§ The CHANCELLOR of the EXCHEQUER (Mr. Philip Snowden)
I beg to move,That leave be given to bring in a Bill to suspend the operation of Sub-section (2) of Section one of the Gold Standard Act, 1925, and for purposes connected therewith.When I addressed the House a fortnight ago on the financial situation—
§ Mr. STEPHEN
I wish to put a point of Order to you, Sir, as to the procedure that is being adopted. I understand that the Chancellor of the Exchequer is asking leave to bring in a Bill, but I do not know under what Rule he is allowed to make the speech that he is evidently going to make.
§ Mr. SPEAKER
The procedure that is being adopted on this occasion is one that has often been adopted in case of emergency. It is not necessary that notice of Motion should he given. That necessity has frequently been omitted. The procedure now being adopted is quite in accordance with former procedure.
§ Mr. STEPHEN
Is it not the case that, when this procedure is being adopted, there must be general consent of this House to it?
§ Mr. SPEAKER
The procedure, as I have said, is according to the usual custom on occasions of this kind. Of course, the House will be able to debate the Motion that leave be given to bring in the Bill, and, if necessary, they can divide and vote against it.
§ Mr. STEPHEN
I am aware that that can be done, but I have always understood that the exceptional procedure demanded the general consent of the House, and I am asking if that is not the case? If there are Members who object to the introduction of the Bill in this way, does not that make this procedure impossible?
§ Mr. SPEAKER
No, that is not so. The method of expressing objection to the introduction of the Bill is to vote against it.
§ Mr. THORNE
Did not the Chancellor know before the House adjourned on Friday what was going to happen, and did he not have time to put it on the Order Paper?
§ Mr. WISE
It is announced this morning in the Press that the Government had this Bill ready and were going to introduce it this afternoon and I inquired at the Vote Office for a copy of it. It is obviously very inconvenient to the House that we should consider a Bill without a copy of it before us. If the Government can break the established practice of the House in regard to giving notice, it would have been much more satisfactory to our discussion if the Bill had been available this afternoon. May I ask whether it would not be possible to make prints of the Bill available now?
§ Mr. SPEAKER
I understand that very shortly, as soon as the Chancellor of the Exchequer has made his statement, copies of the Bill will be available to Members.
§ Mr. SPEAKER
If the Amendments are in order, they will, no doubt, be accepted by the Chair. If they are not, of course, they will not. The Chairman will have the same power of accepting an Amendment or not as he thinks fit.
In the event of leave being given to introduce the Bill according to previous practice and the Standing Orders—
In the event of leave being given to introduce the Bill, will it require a separate Motion to give consent, if the intention is to put it through all its stages, so that there is no opportunity for Members to put down Amendments that the House can see, and the only Amendments that can be handed in will be manuscript Amendments. I wish to ask whether the same procedure cannot be adopted as was adopted in 1925, when it was decided to give the ordinary readings over a series of days to the Bill to go back to the gold standard.
§ Mr. HANNON
Is not this an occasion of national emergency which should command the consent and co-operation of all sections of the House?
§ Mr. SPEAKER
I have told the hon. Member for Leicester (Mr. Wise) that, if hon. Members hand in Amendments, I will certainly consider them, and, if they are in order, they will be permitted. The various stages of the Bill—Second Reading and Committee—can all be opposed in the House.
You are missing the point which I was putting. Is it intended to bring in the Bill which is being introduced without any Standing Order governing its passage through any of its stages? So far as handing in Amendments is concerned, I pointed out that these could only be manuscript and it imposed a very great hardship on Members that they are unable to follow Amendments which do not appear on the Order Paper.
§ Mr. SPEAKER
I am not at all certain that it is not really the Chairman who will have the greatest hardship in interpreting manuscript Amendments. As to the first point that the hon. Member raised, if he will listen to the Chancellor of the Exchequer's speech, he will see whether he proposes to take the other stages of the Bill to-day.
§ 4.0 p.m.
§ Mr. P. SNOWDEN
This is a Bill for the temporary Amendment of the Gold Standard Act, 1925, and the Amendment takes the form of suspending Section 1, Subsection (2), which reads as follows:the Bank of England shall be hound to sell to any person who makes a demand in that behalf at the head office of the Bank during the office hours of the Bank, and pays the purchase price in any legal tender, gold bullion at the price of three pounds seventeen shillings and ten pence halfpenny per ounce troy of gold of the standard of fineness prescribed for gold coin by the Coinage Act, 1870, but only in the form of bars containing approximately four hundred ounces troy of fine gold.The Bill is a one Clause Bill with three Sub-sections, the first of which reads:Unless and until His Majesty by Proclamation otherwise directs, Sub-section (2) of Section (1) of the Gold Standard Act, 1925, shall cease to have effect, notwithstanding that Sub-section (1) of the said Section remains in force1292 The second Sub-section proposes to indemnify the Bank of England for having to-day acted upon the suspension of that Sub-section of the Gold Standard Act, 1925. The third Sub-section, a very short one, reads:It shall be lawful for the Treasury to make, and from time to time vary, orders authorising the taking of such measures in relation to the exchanges and otherwise as they may consider expedient for meeting difficulties arising in connection with the suspension of the gold standard.This Sub-section shall continue in force for a period of six months from the passing of this Act.This Bill will be available in the Vote Office as soon as the House has given permission for its introduction. I ought, perhaps, to add that this will not affect the free gold market in London. There will be no restrictions on the importation or exportation of gold, and any gold sent to London for sale, for example that from the South African mines, will, like any other commodity, fetch its market price, whatever that may be. Also, there will, of course, be no impediment placed upon the free withdrawal of gold which has been put into the safe custody of the Bank of England by foreign Governments or by foreign central banks. All that is changed is that the right under the Sub-section of the 1925 Act to take from the Bank of England gold in bars is suspended. Finally—and I only say this because of an unreasoning fear that appears to prevail abroad—where we are under obligations to make payments in dollars or other foreign currencies, as for example some of the War Bonds that were issued in New York, we shall, of course, continue to meet our obligations punctually in those currencies.
So much, then, for the provisions of the Bill. The situation which it is intended to meet, though it has been precipitated by recent events, has been maturing for a considerable time. Obviously, the fall in the general price level affected the capacity of the primary producers of the whole world to meet their obligations, with consequent effect upon their credit in the markets. A vicious circle was set up, banks and investors becoming more and more reluctant to lend their capital to potential borrowers, and these borrowers becoming more and more insolvent owing to the impossibility of obtaining the usual financial accommodation. The actual crisis 1293 started with the collapse of the chief bank in Austria last May and with the crisis which followed in Germany. The tying up of funds in Germany had an immediate effect upon the London market, because London is the centre of international banking, and it was known, of course, that we had been lending to Germany. Once foreign centres became nervous, the difficulties of our situation came to the front. There was much criticism abroad of our Budget, our expenditure upon unemployment, our adverse balance of trade; these were all seized upon and exaggerated. To meet that situation the Bank of England about the beginning of August raised a very large credit, no less than £50,000,000, from the American and French central banks to meet the withdrawals, but within a couple of weeks these resources were practically exhausted.
At that stage the National Government came into being, and the plans which we announced for balancing the Budget had the immediate effect of restoring confidence. For some days the stream of withdrawals fell sharply, and we hoped that it might dry up. Unfortunately, however, we could not present a united front. [Interruption.] Speeches were made and articles were written by prominent people advocating inflation and repudiation, which had a most damaging effect. There was political uncertainty, and the news of the unrest that occurred in the Navy was recorded in scare headlines in every foreign newspaper. At the same time, in the general atmosphere of nervousness, difficulties developed in foreign countries, and people began to scramble to liquidate their positions. This was as much due to nervousness about their own position as to a loss of faith in sterling. The Government raised further credits to a total of £80,000,000 in New York and Paris, and I should like to take this opportunity of expressing our thanks to the Governments and Banks in both countries for the readiness with which they helped us. But, in the circumstances, even this further credit did not prove sufficient. In the last few days the withdrawals accelerated very sharply. On Wednesday, it was £5,000,000; on Thursday, £10,000,000; on Friday, nearly £18,000,000. 1294 and on Saturday, a half day, over £10,000,000.
Altogether, during the last two months, we have lost in gold and foreign exchanges a sum of more than £200,000,000, apart from agreeing as a result of the London Conference, to lock up £70,000,000 of our assets in Germany. We informed both the United States and the French Government confidentially of the position on Friday and asked their view as to the possibility of obtaining further credits. In both cases the replies, though friendly and sympathetic, afforded no prospect of assistance on the scale that by that time was obviously necessary. On Saturday, the position had become so serious that it was quite evident that it could no longer be dealt with except by suspending the Gold Standard Act, and so the Bank of England addressed a letter in the following terms to the Prime Minister and myself:I am directed to state that the credits for $125,000,000 and francs 3,100,000,000, arranged by the Bank of England in New York and Paris respectively, are exhausted, and that the credit for $200,000,000 arranged in New York by His Majesty's Government, together with credits for a total of francs 5 milliards negotiated in Paris, are practically exhausted also. The heavy demands for exchange on New York and Paris stilt continue. In addition, the Bank are being subjected to a drain of gold for Holland. Under these circumstances, the Bank consider that, having regard to the above commitments and to contingencies that may arise, it would be impossible for them to meet the demands for gold with which they would he faced on withdrawal of support from the New York and Paris exchanges. The Bank therefore feel it their duty to represent that in their opinion, it is expedient in the national interest that they should be relieved of their obligation to sell gold under the provisions of Section (1) Sub-section (2) of the Gold Standard Act, 1925.To this letter the following reply was sent:His Majesty's Government have given the most serious consideration to your letter of the 19th instant in which you informed them of the grave difficulties with which you are faced in meeting the obligation placed on the Bank of England by the Geld Standard Act of 1925 to sell gold in the form of bars to any person making a demand in accordance with the Act and of the dangers which you apprehend if that obligation is maintained. His Majesty's Government are of opinion that the Bank of England should place such restrictions on the supply of gold as the Bank may deem requisite in the national interest. They 1295 will be prepared to propose to Parliament forthwith a Bill giving indemnity for any such action taken by the Bank.Thus, with appalling suddenness, the crisis which we had striven to avert broke on our heads, and we had no alternative but to suspend the gold convertibility of the currency. We have consulted the banks as to the origin of the heavy sales of sterling, and the banks assure us that, as far as they can judge, the selling is predominantly on foreign account, and there is no evidence of any substantial export of capital by British nationals. So far as British nationals are participating in these sales they are, as I said in the House the other day, deliberately adding to the nation's difficulties. The banks and accepting houses have arranged that they will scrutinise all demands for exchange presented by British nationals with a view to preventing, as far as they can, all purchases other than for bonâ Ade commercial requirements, and I am very glad to be able to tell the House that foreign banks in London have taken steps to co-operate with their English colleagues in this matter. The Government are asking in the Bill for powers to take emergency measures under the Sub-section which I have just read should these prove to be necessary or advisable in order to support and reinforce the steps which the banks are taking.
It may be suggested that before taking this extreme step, we should have allowed more of the gold reserves at the Bank to go. This is a question to which both the Government and the Bank of England gave anxious and careful consideration. If it had appeared that the drain could have been stopped by the exportation even of a large proportion of the gold which the Bank holds, the Bank of England would not have hesitated to allow it to go. The Bank and the Government had already obtained credits abroad approximately equivalent to the total amount of gold reserve held by the Bank, and these credits have to be repaid within one year at latest. We had to take account of this liability, and we must also maintain a certain reserve for eventual emergencies which no one can foresee.
§ Mr. SNOWDEN
We were informed that the foreign assets still held in London largely exceeded the amount of the Bank's gold, and it appeared that to allow any further export of gold simply would benefit those who showed least confidence in sterling, and it would be at the expense of those who had not with drawn their balances, so that in the circumstances we decided that it would be contrary to the national interests to allow any further gold to go.
It is frequently suggested that we could have met the drain on our exchange by mobilising our holdings of foreign securities as was done during the War. This was one of the first points to which His Majesty's Government directed their attention, and they made inquiries as to what possibilities there were in this matter. These inquiries satisfied them that the position at present is, for various reasons, substantially different from what it was during the War, and that, having regard to the extent and rapidity of the drain on the exchange, such resources as we might have been able to obtain would not have materially affected the drain. At the same time, these securities may well prove a reserve for the support of the exchange in the situation which has arisen, and this matter is under constant consideration.
The unequal distribution of the world's supply of gold has long been under the consideration of the British Government and the Bank of England. In fact, we have taken every possible opportunity to promote co-operation between central banks with a view to finding a remedy. So far as we are concerned, we would willingly have called a conference for this purpose. But it was made abundantly clear to us that any proposal of this kind would be unwelcome to other Powers, and therefore a conference would be foredoomed to failure. [HON. MEMBERS: "Protection!"] It may be that the present crisis will bring home to those who have hitherto been reluctant to enter into a discussion on this matter the pressing necessity of concerted action, and His Majesty's Government will certainly miss no opportunity of emphasising the urgency and importance of the matter.
When the financial history of the post-War period comes to be written, I do not think that this country will have any reason to be ashamed of its part. We set the example, both as regards meeting our 1297 obligations and of helping the reconstruction of the world, and, if we have failed, it is because we have undertaken a burden too heavy for us to bear. Certainly, it does not seem to me that other countries can afford to challenge or to condemn us for what we have done. As regards the United States, we exported to America, during and immediately after the War, actual gold to the value of £322,000,000 in discharge of our obligations. We then proceeded to fund our War Debt to the United States, and under the basis of settlement we have contributed 1,352,000,000 dollars, or over £280,000,000, representing nearly 30 per cent, of the debt at the date of funding. Though the British debt to the United States represented only 41 per cent. of the total War Debt owing to the United States, our payments to the United States represent 83 per cent. of the total payments they have received in respect of those debts. As regards France, the War loans made by the British Government to France, after deducting all offsets, amounted at the date of funding to £600,000,000, on which the British taxpayer has been paying approximately £30,000,000 a year in interest. Under the terms of settlement, the French Government pay us only 40 per cent. of this. Much more could be said, but I will only add this: America and France taken together have now acquired three-quarters of the entire gold in the world and have buried it in their vaults, where it is largely sterilised and useless for the purpose of promoting international trade.
