HC Deb 15 April 1931 vol 251 cc321-5
The SECRETARY of STATE for DOMINION AFFAIRS (Mr. J. H. Thomas)

I beg to move, "That this House do now adjourn."

I have availed myself of this procedure in order that the statement which I am about to read may be given to the House of Commons first, because a similar statement is being made in Australia. As the House will realise, the difference in time between Australia and here, rendered it impossible to make the statement this afternoon. When the Prime Minister of the Commonwealth of Australia attended the Imperial Conference last year he discussed with the Chancellor of the Exchequer the question of the revision of the terms on which Australia's War indebtedness to His Majesty's Government in the United Kingdom was funded in 1921. The negotiations were continued after the Prime Minister's return to Australia. The indebtedness funded under the agreement of 1921 represented advances made by His Majesty's Government in the United Kingdom to His Majesty's Government in the Commonwealth of Australia for War expenditure and totalled £92,480,156. At the time when arrangements were made for those advances His Majesty's Government in the Commonwealth expressed the desire that Australia should bear the whole cost of its War effort. Accordingly it was agreed that moneys would be lent to Australia at the rate of interest at which His Majesty's Government in the United Kingdom itself borrowed them. This principle was embodied in the Funding Agreement of 1921 which provided that the average rate of interest on the indebtedness would be £4 18s. 4d. per cent. per annum representing the approximate cost to Great Britain of raising the loans from which the advances were made. In addition, the Funding Agreement provided that the Commonwealth would make Sinking Fund payments sufficient to bring the total annual payment for interest and Sinking Fund up to 6 per cent. and thus provide for repayment of the total indebtedness during a period of 36 years from 1921. In the recent negotiations, His Majesty's Government in the Commonwealth asked that the rate of interest be reduced, that the period for repayment of the principal sum be extended, and that the half-yearly instalment of £2,774,404 due on 31st March, 1931, be funded. In support of this claim, His Majesty's Government in the Commonwealth represented that, while the heavy annual payments under the present agreement had been within Australia's capacity during the years of buoyant revenue, the serious fall in national income had entirely altered the position. Moreover, unemployment, reduction in wages, general Governmental expenditure, greatly increased taxation and high exchange charges had enforced heavy sacrifices on the Australian people and had considerably increased the relative burden of interest payments including those under the Funding Agreement. His Majesty's Government in the United Kingdom replied that, in their view, the 1921 Agreement represented a fair and generous interpretation of the desire expressed by the Commonwealth to bear the whole cost of its War effort. The annuities represented only the actual cost of advances to Australia, and any reduction of Australian payments meant throwing an additional burden at an exceptionally difficult time on the United Kingdom taxpayer who had also to face very great difficulties in respect of debts, taxation and unemployment. At the same time, His Majesty's Government in the United Kingdom stated that it fully sympathised with the Commonwealth's present difficulties, and in spite of Great Britain's grave problems, both financial and economic, was ready to respond to the appeal of the Commonwealth by a substantial temporary reduction of the payments due. Accordingly, His Majesty's Government in the United Kingdom expressed its willingness to agree that His Majesty's Government in the Commonwealth should have the option of postponing four half-yearly payments of approximately £814,000 each of sinking fund on the Australian indebtedness to His Majesty's Government in the United Kingdom. In postponing these payments, His Majesty's Government in the United Kingdom did not propose to increase the amount of future annuities but only to prolong the period of repayment by two years. His Majesty's Government in the United Kingdom hoped that this offer would be accepted as a sincere endeavour on its part, despite its own difficulties, to share the burden under which the Commonwealth is labouring. His Majesty's Government in the Commonwealth expressed appreciation of the friendly spirit animating this offer, and in accepting it acknowledged that it would give material temporary relief. The effect of this arrangement will be a reduction of over £1,600,000 per annum in the payments to be made by the Commonwealth to Great Britain under the funding agreement during each of the next two financial years and extension of the period of repayment of the principal debt by two years. The Commonwealth budget will also be relieved of exchange charges which would have been payable if repayment had not been deferred. His Majesty's Government in the Commonwealth still hold the view that there are good grounds for a further extension of the period for repayment of the Australian debt to Great Britain. His Majesty's Government in the United Kingdom on the other hand consider that as the repayment of capital will be entirely suspended for two years and a further revision of the period of repayment would not afford any immediate relief consideration of the question is at present neither necessary nor desirable. His Majesty's Government in the United Kingdom expresses the hope that by 1933 the economic situation in Australia will have so greatly improved that need for any further revision will not arise.

Mr. STANLEY BALDWIN

I am sure that the House will have listened with great interest to the statement which has been made by the right hon. Gentleman, and will be grateful to him for having made so detailed a statement. It would not be proper, without further examination, to make any comment except this, that I think the Government have acted with consideration and generosity, and that in no quarter of the House will there be any cavilling at the course they have pursued. We echo most warmly the last words of the statement, and we hope that in two years the financial and economic situation in Australia will have so greatly improved that there will be no further need for the question of revision to arise. I may conclude with the hope that in two years our own economic position will be improved also.

Sir DONALD MACLEAN

Speaking on behalf of those who sit on these benches, I desire simply and shortly to endorse what my right hon. Friend the Leader of the Opposition has so well and adequately said.

Mr. BRACKEN

I should be grateful, and a lot of people in this country would be grateful, to know whether any conditions whatever have been attached to this agreement. It is well within the recollection of the House that the Bank of England sent Sir Otto Niemeyer to Australia, and he rendered a report to the Australian Government which has not been implemented. It is necessary to ask definitely whether any conditions have been attached to these concessions which the Secretary of State for Dominion Affairs has outlined. Unless some conditions are attached which will enable this report to be fulfilled, it is not only unfair to Australia generally, but unfair to the English taxpayers. I feel sure that there are many people in this country who sympathise deeply with the troubles that are afflicting Australia, and who feel that there are certain lessons which must be learned by the Australians. They must also feel that it is of vital importance to the taxpayers of this country that we should know whether any genuine effort is being made in Australia to fulfil the suggestions which have been made to them by Sir Otto Niemeyer.

Mr. THOMAS

There have been no conditions whatever. It would be improper to make conditions to a self-governing Dominion. I hope, with the right hon. Gentleman the Leader of the Opposition, that the economic position not only of Australia, but of the world, will be improved. It is for the Australian Government themselves to realise, as I feel sure they do, their own responsibility, and the effect of this offer on our part would be lost if we had any more suggestions such as are now being made. I hope that there will be no Debate to destroy the value of the offer.

Motion, by leave, withdrawn.