HC Deb 09 June 1932 vol 266 cc2180-247

I beg to move to leave out the Clause.

When the Exchange Equalisation Account was originally introduced, it was hailed with unanimous approval and support by the House, but since that time a great change has come over the scene, and to-day I do not think it would receive either unanimous—


On a point of Order. Would it be possible, Mr. Speaker, for you to indicate at this stage, for the convenience of the House, whether you are going to call any of the other Amendments to this Clause, or whether you desire to have a general debate now?


It was my intention to call the Amendment standing in the name of the Chancellor of the Exchequer —in page 15, line 12, to leave out from the word "which" to the end of line 15, and to insert instead thereof the words: the Commons House of Parliament resolve that the account is no longer required for the purpose for which it was established"; the Amendment standing in the name of the hon. Member for Caerphilly (Mr. Morgan Jones)—in page 16, line 7, to leave out the word "certify," and to insert instead thereof the words "report thereon"; the Amendment, also in the name of the hon. Member for Caerphilly —in page 16, line 8, to leave out from the word "Parliament" to the end of the Clause; and the Amendment standing in the name of the hon. and gallant Member for Gainsborough (Captain Crookshank) —in page 16, line 12, at the end, to insert the words: Provided that nothing in this Act shall prevent the Comptroller and Auditor-General from rendering to the Public Accounts Committee of the Commons House of Parliament a report on the state of the account should he consider it to be in the public interest to do so. I think that it would be as well to take the general discussion on the Question, "That the words proposed to be left out stand part of the Bill."


Thank you very much.


Would it be possible to know whether any of the Amendments to the following Clause, Clause 23, will be called? If not, possibly some of the matters raised by those Amendments might be raised on Clause 22.


I understood you to say, Sir, that you desired that the general discussion on the subject should be taken when we discussed the Question, "That the words proposed to be left out stand part of the Bill." The point which I desire to raise is one that I should like to raise specially rather than in the general discussion, in view of the importance of its being raised before we came to the question of the Clause standing part.


That is rather a matter for the hon. Member himself to decide. He can raise his point in the discussion on the Question, "That the words proposed to be left out stand part of the Bill," or he can raise it on his Amendment.


It. would be preferable to my hon. Friends and myself to raise it as a special point, and to take a Division upon it, if that would be possible.


Certainly, that will be quite all right; but it is obvious that, on the Question, "That the words proposed to be left out stand part of the Bill," there must be a general discussion on the whole Clause.


Would you be good enough to give me an answer to my question as to whether the Amendments to the following Clause are likely to be called or not?


We had better discuss one Clause at a time. We had better confine ourselves strictly to Clause 22 at the moment, and then, when we come to Clause 23, discuss that Clause.


I only wanted to know whether the Amendments are going to be called, because, if they are not, some of the points might be raised on Clause 22.


They are going to be called.

7.0 p.m.


My Amendment is to leave out the Clause, and, consequently, to leave out the Exchange Equalisation Account. The attitude of the House and the country towards this scheme has been considerably modified during the last six weeks. When the scheme was originally introduced, it was thought that it could be used in order to reflate to the 1928 price level, but that long-range policy was, as the Financial Secretary to the Treasury made quite clear, not part of the scheme that the Government were introducing, and, consequently, any use of this Exchange Equalisation Account in order to depress sterling or to restore sterling to the Gold Standard was equally out of the question. There remained the other use to which this Fund was to be put. It was to be used to prevent fluctuations in sterling. While everyone is agreed that it is desirable to stop fluctuations in sterling, it has gradually become obvious that any attempt to check fluctuations might involve the Treasury in very serious losses. It is, unfortunately, impossible to decide whether a fall in sterling is a fluctuation or a trend. If it is a trend the Government would not use this Fund to stop it, but if it is a fluctuation, the Government would use it to stop that fluctuation. If we could distinguish between a trend and a fall which is merely a fluctuation we should all of us be millionaires, but it cannot be done. We cannot tell, so it comes to this, that the Government are to use this Fund of £160,000,000 in an attempt to do what so often bankrupts private individuals.

