HC Deb 20 December 1932 vol 273 cc929-72

Considered in Committee under Standing Order No. 71A.

[Sir DENNIS HERBERT in the Chair.]

Motion made, and Question proposed, That it is expedient to authorise the Treasury, in pursuance of the Austrian Protocol drawn up at Geneva on the fifteenth day of July, nineteen hundred and thirty-two, to guarantee the payment of the principal of, and the interest on, a loan (being a portion of the loan for the raising of which by the Austrian Government provision is made by the said Protocol), of such an amount as will, after payment of the expenses of issue, produce the equivalent of a sum not exceeding one hundred million gold schillings. [King's Recommendation signified.] [Mr. Chamberlain.]

3.46 p.m.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

The Resolution which I commend to the Committee has made a certain amount of noise, but it cannot be accused of too much speed, in view of its previous history. The proposition that I want to make to the Committee ought not to arouse any opposition, but I think it only right that hon. Members should have from me some statement, which I hope will not be a very long one, of the contents of the Bill and the various conditions that have led up to it. In order to make that statement I must give the Committee a very brief summary of the history of this particular affair. During the years 1919–20–21 Austria passed through a time of very great trouble. Her budget was totally unbalanced, her currency depreciated until it became practically valueless, and the population suffered very severely from want of food. Sir Arthur Salter, in an interesting memorandum upon the subject, declared that death or enfeeblement by starvation was probably greater during those years in Austria than in any other country in Europe, with the exception of Russia.

The sufferings which Austria went through at that time attracted, a good deal of sympathy in Europe, and various nations, not only former enemies, but also a number of neutral nations, came to her assistance and supplied relief loans, which amounted in all to some £25,000,000. In addition to that, a great deal of assistance was given to the Austrian people without any obligation, that is to say, it was given freely to them, and it amounted to perhaps 'another £10,000,000 in value. But, although this help was given, no steps were taken in these years to cope with the fundamental causes of the trouble and assist Austria to put her house in order, to cope with the causes which had brought her so low. Accordingly, 'although she managed to scrape along by the aid of this help in 1922, things were no better, in fact, they were worse, and she was really on the verge of bankruptcy. The United Kingdom, France, Italy, and Czechoslovakia once again came forward and made temporary advances to Austria, amounting to £2,250,000. In October of 1922 the matter was taken up by the League of Nations who drew up an elaborate scheme, not merely for a loan, but also for internal reform, without which a loan did not seem likely to be of much permanent value. Guaranteed loans were then granted to Austria 'amounting approximately to £27,000,000, and out of them the temporary advances made earlier in the year were repaid. The loan was issued in 1923, and this time the assistance, combined with the scheme of reform, was a great success; indeed, it was a startling success. In a short time the Austrian Budget was balanced, the currency stabilised, and so far was the credit of the country restored that in 1930 Austria was able to raise a loan on her own credit.

Unfortunately, that is not the end of the story. In 1931 the Creditanstalt, the principal bank of Austria, found itself in serious difficulty. It held securities of a great number of industrial concerns in neighbouring countries, and it was found that the assets were no longer sufficient to meet the liabilities. In that year the Creditanstalt suspended payment. In September, 1931, and again in the following March of this year, the Financial Committee of the League of Nations took into consideration the whole situation in Austria, and they recommended that again a number of guarantee loans should he provided by the Governments of other countries for the assistance of Austria and some of the neighbouring States in Central and Eastern Europe. In the following month of April a conference was held in London, and at that conference the recommendations of the Financial Committee of the League of Nations were considered and referred to a committee of Treasury experts belonging to four countries, the United Kingdom, France, Germany and Italy. As guarantees were being suggested on the part of these Governments, it was felt that an expert examination of the proposals was necessary.


Were the guarantees different or similar to those given in connection with the previous loan?


I am now only relating the history of this matter, and the loans of which I was speaking were guaranteed loans which did not materialise. It was the recommendation of the Financial Committee of the League of Nations that a guaranteed loan should be issued, and that proposition was examined by the Treasury experts of the four countries.


Are we to understand that the English loans were not guaranteed by us?


I have said that the 1923 loan was guaranteed by us, with others. That was the successful loan.


It has not been paid back.


It is not due to be paid back. This proposal was considered by these experts, and the representative of the British Government opposed the granting of guaranteed loans to these States as a general principle on the ground that a loan in their case was not really what was required. The real cause of the troubles of the Danubian States lay in the difference between the costs of production and the prices they could obtain for their products. But the British representative made an exception in the case of Austria. There were certain reasons which made Austria an exception to the general rule applying to the other States, whose situation was under consideration. In the first place, hon. Members must remember that Austria, under the terms of the Peace Treaty, was put in a position of exceptional difficulty. Austria was not really the creation of a new State, it was the remnant that was left after the boundaries of the Danubian States had been fixed. The capital of Vienna, in which was concentrated a large population dependent on a system of trade industry and banking suitable to a great Empire, now found herself only the centre of a small country without any real sense of cohesion or unity. The rest of Austria consisted largely of agricultural provinces, and there was really no national sense to bind together these agricultural provinces and the great industrial and banking centre of Vienna. There is a responsibility on those countries which were the creators of that particular situation.

In the second place, by the position of Vienna anything in the nature of a financial disaster occurring there would be bound to have a greater effect, and a more serious effect, upon the general credit of Europe than a similar disaster in the adjoining States. Finally, from the British point of view, if Austria were to default on the 1923 loan, which we had guaranteed, it would mean this country would be liable for a sum of about £800,000 a year which we had guaranteed. In view of these considerations the British representative, acting on instructions, made an exception in the case of Austria and while he could not support the proposal that a loan should be made to the other countries he did propose that in the case of Austria a loan should be granted, and that it should be guaranteed. But he laid particular emphasis on the necessity for combining a loan of that kind with measures of budgetary and financial reform. Those measures were the foundation of the success of the previous loan in 1923, and it was felt that without some security of that kind we might as well throw the money away as guarantee a loan to Austria.

That was the position of the British representative on the committee of Treasury experts, but the Government of M. Tardieu was not prepared to grant a loan to Austria unless a loan was made to the other States. That Government fell shortly afterwards, and there came into office M. Herriot's Government, who were not so insistent upon the necessity of making this other loan as M. Tardieu had been. But both the Italian and the French Governments declined to join in any project for a guaranteed loan unless Austria were prepared to reaffirm her previous undertaking that she would not alieniate her economic independence. On the other hand, Germany refused to join in any such loan if she did make any such reaffirmation, and, consequently, for the time being, there was a deadlock. It was only after the Lausanne Conference, and largely owing to the efforts of His Majesty's Government, that agreement was at last reached, and on 15th July the Protocol was signed which is now before the Committee in Command Paper 4207. The Protocol was approved by the League of Nations, and it was ratified by Austria on 23rd August this year. In order that. it may come into operation, it has to be ratified by 31st December by three other Powers, namely, the United Kingdom, France and Italy.

The Committee, no doubt, will ask itself what test should be applied to this problem in order to decide whether it is prepared to approve the Resolution which is now before us, and I suggest that the test which should be applied is whether if this loan is made with the guarantee of the several Governments, it does really offer a reasonable chance that Austria may once again recover her position, that she may be able to meet her foreign obligations and that she will be able to carry through those budgetary and financial reforms which are eminently essential. If the Committee will look at the Protocol, it will be seen that it does provide for a loan on one side, and, on the other, for the reforms which I have described. These reforms are to be carried out with the assistance of a representative of the League, a Dr. Rost van Tonningen, a Dutch subject, and with the advice also of the adviser to the Austrian National Bank who is at the present time a Belgian, M. Frère. The reforms included, in the first place, the balancing of the Budget; next, a programme of reorganisation and economies upon the railways; a currency policy which should aim at the abolition of the exchange control the resettlement of the affairs of the Creditanstalt and the straightening out of the Austrian National Debt. In the Preamble, the Austrian National Government undertakes to meet in future all its foreign obligations, and in that connection we have to consider the position of the previous 1923 guaranteed loan. We asked the Austrian Government to give us a specific assurance that that loan shall have priority, and on the 17th of this month the following declaration was made by the Austrian Government to the British Minister at Vienna: The Austrian Government declare that the priority of the Austrian guaranteed loan of 1923–43 as compared with all other Austrian loans will on all occasions be faithfully observed, and that transfers covering amortisation as well as interest in respect of that loan will be resumed as soon as the Geneva Protocol of the 15th July has come into force. Therefore, if the Protocol is ratified, transfers under the 1923 loan, which were suspended as from 1st July last, will again be resumed. On the other side, five Governments—the United Kingdom, France, Italy, Belgium and Holland—undertake that they will ask for whatever authority may be necessary under their respective municipal laws to guarantee a loan which may go up to as much as 300,000,000 schillings, equivalent to about £12,500,000 of our money. Each Government is to be a guarantor only in respect of the amount of issue in its own market. There is no joint guarantee, but each Government has set down the amount for which it is going to be responsible, and it will be responsible for that amount, and for that amount alone. The share of the United Kingdom is 1,00,000,000 schillings out of 238,000,000 schillings, which is all that has at present been undertaken, but we hope very much that if the Protocol is ratified some other Governments, particularly, perhaps, the Swiss Government and the Czechoslovakian Government, will be willing to come in, and also to undertake to guarantee a certain amount so that we may arrive as nearly as possible at the maximum of 300,000,000 schillings. So far as the proceeds of the loan arc concerned, the amount which is guaranteed by the British Government is to be utilised in repayment of a temporary advance made by the Bank of England in 1931. That temporary advance was of a similar amount, and it was made a condition of its advance that it should be repaid out of the first long-term loan which was issued by the Austrian Government.


