HC Deb 30 September 1931 vol 257 cc482-500

Whereupon Mr. DEPUTY-SPEAKER, pursuant to the Order of the House of the 9th September, proposed the Question, "That this House do now adjourn."


On a point of Order. May I ask if the other Orders are not to be read out to-night? Surely, in accordance with the Standing Orders of the House, the other Orders should be read out, seeing that it is not yet Eleven o'clock?

Mr. DEPUTY-SPEAKER (Sir Dennis Herbert)

Under the Resolution of the House, those Orders are not read, and it is the duty of the occupant of the Chair immediately to propose the Question, "That this House do now adjourn."

10.0 p.m.


I rise to call the attention of the House to certain transactions of very great importance and of a rather technical nature, in regard to which it is clearly desirable that the House and the country should have a great deal more information than has already been vouchsafed by the Government. The House will recall that, at about the end of July, it became clear that the position of this country in regard to gold was becoming difficult. During the last fortnight of July, owing to a run on London, mainly from Paris, very considerably quantities of gold were leaving the Bank of England, and that panic began which has played so great a part in our discussions since that time. At about the end of July a distinguished member of the Court of the Bank of England, accompanied by various Bank of England officials, went to Paris and negotiated credits on behalf of the Bank of England, for the purpose of stopping, so far as possible, the loss of gold. We have not been given very full details of those transactions, but, from the financial Press in London and Paris, it appears that half the amount was subscribed by Paris in francs and half by New York in dollars. The whole transaction was a purely Bank of England transaction; at that stage there was no real talk and no public expectation of our going off the Gold Standard, and in the "Economist" and in the Press generally there was great mutual congratulation at the manner in which the three central banks of this country, France and the United States had cooperated in the common financial interest of the banking system of the world.

The rate charged, as far as I can gather, for these facilities, was 3⅜ per cent. They were of the nature of re-discount facilities, and were repayable within three months. That was at the beginning of August, and at that stage neither the Treasury nor the Government appeared to have come into the transaction in any way whatever. About two weeks later, it rapidly appeared that these credits would be insufficient to save the pound sterling. They were evidently being utilised rapidly for the transfer of sterling balances belonging to foreigners or to British subjects from London to Paris and New York, and were rapidly running out; and it was evident, of course, that, if they ran out, a dangerous call on gold would immediately eventuate. In these circumstances, representatives of the Bank of England and the City met the Labour Government of that time, and pressed upon them the necessity of drastic and immediate action in the way of more and larger credits, in order to preserve the stability of the pound sterling on gold, and we have heard a great deal from both Front Benches as to the events of the next few days. There was a tremendous pressure from the City on the Government, and a tremendous pressure, apparently, on his colleagues by the Chancellor of the Exchequer, in order to procure, as rapidly as possible, credits, not this time for the Bank of England—because I presume, since the Government intervened, that the power of the Bank of England to get credits on its own credit had ceased—there was great pressure on the Government to come in and rescue the Bank of England, and themselves procure the credits from New York and Paris which it was alleged were, and, as events proved in the circumstances, were necessary.

It was at that time that the conditions were made, apparently by the New York banks as interpreted by the Bank of England representatives, that drastic steps should be taken in regard to the Budget and in regard to the method of balancing the Budget such as are now embodied in the National Economy Bill which we have been discussing. According to the statement of the Prime Minis- ter in reply to a question some week or two ago, those credits were conditional on measures being taken to deal with unemployment insurance benefits and with the Unemployment Insurance Fund on lines that we all know about in the House now. In fact, as far as one can tell, the New York banks definitely made certain very important and far-reaching political stipulations as a condition of their financial help. They did not content themselves with merely political stipulations. They proceeded to drive a very hard and profitable bargain.

According to a reply made to me in the House of Commons on 17th September, they insisted that we should pay a minimum of 4¼ per cent. per annum for the actual accommodation and an overriding commission for, I understand, underwriting and other costs of 1½ per cent., with the further condition that, if the Federal Reserve Bank discount rate exceeded 6 per cent., the rate should follow the Federal Reserve Bank. The minimum was 4½ per cent., but the rate was to be at all times 2 per cent, above the Federal Reserve rate and, if the Federal Reserve rate increased to 6 per cent, it was to follow that rate, making the cost to us for that accommodation, assuming that it was available for the whole 12 months, which it was not, a minimum of 5¾ per cent. and a maximum of somewhere in the neighbourhood of 7 or 8 per cent. I recite these terms to the House because they were very remarkable terms. This is an economy Government come in, as we understood, to apply what they call business methods to the national finances and this was their first transaction, setting the tone, no doubt, which would be followed by others, and that rate of somewhere in the neighbourhood of 6 or 7 per cent. is to be contrasted not with the price of money accommodation in London, Berlin or anywhere else, but with the rate prevailing in New York and in Paris.