The risks involved to the taxpayer in the use of this Fund are very considerable. It is always legislators acting with the best intention who make the biggest blunders. We had the extraordinary beet sugar ramp, for instance, which has run us into £4,,000,000 or £5,000,000, done by both sides of the House with the best possible intentions, and yet with that inevitably disastrous result to the taxpayers. Now in this experiment, equally hastily adopted, the risks of loss are on the same scale. That is not merely the private wisdom of a private Member. City people and business interests are becoming seriously disturbed because what the Government propose to do under the Exchange Equalisation Account has already been done or been going on through the Issue Department of the Bank. We have had during the last two months efforts made to prevent fluctuations in sterling and to prevent what was described as a disastrous rise in sterling. We have had sterling being sold and the Bank going into the exchange business in an effort to prevent an undue rise. You cannot sell sterling unless you buy something with it, and we have seen large purchases made already. I am glad to hear they are not going to be transferred to the Exchange Equalisation Account, which inspires what I cannot describe as anything less than terror in the minds of people who are acquainted with the ease with which you can lose money by gambling on 'Change.

The position has been made infinitely more difficult and has completely changed since the scheme was introduced, because everyone is now conscious that America is apparently going through precisely the same affair that we went through last year. They are endeavouring to inflate in America. They are not balancing their Budget in America.. They are faced with a £400,000,000 loan for reconstruction, and inevitably the result is that American dollars are becoming suspect in the eyes of people. Last year when we were driven off gold, the Bank of England and the Government did their very best to prop up gold by buying sterling. They were met very kindly by the bankers in Paris and America who lent us large sums of money. They lent us this money in foreign currency. They lent it in dollars and francs. We used those large borrowings for the purchase of sterling in order to keep sterling up. Those large sums, amounting to £130,000,000, vanished. We fired the last shot in the locker in an attempt to preserve dollar parity and the Gold Standard, and we had ultimately to pay back those foreign countries in the dollars and francs which we borrowed, at large additional expense to ourselves in sterling.

Nowadays people will, I think, regret that we borrowed that £130,000,000 and used it in that particular way, but I am quite prepared to let bygones be bygones. What I want to point out is that now, apparently, in order to preserve sterling from fluctuation in relation to American dollars, we are doing for America what we tried to do for the currency of our own country. We are trying to prevent the dollar falling relatively to the pound; in other words, to prevent the pound rising relatively to the dollar. We are buying dollar exchange and gold. We are, no doubt, helping the creditor class in America by so doing. But why should not the Americans, if they want their dollars preserved at gold parity, do what the Bank of England and the British Government had to do last year, that is, borrow from us in sterling so that we can get back the full value of sterling? The difficulty at the present time is that we are buying dollars and gold with a prospect of very heavy loss. If America goes off gold, all those 30,000,000—or is it 60,000,000—dollars that the Bank has bought will depreciate. When we come to sell those dollars and that gold we shall get a much lower figure for them, whereas if we had said to America that we were quite prepared to lend them sterling, we should, at any rate, have enabled them to go on using that sterling to buy dollars, and if they had come off gold it would have been their loss, and not ours.

As it is, we are pursuing that universally amiable policy which we have pursued ever since the War, of helping other people for nothing because we love them. We cannot go on doing that sort of thing, and if the fund is to be used by these methods that we have seen in the last two months then I say that the initiation of the Exchange Equalisation Account is going to be disastrous to this country without saving the dollar from going off gold. A sum of £150,000,000 will go nowhere in support of it. The Exchange Equalisation Account, unfortunately, does not say what you are going to exchange. You talk about stabilising sterling, but stabilising in terms of what? If it meant stabilising in terms of raw materials, there would be something to go on, but you do not say whether it means stabilising in terms of dollars or francs, or of some of the other hundred and one unsound currencies of Europe. What does stabilisation mean and why on earth has the Bank of England, with, I presume, the consent of the Treasury, been buying dollars, francs and gold in the last few weeks? It was £10,000,000, but this morning I see another £800,000 of gold has been bought. How long is it going on? I wonder whether it would be possible for the Chancellor to give the House any idea of what the loss would be if America joined the sterling convoy, with our commitments as they are at present? Perhaps we might have three figures—what the loss would be, with our present commitments, if America came down to sterling, what it would be if francs also came down to sterling, and, lastly, what it would be if gold went down to its trade value from its present fictitious level?