Was that advance guaranteed by the Government?




Not by the Chancellor of the Exchequer in the late Government?


No. That was made by the Bank of England on the condition that it should be repaid out of the first long-term loan issued. Of course, the fact that any money which may be subscribed here under this guarantee now being proposed will be utilised for the purpose of repaying that advance, makes it possible for the British Government to propose this scheme to the Committee at a time when we are not really able to make new foreign loans. The fact that there is that repayment to be made will make it possible to bring in the proposed reforms.


Did the Bank of England make this advance at the request of the Government?


I will not say that, as I was not a member of the Government at the time, but that it was with the approval of the British Government I have no doubt.


The British Government have a moral responsibility in some way about this.


I do not think that the British Government can be said to have a moral responsibility. I really do not quite see how that arises at the present moment, because the obligation is the obligation of the Austrian Government to the Bank of England to repay this advance out of the first long-term loan issued. That is a matter which is not one between the British Government and the Austrian Government, but between the Austrian Government and the Bank of England. With regard to the rest of the proceeds, they will go towards repayment of part of the internal floating debt of Austria which at present is far too large, and the foreign exchange will be paid to the Austrian National Bank, and will serve to strengthen its resources and facilitate the meeting of foreign obligations.

I think it right to say that the Austrian Government has not waited for the completion of this instrument to begin the programme of internal reform. I am very glad to say that they have made great efforts to start at once to put their house in order. The Budget for 1932 has been balanced, and proposals have been already laid before the national council for the balancing of the Budget in 1933. Then a great programme of reform has been commenced in respect of the railways. It will be finished in 1933, and it includes the reduction of capital expenditure, the cutting down of the staff and the raising of the rates. It is true that, in spite of that, there is a deficit which has got to be provided for out of the Budget, but that is due to the fact that, in spite of these economies, the revenue from the railway, owing to the reduction in traffic, has very seriously diminished, and so there is still a deficit; but, at any rate, it has been vastly reduced by the steps which have already been taken. With regard to the exchange, there is now a free market for commercial transactions at the natural rate of exchange, which is about 20 per cent. below what it formerly was.


When you say a reduction of 20 per cent., you mean 20 per cent. below sterling?


No, below gold. The affairs of the Creditanstalt have been settled in principle, and arrangements have been made so that the foreign creditors will be partly repaid by a series of annuities which are to extend over a term of years. I think what I have said shows that Austria is taking the scheme of reform seriously, that she is making a valiant effort to carry out her side of the bargain, and, as she has done that on the strength of the Protocol, it is now for those who signed the Protocol to carry out their side of the arrangement, and to guarantee the loan accordingly. His Majesty's Government took a leading part in the scheme of 1923 which did so much for Austria at the time, and are now taking again a leading part in this scheme. The Bill which will have to follow upon the Resolution will, of course, not be able to be introduced until after Christmas, but if the Resolution is passed in this House, the Government will take that as recording the approval of the House, and the Protocol will, on the strength of that, be ratified before Christmas, which is the only step remaining for us to take. I hope that that is a fairly complete statement of the position, and I trust that the Committee will see their way to pass this Resolution without undue delay.

4.10 p.m.


It is very seldom indeed that I have the audacity to intrude in foreign affairs, and I only do so to-day because I have taken some little interest in the situation which now prevails in Austria and some of the surrounding countries. I would like to tell the right hon. Gentleman right away that I hardly think it is correct for him to claim that he has told us the whole of the story. The Chancellor of the Exchequer has explained, undoubtedly, all that is necessary for the passing of this Resolution, and I was very interested indeed to hear him refer to the terrible privations of the Austrians during and immediately after the last War. I may say, from what I heard several times in Austria, that the blockade of the Allies on those people provides what is probably the most terrible chapter in the whole history of the Great War. The criticism I have to make on the right hon. Gentleman's statement this afternoon is that he claimed in what he said that the countries interested in this loan have already found the fundamental causes of Austria's troubles. The right hon. Gentleman ought to know that the fundamental causes of Austria's troubles are to be found in the treaties that were made at the close of the War. Some of the troubles connected with this loan in Austria are, in fact, connected with the attitude of France towards Germany. I feel sure that as long as Austria remains in the political and economic position in which she finds herself at the moment no amount of injection of these sporadic loans into the coffers of Austria will ever get her out of the difficulty. I am sure of that.

Let me deal therefore with one or two of the most important points connected with this loan. The Chancellor of the Exchequer has told us only that this Government, along with other Governments, has guaranteed this loan. I do not think I am wrong in saying that what we are doing is to guarantee this new loan to Austria in order that Austria may pay back to the Bank of England what she owes to that Bank. There is a great deal of mystery attached to some of these loans, but in effect we come to this in the end: That Governments are sometimes lending money to each other in order that the borrowers shall pay the money back, in some instances to the very countries from which the loans are raised—at any rate to individuals in the countries where the loans are raised. The Chancellor did not say anything about the interest on these loans. So far as I remember the interest on the first loan was about 6 per cent., and I think I am right in saying that the interest on this loan is to be about 7 per cent. If that is so, the Austrians are paying very dearly indeed for this money.

We on these benches shall not vote against this Resolution, but we have a few pertinent criticisms to make on the Resolution itself. The first question I ask on the main issue is, how comes it about that Great Britain, France and Czechoslovakia are bearing the greatest part of the burden of this loan? It will be noticed that we are bearing 241 per cent., and that. France and Czechoslovakia are bearing an equal sum in the guarantee.


That was the old loan.


I should have said that those figures relate to the old loan. I would ask whether the proportions are to be the same in this case, and how many of the Governments guaranteeing this loan have already secured the necessary authority from their parliaments to provide for the guarantees of their countries. Let me pass now to a subject with which I am a little more familiar. The Chancellor of the Exchequer said that there were certain conditions laid down for this loan to Austria, that Austria had to make economies in her expenditure, that she must balance her Budget, that she must see that the railways were conducted on certain lines according to the dictates of the bondholders. What I want to know is, what effect has the demand of the lending countries had on the social services of Austria? Is it true to say that even old age pensions in Austria have had to be reduced in order to meet the demands of the lenders of these moneys? I repeat that I would like to know definitely what effect this loan and previous loans have had or will have on the social services in Austria. Vienna, the capital, was built as a centre for an Empire of about 60,000,000 people. To-day the total population of Austria is only 6,000,000, and one-third of that population, or thereabouts, is resident in Vienna itself. I do not think I am wrong in saying that at the moment Vienna is really the most tragic city in the whole of Europe. That is why I complain that the Chancellor of the Exchequer is lending his aid to doing nothing more effective than pouring loans into the coffers of Vienna.

The test of whether a loan of this kind is successful or not must rest not only upon imports and exports, and not only on balancing a Budget. Has unemployment in Austria increased or decreased as a result of the loans that we have given in the past? That is a fair measurement of success. I have no quarrel with the dictum of eminent politicians in this country that you can measure the success or failure of a Government by the numbers of people who are employed and unemployed. Let me give figures supplied to me as to what is happening on that score in Austria at the present time. I am told that the number of unemployed in that very small country, with not more than 6,000,000 people, has risen from 237,000 in September, 1931, to 334,000 in September, 1932. That is to say, there has been a considerable increase in the number of persons unemployed there. They are on the register of the Employment Exchanges and benefits are ordinarily payable to them.

I remember that just before the last general election we were told that pressure had been brought to bear upon our own Government to reduce unemployment benefit in order to balance our Budget and it was said that otherwise we could not raise loans in some foreign countries. I would ask, is there any understanding anywhere between the several countries that are proposing to lend this money to Austria, that there is to be a further cut in the social services in Austria before this money is lent? The right hon. Gentleman said that the Austrian Government had issued an explanation of its attitude towards this loan, but he did not say that it was only in August last that this very problem came before the National Assembly in Vienna. It is common knowledge that when the vote was taken in the division lobby there was only one vote majority in favour of acceptance of the conditions laid down by the Governments that were lending the money. The criticisms in Austria against the conditions attached to the loan were very strong, and I think they were very proper too. Once the Austrians decided, if they decided at all, to accept this loan, they practically put the whole of their country in pawn to the moneylenders.