To record these historical facts is in no way to overlook the help that we have received recently from France and from America. I have already expressed the warm appreciation of His Majesty's Government for the readiness with which they came to our help in the matter of credits. But I should also like to add this special word as regards the French banks. I am told that these banks have not played any part in the recent withdrawals from London, but have maintained their balances practically intact, and the critics of the French banks will, I hope, bear this in mind.
The credits we have raised could do little more than disguise the symptoms of the present trouble, but could do nothing to remedy the disease. There is, in sober 1298 truth, a world-wide panic on the part of the investment markets. The whole world seems to be bent upon selling securities for cash and denying the possibility of the existence of credit. Such a course cannot be pursued for very long without, inevitably, causing the breakdown of the whole world system of credit, and, in the face of such a panic as that, we must protect ourselves.
His Majesty's Government, therefore, must ask Parliament to suspend temporarily the provisions of the Gold Standard Act and to authorise such other measures as may be necessary to protect our position. But happily we are forced to do this by reason of an exchange crisis and not because of any disorder in our own internal finances. We are securing, at the cost of painful sacrifices, a balanced Budget and our internal position is secure. It is vital for us to maintain that position. Externally, the initial effects on our exchange of the steps we are proposing may no doubt be serious, but I believe they will be temporary and that those who have confidence in sterling will not find their confidence misplaced. At the same time, I think we are entitled to look for some recognition on the part. of other creditor countries of their responsibility for the present situation. Firstly, the world must learn that the existing economic system cannot be maintained—[Interruption]—if everybody tries simultaneously to liquidate their investments. This is playing fast and loose with the delicate machinery of credit. It may be, as I said, that the present crisis will pave the way to better international co-operation, but its immediate effects may be at least as serious for the countries which have been dependent on London for credit as they may be for ourselves; and there is a risk, of course, that for a time the machinery of international credit may be dislocated. I can only hope that this risk will not be realised and that, even though it may temporarily not be linked to gold, sterling may continue to serve, as it has in the past, as a medium of international trade.
That is all that I have to say in asking leave to bring in the Bill and in asking the House to pass it without delay through all its stages as a matter of extreme urgency. I do this with no light 1299 heart. Our action, no doubt, will have wide repercussions and increase the dislocation and instability for the time being of international trade and finance, but at the same time there is no need to exaggerate the difficulty. Apart from temporary panic sales, which may, of course, have to be reckoned with, I see no reason why sterling should depreciate to any substantial extent or for any length of time provided, and this is vital, that the finances of our country are administered with proper care. It is one thing to go off the Gold Standard with an unbalanced Budget and uncontrollable inflation, but it is far less serious to take this measure, not because of internal financial difficulties, but because of excessive withdrawals of borrowed money. We have balanced our Budget and therefore removed the danger of having to print paper, which leads to uncontrolled inflation. We can, therefore, face the position with calmness. The ultimate resources of this country are great, and the Government will, of course, continue to watch the situation and take such measures as may be possible to circumscribe the fluctuations of the exchange. At the moment, we have no alternative before us but to suspend the convertibility of the currency.
I venture to appeal to everyone in this place not to use words at this moment which will make things more difficult. We must get together as a nation and set to work to build up our prosperity anew. The question of the adverse trade balance has to be dealt with, and the Government are giving that matter their fullest consideration. In the process of rebuilding, we may have to adopt, as we have done in connection with balancing the Budget, many expedients which in other circumstances would be repugnant to us. In the meantime, it is the duty of everyone to keep cool and not to aggravate the situation by panic. If we do this, our inherent strength will pull us through these temporary difficulties.
Mr. ARTHUR HENDERSON
I think it will be recognised in all parts of the House that to follow the Chancellor of the Exchequer in this Debate, in view of the short time that we have had to consider the position that is represented by the Bill, is one of considerable difficulty. I was very much impressed with the 1300 closing appeal made by the right hon. Gentleman. I thought that I could take heart of grace, as it was such an improvement upon the peroration that he delivered in this House a few nights ago. I noticed in his speech that he said that they could not secure a united front, and he seemed to attribute the lack of that united front as one of the causes that have led to the necessity of pursuing the policy which he has outlined. If there has not been a united front and if we are going to hold an examination or an inquest in order to find out the causes, I am inclined to think that all the blame will not rest on one side of the House.
The speech of the Chancellor of the Exchequer clearly shows that the action now proposed by the Government is due to the drain of gold and the withdrawal of credit. That, I think, can become common ground. This is no new position. The Chancellor of the Exchequer thought that it began with the German crisis in May. [HON. MEMBERS: "Austrian!"] The German-Austrian crisis—the failure of the Credit Anstelt Bank. I think it began before that. This situation has been growing up for very many months. [Interruption.] I am afraid that if we have to take it in minute form, we shall have to go back to the Peace Treaty. I want to come nearer to the present moment. In my opinion, this trouble began to grow up many months ago; so much so, that very serious discussions took place in May, when I was at Genera, at the meetings of the European Commission of Inquiry, and, very largely through my instrumentality, two very important committees were appointed, one to deal with the economic aspect of the world situation, and the second to deal with the financial aspect of the world situation. I am afraid that the international aspect of the case has not been explored as fully as it might have been. I was glad to hear the Chancellor of the Exchequer suggest that that aspect of the case is going to receive very full consideration at the hands of the Government.
I agree with the right hon. Gentleman that there is no need for panic. So far as I can assist, on this side of the House, I shall do everything I possibly can to avoid, according to his appeal, uttering any word or making any statement calculated to produce 1301 panic, either at home or abroad. There may have been differences, but I will say again, as I think I said on the last occasion that I addressed the House, there was no difference of opinion as to the necessity of balancing the Budget. The Chancellor of the Exchequer, in speaking on several occasions, has referred to the question of balancing the Budget. How could we go on very long without straining every nerve to balance the Budget? As everybody knows, I need not traverse the ground, the difference was not on the question of balancing the Budget, but as to the method by which the Budget was to he balanced.
Another point comes out of the present position. I have said that it is due very largely to the continued flow of gold and the transfer or withdrawal of credit. I would like to ask whether the Government are satisfied that the programme that they undertook to put before the country three weeks ago has not failed in the object they had in view. That being so, if there is desire, as I am told there is, according to the peroration of the Chancellor of the Exchequer, to have a united front, to avoid everything that would divide the nation; if that desire is genuine, it seems to me that the programme upon which the Government set out, and which has not succeded in the object they had in view, should be withdrawn. We may be told, in reply, that that would be altogether too serious a change to make at this stage; but I want to bring before the House the fact that there have been most important changes made during the last three weeks—changes which have not yet been reported to this House. The figures that were submitted to us, dealing with one very important part of the Budget now before the House, contained a sum of £62,000,000 of direct taxation. Everybody in this House knows that that £62,000,000 has been reduced to £57,500,000. I hope that statement is not challenged. I shall be within the recollection of everyone associated with me that the figure that came before us of direct taxation was £62.000,000. The point that I am making is that £4,500,000 has gone from that sum. If that £4,500,000 had been left there and had been used to ease the situation of certain classes—even the Prime Minister over and over again has admitted that there are very hard cases included in each 1302 one of these classes—the position in this country would have been vastly different, if you want unity.
In all classes—and reference has been made to nearly every class by way of question and supplementary question this afternoon—it is admitted that there are serious cases of hardship. If there were cases of hardship last week, what is the position to-day? I repeat, if there were cases of hardship last week among the teachers and among the members of the Police Force and branches of the Services, what is the position to-day? If we are to believe the statements which have been made on every occasion that the question of the Gold Standard has been discussed as to the serious losses which will be suffered by all classes of the community, that it will hear hardest on the working classes, then I say that if the cases were hard last week—and hon. Members opposite know full well that in many instances they were exceedingly hard, almost oppressive—they are infinitely worse to-day. What does it mean? Take the case of a teacher. He has to stand a reduction in salary. He is also affected by the lowering of the standard of the Income Tax, and he is to have his pension position very seriously prejudiced. There is a triplicate punishment, as it were, inflicted upon a teacher. Now we are going to add, as a result of our going off the Gold Standard, the very definite possibility of inflicting hardship if not privation upon the same individual. Therefore, is there not something to induce the Government, to induce the Chancellor of the Exchequer, to reconsider the position; to stand by the principle of a balanced Budget but a balanced Budget which, in face of the existing crisis, would unite this nation as it has not been since the issue was raised. I hope that that appeal will not be made in vain.
I ask another question. Are the Chancellor of the Exchequer and his colleagues quite satisfied that the proposals for which they have made themselves responsible are really going to meet the situation, are really going to solve the difficulty with which the Government and the nation is confronted? I confess that I have very serious doubts as to that result being achieved. Having made these few general remarks I will come to the 1303 Bill itself. By the kindness of the Prime Minister, I have received a copy, but I have not had an opportunity of fully consulting with my colleagues upon it. I am very much concerned to get some information with regard to Sub-section (3).It shall he lawful for the Treasury to make, and from time to time vary, orders authorising the taking of such measures in relation to the exchanges and otherwise.The last words are "and otherwise." I thought that the Chancellor of the Exchequer, in his speech, would have detailed a little more fully what they mean; what these orders are going to contain, and what is going to be the effect upon various sections of the community. I am not objecting to powers being given. If they are given under proper conditions, and if they are properly used, I could sec such justification coming from them as would almost compel some Government to make such orders part of our permanent legislation. I look at it like this. Without attaching too much blame to the financial interests—I am quite certain that they cannot be exonerated entirely—it may be advisable, after the experience we are going through, to experiment and see whether by the powers which are going to be given to the Government we cannot learn such lessons that eventually we shall have a greater control, a much greater control, than that which we enjoy at present over a great interest that can do something that may seriously prejudice if not depress the standard of living to the masses of the people of our country.
I want to ask the Chancellor of the Exchequer one or two questions. What kind of control is envisaged for exchange operations? Does Sub-section (3) mean any measure of control over foreign securities in the possession of British nationals in this country or abroad? Does Sub-section (3) include any control of foreign balances or payments abroad to British nationals? Does Sub-section (3) mean that effective steps will be taken—and to this we on this side of the House attach great importance—to prevent, during the period that the Bill is going to run, the exploitation of wholesale and retail prices?
§ Mr. P. SNOWDEN indicated assent.
The Chancellor of the Exchequer says "yes." Will he in- 1304 form us, before we part with the Bill, what machinery it is proposed to use for this purpose? May I say that much will depend upon the answers to the questions I have just submitted, and I hope that the Parliamentary Secretary, as early as possible in the Debate, will give answers which will reassure us on these points which we regard of such vital importance. If the answers are at all satisfactory, though I have not had an opportunity, as I have already said, of consulting the whole of my colleagues, the advice we will give is that we will not oppose the Bill, and by that means we will make our contribution to that unity that has been referred to.
§ Mr. WISE
No one who has listened to what the Chancellor of the Exchequer has said to-day can fail to contrast it with what he said two or three weeks ago. It is perfectly plain that the whole case which brought this Government into existence, and which is about to inflict a disgraceful Economy Bill and a discreditable Budget on the country, has collapsed. We were told that it was necessary to reduce unemployment benefit allowances and to carry through the other reductions in the Economy Bill in order to save the pound sterling. It is quite plain that the Government has not saved the pound sterling. All that case has disappeared. But it is not only that the core for the policy of the Government has collapsed. I can well believe that the right hon. Member for Edgbaston (Mr. Chamberlain) will in private, if not in public, complain of the troubles and difficulties which this bankers' crisis is also inflicting on the Tory party, for it is perfectly plain that if the cost of living is to be increased by going off the Gold Standard the whole case for pushing up price by Protection disappears as well.
Quite apart from these Parliamentary points it must be plain that very much more is happening in the world than a mere temporary difficulty in exchange. The process of increasing difficulty in regard to the working of the international financial machine, which has been observable now for many months, has reached another and very critical stage, and it is equally plain that this is very far from being the last stage. We are now, despite all the efforts of the Government, abandoning the Gold Standard. We are giving power to the Bank of 1305 England to discontinue payments in gold, and we are giving vague powers to the Treasury in regard to the control of exchange. I should like to know what the Chancellor of the Exchequer proposes to do with these powers? What is his policy in regard to currency and in regard to the international financial position. What is his position in regard to the world collapse of finance and commerce?
Two or three weeks ago the Chancellor of the Exchequer and the Prime Minister, and the right hon. Member for St. Ives (Mr. Runciman), informed us that if we went off the Gold Standard the whole structure on which the standard of life and world trade were built up would collapse. If there is any panic now, if the Chancellor of the Exchequer finds it difficult to persuade people in this country to accept the words of comfort and calm which he is addressing to them now, it is the speeches of the Chancellor of the Exchequer two or three weeks ago, and his colleagues, that are responsible for it. If there is apprehension in the minds of the working people of this country as to the possible and probable effect of this latest development, it is due to the speeches made over the wireless by himself. At that time he was trying to delude the working people that they must endure sacrifices in order to save the bankers. It is plain that all these sacrifices, if they are enforced—I hope the Government will not continue in office long enough to enforce them—will have nothing to do with the problem and difficulty with which the country is now faced.