It seems to me those are estimates which any careful Treasury must have in mind when the world is in the position it is in to-day. It is quite possible that America will stop on gold, but there is a chance and anybody who is gambling in that sort of finance ought to keep account of what his losses would be in certain circumstances, even if those circumstances are not regarded as very probable. I do think we might know what our commitments are to-day, with the purchase of dollars and francs and gold, and taking into account the £120,000,000 worth of gold already in this country. We ought to have from the Government some explanation of what they think has been at the back of the mind of the Bank of England in making these large purchases. They must know what the Bank has in mind. It is important that we and the country should know, because the Government themselves are going to take up the same business that the Bank has been conducting. It will be no longer the Issue Department of the Bank of England which will be involved; it will be the Exchange Equalisation Account. It is true that makes no difference to the British taxpayer who has to pay for losses in either case, but at any rate under the Exchange Equalisation Account the Treasury has a more direct say in the purchase and sales that are to go on.

We really ought to have an explanation of what has been at the back of what is going on. I think it is the sort of feeling that we must support the dollar and American bankers. I think that has something to do with it. They helped us when we were in straits, and we are helping them now. It may be partly the fact that, if you have to sell sterling, what on earth are you to buy with the sterling that you sell? I cannot help thinking that there is also this determined intention on the part of the Bank, and I should fancy on the part of the Treasury, to increase our gold resources and to get back to gold. It seems so senseless to buy gold when we do not need it. When we went off gold we stopped the obligation to buy whatever gold was offered at a certain static price. Why do it now? You are still paying a very heavy price. On the £150,000,000 that we borrowed, presuming that it is used for this purpose, we have to pay interest. Any additions to the gold resources of the Bank of England bring in no interest at all.

There may be another reason. Has the increase in the gold reserves which has been brought about within the last few months increased the credit issues by the Bank? Has it increased the amount of credit available in the country? I do not know. We might be told whether it has been used for that purpose. I do not think it will be a very useful way of increasing credit, and I do not think it is the best way, but it would be some sort of explanation of why they have been buying gold and dollar currency. I cannot help thinking that the whole mind of the Bank of England and of the Treasury is centred on a conversion scheme. They say, "We must secure here a large amount of gold and dollar currency or francs in order that, when we convert, we may have something to give to those people who desire to have cash instead of conversion." There are a large number of foreign holders of War Loan and many of them will refuse to convert on a 4 per cent. basis, and will want cash. We have certainly now enough gold and dollars to buy these people out. If that is so, I do not really see that there is any misfortune or any disaster to the country in saying so. After all, if you tell people, when you are going to convert, that you have ample resources to pay them out if they will not convert, it will give them greater security. They are much more likely to take their new War Loan at a lower rate if they know they can be paid out easily if they wish to take out the cash.

To say that you are in a strong position to deal with the situation is half the battle in a conversion. We certainly are getting to a strong position, but I cannot for the life of me see why we should not pay these people out in sterling instead of in gold and foreign currency. If the Government are really anxious to restore prices to the 1928 level —that means to put sterling lower than it is to-day—there is no better way of doing it than by buying out the people who do not want to convert in sterling. You are getting rid of your sterling and you are getting something for it. You are reducing the debt. I have said before that the best way to depreciate the currency was to buy War Loan and pay for it in cash, or in credit, or in short-term loans. Here is an opportunity of doing it. There is no reason, if you want to get sterling lower, why you should not use your conversion as a means —an adventitious means if you like—of bringing about that end.