Will the hon. Member explain how he arrives at a minimum rate of 4½ per cent. and estimates an average rate for the 12 months, if necessary, of 5½ per cent.?


There was a minimum rate of 4¼ per cent. on the money for so long a period and there was a commission of 1½ per cent, on the full amount of the credit whether borrowed or not. We should have had to pay several hundreds of thousands of pounds even if we had not borrowed a penny. The money might not have been borrowed for as long as 12 months and, in that case, the rate would have been higher. Assuming that it was actually borrowed for 12 months, which is a favourable case for the Government, we should have had to pay 1½ plus 4¼, making 5¾ per cent. If you take the higher figure, you get a figure up to 7¼d per cent.


At what price was it issued?


To the best of my knowledge, at par. They were bills, and there is no question of a discount on bills. If there was, it would probably be again against the Government. They were certainly not issued at a premium. I understand from the Financial Secretary to the Treasury that those figures are accurate. At that time the bank discount rate on three months bills—these credits were in the form of three months renewable bills—was 1 per cent. The rate that the United States Government was paying for bills on 12 months' tenure was 2 per cent. The rate for long-term United States Government bills was 3 per cent. The corresponding rate to the transaction that we were engaged in was somewhere between 1 and 2 per cent. I ask the Financial Secretary to the Treasury why it was, therefore, necessary for the British Government to pay between 5¾ and 7 per cent.? The actual rate on ordinary commercial three months bills was about 2 per cent. per annum. It may be that we should have to pay, in the special circumstances, apart from the political price we were required to pay, as expensive and humiliating to the prestige and business interests of the country as anything that has happened in our generation, a little more than the United States rate borrowing in its own market, but I can conceive no financial justification in the circumstances why this country, borrowing in New York, should pay about three times the current rate for money.

In Paris the situation was somewhat different, but there are some interesting comments in the "Statist" on the way in which the transaction was carried through. For some months Paris had been absorbing gold to an extent which it was quite impossible for it to absorb immediately into industry. In 12 months Paris withdrew in gold about £100,000,000 and, apart from some small increase in the circulation, £75,000,000 of that £100,000,000 was to be found in private deposits in the Bank of France. It was deposits held there by French banks, and non-interest bearing. The Bank of France does not pay interest on its de posits. The French banks had withdrawn their balances from London in the form of gold and deposited it in the Bank of France, because they could not find any method of using it in France. France was suffering from gold indigestion.


The hon. Member says the gold was withdrawn by French nationals. There was no bankers ramp.


The hon. and gallant Gentleman must distinguish between the Bank of France and the banks of France. It was withdrawn largely, not by the Banque de France, but by the banques Francaises and by French individuals. Actually, anyhow, a return of the Bank of France shows that three-quarters of the whole of the withdrawals of gold was lying on sterile deposit, earning no interest at all, in the Banque de France. The French banks were paying something to their nationals for deposit. The deposit rate in France at that moment was between ¼and ½ per cent. So you have a financial situation in France in which the French banks were paying¼ to½per cent. for the deposits of their nationals. They were holding their money, being unable to use most of it, in the Bank of France, and getting no interest upon it.

I apologise for dealing with very technical matters, but it is essential to an understanding of this problem. If you look at the cash ratio—I quote one of the leading French banks—you will find that it completely confirms my analysis of the situation, because the cash ratio which had been, at the normal, about 9 per cent., which is the sort of rate applicable here, increased in that period to somewhere over 20 per cent. In other words, Paris was full of idle money, earning no interest and brought back on account of a panic or for political reasons by French nationals and French banks, and just awaiting an opportunity for reinvestment or re-use in some way. At that moment His Majesty's Government go into the Paris market and pay a price which was practically the same as the American price—if not quite the same—of 4¼ per cent. per annum interest, with a commission rate going to the French banks, which themselves directly provided the money, of 1¼ per cent. A rate of 5¾ per cent. was paid to the French banks for money which at that moment was entirely unusable in Paris and was yielding no interest to French nationals, who at the most were getting from ¼ to ½ per cent. for their money. The rate for money borrowed was very little more than ¼to 2 per cent.