Of course the Austrians are in such a terrible financial situation at the moment that I suppose they are bound to accept these conditions, but I appeal to the Chancellor of the Exchequer to do one thing above all. France, so we were told this afternoon, has had a great deal to do with this loan. She apparently accepts the same proportion of the burden of the guarantee as we do, and it is stated in reliable quarters that the loan is granted on this occasion again in order to prevent Austria having any connection with Germany. I hope that the Chancellor of the Exchequer will not be drawn by France into an arrangement of that kind, because I am confident, with the little knowledge I possess, that until Austria has her frontiers extended, until she can make bargains with other countries across her own borders, until she gets a better understanding than she has now with her neighbours, none of these loans will in the end avail her at all. Some of us are apprehensive that we are bolstering her up at the dictates of France, because France is afraid that Germany may extend her frontiers and make more friendly arrangements with Austria. In spite of all that I think the policy of this country towards Austria ought to be a different and a better one than that which is dictated by the French Government.

The conditions of Austria compel us to support this loan, I agree, but I appeal to the Government to look into the problem once again. Let me repeat the two or three points that seem to stand out most clearly. The treaty that was made at the end of the War is tying Austria down in such a way that no loan of money of any kind can save her in the end. We ought not always to be dragged behind the French Government in our policy towards Austria. Above all, we ought to take a. very bold step in the near future and try to rearrange the Austrian frontiers in order that countries that want to be neighbourly to each other can come closer together for mutual trade and financial purposes. Great Britain ought to take a lead in these things instead of allowing Continental countries to do so.

Those of us who are on the Labour benches in this House have great sympathy with the people of Austria. They are very very poor indeed. If I remember rightly there are about 2,500,000 out of the 6,000,000 paying income tax. Every person who earns as little as 25s. a week of our money or over is at present paying income tax. The Austrians are already paying very dearly for these loans. Though we shall not oppose the proposal before the Committee at the moment, we do ask the Chancellor of the Exchequer to look further into some of the points that we have raised. Above all I would say, do not let. the Governments which are guaranteeing loans lay down such harsh conditions for the people of Austria that they will be compelled to starve themselves in order to pay 7 per cent. interest to the moneylenders.

4.25 p.m.


I join with the hon. Member for Westhoughton (Mr. Rhys Davies) in sympathy with the tragic city of Vienna. Everyone who has any knowledge of that city must be full of sympathy. But my sympathy goes out to the tragedies in our own country too. There are tragedies here, in South Wales and the North of England, where you have idle men. There are 3,000,000 unemployed, as was stated in His Majesty's Speech. There are youths who have never had an opportunity of doing a day's work. I approach this subject from the point of view of an Englishman. My right hon. Friend the Chancellor of the Exchequer told us that the Austrians had had loans, since the War, of about £35,000,000. He told us that the loan of 1923 amounted to £27,000,000, of which our share was about £6,000,000. Precisely the same arguments were adduced then as my right hon. Friend has adduced to-day. I have here the undertaking of the Austrian Government in 1923. This is the Protocol, the Declaration: The Austrian Government will, within one month, with such provisional Delegation of the Council of the League of Nations as may be appointed for the purpose, draw up a programme of reforms and improvements to be realised by stages and designed to enable Austria to re-establish the permanent equilibrium of her Budget. That is in conjunction with the League of Nations. Then it is stated: This programme must place Austria. in a position to satisfy her obligations by the augmentation of her receipts and the reduction of her expenditure. It must further enable Austria to ensure her financial stability on a permanent basis by a series of measures leading to a general economic reform. That was eight years ago and now there is another loan of £4,300,000. My right hon. Friend the Chancellor of the Exchequer is an incorrigible optimist if he imagines that this will not be like throwing good money after bad. In this White Paper we are told that the Bank of England will be repaid this £4,300,000, but my right hon. Friend said that there was no moral obligation. I would like to inquire into that a little more closely. Supposing this money had not been advanced to Austria by the Bank of England, would the Government now guarantee the loan? That is a point which I think might well have elucidation.

I agree that my right hon. Friend was not a member of the Government in July, 1931. Very good, but let us know exactly what that Government did at that time. Was it owing to the late Government that the Bank of England advanced this money to Austria? Did they do it under instructions from the Treasury? Was there any implied recognition at that time by the Treasury of this loan by the Bank of England or did the Bank of England do it, "on its own." If it did, then it deserves to stew in the juice of its own stupidity. That is all I have to say about it. I do not understand why the House of Commons is not taken more into the confidence of the Government.. We know that the Cabinet are omnipotent in this matter and that whatever they propose will be carried here, but I warn them that they cannot play fast and loose with the taxpayers' money. That is a real danger, and I see, looking back over the last 10 or 12 years, an ominous similarity between this Government and the Coalition Government. They also spent money and raised loans, and I objected then as I object to this loan to-day.

This £4,300,000 loan coming on the top of our American Debt payment is a most surprising development. I have not had an answer to my question yet, but I cannot think that, unless there has been some implied obligation on the part of the Labour Government, this loan would never have been made. If there was no implied obligation all I can say is that this is a matter which must do damage to our own country. I do not think that anybody however much they might have welcomed going off the Gold Standard, imagined it to be a sign of financial strength. We were forced off it. [HON. MEMBERS: "And a good job too!"] Yes, but it was then contrary to the policy of the Bank of England. Let us get that quite clearly. However, I am not going into that question now, but I say that these loans made without any return will weaken our financial position. The hon. Member for Westhoughton asked if this loan had anything to do with a condition that Austria should not join with Germany. That is an important point. I observed from the "Times" newspaper the other day, that one of the Austrian newspapers was very much exercised about the fall of M. Herriot. The statement appeared on 15th December to the effect that one of the Austrian newspapers had declared that the result of M. Herriot's fall would be to deprive Austria of the new loan and release her from her part of the Lausanne bargain which included reaffirmation of the pledge not to unite with Germany. I hope there is no condition of that kind with regard to this loan.


No condition of what kind?


That Austria shall not have perfect freedom to do what she likes; that if she likes to join with Germany she may, and if she likes to remain independent, she may. I understand that it is part of French policy that Austria shall not join with Germany. It seems to me quite impossible in these days to say to nations like Germany and Austria that they shall not do what they like and follow the dictates of their own reasoning. It is quite impossible to keep nations like those constantly in a state of tutelage and I hope that no such condition as I have indicated will be imposed by the Government. I have seen enough of these endeavours to cure political grievances by boluses of public money. I am sorry to have to complain of the Chancellor of the Exchequer. I thought he was one of the most candid and open of men. But, getting wind that this loan, or something like it, was coming off, I asked last Tuesday what was the amount of money advanced to Austrian banks within the last three years for which the Treasury took responsibility and my right hon. Friend replied: My right hon. Friend appears to be under some misapprehension. The British Treasury has taken no responsibility for any money advanced to Austrian banks."—[OFFICIAL REPORT, 13th December, 1932; col. 191, Vol. 273.] I looked rather a fool in view of that answer but I have been made to appear foolish so many times in this House that it did not much matter. Having been told by my right hon. Friend that the British Treasury had taken no responsibility for any money passed to Austrian banks, I read two days later this White Paper informing us that the British Government were to guarantee this loan. I wish that my right hon. Friend would take us a little more into his confidence.


My right hon. Friend asked his question about the past and not about the future.


But I cannot understand being told that the British Treasury had taken no responsibility and finding this loan of £4,300,000 being made two days later. I have not the smallest doubt that my right hon. Friend was technically right. Still, as I say, he does not take us too fully into his confidence. He has absorbed all the tricks of the departmental trade which of course we know too well. This loan is to be administered by the League of Nations. I object to the League of Nations becoming the financial authority for this country. For the League of Nations to adjudicate upon disputes between nations—that is all right—but as a super-financial authority I object to it entirely. I do not believe that the League of Nations can proclaim the last word in financial wisdom. The League of Nations loans have been rather farcical. We were told on 18th October that out of £79,000,000 of loans which it had sponsored, something like £38,000,000 were in partial or total default—that is, nearly half. Therefore I have not much confidence in League of Nations finance. I want to be quite fair to them. They are a body of high-minded idealists but high-minded idealists are not always the best financial advisers.

If the British Treasury is going to guarantee a loan it ought to have that loan under its own control never mind about the League of Nations. I have more confidence in the Chancellor of the Exchequer than in the advisers of the League of Nations. We can cross-question him here even though we do not always get a satisfactory answer. Still he is here and we can see him, while the League of Nations is a long way off. This Dutch gentleman, whose name I cannot pronounce, may be a very admirable person but I prefer my right hon. Friend. I have put down an Amendment to the Resolution but I understand that you, Sir Dennis, will not accept it because it is a direct negative. I take this opportunity however to raise my voice in protest against this loan. I believe that we should have first regard to the interests of the British taxpayer and I cannot think that the Government of their own volition have brought out this loan, in view of past disastrous experiences.