The method adopted by die Government two or three weeks ago in order to stave off a collapse in the pound sterling, which has happened now, was to borrow money in New York and Paris. The terms they paid for this arrangement have had a great deal to do with the panic and the flight from the pound of the last few days. The Government paid in New York for these credits a price which was a minimum of 61 per cent. and a maximum of 7¼ per cent., or thereabouts, in certain circumstances prices might have been higher. But let me remind the House what at that time was the cost of money in New York. At that moment for three months Bills, bank bills, the price was 1 per cent. One year United States Bills 1306 with a large amount outstanding were at 2 per cent.; and the price of United States Treasury long-term securities generally was about 3 per cent. After the British Government, whose credit in the world has always stood as high as that of any other country, has gone into the New York market—and into the French market too—and offered a price for discounting bills, three months bills, or six months bills, or at most 12 months bills, about three times the current market price for money, what could you expect to happen to the credit of this country? That scandalous, that indefensible operation, I am sure, has played a very big part in the collapse of the pound sterling in the last week or two. We understand that the Government are taking very wide powers, but it is plain, despite what the Chancellor of the Exchequer said, that a very important factor in this emergency has not really been only the withdrawal of foreign balances in London and the sale of securities held in London by foreign holders, but to a greater or less degree to the attempts of British subjects to transfer their balances abroad. The Chancellor of the Exchequer told us that the French banks, the United States banks, have co-operated, and he went out of his way to thank them far all the assistance that they have given him. But if Paris and New York have co-operated to this extent, how has the flight from the pound come about? It is current talk in the City, as the Chancellor of the Exchequer must be aware—it is referred to without any equivocation in the Press—that a great deal of the transfer of sterling into other countries in this last week or two has come from British subjects desiring to get their balances abroad.
§ 5.0 p.m.
§ Mr. WISE
The right hon. Gentleman says it is not true. I ask him what really effective steps has he taken to verify that fact? He has acquired from the banks in a general sort of way. Has he in any way checked or controlled the methods which the banks have taken, in order to verify that information? If he consults the banks, if he consults his Treasury officials, I am sure they will tell him that there are a dozer ways in which British subjects can get their balances abroad, and many British sub- 1307 jects must in the last week or two have been indulging in them.
What I would like to know further is this: The pound is now off parity with gold. No one knows how far it will go. We have had no indication at all as to what, in that respect, is the policy of the Treasury or the Bank. The mere fact that it is in that position makes it commercially desirable and possible for commercial firms and others, in the ordinary course of their business, apart from any attempts which have been made and which I suspect will he made to evade taxation and that sort of thing, to put their money abroad and to do it quickly, because the longer they wait the less they may get out of it.
The whole experience of Germany, of Austria and the other countries which have gone off the gold standard—the experience which was pressed upon us in previous Debates, is that once that process starts, once it is possible for a firm to make large profits by buying foreign currency instead of holding sterling, it is essential to take effective measures to control the exchange. That has been the experience of Germany. That is what, in fact, Germany and Austria and these other countries have done in the last few weeks. The Chancellor of the Exchequer proposes, I understand, to leave it to the kindly offices of the banks. I suggest very strongly that, however benevolent may be the intentions of the banks in that direction, the national position is unsafe and unstable, unless effective powers are taken and used to control all such possible operations.
I go further than that. It is plain that until the pound is stabilised somewhere, the operations in sterling, in the transfer of sterling to other countries, will be extremely profitable. There are all kinds of ways in which such operations can be wrapped up. As is well known, Germany has centralised all her operations in that respect. She has done more than that. In the last two or three days, in order to avoid the sort of difficulties from which we have suffered in the last few weeks—difficulties largely due to the unsatisfactory methods and policy of the banks—Germany has taken effective control over her whole banking organisation. We shall be driven to that, even under this Govern- 1308 ment, sooner or later. Better to do it now than to be pushed into it in three or four weeks time, as the Government have been pushed off the gold standard after three weeks of playing with irrelevancies which have no sort of reference to the problem with which we were and are concerned.
Take another point. We were told that if we went off the Gold Standard the effect would inevitably be that prices would rise, the cost of living would increase. I understand that in the Liverpool market the price of wheat has already increased by 12½ per cent. to-day. Do the Government propose any effective means for controlling the cost of living? There was nothing in the Chancellor's speech which had anything to do with that problem. Although, as a result of going off the Gold Standard, the price of wholesale commodities will rise, there is a wide margin before there need be any corresponding rise in the retail price. The margin between wholesale and retail prices has been one of the insistent difficulties in our economic problems for a year or two. I have taken out the figures of the wholesale and retail indices in 1928–29, before the big collapse in world prices took place, and compared them with the corresponding indices now. In 1929, with wholesale prices at 136½, taking the pre-War as 100, retail prices stood at 164. Now, with wholesale prices at 100, retail prices stand at 145. The 1929 relation was not at all abnormal. On that basis the wholesale price might rise 20 per cent. without there being any necessary rise in the general level of retail prices. It ought to be the first task of the Government to take action, after being pushed into measures which must inevitably make imported foodstuffs and raw materials dearer, to prevent any unnecessary increase in the retail cost of goods.
Then in regard to the future, what do the Government propose to do? I see that the Bill contains a limitation of its operation, or a part of its operation, for six months. Is it the intention of the Government and of the Bank of England, or, should I say, of the Bank of England and the Government, to put things in their proper order in these days, to continue to pursue the policy which it has pursued with such disastrous results all 1309 these years—the policy of deflation—and after the period of collapse and difficulty to try again to go back to gold? Is that the intention of the Bank of England? I observe that their first reaction to this situation is to push the bank rate up to 6 per cent. That is a very necessary precaution at the moment, when changes are being effected. But a bank rate at that figure would mean a policy of contraction of credit, of deflation, which would add to all the difficulties from which we already suffer under the economy proposals of the Government, and the new difficulties from which we shall suffer on account of the higher cost of imported food and raw materials. This would mean a continuance of the disastrous policy of trying to adhere to the Gold Standard at whatever cost to the productive industry of this country. This, indeed, has always been and probably remains the desire of the City.
Moreover, the mere insertion of a limiting period of six months will tend to create an uncertainty, an incentive to speculation, which may be very valuable to those who arc able to profit by such transactions, but very disastrous to the possibility of the country and of industry speedily getting again into a position in which trade and industry can proceed satisfactorily. What indeed is the policy of the Government? What indeed do the Government propose to do? It is quite plain, as has been plain for months —the Macmillan Committee drew attention to it—that in order to preserve the possibility to the City of carrying on its business on the Gold Standard—a very profitable possibility and very advantageous to the City—we were striving in vain to keep the industry of this country going on the basis of a pound which was, as that Committee considered, 20 to 30 per cent. over valued. We were carrying a burden, in our adherence to the Gold Standard, which was too heavy for this country to bear, which benefited the rentier class but inflicted injury on industry and the rest of the community, and was the main cause of our unemployment, and which helped much to keep back the whole possibility of world recovery.
What is our policy to be? Are we proposing to accept the situation, and to recognise frankly that on the old basis this country cannot prosper, that world 1310 trade cannot recover, that the world would continue in a state of bankruptcy and hopelessness, and that with three-quarters of the gold of the world in the possession of France and America we should be putting our necks under the heels of Wall Street and Paris? Or are we now to take the opportunity of regaining the initiative in international affairs, of recognising that the old system is going, that the gold basis, which has been the key and centre of financial control of industry, has collapsed? Are we indeed going to take the lead in striving to get the industry and commerce and finance of the world on to a more scientific and more satisfactory basis? I can conceive no greater misfortune than that the Government, having failed to learn the futility as well as the humility of going on its hands and knees to the financiers of Wall Street and Paris, should continue this practice.
We have got off the Gold Standard. We had better stay off the Gold Standard and strive to reconstruct the trade of the world on a new basis. Let us call a conference of the non-gold standard countries, which now include Australia, Germany, many other European countries and practically the whole of South America, and the day after to-morrow will include a very large proportion of the remainder, except perhaps France and the United States. Let us try, as was suggested at Geneva two days ago in a very important speech from a representative of the Eastern European countries, to reconstruct international trade on the basis of a, pound sterling kept stable in terms of commodities instead of this slavish and hopeless adherence to the Gold Standard which has now completely let down the world. Let us strive to get things going on a new basis. That means, of course, much more than the establishment of a new scientific currency system, though that is necessary. If we are going to base our currency, as we ought to, on the maintenance of a stable level of the prices of commodities, supervision must he exercised to secure that the main commodities are handled on lines which will preserve stability in supply and distribution.
It means definitely that we have to get off the old capitalist basis of international finance and trade and try to re- 1311 place it with one which is not only more human, but more scientific and more adapted to the circumstances of the present moment. I doubt if anybody on the benches opposite sees any way out of the present situation on the old lines. I fail to find any indication in the Press or in speeches either here or elsewhere that the bankers of Europe of London or New York see any way out of the present difficulties of the world if we try to remain on the old basis. The gold basis and the capitalist organisation of finance and world trade have collapsed. The Government have striven to preserve it in this country. They have failed and they will fail again if they try to do it again on the old lines.
The essential thing now is that this country, facing the fact that there has to be a change in the currency and the trade organisation of the world should, as in the 19th century, take the lead in initiating those changes. For the last two months we have been on the run. We still have the chance of taking the lead. But if we took the lead in this matter we would, I have no doubt, preserve the prestige and the importance of the City of London as a world trade centre. But let there be no mistake that this requires not only a new currency method, but organised supervision on a world basis over the distribution and prices of essential raw materials and commodities, so that the collapse of this past year or two may not be repeated. It also requires this, as I see the situation—that never again can this country permit its economic life, its financial stability, the livelihood of its workers to be at the mercy of bankers in the City of London who are guided, not by any general considerations of national policy or interest, which are entirely outside their province, but are guided only by their immediate personal interests. We on these benches will do our best to prevent any danger of our ever again permitting this country to get into such a position of bondage and of danger.
§ Colonel WEDGWOOD
I have the greatest sympathy with the Chancellor of the Exchequer. For years he has regarded himself as the champion and protector of the honour of the British pound. The financial integrity of 1312 sterling has been to him as a woman's honour. Like Foch he said:
"Ils ne passeront pas."
But they have passed. I feel that the Chancellor of the Exchequer is too expensive for this country and I am not certain that he is not going to be even more expensive than he has been. The Budget is no longer balanced. I want the House to understand what has been happening during the last fortnight. A fortnight ago I pointed it out to the House, but now we know. We borrowed £80,000,000, half in francs and half in dollars, and we have to pay it back in 12 months time in gold. That means not £80,000,000 sterling but far more. The dollar has come over today from New York at 4.20 dollars to the pound, or a drop of 60 cents in one day. That means already on the £80,000,000 credit alone, a loss of £10,000,000. I am not clear as to how much it means on the £50,000,000 which we borrowed previously. There you have an example of the expense of flying in the face of nature and pegging the pound at an artificial value. The Chancellor of the Exchequer can hold back some things on earth, but he cannot hold back the forces of nature.
I ask the House to observe what is happening. We are suffering not from an unbalanced Budget but from unbalanced trade. As our imports have gone up our exports have gone down. In normal circumstances such a difference between exports and imports would be met by invisible exports, or by paying the balance in gold from this country; and, if our imports went up and our exports went down, gold should have been exported from this country abroad. We peg the exchange to prevent that gold going abroad. But that does not interfere with the balance of trade. That still goes against us, and the position merely becomes worse. The fly-wheel, the regulator, is not working, and the result is that conditions go from bad to worse. In spite of the pegging, gold inevitably drains out at top prices.
The Chancellor of the Exchequer says it is not people in this country who have been selling owing to the pegging of the exchange. He says that the demand has come from abroad. I hope that is so. But those who wanted to get out of England, to get out of sterling, had the 1313 opportunity of getting out at top prices and at our expense. That is past history now, and it would be almost a shame to rake it up, considering the Chancellor's position, save for this—that in his speech to-day the right hon. Gentleman foreshadowed pegging the exchange again and throwing more of our money down the sink. For goodness sake, let us realise now that we had better allow nature to have its way and the pound to sink to its true level, whatever that level may he, without trying to interfere with it. We shall do that all the better if we realise that a fall in the value of the pound, ruinous as it is to those with fixed incomes, to those who are paid pensions or salaries, yet has this great value, that it booms the export trade of the country.
If we sell goods abroad now, we get a certain number of dollars which purchase a certain number of pounds over here. If we sell at the same price in future, we shall get the same amount of dollars which will purchase a larger amount of pounds and therefore the profits of the export trade will be higher if the prices are kept the same. If, on the other hand, the export trade drop their prices, they will be better able to compete with other countries in the neutral markets of the world. There will be more production here, and yet the export trade will he able to make some sort of profit on the deal. [HON. MEMBERS: "The pottery trade."] There is not very much raw material employed in the manufacture of crockery. The whole benefit will go to the pottery trade which will be able to supply better and cheaper goods to the rest of the world, or if prices were kept up it should be able to pay the overdraft at the bank which is strangling the trade at the present time. [HON. MEMBERS: "And higher wages?"] The workmen will be able to look after themselves. Let me assure my hon. Friends that the wages of the workers of this country are regulated by the cost of subsistence. They cannot go lower, and if prices go up wages will go up also. We know Karl Marx's iron law of wages. We know what regulates wages.
I do not say that it is not going to be a hard time for everybody, particularly for people with fixed incomes, but if we are going to have this automatic, this perfectly just cut on everybody, why 1314 should we also need an Economy Bill? That is making not two bites of the cherry, but two cuts at the chicken. We have now, unfortunately, got the worst of both worlds as far as cost-of-living and wages are concerned. But this is not the tragedy which it has been painted, not only by hon. and right hon. Gentlemen opposite but by the entire Press of the country during the last fortnight. They tried to make it clear to us that the end of the world would come if we got off gold. We have been off gold before. I remember when we unpegged the exchange in 1919 and the pound dropped to 3.57 dollars—lower than it has gone yet. [HON. MEMBERS: "3.30 dollars."] Yes it fell to 3.30 I believe in 1919, and that is far below 4.20 and far below what we expect it to reach. The world did not come to an end then. On the other hand, our trade boomed. It only boomed for a short time of course.
That is the whole history of civilisation. Looked at in one way, it is a series of crises exactly like that through which we are passing. Trade expands; people borrow money on the strength of high prices, and with the high prices they extend their factories and their trading relations. Then prices fall; they have all their debts based upon the high prices that were and they cannot pay their debts. Crises of that kind occurred frequently in mediæval times and also, I dare say, in ancient Rome. In old days when you could not pay your debts you either went to gaol or else went out and slaughtered the Jews from whom you had borrowed the money. In any case, you got rid of your debt somehow or wrote it off, and I am not sure that the mediæval method was not in the long run, the more humane. These crises have taken place in English history before. Kings in the old clays did what Chancellors of the Exchequer are called upon to do now. Kings "clipped" the coinage, and the value of the shilling or the florin, or the mark, as the case might be, went down. Under Henry VIII it dropped by over 50 per cent., and under good Queen Elizabeth it dropped to one-quarter.