It all comes back to this. Have the Government any plan in view? The Chancellor of the Exchequer and the Financial Secretary to the Treasury have both expressed a more or less platonic desire to get back to 1928 prices. I cannot help thinking that they are honest in that wish. They must think that it is the only chance for a recovery of trade. If they are really anxious to do that, why cannot they use their influence with the Bank of England to make these operations, whether it be by the Issue Department of the Bank or by the new Exchange Equalisation Fund—why cannot they use these transactions towards that end? I am afraid the real reason is that the Government cannot make up their mind. Has the Financial Secretary to the Treasury a plan? Is his desire to get wholesale prices back to the 1928 level an honest desire? There is no other way of restoring prices except by depressing sterling. On that we are all agreed. [An HON. MEMBER: "No!"] I should be glad to hear of any way of getting prices back to the 1928 level without depreciating sterling. When we talk of prices in sterling, it is prices up and sterling down. The prices of sterling are the exchange equivalent. If there is any other way of getting them up, let us hear it but, for goodness sake, let the Government make up their mind what they want and tell us what they want. If they say they do not want to get prices back, let the trade of the country know the worst. People keep going bankrupt one after the other. Those who can are grimly holding on in despair, looking for the Government to do something to raise prices. The Government can do something to raise prices, and all that we wait on is that the Government should make up their mind and should have a scheme. I believe they have consistently stopped thinking of it and have driven away the whole question till they have a conversion loan through. I am not at all certain that they have not missed the boat with their conversion loan.

If there is to be conversion, let us have it as soon as possible coupled with a sane, honest method of doing what the whole trade of the country wants, a linking of currency and price levels which will restore trade. When this scheme was brought in, we all hoped that something of that sort was in the air, but we have all found that nothing of the sort can be done by these methods. Few of us have any further interest in this Exchange Equalisation Account, but we see in it more and more the risk of a very serious gamble in a business which is not the Bank's own business nor the business of the Treasury, a gamble which, owing to the natural good nature of the Englishman, is likely to lead us into intolerable losses, and it is only right that there should be a few voices raised in the House as a protest against an experiment of this nature which is not likely to do any good, and which may involve us in very heavy loss.


Whenever this question comes up in Debate, it leads to Members appealing to the Government to make some statement as to the nature of their monetary policy. It appears to be very difficult for anyone to realise that this Exchange Account of £150,000,000 has been put up for no other object than merely the steadying of the sterling exchange. The Government at different times have given certain very definite indications of what their views on monetary policy are, but I do not remember up to the present that there has ever been made to the House any concrete, definite statement as to what kind of money policy they are pursuing. It has generally been explained that it is not considered wise to go into too much detail or to expose the nature of the plan that they have in mind. I cannot help feeling that that leads to a great deal of uncertainty for traders and I have always felt that, just as this country rallied to the Government when we went off the Gold Standard and everyone assisted to keep the boat steady, if we had some more definite policy, traders throughout the Empire would lend their assistance towards reaching the aim that the Government have in mind. It appears to me that they have not sufficient financial courage in the matter.

I have rather carefully searched their statements on the subject, and I have come to the conclusion that the Chancellor of the Exchequer is in no doubt as to the financial policy that he would pursue. I am going, for greater accuracy, to read a very few notes, which are based almost entirely on speeches made by him or on answers given to other speeches. This is the Chancellor's money policy as far as I can make out. It seems to me to be a good one, and I believe that it will meet with general approval from most people in the country and, if it is indeed his policy, I believe it will do nothing but good. I find that these are the indications that he has given: First, a return to some form of Gold Standard, not barring the possibility of a gold-cum-silver standard; secondly, that the eventual return will be at a figure below the previous gold standard parity; thirdly, that such a return to a metallic standard is not expected to take place in the near future; fourthly, it is intended to control fluctuations in sterling exchange with a view to bringing about a higher price level for commodities. I think the 1929 level was indicated.


They said 1929 in the first place, and 1928 in the second.

7.30 p.m.


Fifthly, that every effort will be made to prevent violent fluctuations in sterling in the meantime; and sixthly, that, when the higher commodity price level has been attained, sterling exchange will be controlled with a view to the stability of commodity prices. That appears to me to be, from statements made by the Chancellor himself, the policy that he has in mind. It seems to me to be a sound and useful policy for this country to follow in the present circumstances, and I would appeal to my right hon. Friend, if that be so, that the policy should be made known to the country and that the aid of everyone in this country should be sought towards making it effective.