I should like to know in regard to both those transactions by whose advice the Treasury was guided? Who told them that it was necessary to pay these extravagant rates? Who let them in for these extraordinary and expensive transactions? I should like to know also what exactly were the pacts made with the French and the American banks? In the government of this country, if a contract is made by the Post Office for mail bags or for uniforms or for boots, we are entitled to have details of it. In regard to many departments, copies of contracts are furnished to this House. The firms with whom the contract is made, the articles and all the rest of it are published periodically by the Contracts Department of the Army and Navy. But why are we forbidden to know who were the fortunate banks in Paris and New York who handled this extremely profitable transaction? Why are we not told what the other conditions were? It may be that there were circumstances, conditions and stipulations of very great importance, if we are to understand rightly what, on the face of them, are almost inexplicable financial or political transactions. Why are they hidden from a House which is entitled to know?

I ask the Financial Secretary to give an explanation which will be reasonable and not based on the precedent of the situation. I quite understand that it has not been customary to suppose the ordinary voter in this country is interested in these high and mighty matters of finance. I quite understand that the relations between the Bank of England and the Treasury, and between the Treasury and the City have always been regarded as something of a peculiar and secret nature which must not be told, but I think that the time has passed when the House should be put off by that sort of reason. I think the House and the country are beginning to realise that these mysterious transactions are of very great importance not merely to the Treasury but to the whole structure of finance and industry in this country. So much for the transactions.

Let me point out to the House that, despite the high rate paid, these transactions were entirely futile. They entirely failed to achieve the object for which they had been entered upon. Their purpose was to save the pound. They were not successful in saving the pound. Indeed, the only purpose which, in fact, was fulfilled by those credits was in facilitating the transfer of sterling to francs and to dollars at a high rate. Whether these higher rates went to foreigners who had their balances here or possibly to a very considerable number of English citizens who desired to get their money abroad, there is no justification for these amounts being paid by the taxpayer. The whole transaction is so unsatisfactory from the financial point of view and so disastrous from the political point of view that the Government found themselves coerced, so we were told by Members of the last Cabinet, into embarking upon a policy which is entirely disastrous to the whole country, and we are entitled to know all about it.

I want to deal with another point, a legal point, affecting the relations between the Treasury and the Bank of England. Those relations have always been rather uncertain and mysterious. We have been constantly told in this House that we cannot put questions, because the Bank of England is an independent unit and not under the control of the Treasury. It appears, however, that when the Bank of England is in a difficulty the Treasury rushes, at the expense of the taxpayer, to its rescue. That is exactly what happened in this case. But it is not within the power of the Treasury to charge the credit of this country, however great the emergency, beyond the statutory and legal power. The Treasury has no arbitrary right, apart from Statute, to throw public money recklessly about in transactions of this kind or of any kind, whatever the emergency, unless either before or after- wards they come to this House for an indemnity. The powers and functions of the Bank of England in relation to the Treasury are set out in the Bank Charter Act, 1844, and in a later Act passed in 1928, when the Treasury notes were handed over to the Bank of England for management.

In reply to various questions that have been put from this side of the House, the Treasury said that the taking over by the Government of the responsibility of those two series of transactions, the first one conducted entirely by the Bank of England and the second one conducted by the Treasury, was covered by a Clause in the second Act. Let me deal with that point. The Bank Charter Act, which determines the broad relations and duties of the Bank of England, requires the bank, in dicharging its public function of running the currency, to keep the accounts relating to the currency in what is known as the Issue Department., and lays down very strict and clear conditions as to the kind of transactions which may be entered into by the Issue Department of the Bank of England. It says very definitely that the Issue Department May issue banknotes and promissory notes, payable on demand. There is no provision for the Issue Department undertaking rediscount operations or issuing bills of three months' tenor or, so far as I can see, anything remotely resembling the sort of transactions into which the Government have entered. The later Act of 1928 merely requires that the profits from the Issue Department, less any losses, presumably, should come back to the Treasury.