Those were the days of inflation, if you like. Hon. Members should remember that the franc was originally the equal to the pound, but they deprecated their 1315 coinage more quickly in France, being perhaps more civilised, and to-day the franc is at 2d., and the pound is still anywhere about 18s. If you go to Portugal or Spain, you deal in the milreis, a thousand reals, and the old real, was the equal of the pound. Depreciation has been the constant state of every currency. The pound hitherto has depreciated less than any other, but the same crisis that has driven down the value of the currency in the past is driving it down to-day. Whenever the currency depreciates, there is an enormous amount of disturbance and painful sacrifice by the people of this country.
Currency depreciation is not a thing to enjoy or to smile at, but it has happened before, and for exactly the same reason, namely, that debts were too heavy. The rentier class before have objected to it, just as they do now, but in the interests of the recovery of trade and industry in this country, and in the interests of the City of London itself, it is desirable that we should be in a position to make a fresh start, as it were, with some portion, as small as may be possible, of the burden of debt written off in order that new men and new methods may again build up the trade of this country, the manufactures of this country, and the financial supremacy of London.
Let me tell the hon. Member for Chislehurst (Mr. Smithers), whom I see in his place opposite, that the worst service that has been done to the City of London and the finance of this country has been done by the hon. Member's friends in the City, through the Press, in the last fortnight. The nonsense that has been talked about depreciation has caused a great deal of the trouble from which we are suffering to-day. If you go on turning people who cannot understand into cowards, they will behave like rats, and the best service the hon. Member can render to-day is to point out that coming off the Gold Standard, and the pound sterling at 4.20 dollars, does not mean the ruin of this country, but may very well be an unasked-for blessing to the trade, finance, and industry of this country.
§ Mr. SMITHERS
If I may be allowed to intervene, as I have been referred to 1316 by the right hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood), I would at once dissociate myself from any attempts to promulgate or put into the Press any kind of words that might make the situation worse. The right hon. and gallant Gentleman overestimates the powers of the Stock Exchange. We are purely and simply intermediaries. We have hardly any control at all of prices. We are dependent entirely on outside forces and on people who wish to buy and sell, and I wish that were more realised, because it is quite untrue to say that we have any influence on the course of markets whatever. The Chancellor of the Exchequer, in his opening remarks, said that the present situation was to a great extent psychological, that there was a wave of uncalled-for panic going on in all markets of the world. I agree, and I would with respect point out to the right hon. and gallant Member opposite and the hon. Member for East Leicester (Mr. Wise), who spoke before him, that it is no good talking about the Romans and Henry VIII, or what they hope to accomplish next year or the year after.
I want with all the earnestness at my command to appeal to this House to-day to remember that the whole world is watching us. The last speaker referred to the inevitable chaos and the enormous amount of disturbance in any devaluation of the pound. For the moment our duty is to avoid undue disturbance. I say this as a backbencher to hon. Members, that the best gesture that this House can make to the world to-day is to pass this Measure without further discussion. The pound is devaluated, and I hope and believe that it will be stabilised somewhere round about this point, but if there is a further outbreak of panic, it will not be possible to say how far, during those few hours or few days of panic, it may go on; and a gesture from this House to-day, so that the whole world might see that we are facing our difficulties and our dangers as a united House of Commons, would have a greater effect than any hon. Member opposite can possibly appreciate. I know something about the nervousness of the exchange markets, and I appeal to hon. Members opposite not to rise any more in their places, but to let this Bill go through. [Laughter.] Hon. Members may laugh; 1317 they can come along next month or the month after, when the period of extreme disturbance has passed, and bring forward any theory they like, but to-day I ask them to let this Bill go through at once.
§ Mr. MARLEY
I want to ask the hon. Member for Chislehurst (Mr. Smithers) to make his appeal to another place, to his own Front Bench, because the only dividing line between this side of the House and that is the question of how the Chancellor of the Exchequer has proceeded to balance his Budget. My right hon. and gallant Friend the Member for Newcastle-under-Lyme (Colonel Wedgwood) said that the devaluation of the currency, which I said last week would not be a great evil in our present circumstances, is going definitely to hit the middle classes and the people with fixed incomes more than anyone else, and yet your Economy Bill—and here is where I want to make a special appeal—hits those people more than anyone else in the country. The unemployed man is also a fixed income drawer, so far as his insurance is concerned, and I simply want to make this appeal; If the hon. Member for Chislehurst really wants that united effort in front of the world to-day and from now on, then that Economy Bill must be taken out of this House, because the effect of the economies on teachers, civil servants, police, Navy, and every one else with fixed incomes, on top of the devaluation, means that you are lashing them twice with the same whip, because you are hitting them in so far as you have reduced their rebates for Income Tax, which is—
§ Mr. SPEAKER
It ought to be obvious to the House that we cannot debate the Economy Bill on this Bill. Hon. Members may argue that the Economy Bill may have an effect upon this Bill, but they cannot argue that this Bill will have an effect on the Economy Bill. The time to argue the question of the Economy Bill is on the Committee stage of that Bill.
§ Mr. MARLEY
With all respect, I want to say that if the Government desire this Bill to go through without opposition or lengthy discussion, the question as to whether the Economy Bill will be proceeded with makes a very great difference to our point of view, but I will leave that point. The Bill which has been presented to-day permits the Govern- 1318 ment to indemnify the Bank of England for actions which they may have taken to-day or any action which they may take before the Bill becames law in relation to not keeping its commitments under the 1925 Act. Is it necessary to restrict the movement of gold? Is it essential that there should be no heavy withdrawals of securities from this country to-day? We are told so, because this Bill asks that we shall indemnify the Bank of England in this regard, and I am afraid that there is no option, since the Government already, in the reply which was sent to the Bank of England and which was read by the Chancellor of the Exchequer, agreed to indemnify them in so far as they may have broken the Act.
I come to the next Clause of the Bill, or the third Clause—I am not sure which it is—in which the Government ask for powers to do more than indemnify the Bank of England; they ask for powers to take any steps they may think necessary to keep the exchange regulated in the interests of this country. That is a very serious power to ask for without further explanation and further definition of what these powers may be. It may well be that, having got this Bill through, hon. Members opposite who were clamouring for an election less than a few days ago, may decide to adjourn this House and to carry on the Government by Order in Council and by the process of the second or third Clause of this Bill. I hope the Financial Secretary to the Treasury will give us some further definition as to what powers it is proposed to take and what are the steps that he, after consultation with the Chancellor of the Exchequer, thinks will be necessary arising out of this particular Clause of the Bill, because under this Bill it is possible, as I see it, for the House to be left entirely out of account by the Government in the next few months, and if the Government are going to be swayed by the advice of the Bank of England, as they have been swayed up to now, some of us would like to discuss the action of the Government when it takes action upon that advice.
Is there going to be any taking of absolute powers by the Government without consultation with this House? Is the House going to be left entirely out of any action that may be taken under this Bill, or is the Treasury to be given 1319 powers to act in the interests of the country as dictated by the Bank of England? What you have had to-day shows that if the Bank of England had known or paid any attention to its job, you would have had no Economy Bill. You have balanced your Budget on paper, but it remains unbalanced, and will remain unbalanced, as my right hon. and gallant Friend in front said, at the end of the financial year. If the Bank of England are to be allowed to advise the Treasury as to special powers to be taken under this Bill, we want to know what powers the Chancellor of the Exchequer seeks and what action may be taken under such a wide Clause as the one I have mentioned.
§ Sir OSWALD MOSLEY
This Debate is not the time for making any reproaches or for scoring any debating points. A very heavy indictment could be drawn against both sides of the House, and only those who have consistently opposed the folly of this country's policy in relation to the Gold Standard have any right to make that indictment. But I am not here to make any such point or any such reproach this afternoon, but to strive to urge upon the Government even at this hour the adoption of some measures adequate to the present situation. I want to ask them definitely whether they are prepared at any given point to take drastic measures to maintain the pound. Have they in their minds any point at which they will maintain the pound? Have they, in fact, any plan, or are they going to permit the pound to tumble until it reaches they know not what equilibrium?
I believe that the present situation may end in complete disaster, or that it may end in a far stronger position for this country than we have known for long past. Whether this situation ends in disaster or whether it means that this country will emerge far stronger from this event, depends entirely upon the vigour and decision with which the Government act at this juncture. Therefore, I ask them, as a first question, if they have any point in view at which they mean to maintain the pound. Have they any conception of an exchange parity which will bring price levels here into some equilibrium with the rest of the world and which will justify them in 1320 making strenuous efforts to hold the pound at that point? There are several courses open to them to achieve that purpose. Other countries might be willing to make us loans to hold the pound at a proper level, although they would be unwilling to finance us in holding the pound at a level far above that which was justified by the equilibrium of our prices with the rest of the world.
Now at last they have reached the point at which it may be necessary to mobilise the vast resources of this country abroad. I believe that those investments could be mobilised by consent and by patriotic people being willing to place them at the disposal of the country. By this method and other methods it is open to the Government, if they make a strenuous effort to uphold the pound at any reasonable level, and by the organised buying of sterling abroad, to check panic and, in a word, to stop the rot. It is hopeless to go into a situation like this simply tumbling down the staircase without any idea where you are going to stop your fall. With a relatively slight devaluation of the pound I believe that it is possible with energetic measures to arrest the flight, and as far as industry goes, if the pound is reasonably devalued, we shall be in a far stronger position than we have been for a long time past.
Everybody who has given attention to these matters knows that the premature return to an artificial level of the exchange in our efforts to regain the Gold Standard led automatically to a bounty on foreign imports and to a handicap on our own exports, and we have never really adjusted that disequilibrium. It is now in the course of being adjusted by the devaluation of the pound, and the first effect is to put a bounty on exports and an automatic barrier against imports. If this movement is kept under reasonable control, and if by vigour and decision the Government command and control the situation, British trade may benefit rather than be injured by the result of this transaction. If, however, they simply let the matter slide, if they have even now no idea or plan of action in their minds, we may fall into a disaster comparable with that which has overwhelmed some continental nations. The Government by the action which they take and the vigour which they show 1321 have the future position of this country closely in their hands at this very crucial moment.
There is one other point which I wish to urge upon the Government. The most hopeful thing to me in the speech of the Chancellor of the Exchequer, and the first thing that he has said for many years past with which I find myself in agreement, was that the Government would address themselves to the question of the balance of trade and that he might himself feel disposed to accept measures normally repugant to him. That was the roost encouraging sentence which I have heard for a long time past, and it will go far to mollify his hardest critics. After all, it has been proved in a tragically brief space of time that to restore the confidence of the world and of the foreign investor in this country it is necessary to deal with our trade position. Less than three weeks ago the view was expressed in this House that a mere balancing of the Budget was inadequate, and that it was not really the fact that we were adding £100,000,000 or £200,000,000 to a National Debt which was already some £9,000,000,000 which alarmed the foreign investor; it was his growing disbelief in the industrial recovery of this country. His disbelief in the industrial recovery of this country arose largely from factors and conditions which were created by the long maintenance of our exchange at en artificially high level.
It has, at any rate, been proved that the mere balancing of the Budget is insufficient to reassure the foreign investor and depositor. Since that effort was made, foreign withdrawals have proceeded at a far greater pace than ever before. Therefore, I urge upon the Government that they should immediately adopt some plan of action to redress the trade balance of this country. Of course, some check and control upon the imports is necessary to that end. Some slight barrier has been placed on imports by the depreciation in the exchange, but unless the exchange depreciates further and far more rapidly, a harrier has to be placed against them. The adverse trade balance has to be redressed, otherwise we shall stagger from collapse to collapse; we shall go downhill in a series of humps. No country can maintain its exchange, whether it balances its Budget on paper or not, if its trade balance is persistently 1322 adverse. The country finds itself faced with the necessity of redressing that balance in trade, and the most hopeful thing I have heard for a long time is the Chancellor's statement that he was willing to consider measures that were formerly repugnant to him.
I believe that we need not face the situation with any alarm or with panic, provided that the position is gripped with decision by the Government. Many of the handicaps from which this country has been suffering have been automatically redressed to some extent by the events of the last few days. We have in the last decade, as the result of the policy the final failure of which we have witnessed this afternoon, something like doubled the burden of our War Debt and every rentier and fixed-interest-bearing charge upon industry and upon the nation's productive effort. We have thrown this country into two of the greatest industrial struggles in history by our monetary changes, and we have led the nation from disaster to disaster in pursuit of a false illusion, and not one man in a hundred had the slightest idea of where it would lead him. Now at last that policy this afternoon—by force of circumstances, not by human wisdom—has been abandoned, and at last some of those great handicaps and burdens that we have placed upon ourselves, which no other nation in the world has had to carry, has been lifted automatically from our shoulders. That gives us a supreme opportunity to initiate a policy of action in order to lift some of the burdens that have been placed upon industry.
If this situation is allowed to drift, we shall fall into hopeless, irretrievable disaster. If, on the other hand, it is gripped and seen as an opportunity which may be taken, I believe that this nation may emerge from the troubles of this moment in a stronger position than it has known for many years past. Therefore, for my part, and without making reproaches for the past, because I really believe that both sides of the House are equally to blame, I urge upon the Government the adoption of a policy of action and decision. Let them announce definitely at what point they will hold the pound. Let them mobilise every resource of the nation to hold the pound by a proper equilibrium which will bring our prices in relation to the rest of the world; let them, at the same time, adopt a construc— 1323 tive industrial policy to redress the balance of trade by the control of imports, and at long last initiate a policy of decision and action which the whole country wants.