4.41 p.m.


The exhaustive statement which the Chancellor of the Exchequer has made to the Committee is evidence of the importance which he attributes to this matter and he evidently appreciates the fact that many Members of the Committee are 'a great deal disturbed about the Resolution which we are now considering. I do not propose to oppose the Motion but I think that my right hon. Friend the Member for South Molton (Mr. Lambert) has done a public service in putting down an Amendment to it in order to draw attention to the circumstances of the case. I shall vote for the Resolution because it represents an accomplished fact in relation to the Government's policy in foreign affairs. I must add that it does not lie in the mouths of hon. or right hon. Gentlemen opposite to say a word against this proposal because I remember a very strong piece of writing which appeared in the official organ of their party, the "Daily Herald" in connection with this matter and in view of past circumstances I do not think they can justly criticise the present Resolution. But I think that this Resolution ought to remind us of two apophthegms. One is "you may put a bankrupt on his feet but it does not follow that you can keep him there." The other is "it is folly for a manufacturer to lend money to a bankrupt customer to enable that customer to buy goods from him with the loans which the bankrupt customer will not repay until another loan is granted."

That is what is going on here. We have tried to put these bankrupt European nations on their feet by granting them loans, and the last state will be worse than the first. This discussion raises the whole principle of granting loans to foreign countries. My hon. Friend the Member for Westhoughton (Mr. R. Davies) spoke about the loan being used for the benefit of the unemployed and for other social purposes in Austria, and he suggested that some condition of that kind should be attached. But if you pursued that to its logical conclusion you would be raising loans to provide for the social and moral uplift of young children in Ashanti by buying them red flannel petticoats.


The point which I made was that it would be unfair on the part of the Governments guaranteeing this loan, to attach any conditions which involved a reduction of the social services in Austria.


It is our business however to look after the interests of our own people. The object of the loan is shown in the White Paper. It will be remembered that the Austrian Creditanstalt got into trouble, and the Austrian Government asked the Bank of England to get it out of trouble by advancing a loan. I believe that questions of Foreign Office policy were involved in regard to the position of Austria and Germany, but as I do not know the facts I do not propose to touch upon that aspect of the question. But the already known facts as to the loan are as stated by the Chancellor of the Exchequer. No loan was given by the British Government; no loan was promised by the Government or guaranteed by the Government. The Bank of England thought it proper, and I have no doubt it was proper, to help the Creditanstalt, through the Austrian Government, to keep on its feet; but it has not kept on its feet. You put the Creditanstalt on its feet, but you could not keep it there; and, when it came down, it wrecked the whole financial structure of Europe and sent us off the Gold Standard 15 months ago.

With regard to the point raised by the right hon. Member for South Molton as to France, I see from the Memorandum, Command Paper 4218, that France has promised, subject to ratification, to guarantee a loan of the same amount. I dare say the Chancellor of the Exchequer will tell us later whether the fall of the French Government will render that ratification impossible, because that would alter our opinions a good deal. I hope the French Government will ratify, but we have no assurance yet on that subject.

In a telegram from Vienna on Friday last we were told that, as a result of the granting of this loan, it is hoped that Austria will be able to resume transfers for the services of the 1923 Guaranteed League Loan. With what? The Financial Secretary to the Treasury has a very pretty wit—he is not lacking in a sense of humour—but I think he forgot that it is not very humorous to give the reply that he did in this House yesterday, when he stated: I am just informed that the Austrian Government have now agreed to resume transfers on the 1923 Guaranteed Loan as from the 1st January, assuming that the Protocol of the 15th July, 1932, is ratified before the 31st December. What a confession! It is feeding a dog on its own tail. We are providing money with which to pay the interest on the former loan, and the hon. Gentleman asks us to implement this guarantee on the part of the British Government in order that we may provide the means in cash with which to pay ourselves our own money. When my right hon. Friend the Member for South Molton yesterday asked a question, the hon. Gentleman said: His Majesty's Government have guaranteed 24½ per cent. of the total service of the Austrian Government Guaranteed Loan, 1923–43. Answering a further question, he said: The original amount was equivalent in all to about £24,500,000."—[OFFICIAL REPORT, 19th December, 1932; cols. 752–3, Vol. 273.] What did he mean by that? Let us be clear about these accounts. I understand the two Austrian loans in which Britain is chiefly interested are the 6 per cent. guaranteed loan of 1923, of which £10,000,000 is outstanding, and the 7 per cent. International loan of 1930 which amounted to £3,500,000. Since the middle of June the Austrian Government have failed to pay the trustees of the guaranteed loan the whole of the pledged revenues, though the trustees had sufficient funds to meet interest and sinking fund payments due at the beginning of this month. In the case of the 7 per cent. International loan, the Austrian Government decreed a transfer moratorium in July last, the service of the loan being paid in schillings into a special account at the National Bank of Austria.

On the 15th December I heard questions answered in this House by the Financial Secretary to the Treasury, who told us that relief loans to Austria owed to this country amounted to £8,825,000, and he went on to say: The Austrian Government were indebted to various European Governments and also to the United States of America Government in respect of Relief Loans to the total amount of about £37,000,000. All these loans were funded in 1928 on identical terms representing a considerable reduction of the debt which was agreed to in view of the financial situation of Austria … Payments in respect of these loans were suspended under the terms of the Hoover Moratorium from 1st July, 1931, to 30th June, 1932, and a further suspension after the end of the Hoover year has been agreed to."—[OFFICIAL REPORT, 15th December, 1932; col. 508. Vol. 273.] The whole thing is a farce. They get into debt, they get a suspension, and then they get a further suspension. It reminds one of the story of a very distinguished Member of this House of the last century, Sheridan, whose tailor applied to him for payment of an account. He owed £100, and he gave a bill payable at three months, signed it, leaned back in his chair, and said, "Thank God that's settled." These loans do not settle anything, but they get people into further trouble, and we have to lend them one loan after another. We are told: The Austrian Government reaffirms its intention of meeting punctually all its foreign obligations. I might reaffirm that I would pay a debt of £16,000,000, but it would not mean that I am capable of carrying out that obligation.

My right hon. Friend below the Gangway referred to the reference in the White Paper to the League of Nations. The League of Nations will assist in the work of economic and financial reconstruction. As has been said, the financial experts of the League of Nations have not done their reputations very much good. They have injured both themselves and the British investors; but they have also injured the moral force of the League of Nations, because they have created a feeling of irritation against the League by allowing the League to supervise loans of which we have just heard £38,000,000 were issued here, and most of them now in default. The League of Nations certainly deserves support; but when these so-called expert economists, these muddle-headed experts advised the issue of loans to the now defaulting countries, they overlooked the contingency of a failure of the currency systems, with the result, as the right hon. Member for South Molton has told us, that nearly all the loans to the bankrupt nations of the East End of Europe, issued under the supervision of the League of Nations, are in default for some part, and have dragged the good name of the League of Nations through the mud.

In Article 7 of the Protocol we are told that the Austrian Government will request the Council of the League of Nations to appoint a representative and to nominate an adviser to the National Bank of Austria. I should advise Austria to do nothing of the kind. It does not help matters at all. The supervision of the League of Nations did not save the British investor in the past. I am not going to vote against the Resolution. I shall vote for it, but I think the policy by which we grant or guarantee these loans to the nations in the East End of Europe does harm to all concerned. I can imagine that if the representative of the League of Nations were to go in and take charge of the pledged revenues of Austria in the same way as the various consortiums of Europe took charge of the pledged revenues of China, by the Chinese Maritime Customs, it would be all right. If Austria would submit to that, she would be wise, and I do not think it would be interfering with her sovereign rights. At any rate, the representative of the League of Nations would have some locus standiand power to see that those who had guaranteed or provided the loans received that to which they were entitled. My view is that the League of Nations ought to be kept entirely out of these loans and that we should go in on the principle of controlling the Excise and Customs receipts. There are no Maritime Customs, of course, in Austria, as there are no ports there, but the principle of the Maritime Customs control in China would be very useful if applied to these loans.

The standard of living of the East European countries should be based upon their production; and unless a. country borrows, begs, or steals from an outside country it is not entitled to a standard of living higher than its productions warrant. It cannot consume more than it produces for use or exchange, without outside help. We have by lending them money been allowing these nations for years to live at a standard of life to which they are not entitled. Let them sink to their own level, and if there are a few wholesome slidings down, that will clear the air. I have no feeling that there will be a crash in Europe because we do hot lend more money to these people. We did lend them money before the War. We then had Rumania, Bulgaria, Serbia, Hungary, and Austria all borrowing money, with what result? If there had not been the war, they would have gone into default sooner or later. Sir Robert Kindersley lately put forward some figures about the loans which have survived the wreck, in which British investors are interested—loans to foreign Governments and foreign municipalities, and British investors are told that of the surviving amount of £356,000,000 there is a total of £140,000,000 in default. This excludes Russia, Mexico and Brazil. What is the good of lending money to foreign countries on those lines I You might just as well call them gifts.