These transactions are very expensive in themselves and they are likely to be much more expensive, because we operated in francs and dollars when the pound was on a parity with gold, and we have to repay back as far as this transaction is concerned in depreciated sterling, and as far as other transactions are concerned probably in depreciated sterling also. At the present sterling rate there has been a loss of between £30,000,000 and £40,000,000, at least £30,000,000, on these transactions, which will have to come out of the taxpayer in the next Budget or be met by an addition to the National Debt. I want to know under what statutory or legal authority these transactions, particularly the first, are to be carried by the taxpayer? Take the first transaction. It was entered into entirely by the Bank of England, and, so far as I know, until the sterling went and a heavy loss appeared likely to result from the transaction, there was no suggestion that it was a transaction in which the profits and losses should be borne by the Treasury.

If it was a transaction to be carried out by the Issue Department of the Bank of England will the Financial Secretary tell me why there is no trace, as far as I can see, in the weekly returns published under statutory requirement by the Issue Department in which this first transaction can be traced. If the Issue Department in the early weeks of August had entered into a transaction involving a liability, contingent or actual, of anything up to £50,000,000 sterling, it should appear in the weekly return. I have examined the weekly returns very carefully and there is not the slightest trace of that transaction anywhere. I suggest that there may be this interpretation of this transaction; that the Bank of England never thought it was a proper charge to put on the taxpayer until it was clear that there was going to be a serious loss, until the exchange went, and then they looked around for someone to "carry the baby" and they found a willing Government glad to economise at the expense of the unemployed and equally willing to help their friends in the City out of what was a very awkward position. That seems to be the interpretation. if it is wrong, the Treasury have to thank their unwillingness to give precise details and accurate information to the House for any misundertanding there may be.

The same kind of considerations apply to the latter transaction, the bigger one, both of them fruitless and unprofitable and both of them extremely expensive and likely to result in a serious loss to the country. The Financial Secretary will probably say that it does not matter now. I think the Chancellor of the Exchequer said that it does not matter, because we can export gold which is already in the Bank of England and make a profit which will rub out this loss. The gold was there in any case, and we could have made a profit on that gold if these transactions had never been entered into. The gold is held as a reserve not only for balancing losses of this kind made by the Bank, but as a reserve for internal purposes as well as for general exchange purposes. As far as I can see, these transactions are not the general banking transactions which the Currency Act definitely allots to the Issue Department, which is a sort of Treasury Department of the Bank of England. There was no idea of putting the first transaction on to the back of the taxpayer until it was clear that it was going to land the Bank in a very heavy loss.

I submit that the House is entitled, the taxpayers are entitled to very much more satisfying and exact information as to the legal and other reasons, before we separate for the Recess. I would particularly like to know—I put a question to the Financial Secretary on the subject this afternoon—whether the Comptroller and Auditor-General or the Law Officers have advised that this is a satisfactory legal procedure. I do not know whether there are any precedents for it. I do not think there are. We have never had to go into such a transaction as this before; never before in the history of this country has any Government submitted to such humiliating political terms. But to discuss that is not my purpose to-night. I do not want to get off the financial point; I am dealing primarily with the financial point.

One word on the general relations between the Bank and the Treasury. It is perfectly plain that it is an absolutely indefensible anomaly to have the financial affairs of this country that matter, the control of the currency, the exchange, the balance of trade, and all the rest of it, under the control of a more or less irresponsible private corporation whose relations to the Treasury no one exactly knows, whose responsibility and that of the Treasury are quite inadequately defined, which sometimes is operating on its own account—because most of these transactions are designed to protect and assist the exchange, as this transaction is alleged to have done here—and sometimes on account of the taxpayers. It is equally plain that in transactions of this sort the House is entitled to have full and complete papers showing exactly the liabilities, the responsibilities, and the reasons for those liabilities and responsibilities into which the country has entered.


