Financial Resolution in the way in which I want to deal with it—touching on rather larger aspects of long-term credits than those directly involved here. In these circumstances, I shall not add anything further at the moment, but if there is any point which I have overlooked, and if hon. Members draw my attention to it, I shall try to answer on the Second Reading of the Bill.

Mr. R. A. TAYLOR

Would the hon. Gentleman reply to the specific question which I put to him, as to whether any instructions are to be issued to the effect that the maximum use of the powers given by Parliament is to be the policy of the Government, and that, if necessary, credits up to five years are to be regarded as normally within the province of the Department.

Mr. GILLETT

That is a point with which I shall be very glad to deal when I discuss the whole question of long-term credits on the Second Reading of the Bill.

Question put, and agreed to.

Resolution to be reported To-morrow.