I heard the speech made in this House a few days ago by my right hon. Friend the Member for West Birmingham (Sir. Chamberlain). It moved the whole House. It moved me profoundly. It was a very noble speech, worthy of a great name, and I believe that every word he said was true. Indeed, I can confirm it from my own knowledge. We have slums all over England where health and even life are almost unsupportable, and here we are throwing away money to keen up, as the hon. Member for Westhoughton suggested, the unjustified high standard of life or the social amenities of countries like Austria or Greece. We have slums in England crying out for the money which we have wasted in South Eastern Europe. We pour out loans to put bankrupt nations on their feet; and we can- not keep them there. If the money has to be lost, let us, as the right hon. Member for West Birmingham said, use it in our own cities. Let us use it to clear away some of our slums, and if we get no interest in money from it, we shall get interest in the form of better health and a little more comfort for our own people.

I protest against these dole loans. If there are disasters, or floods, or earthquakes in various parts of the world, in Austria, Poland, China or Timbuctoo, Britain has, in the name of our common humanity, always had the reputation of devoting private funds to help those in distress. But I protest against the Government continuing this unsuccessful policy, which is nothing but a charity policy in order to keep bankrupt nations on their feet at a standard of life to which they are not entitled. Charity begins at home.

4.59 p.m.


I do not think this Committee should pass this Estimate without first getting some more information on the subject from the Treasury. I do not expect the right hon. Gentleman to tell us exactly what this loan will cost, for obvious reasons, but I think he ought to give us some idea, and bearing in mind the kind of loans we have recently issued for our own purposes, I presume it will be somewhere between 3 and 3 per cent., and not, as the hon. Member for Westhoughton (Mr. Rhys Davies) suggested, 6 per cent. The Debate so far has turned on what are the real reasons for this loan. There is, unfortunately, no reason to doubt what the Chancellor of the Exchequer has said, namely, that the real reason is the obvious need of Austria. As to the question of helping the Bank of England, that is incidental. When one remembers that France, Belgium, Holland and Italy are participating, one must suppose that they are not participating for the sake of helping the Bank of England. There is another reason which has probably a good deal to do with it. It is generally supposed in the City that if further credit facilities were not given there would be a definite call on the guaranteed loan which was issued in 1923.

The whole business has a sad history, and nothing has been said in this Debate and nothing could be said which makes it much more promising for the future. It is obvious that Austria, if she has to continue to exist under similar conditions to those under which she has existed since the War, is just as sure to get into financial difficulties again in the next few years as she has done in the past. One can only hope that the nations which are guaranteeing this loan are doing so in the knowledge that it is part of their own policy to do what can he done in future to help Austria to her feet.

5.2 p.m.


I want to support the Government in guaranteeing this loan. The parochial outlook of many of the speeches is to be deplored. The object of this loan is to enable us to co-operate with other countries to help Austria, and I believe that the action of the Government is in the best interests of Great Britain. Something was said about chucking money away. I am not in a position to judge, but I am sure that the Government, having weighed the pros and cons of guaranteeing this loan, are quite certain that it is the best thing for England. We have only to cast our minds back on the events of the last two years to realise that it is in the interests of Europe and therefore of England—never mind what may happen this time next year or two years hence—to do our best to keep Austria on her feet for the time being. If we do not help Austria, we shall play exactly the same game which we are complaining that America is playing to-day. I understand from the extract read by the right hon. Member for South Molton (Mr. Lambert) that Austria will try and have a stable Government and a balanced budget. In the past we have lent money to help countries in their difficulties, and we have always made one mistake. Is it possible to do anything to ensure that Austria can earn her living and earn the interest on the loan? Can we take any steps to get Austria to break down her trade barriers and to give freer trade to her neighbours? I would be in favour of lending as much money as we can to those countries who would come in to the sterling area. I do not know whether it is possible to try and induce Austria to become another of the sterling area countries, and in that way to make our job of paying the American debt more simple. In the hope that something can be done along the lines I have indicated, I shall certainly support the Government.

5.5 p.m.


I happened to be in Vienna in the spring of 1923 at a time when one got over 300,000 Austrian kroner for the English pound. No one could be unsympathetic towards Austria at that time, because Vienna and the whole of Austria were going through the most appalling sufferings, and they are very vivid in my memory. There are one or two points which I would like to put to the Chancellor of the Exchequer. He referred to the amortisation of the 1923–43 loan. If the same proportion is to be repaid each year, 1933 should obviously see half the loan repaid. I should like to ask what is the position of the English taxpayers with regard to their liability in case of possible default in this amortisation, whether it is carried out up-to-date or whether it is not. Another important question arises. We are told that 100,000,000 schillings of this present joint loan to Austria is to repay money lent by the Bank of England. Were similar advances made by the Bank of France, or the French national banks, or the National Banks of Italy, Belgium and Holland? My reason for asking is that if similar loans were made by these other countries, Austria will get no fresh money from this loan because the 100,000,000 schillings which we are lending will be transferred to the Bank of England to put the Bank of England straight for a loan made in July last year. It is important to know whether there are other contingent liabilities of the Austrian Government which have to be made out of this loan.

There is a further point about which I am not happy. I happened to be on the Continent in August this year, and, knowing what had taken place in Geneva, I made inquiries with regard to the Austrian State Railways' position. I was told that they were keeping far too large a number of employés for the services that they were rendering. I also heard that they had a large scheme of fresh building, which is mentioned incidentally in this Agreement, and that while committees of inquiry, possibly of an international nature, had been set up in the past, no action to speak of had been taken to put their financial house in order. We find in this Agreement the Austrian Government. undertakes to carry out without delay the general programme of economies. In regard to the railways. The Agreement is dated 15th July, and it would be interesting to know whether, in view of the fact that it is now more than five months since they stated that they were going to take action without delay, what action, if any, has been taken. Furthermore, it states that an expert appointed to the Council of the League of Nations was going into the question of capital expenditure. Has that expert been appointed, and, if so, when may his report be expected? On the following page we read that the representative of the League of Nations will report to the League every three months on the execution of a programme of reforms. If they started last July, presumably the League has had a report in the last month or two. If so what is the nature of the report, and if the report has not been received, will it be available in the Library of the House of Commons to those of us who are interested in this question? Unless Austria will balance her budget, especially in regard to the State railways, there will continually be trouble in her finances in years to come. I know that for political reasons it is difficult for her to balance her budget, but I hope that my right hon. Friend will give some re-assurance on these points, because, from inquiries I have made, they are largely the cause of Austria's present trouble.

5.10 p.m.


I cannot possibly vote for this Motion, which is simply asking the House of Commons to throw good money after bad. My hon. Friend the Member for Chislehurst (Mr. Smithers) criticised speeches which had preceded his by saying that they had a parochial outlook. If he means a national outlook, that is not at all a bad thing. One of the great drawbacks to the chief Ministers of our Government continually going to Geneva is that they lose to a great extent the national out look. They get an internatonal or a European or a world oulook, and I do not blame them, for they are always going there and having hard cases brought to their attention. They are human beings with feelings like the rest of us, and they are naturally sympathetic when some other gentlemen with similar feelings and belonging to some othernation says, "This or that country is in a parlous state; cannot we lend them a hand?" All the other representatives say, "Oh, yes, we will lend them a hand if you will lend them a hand, but of course, we have to get our own handshakes ratified by our own Parliaments." Then we ratify our handshake, but the other Parliaments do not, and we are left with baby after baby of different nationalities to look after for the rest of their natural lives. So it goes on, and I deplore these Motions being continually brought to the House of Commons asking us to throw good money after bad.

The idea of thinking that £3,000,000 or £4,000,000 will put Austria on its legs is farcical. The only thing to be said for the Motion, as I understand it, is that the money will remain in this country and the country's credit will have the use of it at the Bank of England. But it is time we stopped using British credit for these international loans. The Chancellor of the Exchequer has referred to other countries which, he hopes, will join in with us. Will he assure the House that this loan will not be issued until we have definite assurances and guarantees that the other countries will do their bit in the matter? Do not let us be the sole foster parent once again. These are the reasons which prevent me from voting for any Motion of this kind. This international finance is really getting a perfect blight on the country. We see it in Russia and elsewhere. I was told the other day, "We must continue to give credit to Russia, because, if we do not, her credit will be brought down and another European nation will suffer. We owe money to that nation, and you must have a broad outlook." I beg the Chancellor of the Exchequer to let this be the last instance of carrying European babies.

5.14 p.m.