The hon. Member for East Leicester (Mr. Wise) has addressed the House at some length on this topic. Of that I make no complaint whatever, but I do make some complaint of the fact that he seems to think there is something extraordinarily mysterious about this transaction. The transaction is perfectly plain and straightforward. There is no mystery about it whatever. The relationship which the hon. Gentleman wants to have explained is set out in great detail in the Sections of an Act of Parliament. The hypotheses upon which the whole of his argument has proceeded, that some irresponsible transactions were entered into by the Bank of England, about which the Government did not know anything whatever until it was called in to save the Bank from loss on a private banking transaction—those were the arguments of the hon. Member—


I did not say that the Government were not aware of the transactions. What I said was that this first transaction, the £50,000,000, was a transaction made by the directors and by the officials of the Bank of England. I said there was no evidence at all that the Bank or the Treasury decided to charge the lot to the Issue Department until it appeared that the pound had gone off parity with gold and that there would be a considerable loss on the transaction.


Surely that is exactly what I have been saying. The hon. Member said that the Bank of England had entered into transactions either with the cognisance of the Government or without it. Let me take the two hypotheses. If it was with the cognisance of the Government the whole of his argument falls to the ground. If the Bank was acting with the cognisance of the Government it was acting as expert financial manager on behalf of the State. It it was acting without cognisance of the Government, then it was certainly acting entirely outside its power. Let me take that issue and let me reassure the House, and the country through the House, that there was no question whatever of the Bank acting without the cognisance of the Government. [Interruption.] I am dealing with a point, which has certainly been made outside, and which has certainly made an impression upon the minds of many hon. Members—the point that in some way or other the Bank entered into a transaction on the principle of heads I win, tails you lose." Let us dispose of that issue first because that is the gravamen of the whole charge. Here is the provision in the Currency and Bank Notes Act, 1928: The Bank shall at such times and in such manner as may be agreed between the Treasury and the Bank pay to the Treasury an amount equal to the profits arising in respect of each year in the Issue Department. That is the first point. If the Bank is to pay over the profits to the Government, it is surely clear that, similarly, the Government have to allow to the Bank the amount of any losses. That is an arrangement of a kind of which we shall have many more in the future in which a technical organisation is undertaking a liability on behalf of the State. It is the sort of problem which the hon. Member himself has examined on many occasions and to which hon. and right hon. Gentlemen opposite have frequently had to bend their minds—the relationship of this House of laymen with high technical problems and organisations. A technique has to be worked out in each particular ease, and the technique in this instance is the Bank of England acting as expert manager on behalf of the State.

We are all agreed that in the matter of the Issue Department the Bank of England acts as an expert manager, and that transactions of that department are transactions of the State and not trans- actions of the Bank. The hon. Member says that this was not a transaction of the Issue Department but it certainly was. He also asked what position was taken by the Comptroller and Auditor General. Certainly, the authority of the Comptroller and Auditor-General was not sought beforehand, and it would be quite wrong if it were, but the Comptroller and Auditor-General has been kept fully informed of all the material facts and has raised no question whatever. The first thing to get hold of is that the first transaction of the £50,000,000 was a transaction of the State and that the second transaction, the £80,000,000 was a transaction of the State. They were transactions in which the State would certainly have claimed the profits had there been any, and in which the State or in other words the whole community, is subject and rightly subject to the losses. These were transactions on behalf of the community as a whole. Every, coin, every note in the private pocket of every citizen is affected by these transactions. The hon. Member himself would be the first to object if transactions of that kind were carried out irresponsibly and privately by some private corporation.

I have now exposed the first point raised by him—was it or was it not a transaction of which the Government was fully cognisant and responsible from beginning to end? It was a transaction of which both the previous Government and the present Government have been fully cognisant from beginning to end, and therefore the responsibility is a State responsibility. His second point was that this was a foolish transaction. [An HON. MEMBER: "Why did not the transaction appear?"] I will deal with that because it is a point of some importance, It did not appear for this reason, that obviously when a run was going on it was most undesirable that these figures should be published, and information given for the benefit of the "bear raid," and those who were carrying out such a raid as certain persons were. No more foolish transaction—


Do I understand the Financial Secretary to say that the return made by time Bank of England was a false return?


Certainly it was not a false return. The fact is that the gross transaction is given in our return, but the details are not given. There is nothing false about that. The details will be returned in full.


I have here a return, for the 26th September, of the Bank of England, and I have examined the files of the "Economist," and if the Issue Department had undertaken liabilities in respect of bills of exchange, or rediscount, or Treasury bills in New York and Paris, will the hon. and gallant Gentleman explain to me where it appears in any of these returns, in the total, which hardly varies, or in the actual details?