§ Mr. O'CONNOR
There is only a small portion of the remarks which the hon. Baronet has just addressed to the House with which I venture to quarrel. He seemed to disparage the value of proceeding with the balancing of the national Budget, and to suggest that such, efforts were without any effect upon the confidence which the rest of the world showed in us. I suggest, however, that the need for balancing the national Budget, imperative as it was a week or so ago, is even more imperative to-day, because to-day we have a currency not anchored to any material resources, to gold which has been the standard of measure, but anchored to something entirely different, to the spirit of self-sacrifice, self-reliance and independence of this people. Therefore, it is sterling which at the present moment has to be kept going, whereas yesterday it was the Gold Standard, and we ought to fix our eyes above all things upon the maintenance of sterling now that we have abandoned the Gold Standard. In the maintenance of sterling, we must face all those domestic sacrifices which were necessary only yesterday in connection with the maintenance of the Gold Standard.
I agree with the hon. Baronet that the situation in which we find ourselves has a bright side to it as well as a dark one. In the first place, used rightly it may very well restore to us the initiative in currency and financial matters which we have been in danger of losing as long as we were attached to a perfectly illusory Gold Standard. I can see this country now sharing the point of view, the responsibilities and the difficulties of the debtor countries of the world. Herself a creditor country, she stands in a strong position to put herself at the head of the debtor countries, and to secure that rationalisation of the method of the use of international currency which, but a few days ago, being on the Gold Standard, she was unable to attempt. Used aright, and dependent, of course, upon stringent internal domestic finance, it gives our ex- 1324 port trade the possibility of an electrical recovery. Nothing was more significant this morning, in looking through the news of the markets than to see the immediate rise in the values of certain commodities, and I think there is no doubt that, rightly used, this emergency, this temporary difficulty in which we find ourselves, can be turned to the most enormous stimulus of our export trade; but there are many difficulties which we shall find confronting us in the course of the, next week or so. Do not let us imagine that we shall be free from the stigma of dumping. It will be said by other countries that we may be attempting to deal with our export situation by the dumping method which we have so much criticised when it has been practised by other countries.
I only utter that word of warning lest the rosy pictures which appear from the industrialists' side, lest the view that this is to be all to the advantage of the export trade of the country, should be too much emphasised. Many difficulties lie ahead. We have embarked upon, or we have been pushed into, a most perilous and difficult endeavour. It is, to a large extent, the price we are paying for our democratic method. There is not the smallest doubt that if this country had been able to find expression swiftly for the will of the people this situation would not have come about at all. We are paying the price for the runaway tactics of the Opposition, for the lack of leadership which has been shown by the Leader of the Opposition, for the divisions which have occurred and for the inability of the Leaders of the Opposition to control their more irresponsible elements and, therefore, to engender the kind of confidence which is essential. [Interruption.]
I do not think that even now hon. Members on the other side of the House realise with what close attention not only their sayings, but their demeanour are scrutinised in other countries. I had the opportunity of speaking to a distinguished French Senator a few months ago, when this crisis was on its way. He had occupied a seat in the Distinguished Strangers' Gallery in this House, and he said to me afterwards, "In France they cannot realise the type of material that you have got on those benches. It is impossible for any Frenchman who has not been, as I have been, in that Gallery to see the real difficulties with which any 1325 attempt at government is faced in this country." Do not let us forget that to-day that disposition is accentuated and intensified a hundredfold. To-day the action and the methods of His Majesty's Opposition—save the mark!—are under a fierce scrutiny. It is the disposition and temper of hon. Gentlemen to which other countries are looking when they have to determine the new issue, which is whether sterling, now based upon the confidence that other nations can show in our people, is to stand, now that the pound is no longer anchored to the Gold standard.
It has been said that at this moment we ought not to go back to the old avenues of mutual reproach. I agree, to a certain extent, with that view, but, on the other hand, it is essential, in my opinion, if we arc to prevent that tumbling devaluation which has been spoken of, that a great deal more restraint, responsibility, leadership and wise counsel, should be observed by those who pose as prepared to constitute the alternative Government in this country. Unless a more sober and scrutinising view of the facts of the situation replaces the gibes and jeers, the unreadiness to face realities, the kind of imitation of Whipsnade we have been witnessing here over the last two or three weeks on every occasion when the crisis has been mentioned, unless we can get rid of that temper and spirit, then this Parliament will have to evolve a different means of dealing with the situation. Let no one mistake it. It is a choice between the regular democratic method that we now possess and a different method. Let nobody mistake this Bill. This is not a democratic Bill. No democratic Bill could cope with a situation of this kind. Only by suspending the democratic method, by leaving a mere husk of representative government, can we save democracy from disaster, and it lies with hon. Gentlemen opposite to prove by their actions and their behaviour in the next few critical days whether they want more of the method they are getting in this Bill, or whether they are going to make possible the free working of our representative methods.
§ Mr. MATHERS
After the interesting lecture on deportment we have had from the hon. and learned Member for Central Nottingham (Mr. O'Connor) I hope I may 1326 be pardoned for getting back to the Bill. I wish to be very specific in the questions I put to the hon. and gallant Member who, I understand, will reply to this discussion. I wish to direct his attention to Sub-section (3) of Clause 1 of the Bill, and to ask him particularly what the word "otherwise" means. Perhaps the House will understand my point better if I read a portion of the Subsection.
§ Mr. STEPHEN
On a point of Order. I understand that leave has not yet been given to bring in this Bill. I am wondering whether the Bill has been circulated, although leave has not yet been given to bring it in. Is that in order?
§ Mr. SPEAKER
I understand that a print of the Bill is available in the Vote Office. It may be a question whether it is better to take the discussion at this stage on the Motion for leave to bring in the Bill or whether we should take it on the Second Reading, but it should be clearly understood that we cannot have the same discussion on both stages. If hon. Members like to have the discussion at this stage, well and good.
§ Mr. STEPHEN
When the Chancellor of the Exchequer was moving for leave to introduce the Bill I asked about the procedure, in order to protect our rights. On the Ruling that was then given I hope we are to have an opportunity to deal with the Bill at each stage of its progress. Whether leave should be given to bring in the Bill is a particular question. If leave is given to introduce the Bill then the contents of the Bill come before us, and what is proposed in the Bill becomes the question. If we are to have some hon. Members discussing the Bill now, although it was stated that we could not have copies of the Bill until leave had been given to introduce it, the position appears to me to be impossible.
§ Mr. SPEAKER
What I said when the hon. Member asked me a question earlier was that hon. Members would have a chance of speaking on and dividing against each stage of the Bill; but the hon. Member will agree with me that it would be an abuse of procedure to have the same discussion twice over. He can discuss it now or on Second Reading.
§ Mr. STEPHEN
That is why I put my Point of Order. One could not expect to have the same discussion all over again, 1327 and that is why I am anxious to protect our rights now. Evidently the Second Reading discussion and the discussion on the question of leave to bring in the Bill are being mixed up.
§ Mr. SPEAKER
If that be the case, we had better decide the question of giving leave to bring in the Bill now.
§ Mr. ANEURIN BEVAN
Many of us are anxious to take part in this Debate, and are anxious that the full privileges of the House should be preserved. Someone might move the Closure and have the question put to the vote merely because we are discussing the question of giving leave to bring in the Bill, and then it might subsequently be ruled that as we have had this discussion the next stage must be curtailed, and so there would be no opportunity for adequate discussion. If we agree that a full and adequate discussion is to take place on the Motion for leave to bring in the Bill it ought not to be curtailed by a premature moving of the Closure.
§ Mr. SPEAKER
I hope the hon. Member does not doubt that I shall do my best to protect the interests of all hon. Members.
§ Mr. EDE
May I ask whether the same points can be discussed on the Second Reading as on the First? I understand that as the first stage we are asked to give leave to bring in the Bill, and that on that question we may argue that the Bill is inadequate, that it does not cover the whole situation, and points like that. When we get to the Second Reading we shall be discussing the general principles of the Measure and the things contained in it. The two stages of the Bill raise different issues. As far as I have observed the discussion up to the moment, it seems to have been mainly confined to the question of whether the Measure is adequate, and, therefore, whether leave should be given to bring it in.
§ Mr. SPEAKER
It may be difficult to distinguish between the two discussions. If hon. Members have any doubt about the matter, it would be best to give leave now to introduce the Bill and discuss it further on Second Reading.
§ Mr. MATHERS
I would point out that, apart altogether from the text of 1328 the Bill, which the Chancellor said could be obtained at the Vote Office immediately he sat down, and of which I have a copy in my hand, the words to which I am referring were actually used by the Chancellor in his introductory speech. Therefore, I think I may claim to be quite in order in raising this point. I referred to the word "otherwise," and to the words used in the context by the Chancellor of the Exchequer.
§ Lord HUGH CECIL
On a point of Order. Is it in order to discuss the actual text of a Bill which is not yet introduced? It is perfectly in order to discuss the principle of the Bill and the policy of the Bill, or anything of that sort, but to debate the text of a Bill that is not yet introduced is, I submit, entirely out of order. Apart from that, the whole discussion on so simple a Bill through all the stages—its introduction, Second Reading and Third Reading—would be very much the same.
§ The FINANCIAL SECRETARY to the TREASURY (Major Elliot)
In pursuance of his arguments, the Chancellor of the Exchequer described in great detail this point, and I think it would be quite in order to refer to my right hon. Friend's description of the Bill and the extensive quotations which he gave.
§ Mr. SPEAKER
The Chancellor of the Exchequer referred in his speech to words in the Bill, and hon. Members are in order in dealing with what he said.
§ Mr. MATHERS
I am using the words which have already been used by the Chancellor of the Exchequer. Sub-section (3) of Clause 1 of the Measure we are discussing provides:(3) It shall be lawful for the Treasury to make, and from time to time vary, orders authorising the taking of such measures in relation to the exchanges and otherwise as they may consider expedient for meeting difficulties arising in connection with the suspension of the Gold Standard.My point is the simple one of what will be the extent of the powers of the Treasury and in what relation will those powers be used under the description of "otherwise" than in relation to the Exchanges.
We have been told very earnestly during the last few weeks that ally suspension of the Gold Standard would mean that the position of people with fixed 1329 incomes in this country would be placed in serious jeopardy. The Government have placed before the House a Measure to limit the income of those whose incomes they control in the public service. I wish to know if it will be competent for the Government under Sub-section (3) of Clause 1 to amend the position and make further provision for those who are subject to the cuts as represented in the Economy Bill. I need not refer to those points in detail; they deal with the unemployed, the police, soldiers, sailors and teachers. Seeing it is represented to us that five points drop in the civil servants' pay was looked upon as equivalent to the cuts being made in other sections of the State service will that be available for adjustment under the terms of this Clause? If the suggestion is simply to work on the present arrangement of cost-of-living basis with regard to civil servants' bonus, namely a review each six months, I believe The position will be nothing like adequate to meet the immediate rising need of those who will he affected by a rise in the cost-of-living caused by the departure from the Gold Standard. I want to know whether the general economies proposed by the Government can be dealt with under this Clause, and whether the economy which is looked upon as equivalent in respect of the Civil Service but not included in the Economy Bill can also he adjusted. Perhaps the hon. and gallant Member will say if the cost-of-living ascertainment will be speeded up and given effect to as under the present arrangement but at more frequent intervals.
§ Mr. BOOTHBY
I have intervened in this Debate very largely as a result of the interesting speech which has been made by the hon. Member for Smethwick (Sir O. Mosley). I can at least claim that for about seven years past. I have expressed my doubts as to our ability to remain on the Gold Standard at the prewar parity of exchange. On looking up the Debate which took place when we returned to the Gold Standard in 1925, I found that the present Lord Strickland and myself were the only two Members of the House who on that occasion went so far as to express doubts as to the wisdom of our action. As hon. Members opposite know, the return to the. Gold Standard is the policy which this country has pursued as a result of the 1330 recommendations of the Cunliffe Committee in 1919, and that is the policy which this country, with the approval of every Chancellor of the Exchequer and every Government, has adopted since the War. The part which interested me most in the speech of the hon. Member for Smethwick was that in which he said that it may well be that in this country we are to-night in a stronger position, fundamentally, than at any time since the War. I believe that may well turn out to be the case.
The Chancellor of the Exchequer referred in his speech to the calamitous lack of confidence and the breakdown of the credit system all over the world. We cannot altogether acquit the late Government of responsibility for that lack of confidence, for they did a great deal towards that end. But I do not dispute that there are other factors, all of which, in combination, have been tending, with irresistible force, to produce the situation in which we now find ourselves. We can go back to reparations for one of the causes; and international debts as another; and the great reluctance among creditor countries to take their payments either in goods or services; and their refusal latterly to re-lend abroad; with the resulting accumulation of gold in New York and Paris. This point was referred to by the Chancellor of the Exchequer. All these factors have led to a continued fall in world commodity prices, and history goes to show that it is impossible to have a prosperous manufacturing industry or a prosperous agriculture in those circumstances.
During the last century, whenever there has been a, serious fall in prices, it has been accompanied by agricultural depression, and it is the fall of world commodity prices that has been at the root of our troubles during the last two years. The position was not improved by our going back to the Gold Standard at the pre-war parity; and we have not been able to make the necessary adjustments in costs so as to establish equilibrium between the internal and the external price level, without which we can never hope to get back our export trade. At least we can say that it will not now be necessary to make anything like the wage reductions which would undoubtedly have been necessary if we had remained on the Gold Standard at the pre-War parity of exchange. [Interrup- 1331 tion.] I know that the hon. Member for Burslem (Mr. MacLaren) thinks that land taxation will solve the whole problem, but in my view if we had gone on trying to maintain the Gold Standard at its pre-war parity, it would have been impossible to attain the necessary equilibrium.
What are the immediate necessities of the present situation? There need be no question of panic. I should like to point out that the situation in this country is fundamentally different from that in Germany.