I have been informed on reliable authority that there is a danger that once the Austrian Government realise that we are going to guarantee this loan, they may take steps to impose further prohibitions on certain imports, notably of Lancashire cotton goods. I should like to ask whether the Government will take steps to ensure that arrangements are made with the Austrian Government that no such prohibitions are put into operation, because they will undoubtedly have the effect of still further reducing the volume of our trade with. Austria.

5.15 p.m.


As one who was in Austria and Vienna both before and after the 1923 and 1924 loans, I recognise the great part loans have played in bringing some measure of prosperity back to Austria, and I presume the 1931 loan by the Bank of England prevented a crisis arising at that time. Now, as I understand it, the Government have taken on the responsibility first shouldered by the Bank of England, and it is quite clear that there must have been some definite understanding that the Government would do some such thing when the Bank made the loan. I understand there are no conditions attached to our loan, except those mentioned in the White Paper, and I think there will be a definite benefit and saving to Austria, because the loan from the Bank of England was at a higher rate of interest than prevails to-day. It was a short-term loan, and the loan the Government are now guaranteeing will, of course, carry only that rate of interest which the credit of the British Government commands to-day. I would like to ask whether there will not be a direct saving to the Austrian Government as a result of the transference of the responsibility for this loan from the Bank of England to the British Government. We have heard from various speakers that there may be a change of policy by France in regard to this loan. I want to ask whether, if France does not guarantee this loan by the specified date, the whole proposition falls to the ground, or do we carry on with our specific portion of it?

5.18 p.m.


Chickens sometimes come home to roost, and this particular one happens to have come home rather sooner than expected. If any country has a right to ask for international assistance it is Austria, for the simple reason that no other country has suffered so much as a result of the Versailles Treaty. The centre of one of the greatest Empires in Europe was practically dismembered, and left with a skeleton population suffering under tremendous economic difficulties. Every year since 1918 we have been brought up against the impossible position in which Austria was left. Some of us supported our Government at the time as to the necessity of defending ourselves against German aggression. We thought Germany was threatening Europe with a military dictatorship of the worst kind, but we also knew that, although there was a kind of organisation and conglomeration between Austria and Germany, that, after all, Austria was only in exactly the same position as Germany was. As a consequence, when the war ended Austria found herself allied to a country which was in a far stronger position in every possible way than the Austrians themselves were; and the consequences are now that Austria has got to carry the baby. But the baby will not be carried by the people financially controlling Austria.

The suggestion is that the loan will be guaranteed at the expense of the poorest people in Austria. The social services have to be attacked. One hon. Member suggested that the railways must be tackled, and the railways there are national property. Are we to do the same with them as was done with the German railways, hand them over to a private company in order that the shareholders may get their pound of flesh? I was very sorry to hear an hon. Member talking about Eastern Europe when, judging by all his antecedents, he owes his very existence to the fact that there was such a place as Eastern Europe to give him birth.


I beg your pardon. I am not from Eastern Europe.


I am only suggesting that race will tell. I happen to be a Celt—born in this part of the world, but of Celtic ancestry—and I am proud of it; and if I had come from the same part of the world as the race to which he belongs came from, I should be proud of it. Therefore, I would not throw bricks at my father-in-law. But who is going to carry the baby when this guarantee is agreed to—and it will be agreed to, because the Government can always command a majority, however silly their actions may be? When all is said and done, the people of this country will carry the baby, and then the people of Austria will have to go through the mill to do their part of it. I am absolutely certain that at the finish Phil Garlick will foot the bill all the way through, in England and everywhere else. This is a financial piece of jugglery. The bankers have got together. Sir Montagu Norman has not been travelling for the good of our health, but in the interests of the section of the community he so ably represents. He has travelled from Dan to Beersheba and back again, and we know who has got to produce the "spondulicks." When these loans come to be paid the common people, who produce the wealth of the world, will have to pay their share, and more than their share; they will have to pay interest on top of their share, and they will get very little out of it.

In so far as we are concerned, this is a regrettable necessity. It is part of the "doctor's mandate." We had to suffer from that at the last election. Now the doctor has gone away and left us with the mandate. Whatever happens, we know that medicine is very poor stuff to swallow. Later we shall have an operation performed on us to discover how silly we were when we began to play "hokey pokey" with the national interest, not merely in this country but in any other country. I am pleased to know that an hon. Member opposite has looked after the national interest. I do not know how the working class stand in regard to that. It appears to be a repercussion of these events that we should lead the way in cutting the social services so far as the victorious countries in the War are concerned, and we are now making it a condition of guaranteeing this money that the social services in Austria must be cut. An hon. Member spoke about having been in Austria. I have not been there, but some of my friends have, and I hope that the workers in this country will never come down to the situation in which the Austrian workers find themselves. They are paying very dearly for the victory of the Allies in the War, and I venture to suggest that this game of trying to make them pay still more, based not upon their capacity to pay but upon their capacity to continue to suffer, ought not to be allowed to continue. The time has nearly arrived when we ought to take a definite stand in this matter. We ought to say to all countries, in debt or out of debt, that these war debts and war loans must be wiped off the slate, so that we may get back to something like the parity that existed before the War.

5.25 p.m.


It is easy in a Debate like this to throw out the idea that we must all have great sympathy with the people of Austria. I think no one in the House is lacking in sympathy with the Austrians, but it is a little difficult for the ordinary Member of Parliament—it may be easier for great financiers such as we have just heard—to explain to his constituents how it is possible for this Government, within 18 months of the great crisis which brought it into existence, to be guaranteeing a loan of some £4,500,000 to another country. It is a little difficult to explain to some of our local authorities. I make no reservation in saying that, having followed the extraordinarily clear speech of the Chancellor of the Exchequer, I personally quite realise the necessity for the loan; but there was one point on which he was not so clear. Last summer four Powers, of which Germany was one, were consulting as to whether there should be some sort of international loan for the Danubian States. As far as I understand the White Paper and the Chancellor's speech, Germany is no longer one of the guarantors of this loan, and I think the House ought to be informed about the reasons for her withdrawal—whether it is through poverty or for some other reason that Germany is not a guarantor on this occasion. After all, the Germans have been let off rather more than we have in the last year or two, and I am here to represent my constituents more than the interests of any other country.

According to some figures given last March by the then Financial Secretary, the actual amount loaned by this Government is now in the neighbourhood of £12,000,000. As I understood the statement of the Financial Secretary yesterday, a sum of rather more than £500,000 will be used out of this new guaranteed loan to pay the monthly transfers which were suspended last July. I want to know whether any proportion of that amount will actually be paid to the Government of this country in consideration of the loans which we have made. I want some idea as to the proportion of interest and repayment of loan which this first and the other instalments of the money we are being asked to-day to guarantee will cover, because a large part, if not the whole of this new loan, will be used merely for the repayment of loans. We are, in effect, guaranteeing a loan to repay former loans, and I want to know what proportion of it will be applied to repaying Government loans rather than Bank of England loans. That is a very important point, and one on which the House is entitled to a proper and clear explanation.

The only other point which I wish to emphasise is one which has been made before. I cannot see what is the good of going on guaranteeing these things for Austria. We are told that she is going to make various reductions. I do not think that we are told in the White Paper what will be the net revenue which Austria will have for the repayment of loans after those reductions have been made. Surely, there must he some estimate of that kind, and it is one that we are entitled to have. However much Austria may reduce, and however much we may hope to get back our loan, the one fact remains, clear and evident to every one of us, that it is totally impossible for Austria, as she is constituted, to continue as a separate nation. You cannot hope, with the present constitution of Austria, that she can ever repay the whole of her loan. Would it not be very much better if, instead of going on with these perpetual attempts to balance the Austrian budget in order to repay her loan, even to have another international conference? Heaven only knows there have been enough failures already, what with the failures of the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), and I am the last person to encourage them. There has only been one success, and that was Ottawa.

Would it not be better to try to reorganise the central countries of Europe, so that they could be a real economic unit? The Chancellor of the Exchequer said that at one time Germany was talking of this, and was negotiating. We ought to be assured that this new loan does not in any way make it more difficult for the people of Central Europe to reorganise themselves for the purpose of reducing unnecessary customs barriers, and for the purpose of trying to set up economic units in the future. I do not know that I ought to have intervened in this Debate, which was supposed to be very select. Some of us who have listened for years in this House to the new guarantees which are always being asked for, are entitled, on an occasion such as this, to say that it is no good going on with these things. The only way to solve the situation is to try to reorganise entirely the position of the Central European countries.

5.33 p.m.


I do not think that anybody in this House believes that this loan to Austria will do any good to Austria. Let us be quite frank in the matter. A year ago the Bank of England came to the assistance of Austria and of this country, and of the world's credit, in financing an advance to Austria. Whether they were right in doing so or wrong, I do not know, but obviously the Protocol is arranged for the repayment of the Bank of England and other similar banks abroad which made advances to Austria at the time of the collapse of the Creditanstalt. The loans made by the banks at that time were recommended to be made by the Governments of the various countries, but they were not guaranteed by those countries. We were not responsible for the payment of either interest or capital on those advances, but now we are shouldering the burden, as usual. We are giving a Government guarantee to provide money in order that the frozen credit of the Bank of England in Austria may be set free.