Does the hon. Member suggest that the raising of this money, the purchase of these bills, the issue of this loan, was not perfectly well known, not merely in every technical—[An HON. MEMBER "Answer the question!"]—I am answering the question, and I say that the gross transactions were not merely known in every technical and financial centre, but were matters of common knowledge in every newspaper and in every circle, public and private, in this country. [Interruption.] I have explained it to the hon. Member, but I will explain it again and say that the exact progress of the run is the one thing in the world which would have been of advantage, and enormous, immediate, monetary advantage, to speculators; and therefore the details of those transactions were not given from day to day or week to week. I think it will be clear to hon. Members in all parts of the House, and even to the hon. Member for East Leicester himself, that nothing more calamitous could have been done during those weeks than to put, in the ordinary returns of our financial transactions, information of that nature.


It is a fortnight or three weeks ago since the Chancellor of the Exchequer told us that those credits were exhausted and that we had therefore gone off the pound—perhaps it was a week or a fortnight ago—and returns have appeared since that date. Why are they not in those returns?


Those returns will appear. Information of the gross transactions has been given in full, not merely to the technical Press, but to the country as a whole. The hon. Member has just said that the Chancellor himself informed the House of the exhaustion of these credits. There is no question at all about the first point of the hon. Member. I am obliged to the hon. Member for Wolverhampton, West (Mr. W. J. Brown) for putting up that point as to the question of the actual returns as to the progress of these transactions, and I hope that also has been dealt with to the satisfaction of the House.


The hon. and gallant Member knows that quite recently a very eminent City man has been sent to prison for a long term of penal servitude for a transaction based upon precisely the same kind of argument as the hon. and gallant Gentleman is putting up now.


If the hon. Member thinks he has got any case parallel to that, he has got hold of the biggest mare's nest that he has discovered in all his long hunting career. We are really dealing with the matters which the hon. Member for East Leicester has raised, which are of the greatest importance, and it. is important that we should not be diverted from the line of explanation by observations such as that of the hon. Member for West Wolverhampton. They are technical matters, and I want to disentangle the threads one by one. The first is: Was this a private or a public transaction? The answer is that it was a public transaction, from end to end a transaction of the State. The State, as it was fully cognisant all the way through, is fully responsible for it and for the participation of the State.

The reasons for the participation of the State are set out, not in any secret document, but in the Acts of this House, particularly the Act of 1928, Section 6; in the statement, which was made known, that the £50,000,000 credit had been raised; in the statement, which was published, that the £50,000,000 had been exhausted or practically exhausted; in the statement, which was published, that the £80,000,000 credit had been raised; in the statement, which was published, that the £80,000,000 credit had been exhausted or practically exhausted; in the statement, which has been published, and which was given in this House, of the terms on which these credits were raised in the money markets of New York and Paris. Every step of this transaction and every stage has been fully within the knowledge of this House, except the single point as to the rate at which these credits were being exhausted, and that was not given in detail for the very reason I have given, that it would have defeated the very object we had in view.

Let me come to the further points raised by the hon. Member He said that this was a very bad bargain and that exorbitant terms were charged for the money; and that the terms on which the money was raised were far above those which were prevailing in the money markets on which it was raised. The hon. Member does not seem to put himself in the position that a borrower always thinks a lender is being most unreasonable. The borrower says, "I have exhausted all my money; give me more." The lender says, "How do I know you will be able to pay it?" "What an unreasonable man you are," says the borrower. The hon. Member for East Leicester says, "What a scandal that we had to pay a sum considerably in excess of the rates which were running in New York and Paris at the time." [An HON. MEMBER: "We are Great Britain?"] Yes, we are Great Britain, but we were the borrowers at the time, and we were engaged in a gigantic transaction far outside any of the transactions which were carried on the money markets of those two countries. Great as the transactions were which were being carried on, we were dealing with the question of confidence.