§ Mr. BOOTHBY
This Bill has been introduced to suspend the operation of the Gold Standard, and in the newspapers all over the world it has been stated that if such a step were taken it might mean a catastrophic fall in the value of the pound. I am trying, Mr. Speaker, to point out that I do not believe that there is any necessity to fear such a fall, and that our position is fundamentally different from the position of Germany in 1922.Our whole position is different. We have only to make quite sure that our position is secure. The Chancellor of the Exchequer pointed out that it was essential that. the Budget should be balanced, and that is being done. The other essential is to restore the balance of trade. I agree with the hon. Member for Smethwick that the most interesting part of the speech of the Chancellor of the Exchequer was that in which he said that he might be prepared to consider methods to achieve that which have hitherto been repugnant to him. We must control imports into this country in some way or another. To some extent imports will be restricted by what we If are now doing. Any devaluation of the pound sterling is bound to restrict imports into this country, and provide al certain stimulus for our export trade.
I also believe the step which is being taken in this Bill will do more to bring France and America into a reasonable frame of mind than anything else which we could possibly do. I think the Chancellor of the Exchequer was right when he said that the greatest hope for the economic future of the world lay in the 1332 successful outcome of an international conference between the great economic nations of the world, as a means of achieving a stable currency. If the Government go forward with determination and summon an international conference to be followed by international action and co-operation between the central banks in order to secure a stabilised currency and stable prices, it may well be found that to-day is the starting point for one of the most encouraging movements in the world. As long as other nations thought that we were bound to maintain the Gold Standard at all cost, they were naturally reluctant to take steps to co-operate with us. Taking a long view, I think there is more ground for optimism than for anything else. I believe that the events of the last week end, if proper action is now taken by the Government, may well prove to have been a, blessing in disguise, and this country has a better chance today, if only it will grasp it, than we have had since the War ended in 1918.
§ Mr. A. BEVAN
It is usually very' difficult for a back bencher to speak in this House with any confidence at all, even on ordinary occasions, but it is much more difficult for one to speak with confidence this evening, because this Debate up to now has been conducted to a very large extent in such hushed accents that it is frightfully difficult for me to throw off the inferiority complex which that atmosphere has created. It is almost as difficult for me to discuss the Gold Standard this evening, in the atmosphere which the Chancellor of the Exchequer and many other Members have created, and particularly in view of the presence of the revered figure of the right hon. Genthrnan the Member for St. Ives (Mr. Runciman), as it is to make a bad joke in a cathedral. Whenever some good demogogue wants to "put something across" in this House, he always makes it as sacrosanct as possible; he always makes it as grave and as difficult as possible. The Chancellor of the Exchequer this afternoon has been the principal bearer in the obsequies of the Gold Standard, and the funeral chant has been rising very slowly and quietly from the benches opposite. There have been, of course, a few notes of almost indecent merriment coming from the hon. Member who has just sat 1333 down, but, as a general rule, in the course of this Debate, the Gold Standard has been interred solemnly and with all that appearance of regard and stateliness which is designed to try to close our mouths and drug our brains.
I cannot claim to have any knowledge of the movements of the exchanges, or, indeed, any clear understanding of the Gold Standard. The only thing that consoles me in that regard is that my ignorance is shared by almost every other Member of the House of Commons. That piece of Parliamentary cynicism is reinforced by the presence of the right hon. Gentleman the Member for St. Ives. I listened to him the other evening with considerable respect, as the House always does, because he is able to give to the most trivial statement an impressiveness which always fills me with admiration. The right hon. Gentleman warned us of the dire consequences which would follow to this country if ever we went off the Gold Standard; he portrayed in harrowing terms the condition of affairs in Germany when Germany went off the Gold Standard; and now the right hon. Gentleman is sitting opposite me smiling cynically, and the country is trembling on the edge of just that catastrophe which he portrayed the other night in such harrowing accents. [Interruption.] We are not yet over, because the hon. Member who has just addressed the House in such courteous terms informed us that the important thing, if we went off the Gold Standard, was that we must still defend sterling, though what that may mean I do not know. It would seem that, however much we retreat, we still have more to defend than ever at the end of the retreat.
We are now in the position, not of having gone off the Gold Standard, but of being in process of going off it, and I cannot respond to the appeals which have been made from the Treasury Box and elsewhere on the other side of the House that I should treat this subject with the reverence or the regard which the House expects from Opposition Members. I may not be able to understand the ramifications of the Gold Standard and the movements of the exchanges, but I can understand that the House is engaged at the moment in meeting one of the most momentous requests that could ever be made. Private enterprise and capitalism have clung tenaciously to the Gold 1334 Standard. It was the only thing that they could trust. They could not trust each other, and they must have some objective, some dispassionate standard by which to measure their property. They could not trust each other's valuation of their property, so they had to trust something the movements of which were entirely outside their own control. We are this evening engaged, not in a society which could trust its statesmen to handle wide and arbitrary powers, because the effect of the exercise of those powers would be uniform and equal throughout all the members of society; but we are being asked to trust the Government with these wide and arbitrary powers still in a capitalist society.
The Gold Standard is going to be abandoned. This thing, which we have trusted to measure the value of our labours and of the services we perform one for another, is to be abandoned, and the value of the property held by citizens in this country is now going to be determined by the fiat of the Chancellor of the Exchequer in subjugation to the Bank of England. We are now being asked to do that, and, having regard to the kind of society in which these powers are going to be exercised, I am compelled to ask myself in what way these powers are likely to be used. Are they likely to be used for the benefit, of those whom I represent in this House, or are they likely to be used for the benefit of those represented by hon. Gentlemen on the opposite benches. It is nonsense for Members on the opposite side of the House to pretend on this issue that there is any common national interest. We are engaged at the present time in this House in passing an Act, or giving permission to introduce a Bill, which is intended to stabilise private enterprise in this country, to give it a breathing space; and my class, and the people whom I represent in this House, will subsequently be asked to pay the whole price.
I want to ask one or two questions. The first thing that emerges from this Debate and from the speech of the Chancellor of the Exchequer is that in this matter the Opposition is more powerful as an Opposition than it was as the Government. The Chancellor of the Exchequer has now admitted that this is not a National Government at all. The world does not believe in it; it does not 1335 take it on trust; it thinks that it is unrepresentative of the British electorate. It is considered that at all costs an election must be postponed, because this Government would be kicked out. At any cost this unrepresentative Government must be kept in power, in order to keep together the miserable shreds of capitalist credit in Great Britain. And the Opposition on this side of the House, although it is an Opposition, still has the ability to blow such a blast through those shreds that the world could see the bare bones beneath. We have learned, firstly, that it is not a National Government, and, next, that this side of the House, as an Opposition, has considerable power with respect to this matter; and we are being urged by the Chancellor of the Exchequer and by many speakers on the opposite side of the House to use our power lightly, to use it discreetly and with muted accents, in order that this funeral might be conducted without people noticing it too much, so that England will still be able to keep up the pretence of being on the Gold Standard, and the rest of the world will be able to say, "Yes, the National Government has an Opposition, but it is a little one "—that, after all, all this that is being done at the present time is generally agreed to by the Opposition, and that they merely had to make the pretence in the House of Commons of representing their constituents.
The next thing that we have learned in the debate this evening is that the preservation of democracy is inconsistent with the maintenance of private finance. That is a very interesting admission, and it is an admission which I hope will be noted, not only in this House, but in the country as a whole. The Chancellor of the Exchequer in the course of his speech, if I recall his words correctly, told us that, as a consequence of the refusal of His Majesty's Opposition to participate in a National Government, and as a consequence of speeches made by Front Bench Opposition Leaders and by other speakers in this House—and indeed, as one hon. Member told us, as a consequence, not only of their speeches, but of their uncouth deportment—[Interruption.]—so fragile has the capitalist system become that even frowns on this side of the House make it tremble. We 1336 are told that the Opposition, because of those speeches, has in fact led to an acceleration of the flight from the pound, and that, as a consequence of all this—as a consequence of our unpatriotic behaviour and of our adherence to purely class politics—the flight from the pound has been accelerated. Consequently, we are asked, and this is the essence of the bargain, to give this Bill an easy passage through the House, in order that the citadel of capitalism may be patched up again eventually, in order that it may be kept together; and for giving that away we get very little return.
I would like to impress upon my own Front Bench, as well as upon the Front Bench opposite, that this is an occasion when we have them by the throat. They want great powers from this House. Without those powers they will not be able to conserve themselves at all. It appears to me that the Opposition is in a situation of great strategic importance, and that, if we are going to win concessions from private enterprise, now is the time to win them, when they want these powers. I gather, however, from the Leader of the Opposition, that our difference is confined to something like £4,500,000; but that is simply tin-tack politics. If the Opposition, if the working-class as represented on this side of the House by the Labour party, is to sit quietly while our masters get their house in order again, we want to know what we are going to obtain for that concession. I have spent some years as a miners' agent and as a miners' leader, and have been accustomed to making compromises, and I want to ask hon. and right hon. Gentlemen on the other side of the House, if this thing is toppling clown about their ears, what price are they prepared to pay to keep it up? Even that point has not been urged from our Front Bench. I can imagine the Labour party uttering its criticisms of private enterprise for the purpose of pushing it over. I can imagine the Opposition using the Parliamentary powers it has to win concessions from private enterprise. But I cannot understand this comparatively mild acquiescence in this proposal. If the Chancellor of the Exchequer wants this shoring up of the citadel, he can get it at a certain price. 1337 I am not being deluded into believing that any of the proposals mentioned this evening are going to save it.
For at least three or four years we have been asked to accept a growing crisis without decisive action because we were promised that this trade depression, caused by deflation, would be solved by an international conference. We were told that such was the capacity for cooperation that had developed between world financiers that it was possible to get America, France and Great Britain together to help to liquify the frozen £1,500,000,000 worth of gold in Paris and New York, and bring about a rise in world prices, and that a new dose of oxygen would be given to private enterprise. We are now told by the Chancellor of the Exchequer that France and America have rubbed the lion's nose in the dust and they are not prepared to come to the conference. So that hope has gone. The suggestion has been made from a Member on these benches that, after all, it might be a good thing if Great Britain, as the one creditor country that is interested in this matter, should call all other countries together and try to get some new form of currency, some new medium of exchange, some very vaguely outlined means of exchanging their products one with another in some other way than the Gold Standard. No one has explained to me what they meant by it. Is it suggested for a moment that with France, one of the villains of the piece, in the middle of Europe, with Yugoslavia, Rumania, Austria and Poland in their power, any conference embracing those countries would be able to arrive at a conclusion agreeable to France and to Great Britain together? If France will not meet with America and agree upon some new method of regulating world commerce, is it suggested for a moment that we can wrest France's allies from her and that we shall be able to go to these satellites of France and get them to agree to a policy agreed between France and ourselves? The one proposal is as fantastic as the other.
The suggestion has been made that, after all, we have balanced our Budget, we are only doing this for the purpose of the foreign exchanges, there will be no precipitate fall in the value of the pound, there will be no sudden rise in internal 1338 prices, and the House can safely give the powers now being asked of it. I should like to ask those who have been welcoming the Bill how they are going to get the ordinary advantages that are attributed to inflation? If it is true that the Bill will usher in an era of prosperity, how is it going to do it? It will only assist private enterprise if it really lessens the burden of fixed interest on the industries of the country and wages and fixed money incomes of all kinds. If the Bill has that effect, there is bound to he a substantial rise in prices. You cannot have it both ways. If the Bill gives private enterprise a new life by lightening its burdens, it can lighten those burdens only by adding to the burdens of the working class.
Therefore, I want to know, if we give these considerable powers to the Chancellor of the Exchequer and the Bank of England—a more or less disharmonious co-operation—are we going first to get the withdrawal of the Economy Bill? Are we to have guarantees that the cost of living will not be increased to the working class or, if they seek to get out of their difficulties by lessening the burdens on finance, cannot we have assurances that the unemployed, the old age pensioners, and the working classes, are to have their money incomes raised? You cannot have a recovery of commerce and trade if the real purchasing power of your people is brought down. You cannot have it both ways. The same charge will be levelled against your Measure as has been levelled with very great effect against the economy proposals themselves. [Interruption.] I did not suppose that I should make my remarks agreeable to hon. Members opposite and I shall not attempt to do so. The House of Commons has no right to give these wide, arbitrary, dictatorial powers to persons who will exercise no democratic control if, accompanying those powers, it does not make conditions which preserve the standard of life of the population. If it is true that, in demanding these things for our own people, we are laying down conditions which are inconsistent with the maintenance of the financial structure of the country, if the maintenance of private enterprise, of unfettered finance, of property, is inconsistent with the maintenance of democratic powers in the 1339 House of Commons, it is you who have said it and not we.
In his concluding sentences the Chancellor of the Exchequer made what was to me a most extraordinary appeal. He asked that all Members on all sides of the House should be united in face of the present financial embarrassment. I have never been one who has imputed dishonourable or in any way unworthy personal motives to the right hon. Gentleman in any of the steps he has taken, but I find myself completely unable to understand how he can expect Members whose whole political and economic philosophy is based on a desire to get rid of the present capitalist system to build in its place a Socialist system, to respond to his appeal that at this moment, when the capitalist system is in the greatest danger, we should lend our support to its continuance. If I understand the philosophy of the Chancellor of the Exchequer, it is that in theory he still retains his Socialist beliefs but that he does not believe the present time is suitable arid opportune for pressing forward the practical application of those beliefs, and that he believes that for same time we should all co-operate in stabilising the financial position of the country and in setting right some of our outstanding industrial troubles, and then, after having introduced some measure of stability into the capitalist system, it is his, belief that we can go on to press forward our Socialist demands.
I am stating that point of view as the fairest and the most logical one that I can possibly make out in order to try to connect the Chancellor's life-long professions and life-long services with those which he is now pursuing. Can he expect that, although workers of every kind have been called upon to bear additional sacrifices, they can then respond enthusiastically to a call to maintain, to support and to carry on a system that is treating them in that way? I have listened in these past days not only to the stupid traditional Tory proposals that all one needs is to cut costs by reducing wages, that thereby you get the advantage of trade over your competitors and everything is going to come right. I have listened to another type of speech. I have listened to intelligent, more imaginative and more 1340 enlightened Conservatives putting forward their proposals. I have never been one of those who thought the present situation was one of bluff. It is not. Those who want the present system to continue are even prepared to make ample sacrifices. They are prepared to try new methods and new ideas. When I compare the speeches of the traditional Tory, when I compare the economy proposals, which have already proved so futile to do the very thing the Chancellor says they will do, with those that the right hon. Gentleman the Member for Epping (Mr. Churchill) put forward the other day, with those that the hon. Member for East Aberdeen (Mr. Boothby) so glibly put forward a little while ago, it amounts to this: Old-fashioned Conservatism says, "Break down wages, break down social services, and reduce all your overhead charges. In that way we shall be able to carry on." The more sensitive type of Conservatism, more responsive to public opinion and more alive to the real danger they are in at present, says, "No. That is a stupid way of trying to maintain the system, because the working-class people will rebel." That view has been proved correct, even in the Navy. They will cause so much social trouble and obstruction that the benefits will be partly cancelled out.