It may be right that we should go to the help of the Bank of England, but do not let us conceal the fact that this is one of the objects of this loan. We have not been told, but we ought to be told, how much of this 100,000,000 schillings are to be used for repayment of old loans, whether by the Bank of England or other banks. I am not clear, on all the other loans that are to be paid, as to whether they are of a similar character to those owing to the Bank of England and as to how much of the money is new money. Probably very little of it is new money which the Austrians can use for development. I judge that this is so, because the Austrian Parliament, when discussing this matter, only managed to carry the acceptance of the loan, on the terms of the Conference, by one vote. Therefore, there cannot be much new money in it. It must be mostly for liquidating the old credits.

One of the things which we ought to be told before we conclude this Debate is how much of the 100,000,000 schillings is new money and how much is to repay loans. Unfortunately, I had to be absent during part of the Debate, and it is impossible to find from the White Paper what interest is to be paid upon the 100,000,000 schilling loan. The British Government guaranteed this loan, and therefore the interest on the loan ought to be as good, or rather as small, as on any British Government loan. We are borrowing money at 3½ per cent.; therefore I cannot see why this 100,000,000 schilling loan should carry a bigger rate of interest than 3½ per cent., which would be of great advantage to Austria.. The real reason, I take it, why that fact is not stated in the White Paper is that we are only guaranteeing part of the loan. It is only 30 per cent. of the total amount of the loan that we are guaranteeing. The rest of the loan is being raised and guaranteed by other countries. Other countries' credit is not as good as ours. We had better not go into the reason why, but some people are not paying, and therefore their guarantee is not as good as ours, and so they cannot raise money at 3½ per cent., as we can.

Is the same rate of interest going to cover the whole of the loan, or is it permissible for us to raise our 100,000,000 schillings at the best rate that the British Government can raise it? It makes a material difference, because our guarantee is a guarantee of interest as well as of principal. A guarantee of interest, therefore, if the loan is raised at 5 per cent. or 6 per cent., as was the old loan, will mean that the problematical and very possible burden upon the taxpayers of this country will be twice as high. Before we come to a decision it should be made clear what is the extent of the annual liability of this country? What is the liability that this country has taken on its shoulders?

The Committee will observe that this is a gold loan, and that the schillings are gold schillings. The present Austrian schilling is, we are told, at 20 per cent. discount, and therefore, if the Austrian schilling recovers, the burden upon Austria will be less. On the other hand, if the Austrian schilling falls, which is not at all impossible, the burden on Austria will become far greater, and may become intolerable. That is not the really serious item, which is that the loan in which we are taking part is one in which the burden is in gold. This is one more desperate attempt on the part of the bankers of this country to anchor our currency to gold. Our liability is a gold liability. All our other liabilities, except the Debt to America, are sterling liabilities. Here is another gold liability. We have had nothing to do with it. It has been entirely arranged by our delegates, the expert financiers of this country. It is about time that we on these benches protested against these desperate attempts to re-anchor us to the old gold parity. Every hon. Member knows, and probably the Chancellor of the Exchequer as well, that we shall never go back to the old gold parity and that we are much better off it. The one good thing that has happened since this Government came into power is that that which they came into power to prevent has happened, and we have got off gold.

Why, therefore, is this Debt incurred in gold? Because the other partners to the loan, the French Government and the others, being on gold, insisted upon our taking our liabilities in gold too. This is one more example of the way in which the taxpayers of this country are sacrificed on every occasion to the interests of France and to the interests of the gold countries.

The two vital things about this are that our credit is far better than that of other countries and that therefore our liability under this loan ought to be less. It ought to be based upon 3½ per cent. interest instead of upon 5 per cent. or 6 per cent. That is one thing. The second thing is that we ought not to take on a gold liability when the one object of financiers and statesmen in this country is to increase the sterling area and to ensure that we shall not be driven back on to gold.

5.43 p.m.


I shall only keep the Committee a moment or two before the Financial Secretary replies. I wonder whether he can tell us the figure which he must have had in his mind when he con- sidered this matter, of the total amount of guarantees which are outstanding to this country, under this guarantee and under all international arrangements, in order that we may weigh the sum by which we are increasing that amount in order to see how important a sum it is. We agree that this country has not only a sympathetic duty but a real responsibility so far as Austria is concerned. We took part in the Treaty of Trianon which led to the present Austria, an Austria which, standing isolated, must be wholly uneconomic. We do not see that the continuance of loans is ever going to cure that position. I am sure that the Chancellor of the Exchequer has it in mind that something far more fundamental has to be done. I hope that the Financial Secretary, when he replies, will be able to assure us that active steps are now being taken either to have this matter discussed at the World Economic Conference or to have it discussed very shortly in connection with the Danubian position. Everybody realises that unless some system for overcoming the Customs barriers in the Danubian area is devised, we can only keep Austria alive by continually pumping in fresh credit none of which we shall ever get back again.

Although we have that duty to the Austrians, we also have a duty to our own people. I shall be very glad to hear the Financial Secretary explain how he is going to satisfy the unemployed in South Wales that the Government are justified in withholding credit from South Wales while giving it to Austria. We believe that the Government ought to do both. If it did both, it would be consistent. How is it consistent, when you are refusing help at home, to offer it quite lavishly abroad? Perhaps the hon. Gentleman will give his explanation as to how that is shown to be consistent. As regards another feature, namely, the repayment of the loan by the Bank of England out of this guaranteed loan which is now to be raised, it seems to us that that is an unfortunate incident of the arrangement. We are not very much concerned with the Bank of England's financial status; we are more concerned with the British Government and with the Austrian Government in regard to this arrangement, and, as far as we can make out, the Austrian Government is going to get nothing out of it at all from our point of view. The money raised in this country is going straight to the Bank of England to repay an existing debt which the Government of Austria owe to the Bank of England.


Does the hon. and learned Gentleman wish to suggest that the Bank of England made this loan purely for commercial purposes, or even at all for commercial purposes?


I do not want to suggest anything, but, as everybody knows, there were many firms of high financial standing in the City of London who at that time were vitally interested in the position of the Creditanstalt and the Austrian Government. Whether it was that which actuated the Bank of England, or whether it was the British Government that actuated the Bank of England, I am afraid I do not know enough about the matter to say, but I think everybody knows that there were many other factors besides Governmental factors coming into account in the position as between the Creditanstalt and financiers all over the world at that date. However that may be, I suggest that it seems a little hard that the Bank of England should get 100 per cent. of its capital returned at once out of this loan, whereas, as I understand it, the other creditors of Austria are going to take their chance in the future of getting back what they can. The Bank of England, in fact, is going to be a. preferred creditor to the extent of 100 per cent., and that feature does not very much attract our sympathy, at any rate.

There is one other factor, and that is the conditions which we understand are being imposed upon the Austrian people. We think it is unfortunate when one country, coming forward to help another, tries to impose conditions upon the people of the other country as to how they should regulate their life, particularly when those conditions may possibly result in particular classes in that country suffering to a particular extent in order that the interest may be guaranteed. The hon. Baronet the Member for Farnham (Sir A. M. Samuel) said, "Let the populations there sink to their own level." We do not believe in that system of humanity. We think that perhaps the hon. Baronet might be allowed to sink to his own level.

5.50 p.m.


My right hon. Friend, when he moved this Resolution, gave the Committee the full narrative connected with Austria in the matter of loans, and it would be redundant if I were to tell again a similar story. But, in spite of the completeness of my right hon. Friend's account, certain questions have been asked by hon. Members, some of which my right hon. Friend had answered in advance, and some of which are answered by reference to the White Paper. Nevertheless, I will try to recall the various interrogatories that were put to me, and, if by inadvertence I should forget to reply to any of them, I trust that I may be reminded, for there were very many of them.

It is possible to look at this subject, and it has been looked at, from two points of view. Some hon. Members think that we are placing Austria in a condition of subserviency; others think that we are placing ourselves in a condition of subserviency. It all depends on the view that is taken of the inter-connected responsibilities of nations. The view of His Majesty's Government is that, if Austria were allowed to collapse, the effects would be felt severely in our own country. Indeed, that has already been proved to be the case, and I think it is the justification for the course which we are now taking. We are providing a portion of a guaranteed loan, our proportion being 100,000,000 schillings; it is hoped that the total of the loan will be three times that amount.