If the hon. Member for East Leicester thinks that the Treasury went deliberately to New York and Paris out of sheer extravagance, out of a spirit of week-end hilarity, and offered terms which were exorbitantly extravagant, it is no use arguing with him. All I can say is that he must think that the bankers and the Treasury were in a mood which I have never encountered. We went into those markets as a borrower in a hurry, and a borrower in a hurry finds often that the lenders look with great suspicion upon him. I shall not go into the reason for borrowing in a hurry, but they were patent, and had been patent to hon. Members in every part of the House, and to anybody who had watched the financial course of this country. It was certainly not the publication of the May Report or any other single document which brought about the realisation of that. What a shame, the, hon. Member says, that they should charge so much for this money, for their coffers were full of money for which they had no use. Did the hon. Member never try to borrow money from a French peasant, and say, "My good friend, you have got a lot of money for which you have no use; give it to me."


I should not be borrowing on the credit of the National Government.


Surely the hon. Member knows he is a 615th part of the credit of the National Government? All I can say is that sometimes I begin to fear that that 615th part is a great deal rockier than the other parts. The suggestion the hon. Member makes is that the French were not getting a high rate of interest or any rate of interest on their money. But that they had that money under lock and key in their vaults, and for that reason they were not very willing to lend it at a low rate of security if they thought that that security was in jeopardy. His statement is the statement of one who is looking at events through rose-coloured spectacles, and who has never gone into the facts of the financial situation. [HON. MEMBERS: They held us up!"] If an hon. Member goes to borrow money or his corporation goes to borrow money, he does not say that the lenders have held him up. He says "I have to look at the terms on which I can raise money. If my credit is good I can raise it easily, but if it is bad I can only raise it with difficulty. If I am in a hurry and have been extravagant, I shall have great difficulty in raising it at all." Local authorities do not go about squealing and saying that the banks have held them up, and there is no reason why this country should squeal and say it has had to pay too high a rate of interest. The hon. Member talked about the French having the money. To get money out of the stockinged foot of the French has always been the financial triumph of anybody who went into the money markets of the world.

I have now dealt with the hon. Member's second point which was that this was an extravagant proposal. It was a vast proposal entered into in haste and in which the borrower had to pay the terms which the lender wanted for his money. There is only one way to keep out of the power of lender and that is not to have to borrow money. There is only one way in which you can avoid borrowing money and that is to balance your Budget and meet your transactions. That is the task which we have been engaged on to-day and will be engaged in to-morrow and the next day and which will be opposed at every stage by hon. Members opposite.

Now I come to the hon. Member's final point which was, should we have under- taken this at all? He asks why we entered into this great transaction for these vast sums of money and says we might have saved it all. Well, we might have, but should not we have lost something else? Supposing that Britain had made no attempt whatever to meet her engagements, what should we have lost? We should have lost more than the difference between the interest of a few months on this amount of Floating Debt. Are not we committed by our bonds of honour to make every effort to meet our engagements? Is not it necessary to us to do our utmost to make it clear to the world that we are attempting to carry out our obligations? Suppose we are down on this transaction we shall have gained far more from having fought and struggled honourably than anything we shall lose on this debt. Then, how much is it we are supposed to have lost because a portion of the Floating Debt has been contracted in New York and Paris instead of in London? The hon. Member speaks with great indignation of the rate of interest we are paying, an interest of 5¾ per cent., he says. What does he think we are paying to-day in our own country, in the City of London, to carry our Floating Debt? It is £5 12s. 6d. today. Surely the fact that a portion of our Floating Debt is carried now in those two great financial centres is not such an overwhelming transaction as he tries to make out? Finally, he asks about repayment. He says that the gold we have borrowed from France we have to repay in sterling—that we borrowed against gold and that the debt is appreciating. So is the gold also appreciating. It will be written up.

Mr. WISE rose


I have given way several times, and we are very close to the moment when the House must rise. The position surely is that if the debt has appreciated so also has the security against which the debt was contracted.


Have you in any way hypothecated or given the gold of the Bank of England as security for these credits?


The gold in the Bank of England, the assets of the country, are the security. We have a perfectly good security to meet these debts. It is a security which is, in fact, appreciating. [Interruption.] Surely that deals with the final point of the hon. Member? My concluding remark will be this, that this is a transaction of which the City of London, the Bank of England, the Government and the nation itself have no reason to be ashamed. We have fought up to the end. We have pulled our weight to the last ounce. We threw everything in to maintain our engagements, and on the maintenance of our engagements depend not merely the honour but the trade and existence of this country.

It being one hour after the conclusion of Government business, Mr. SPEAKER adjourned the House, without Question put.

Adjourned at Two Minutes before Eleven o'Clock.