The more suave, more persuasive Conservative has been talking a great deal about devaluating the pound. The right hon. Member for Epping was talking about calling a conference of the gold-producing countries of the world, and saying that we can devaluate the pound. That point of view has been put forward this after, noon, not only from those benches but from these. We heard it from the hon.Baronet the Member for Smethwick (Sir O. Mosley). Why on earth he should use the benches of the Opposition I cannot for the life of me see, unless he has not yet had an opportunity on good enough terms to cross the Floor. This second point of view differs not in the thing it hopes to achieve, but merely in its methods. It says that inflation and high costs will avoid some of the unpleasantness of direct money cuts in wages.Exactly the same end can be obtained inpassing on still greater burdens to working-class people and in restricting still 1341 further their share of the national income. I fully appreciate the difficulties of Capitalism at the present time, so much so that I cannot help thinking that my right hon. Friend the Prime Minister was merely addressing rhetorical questions to hon. Members opposite when he was asking them what concessions they were going to make. He knows, because he said so in his speeches, and I know, that Capitalism at the present time cannot made concessions to the workers of this country. Capitalism can only carry on by further and still further reducing even the minor concessions that the workers possess.
I want to ask the Chancellor of the Exchequer as to where he thinks he is leading the workers, and what benefits, either now or hereafter, does he think they would gain, if they give him their support in the policy which he is now pursuing? He said that the economies we are making might save further difficulties, but the Chancellor knew, as well as any lion. Member, even when he was making those proposals, that the balance of trade and all the problems connected therewith, had not even begun to be dealt with, and that the investor abroad was not merely looking at the Budget facade but at the trade conditions behind that facade. The investor saw nothing in the Budget to extend the export trade but a considerable amount to restrict the home market and internal trade; therefore it was perfectly sensible and natural that the effect of that policy should be to bring about the second and graver crisis with which we are now faced.
If I understand the point of view of hon. Members opposite, and if I admit the difficulties with which they are faced, I hope they will try to understand our point of view. There has been a considerable amount of changing of places within recent times in this House, but there will be still more changing of places before the real protagonists stand face to face. The real division in this House, and the only division that counts, is between those hon. Members who, no matter how they clothe their proposals and in what way they bring them forward, are prepared to do anything in order to maintain the present system, and those who, on the other hand, think that the present system has long ago served its usefulness and that our object should 1342 be not to try to give good advice to the capitalists how to run their affairs. Capitalists have their experts, and do not need speeches from us telling them about devaluation and methods of balancing their trade. They know that. It is their job, and it is life and death for them that they should know their job. They have enlightened, intelligent and imaginative people among them, who have pointed out all these difficulties.
Judging the situation not only from speeches that I have heard from the Government benches, but from the speeches of people like Professor Maynard Keynes, whom we always quote with great respect, and I think quite rightly, as one of the most learned, acceptable and distinguished exponents among those who wish the present system to go on, I more and more incline to the conclusion that I am watching a lot of tame economists hurrying and scurrying hither and thither, ready to take any way out of their difficulties. There is no way out of their difficulties. If they choose, they can abandon their stupid traditional conservatism, or they can try all the dodges of which the right hon. Gentleman the Member for Epping was talking, namely, doing away with Reparations and War Debts and devaluating the pound. They can get inflation and pass the burden on in another way, and they may even deal with the problem to a certain extent of agricultural prices.
There is one thing with which hon. Members cannot deal, without destroying the order for which they stand, and that is the fundamental problem of the poverty of the people. You cannot have ample markets and bankrupt homes at the same time—or, at least, if there are to be ample markets, they may be acquired as markets but there will be precious little passing across the counter. Every one of the steps now being proposed will still further increase the gap between consumption and production. I have no inclination merely to ask the Chancellor whether he is going to bring in a nice little anti-profiteering Bill to prevent retail prices rising because there is a gap between the wholesale and retail prices. That kind of thing seems to me absolutely trifling and irrelevant, compared with the broad issues which this country and the world are facing. I do not know how much support I may have. I believe I have considerable support 1343 among hon. Members on these benches, but I know I have tremendous support among the people of the country.
Our reply as an Opposition to the economy proposals of the Chancellor the other day, to the Bill which he is now bringing in, and to measures of all types that are being suggested in order to save Capitalism, is that it cannot be done, and that it will not be done. Everything that we have been taught by the Chancellor of the Exchequer and others about the development of the capitalist system has been that inevitably we would reach the present stage of finance capitalism. It strikes me as a most amazing thing. I have been taught that all my life, and have found no economist, however distinguished, that could avoid the conclusion that, as Capitalism develops, the problem for the working-class was going to be worse and worse, that rationalisation and increased production were merely going to bring additional unemployment and hardship, that the class struggle was going to become more ruthless and that our job, when we found ourselves really up against the guns, as the Chancellor of the Exchequer and the Prime Minister found themselves the other week, was not to go crawling into the enemy's camp saying: "For goodness sake, and by any possible device that you can conceive, just let us shelter a little longer under this system that we have spent our whole lives in denouncing."
We are moving on. We are past the time when we can possibly allow the bankers and financial interests, or any other small group now controlling the present system, to continue in control. We have to wrest that power from them, in order that the people can get free from a ridiculous situation that is becoming more and more ridiculous every day. It is not our job to devise means how we can make our people poorer, reduce their wages, and reduce their standard of living. The essential thing in the world is over-production—coffee destroyed in Brazil, cotton destroyed in America and fruit being destroyed everywhere. A fruit merchant told me that he was not allowed to give his surplus food away. He had to allow it to rot because if he had given it away free, he would have been spoiling the market, and black-legging on his class.
I apologise for having been carried away. The standards of value differ in this House. To me, the argument I have been trying to put forward is very much more relevant than many of the others. I shall try to keep within your Ruling. The point I was making was that even where an individual capitalist has the will to go as far as he can towards solving the problem of over-production, he is merely one unit in a system which does not allow him to do what he wishes to do.
Those of us who arc convinced that the present system is doomed and cannot go on, ought not to be addressing our attention at the present time to methods whereby we can prolong its life, knowing that by those methods we cannot avoid additional hardships on the people whom we are here to represent and to protect, but we should be demanding that the Government, through the House of Commons, should own and control the whole of our banking system. I would beg hon. Member opposite to believe that we use that phrase "owning and controlling our banking system" not as an empty shell, but because the banking system is part of the essential machinery whereby we can begin to decide what volume of credit to issue. Whether I believe in inflation or deflation, in import control or not, depends entirely upon whether I am asked to support those measures while Conservatism and private enterprise rule the situation, or as part of the efforts of a Socialist majority to construct a Socialist state. I can see that inflation might be used against us in the hands of our class enemies, and that import control might be used against us in the hands of those who want to preserve the present state of affairs. The present measures further endanger working-class life, but they are some of the devices that we ourselves might use in building up the Socialist society. Free trade is just as incongruous to a conception of the Socialist state as it is to the hon. Members opposite who are now trying to carry on private enterprise.
I do not speak with any hope of influencing hon. Members opposite, beyond making them understand that there is a certain amount of real opposition to 1345 them that want to go right through with its opposition. The economics to which we must address our attention are, not to come in with bandages and zinc ointment to help in the immediate battle of capitalism, but such as are based on our belief that the present system is doomed and cannot go on. We ought to be putting before this House proposals for owning and controlling the Bank Of England, in order to decide what volume of credit we wish to have, in accordance with a planned idea of industry, and to which industries we wish to give that, credit. We cannot do that without knowing how far we want import boards and import control, but it is a very different thing—
I want to conclude in a sentence because you have already allowed me to say most of what I have Lo say. It is, in essence, that I have no desire or intention to take part in a cardboard battle. I do not conceive that to be my function. I think it would be ridiculous if we conceived it to be our function to come forward and give advice to Members opposite, which they already possess in abundance, as to haw they might possibly make their system function. But even with the best of advice, and most enlightened methods the system will not function, because overproduction cannot be solved unless by a rise in the general standard of life which would completely set aside all the present ways of running industry or of distributing our national income. They may do their best, and they have our sympathy in the impossible job they are attempting, to keep the present, bad, unjust and uneconomic system working, but they can depend upon it that, in this House to a small extent, hut in the country to a very much larger extent, our minds and thoughts will be directed towards the future and to mobilising unemployed, employed, and every thinking class of worker whom we can interest in this problem for the big constructive tasks of socialism.
§ Dr. ADDISON
I should think that never before in the history of our country has a new Government had to make so conspicuous an admission of failure in so short a time. The Govern- 1346 ment were brought into being in order to maintain the Gold Standard. Those of us on this side who were in the last Government left it because of our differenees and because we were not prepared to do all that was said to be required to maintain the Gold Standard. I would remind the House of the dreadful things that were to happen, according to the Prime Minister, if we went off the Gold Standard. Speaking in this House on the 8th September he said:We maintain that if instant action had not been taken as regards this specific crisis, it would have meant that sterling, as I have said, would not merely have gone off gold or at least would have been reduced." —[OFFICIAL REPORT, 8th September, 1931; col. 21, Vol. 236.]The Prime Minister went on to say that if we went off sterling, war pensions, old age pensions, health and insurance benefits would become worth, as they became in Germany, only the price of a newspaper. The Government were formed in order to prevent that from happening, and within a fortnight of their creation they introduce a Bill to destroy the very fabric which they were designed to build. It is unique in British political history, but I think, as the hon. Lady the Member for North Lanark (Miss Lee) said, there is a good deal more behind it than that. I have never been a worshipper at the shrine of the financial magnates. The right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), whose illness, I am sure, we all deplore, made a speech a few weeks ago in which he said what he thought about some of the bankers. I was in the crisis with him during the War, and I agree with every word he said. According to the advice that was given to the Labour Government, it was necessary to balance the Budget in order to avoid this very thing happening. The prescription has been administered. It is a very nauseous and nasty prescription. It consists of two doses—the Budget and the Economy Bill. Together they are as nauseous a prescription as has ever been administered to the masses of the people of this country. They said that it was necessary in order to prevent us from going off the Gold Standard. But here we are. The National Government have produced this prescription and are applying it. Very shortly, we are to address ourselves to the most drastic and 1347 tyrannical methods of forcing the dose down our throats whether we like it or not. That is to be the next business of the House.
The extraordinary thing is that before we have read both these Bills a Second time the very thing has occurred which they are designed to prevent. Therefore, the first question I wish to ask the hon. and gallant Gentleman the Financial Secretary to the Treasury is, "What are the Government going to do about these other Bills?" If the object of one of those Bills was to prevent us from going off the Gold Standard and we have now gone off the Gold Standard, is there any longer any occasion for its passage? The Chancellor of the Exchequer answered that question in advance this afternoon. He said that going off the Gold Standard now would not have these dreadful results because we have balanced the Budget. We are all willing to balance the Budget, but he meant that we had balanced the Budget in a particular way. What we were told would be an unmitigated calamity on the 8th September may, we are told to-day, be a blessing in disguise. In fact, an hon. and learned Member opposite even went so far as to express a certain measure of gladness that it had occurred. All I have to say is that if the advice of the financial dictators was considered to be sound, it is only another illustration of the abundant truth of what the right hon. Gentleman the Member for Carnarvon Boroughs said, that there was no set of men he knew of in this country who had made a bigger mess of our business than had these men.
We are being driven—do not let there be any mistake—to take a most drastic Closure Resolution in order to put through the most drastic and stupid Economy Bill that has ever been presented to this Parliament. I shall have a word to say on that Bill when we get to it and, therefore, I will not attempt to anticipate it, or I shall be out of order. The Prime Minister urged on the House more than once that we were not to consider that we were doing these things—first, introducing the Economy Bill, and, secondly, the Budget—at the dictation of outside financiers. This thing, we were told, was necessary—and it has been admitted—to balance the 1348 Budget in this particular way in order that a loan might be obtained, or words to that effect. We are often told that a rose by any other name would smell as sweet, and I should think that dictation by financiers by any other name would stink no less. This House is being dragooned by an extraordinarily incompetent set of people; there is no doubt about it. At the same time, we cannot refuse a Second Reading to this Bill, and the reason is evident. We are off the Gold Standard, and being off the Gold Standard, as some of us anticipated, is not the dreadful calamity that we were led to believe. Some of us have said—and I have said it more than once, and earned considerable opprobrium for saying it—that we have still to be convinced that it would be a dreadful calamity if we went off the Gold Standard. At the same time, your financial expert lives much more by tradition than by reason. I think we ought to prove our facts before we are allowed to draw a conclusion, and this is the last thing your city magnate does. He lives in the rut of tradition and refuses to look over the edge. It depends how you regulate and manage the business. The Bill is introduced in order that there may be a certain measure of regulation. We have either to pass the Bill or let the matter drift. We must have some measure of control, and therefore we have to pass a Bill.
But there is one very important question I wish to ask the hon. and gallant Member. I regard it as vital that the House should have an assurance before it passes the Bill as to what is going to he done about the cost-of-living. The Economy Bill—never mind about the details—presses hardly upon people who have fixed incomes, whether they be policemen, postmen, or men receiving unemployment benefit. It presses very hardly upon them. They have not a chance of enhancing their incomes by being engaged in the export trade, which may receive a fillip through going off the Gold Standard. They have a fixed, stereotyped income and are being got at both by the Economy Bill and by the Budget. If these people are to be subject to this third impost, I want to know what is to be the safeguard with regard to the exploitation of the community in the matter of prices? We were told how 1349 prices might soar. I think that that was probably exaggerated like the rest, but, at the same time, if the Government feel it necessary to take a certain measure of control with regard to how the Gold Standard is to be dealt with in the City —and I quite agree that it is necessary—they must safeguard the poorest people against being exploited as a result of the rising prices which must necessarily occur. I want a definite assurance from the hon. and gallant Member on that very definite point.