Before any negotiations were entered upon with regard to this particular transaction, the Bank of England had advanced 100,000,000 schillings to Austria, an amount which is now equivalent to about £4,300,000. The Bank advanced this money to Austria from charitable motives at a moment of very great distress. When it advanced the money, it obtained a clear understanding that it would be repaid from the first long-term loan that Austria raised. The moment is now approaching when that loan may be raised, if the British House of Commons and the Parliaments of the other countries concerned approve. It is an advantage that, in giving this guarantee to Austria, no strain will be put upon the British exchange, for, in fulfilment of the understanding which the Bank had with Austria, it is to be imbursed out of the proceeds of the loan. If we were not a party to the loan at all, that understanding as between the Bank of England and Austria would still operate, and, if France and Italy were to provide the money, this obligation would still be due to the Bank of England. There is nothing, therefore, dishonest or suspicious about that transaction, and I hope that my right hon. Friend the Member for South Molton (Mr. Lambert) will be reassured. My right hon. Friend, whose nod of assent I am glad to see, was afraid that in guaranteeing this money, which he did not wish to be guaranteed at all, we were imposing a political condition upon Austria—that we were saying to Austria, "You may not in any circumstances unite with Germany." There is nothing in this Protocol which in any way changes thestatus quo,or interferes with any undertakings that Austria may have given in a previous Protocol. The position is exactly the same as it was before, and we have not changed it in any particular.


Surely, the condition was made before.


I thank the hon. Gentleman for repeating what I was saying. The status quois preserved, and we have imposed no further condition whatever. Indeed, it would not have been the policy of this country to impose any further condition whatever. My hon. Friend who has just interrupted me expressed in his speech some doubt as to whether Austria in her present form can survive. The opinion of the Government is that Austria is quite able to stand alone, provided that her affairs are properly managed, and we therefore think that it is a proper course to take, in conjunction with our prospective co-guarantors, to say that Austria's Budget should be balanced, and that her whole internal position should be improved. We have not placed any penalty upon the people, nor deprived them of any of their social services. I trust that my hon. Friend will be glad to have that assurance.

Several hon. Members have asked—I must apologise for the discursive nature of the remarks I am making—whether any other banks had advanced money to Austria at the time when this advance was made by the Bank of England. That question was asked by, among others, my hon. Friend the Member for East Lewisham (Sir A. Pownall), and also, I think, by my hon. Friend the Member for Torquay (Mr. C. Williams). The answer is in the negative; the Bank of England alone took that magnanimous course. My hon. Friend the Member for East Lewisham wanted to know whether the reforms which the Austrian Government has undertaken to operate were in fact being carried into effect. I could, if my hon. Friend so desired, answer his question at some length by giving a full statement of what is being done, but perhaps he will dispense me from that, in order that we may the more expeditiously proceed.


Can I see it?


Certainly; I will show it to my hon. Friend. He will see from the statement that everything practicable is being done by Austria, not only to regulate her own internal finances, but also to put her railways on as sound a basis as the economic circumstances of the time permit. Several hon. Members want to know, and in particular my hon. and gallant Friend the Member for Chippenham (Captain Cazalet), whether, if this country ratified and the other Powers did not ratify, the loan would he made. It certainly would not be made, for the Protocol makes it quite clear that the ratifications of the principal Powers have to be deposited before the loan is made. A unilateral ratification by this country, Austria being the only other country to ratify, would not be sufficient, My hon. and gallant Friend said that, although Austria had ratified, it had ratified by a very small majority vote, I think of one or two, in the Austrian Assembly. The exiguous majority was not in the least due to the fact that Austria did not want this money. I think that everyone in Austria wants this money, and realises the necessity for it. It was due to internal political feeling in Austria. I can assure my hon. Friends that it was not due to any reluctance by Austria to accept this money, but was due to a sensitiveness about their political independence—a point with which I have already dealt in reply to my right hon. Friend the Member for South Molton. A great deal might be said on that subject, but I trust that the Committee will spare me the necessity of developing it now.

As to the terms upon which this loan is to be raised, our portion of the loan will be raised on the British market with the British Government's guarantee, and therefore it will be raised on such terms as the British Government's credit in these circumstances can command. That, of course, will be, in the present financial situation, a great advantage to this country in diminishing the guarantee, which otherwise might be of a greater amount. My hon. Friend the Member for Farnham (Sir A. M. Samuel) was a little confused as to the real amount of the 1923 loan, and was very much struck by the fact that we had guaranteed 24½ per cent., and that the loan itself came to 24½ million pounds. That is a pure coincidence. These are the real facts. The liability of His Majesty's Government under the 1923 loan is about £800,000 a year. If we ratify this Protocol, and if the loan be raised, we have every reason to expect, in view of the Austrian Government's assurance, that the service of the 1923 Guaranteed Loan will be continued, thus sparing British taxpayers from any loss. They have not incurred any loss at all up to the present, because the trustees of the loan have accumulated a reserve out of which they have paid the last instalment.


Are we to understand from that statement that, if this loan had not been made, there would have been a default in the Guaranteed Loan?


The Austrian Government undertook to transfer the sum required for the service of this loan in monthly instalments. The transfer of these instalments has been suspended since 1st July, 1932, but the amount required, namely, £580,000, for the service of the loan has been available out of the reserve fund held by the trustees and, consequently, the British taxpayer has not yet been called upon to make any payment under the guarantee, and we hope he will be spared from making any payment and that the full service of the loan will be resumed, saving us from what would otherwise be a loss of about £800,000 in each year. Not only will the interest be forthcoming on the 1923 Guaranteed Loan but there will still re- main in this country the sum that we are guaranteeing under this new loan.


What rate of interest is Austria going to pay for this loan?


I thought I had explained that by saying that the British portion of the loan will be raised on the British market under the guarantee of the British Government, and, therefore, such rates of interest as the British Government can command will be obtained in respect of this loan. I hope my right hon. Friend understands that foreign Governments are guaranteeing various portions, which they will raise in their own market—in Paris or Rome as the case may be. We shall raise our portion in London under the guarantee of the British Government, and the British Government rate of interest will prevail. Austria, of course, will get the advantage of that.


Will the hon. Gentleman answer the two questions that I put, first, what is the total amount of guarantees outstanding of foreign loans, and, secondly, will the Government explain their attitude to the unemployed in making a guarantee of this sort to Austria while refusing to do it at home?


I had not completely forgotten that. I thought I made some response to the first point when I said it all depends on the point of view that you take. If you look upon the world as a common whole, the various parts having obligations towards one another, it would not pay a country in our position to allow another country to fail. If you preserve that country, you preserve the work of your own people, because you preserve the whole commercial system. As regards Government expenditure, I am sure my hon. and learned Friend would rather be a workman in this country than in Austria. He will find the full particulars that he requires in the financial accounts of the United Kingdom, 1931–32, where there is set out a complete list of all loans in respect of which the British Government is a guarantor.


Why is it a gold loan if it is raised in a sterling country?


It is being raised in various parts of Europe, and we have to make agreements with other countries.


Were not our representatives given instructions on that issue?


The other guarantor countries are gold countries, and you must find some least common denominator, and gold was, therefore, chosen.


It is not a common loan. Our portion of the loan raised in this country from the British people is at a different rate of interest from the loans raised abroad.


It has not yet been floated. If the right hon. and gallant Gentleman will look at the memorandum with the Financial Resolution, he will see among the amounts which have so far been promised, United Kingdom 100,000,000 gold schillings (at present rates about £4,300,000). That is the method by which we measure our share of the total obligation, and that is the purpose of selecting gold.


Will the hon. Gentleman answer my question, why Germany was in the negotiations up to a point and is not among the list of guarantors?


Germany was in these negotiations because, when they originally took place, there was a discussion as to preferences as between some of the Danubian countries and Germany. But Germany is not a guarantor of the 1923 loan and has not, therefore, dropped out in any way. I am sure Germany is well disposed towards Austria, but she has not dropped out, as the hon. Member seemed to suggest.


I did not suggest that, but the Chancellor of the Exchequer said that Germany was taking part in the negotiations this summer. If the negotiations were, as we understood at the time, for the purpose of raising this loan, I cannot see any other object in Germany taking part.


Perhaps I may answer my hon. Friend. The negotiations to which I referred were by a Committee of Treasury experts who were examining the League's proposals. They involved not merely an advance of money to these States, but also various economic alterations in their relations, for instance, the granting of certain preferences by one State to another in respect of particular products. Germany came in in respect of those economic arrangements. She was one of the countries which would have been invited to give the preferences, and it was that that brought her in. That is, perhaps, what misled my hon. Friend into thinking she was also concerned in the financial guarantee, which is not the case.


I also asked what is the position of the Austrian Budget and her power to pay back these loans? Before we guarantee the loan, we have some right to know.


I answered that point by saying that Austria has undertaken to balance her Budget, and we were perfectly satisfied that proper measures were being taken. My hon. Friend could hardly expect me to open in this Committee Austria's Budget and give details of expenditure and revenue, but we are perfectly satisfied that Austria is taking proper steps.

Question put, and agreed to.

Resolution to be reported To-morrow.