I join in hearty accord with the hon. Member for North Lanark. I think that it is evident that under the system whereby the industries of this country from one end to the other and the employment of oar people are to be entrusted to the management of men who are proved incompetent, so incompetent that notwithstanding the masses of wealth in our country, they cannot even manage the business of the City for a few weeks and give short-term bills, the time clearly has come for this country to say that we must control these things ourselves in the national interest. I am certain that our party will stand unanimously for that.
Before we pass this Bill I want to know m, hat is going to be done in regard to the balance of trade and the regulation of imports. I have been fighting the battle on behalf of British agriculture for a good long time, and my most amicable antagonist is still on the Government Bench. Some measures for restoring the balance of trade, for producing more in the old country, and controlling the cost of living are inevitable and proper concomitants of this Bill. That cannot be done unless the Government are prepared to do it by control and regulation. I should like to have an assurance from the Financial Secretary. I do not expect to get an assurance from him in regard to the question of the methods for restoring the balance of trade, seeing that he is cheek by jowl with some of the most convinced mid-Victorian Free Traders that are still alive, and that some of his loyal colleagues also are strong Protectionists. I cannot expect information as to what the Government are going to do in regard to that; it would be asking too much, but the House ought to know what is going to be done by the Government in regard to the inevitable and, immediate results of this Bill, 1350 namely, the increase of prices, and how they are going to protect the poor people of this country against exploitation.
§ Major ELLIOT
We have no reason to complain of the reception that has been given to the Bill by speakers from the Front Bench opposite. They have admitted the necessity of the Bill, that they support its introduction and that the Bill is justified. That being so, we must address ourselves to two separate points, the real opposition to the Bill and certain little points of detail asked for by the two speakers from the Front Opposition Bench. The real opposition to the Bill has been put by the hon. Lady the Member for North Lanark (Miss Lee) who, with all the assurance of youth, advanced the confident anticipation of the breakdown of the capitalist system, based on her study and knowledge of Karl Marx.
§ Major ELLIOT
I did not know that the hon. Member was such a devotee of Montagu Norman. I think the hon. Member has been longer acquainted with Karl Marx than with Montagu Norman. The hon. Member for North Lanark advanced uncompromising opposition to the Bill, and so did the hon. Member for Ebbw Vale (Mr. A. Bevan). They want to attack the temple. They say, "Let us put our arms round the pillars of the temple and let us break it down. Let it crash down." Upon whom?
§ Major ELLIOT
The hon. Member for Camlachie (Mr. Stephen) thinks that it will only crash down upon me, lie must admit that there are other people concerned as well as myself. I will not enter into the course of argument which brought the hon. Lady into collision with the Chair, but I would remind her that there were two great Jews working in London about the end of the last century, Karl Marx and Benjamin Disraeli. There was a great divergence between their views in regard to the difference between the rich and the poor. Disraeli took the view that it could be settled by peaceful methods, but Karl Marx took the view that it could only be dealt with by the inevitable clash of class war. We on this side adopt the 1351 philosophy of Disraeli, while the hon. Lady and her friends adopt the philosophy of Karl Marx. [Interruption.] I am not going to be led away. What we are discussing are the proposals laid before us to-day by the Chancellor of the Exchequer. It has been said that the previous proposals brought forward by the Government have proved a failure, and that although there has been a crisis there has been no panic. I can assure the right hon. Member for Swindon (Dr. Addison) that if we had tumbled off sterling in the late days of August there would have been much more of a panic than he is able to enjoy to-day. If we had gone off the Gold Standard and off sterling before the Budget had been balanced, things would have been far more serious. Right hon. Gentlemen opposite say that the proposal of the late Government was to balance the Budget, but they agree that the proposals for balancing it were tentative and that no agreement had been come to. If we had gone off the Gold Standard and off sterling with an unbalanced Budget, we should have been driven directly and immediately into printing paper money, into an internal inflation, as well as the external withdrawals of gold, and that would certainly have produced a situation in which many of the fears of right hon. and hon. Members opposite would certainly have been realised.
We have been asked what is the provision in regard to the Economy Bill and the Budget. Obviously, it is necessary for the Government to press forward with all the legislation required for balancing the Budget. That is more necessary now than ever before. When there is an unbalanced Budget, it means that unless you can each year get in as much money as will correspond with the money you are paying out, there is no method of meeting that except by printing off pieces of paper and deeming them to be money.
§ Major ELLIOT
We are all aware of the normal methods for dealing with the situation, but the position in which we find ourselves is certainly not normal but 1352 abnormal, and in that abnormal situation, as speakers from the hon. Member's own side have said, abnormal measures have to be taken to deal with it.
§ Mr. A. BEVAN
In what way does the present crisis distinguish itself from others in which borrowing can take place?
§ Major ELLIOT
There is only a limited time. The hon. Member will not expect me to go into an analysis of the various crises that have taken place in regard to the capitalist system.
§ Mr. BEVAN
The Financial Secretary has made a statement to the effect that in the event of the Budget not being balanced, the only way of balancing it is by inflation, by the printing of paper money not covered by the ordinary amount of gold. I ask the hon. and gallant Member, in what way is the present crisis distinguished from other Budget crises, which prevents him from meeting it by borrowing, inasmuch as there is plenty of liquid money available in the country?
§ Major ELLIOT
When this country is upon the Gold Standard you know what you are borrowing against, but when it is not on the Gold Standard you do not know. The hon. Member for Ebbw Vale delivered a general philippic against the capitalist system, not against any particular evil of it. It was a general accusation, and if I defend any part of it he will shift his attack to another phase of the system. It reminds me of the man who asked for an engagement, and he was asked what was his chief line. He replied: "Invective." When he was asked what was his particular line of invective, he said: "Oh, just general invective." The hon. Member is a most thorough and polished master of that kind of general invective. He says that he wishes to pull down the whole system and sweep it away. He does not want economy. He wants to get rid of the whole thing as quickly as possible, and then to rebuild it nearer his heart's desire. When he has done that, I do not know which hon. Member, the hon. Member for Ebbw Vale or the hon. Member for North Lanark, would be the most uncomfortable under the Socialist State.
1353 The proposal brought before us is a proposal to suspend the export of gold. It has been agreed that that proposal is necessary. Then we come to the conditions under which the export of gold is to be suspended. Hon. Members have asked questions about the mechanism under which the export of gold is to be suspendled. They point to Clause 1 (3) which provides that:It shall be lawful for the Treasury to make, and from time to time vary, orders authorising the taking of such measures in relation to the exchanges and otherwise as they may consider expedient for meeting difficulties arising in connection with the suspension of the Gold Standard.They ask what that means and how far it could go. For instance, it would be possible for the Treasury to inquire into any measure connected with the export of securities and to require information which it could not require otherwise. It would not be possible for the Treasury to purchase or acquire securities under that Sub-section. To do that would require further powers. The obtaining of information, or technical action, or the taking of steps which are outside the power of the Treasury at the present time, would be covered by that Subsection.
§ Dr. ADDISON
Would it be possible for the Treasury to inquire in the way suggested? What action could the Treasury take in regard to such matters as the hon. and gallant Member has mentioned?
§ Major ELLIOT
It would be practically impossible for me, here and now, to sketch out the course of action which the Treasury might feel itself compelled to take.
§ Dr. ADDISON
If the Financial Secretary will look up the records as to how this matter was dealt with during the War he will see that we took considerable powers. We took powers over the movement of securities, and so forth. I want to know whether this Sub-section does not include kindred powers.
§ Major ELLIOT
The right hon. Gentleman has given a very good example. He will remember that during the War the Government had power to open and read every letter and to open and read every telegram, and to decipher every telegram. 1354 Those were wide powers, under which it was possible to operate the very stringent powers which the Government took in connection with securities. I would point out to the right hon. Gentleman that if he is not going to censor letters or telegrams, and he is not going to carry out. other steps, then he is not in the same position as we were in the War.
§ Dr. ADDISON
I am sorry to interrupt the hon. and gallant Member again and I hope he will not think me discourteous. I know what happened during the War, and as far as my recollection goes, so far as the matter of securities went, the censorship did not come into it at all. It was done through the organisation set up by the bankers.
§ Major ELLIOT
The right hon. Gentleman will realise that although the safety valve in a boiler may not always be operating it is an essential part of the structure. These enormous powers were in reserve. I can assure him, after looking into the matter during the last few days, that the fact that these enormous powers are in the background will be a tremendous help in assisting and stiffening the Treasury in dealing with the problem. When he compares the present with the War situation he must remember that the stringent regulations made during the Mar covered everything in our daily lives and, therefore, there is no parallel to the present conditions.
§ Mr. SHINWELL
Before the hon. and gallant Member leaves the point upon which so many questions have been asked, is it possible for him to say what steps are contemplated by the Government under the term "otherwise"?
§ Major ELLIOT
Hon. Members will realise that if I were to deal with what you might call sharp practice by nationals of this country—[Interruption.]—this country has got those who are willing to indulge in sharp practice—and to explain the steps that are intended to deal with them, it would be the most certain method of making sure that those steps would be eluded.
§ Mr. SHINWELL
Do I understand that by the term "otherwise" the hon. and gallant Member means those nationals who contemplate steps which he would regard as sharp practice?
§ Major ELLIOT
In vain in the sight of the bird does the fowler spread his net. [Interruption.] I am certainly not going further into the matter. I will merely say that there are steps which the Treasury might wish to take but which it would not wish to explain in advance to the bird.
§ Major ELLIOT
If I attempt to answer all the questions which occur to the fertile minds of hon. Members opposite during the Debate I should detain the House all night. The simple proposal and the main proposal of the Bill is to suspend the obligation of the Bank of England to pay out gold at a fixed sum. The hon. Member for North Lanark asked why this was being introduced. Surely it is vitally important that this national asset should not be removed at a rate far beyond that which the circumstances of the case justify? We are relieving the Bank of England of the obligation to part with that national property at these inadequate rates, and in doing that we should expect to receive support from hon. Members in all parts of the House. The mechanism by which we propose to do it is set out in the Clause, and the further steps dealing with unforeseen circumstances, which we do not wish to particularise, are set out in Sub-section (3). These are the main lines along which we intend to go.
The only other point raised is in connection with the cost of living. The Government have considerable powers under this Bill, and under other Acts of Parliament, to deal with any catastrophic changes which may bring hardship to many sections of the community. May I point out to hon. Members that one of the great fixed charges to which they themselves have drawn attention as that bearing most immediately on working people and the unemployed is already limited by Statute, and there is no chance of that being raised under the provisions of this Bill? I refer to house rents. [Interruption.] The Bill brought forward by the hon. Member for Camlachie is itself a witness to that point.
§ Major ELLIOT
Then I withdraw entirely anything that I have said if I have improperly appreciated the effect of that Bill. I am not, of course, as well acquainted with that Measure as the hon. Member himself, but the great item of a controlled house rent is a charge which cannot be increased on the poorer people, and, therefore, there will be no variation in this basis charge to which the people of this country are subject. In the case of the prime necessities of life we must observe the moves. There is no reason to expect any wide or immediate rise in the prime necessities of life, and if there is any such rise it will be kept closely under observation. [Interruption.] We can do no more than that. This Bill does not provide any mechanism for dealing with that question and it would be quite wrong for it to do so. There are other Statutes which give power to the Government to act in case of emergency, and it would be out of order for me to go into the measures to control prices on a Bill which is introduced for the purpose of enabling the Bank of England to suspend the export of gold, and nothing else.
§ Major ELLIOT
I have already given the assurance that any alteration in the price level would be most closely watched by the Government. [Interruption.] Hon. Members must realise that I might give undertakings which might easily have an effect quite contrary to that which they desire. It might easily happen that if I gave a rash undertaking, or suggested that some wide sweeping action would be taken by the Government, that it might precipitate panic and uneasiness. I would suggest that the nation in the immediate future should consider what it was doing last week and act in the same way next week. There is no greater danger to the nation than the loss of a balanced mind. There are three important balances; there is the balance of the Budget, the balance of trade, and not less vital, the balance of mind. Unless we can maintain a balanced mind in face of these potential dangers they may easily turn into actual dangers. I do not think that these actual dangers will arise, or need to 1357 arise, but nobody can deny that this measure does open the door to potential dangers and we are asking the House to give us this measure, which, though it exposes the nation to potential dangers, does save it from immediate dangers. That is the case, roughly speaking, which we put before the House. They are proposals to which right hon. Members opposite have given their assent. The mechanism of the Bill, while it takes powers to deal with variations in the exchange, does not cover the wider questions raised by hon. Members, and the six months provision enables these proposals to he brought within the purview on the House in six months time. It is not a way of removing them from the purview of the House. With this explanation I hope the House will give us leave to introduce the Bill.
§ Mr. R. A. TAYLOR
May I ask, Mr. Speaker, if your Ruling earlier in the Debate meant that there was to be no Second Reading discussion?
§ Mr. SPEAKER
I certainly gave no such Ruling, although I expressed the hope that the Debate in the subsequent stages of the Bill will not be a repetition of this Debate. I hope that the same discussion will not be resumed on the various stages of the Bill.
§ The House proceeded to a Division:
§ Mr. SPEAKER stated that he thought the "Ayes" had it; and, on his decision being challenged, it appeared to him that the Division was unnecessarily claimed, and he accordingly called upon the Members who supported and who challenged his decision successively to rise in their places, and he declared that the "Ayes" had it, three Members only who challenged his decision having stood up.
§ Bill ordered to be brought in by the Prime Minister, the Chancellor of the Exchequer, Mr. Stanley Baldwin, Sir Herbert Samuel, and Major Elliot.