I do not intend to detain the House very long, because I think we have talked so much about the Exchange Equalisation Fund and obtained so little information from the Government that it is really a waste of time to ask for more. I was very much struck by the appeal of the right hon. and gallant Gentleman the Member for New-castle-under-Lyme (Colonel Wedgwood) to the Government to define their monetary policy. Their monetary policy, like the Peace of God, passes all understanding. The Chancellor of the Exchequer apparently devised this fund for the sole purpose of holding sterling down Meanwhile, by his orthodox sinking fund policy, and by the merciless taxation in his Budget, he is doing his very best to contradict this policy. It is almost preposterous to say we will hold sterling down by this fund when at the same time the right hon. Gentleman comes down to the House and says that we must, at all costs, balance the Bulget, and greatly strengthen the sinking fund, and thus make sterling higher. It appears to me that the Government have no monetary policy, just as they have very little policy upon anything else. They have gone into one of the most technical markets of the world to display the abilities which we have so greatly admired in the House of Commons. It really shocks one when one considers the technicalities of that market and the enormous risks which day by day must be run by those people who have given their lives to the subject to find some bureaucrats in Whitehall, with the aid of a few Ministers, rushing in where very wise men have not only feared to tread but have often found it very expensive so to do.

I appeal to the Government to make up their minds and to give us a little more information about their policy. It is really ridiculous at this stage to set up this fund and to wrap it in the greatest mystery and meet every criticism of that policy with the statement that we must keep this secret, because we have to deal with dreadful bears. The best bears of sterling in the world are probably certain Members of the Government including Cabinet Ministers. You have only to read their contradictory speeches in defence of the fund to realise that the whole thing is a monstrous gamble. We in this House time after time are solemnly enjoined to support economy. We are told time after time that we cannot afford to spend a penny on all sorts of worthy and deserving objects, and yet here the Government are launching out on a sort of Derby day finance scheme and justifying it by no reasons. They say that in two or three years' time they will condescend to tell us what they have done with the money.

The Financial Secretary to the Treasury whose brilliant conduct of the financial Debates has been the admiration of this House is a Caledonian with a very strong respect for the bawbees, yet he has come up to that Box and has pounded it on several occasions and said, "Two or three years hence I will tell you how I have spent your money." The Chancellor of the Exchequer is here, fortunately fully recovered after his illness, and I hope that he will break the vow of silence which his colleagues imposed upon the Financial Secretary. I. hope that he will tell us exactly the principles which animated him when he established the fund. I hope that he will do something to explain the inconsistencies to which I have referred.

What is the point of this fund? As I have already said, one cannot see what the Chancellor of the Exchequer's policy really is. He is apparently doing his best to hold sterling down by the aid of his mysterious £150,000,000 fund. And at the same time he is rushing around holding himself up as the exemplar of financial orthodoxy. He tells us that we must strengthen and guard our sinking funds and so preserve the pound he wishes to depress by this fund. He rebuked my right hon. Friend the Member for Epping (Mr. Churchill) for suggesting that £10,000,000 or so of our dollar balances should be applied to revenue purposes and he comes down this evening in defence of this £150,000,000 fund and asks us to vote this large sum without explanation to or examination by Members present, all of whom I think are pledged to economy. Therefore, I hope that the Chancellor of the Exchequer will in his inimitable fashion describe to us to-night how he proposes to expend the fund and what qualifications he and his colleagues possess for setting themselves up as cambists.


I entirely agree with what has been said by the hon. Member for North Paddington (Mr. Bracken) with regard to the very serious departure from constitutional practice upon which the Government have entered in going into the exchange business. In my younger days I had some experience of a financial house, and I can confirm what the hon. Gentleman has just said— the house was an international house with branches in New York, Paris, Berlin and so forth—that such an occupation is the most scientific and highly skilled of any financial operation known. As he well points out—and I do not wish to reflect upon any one at the Treasury or upon the judgment of the Bank of England—however able they may be they cannot suddenly, without preparation, set out to secure and accomplish their purpose. I cannot believe that at the present time they are in possession of the necessary experience, and therefore I entirely agree with the hon. Member, and with the right hon. and gallant Gentleman who moved the omission of the Clause, that the probability is—and even the Chancellor of the Exchequer himself was very frank when he drew our attention to the conditions of the fund—that it would very probably result in loss.

I asked the Chancellor of the Exchequer to-day, as also did the right hon. and gallant Gentleman the Member for Newcastle-under-Lyme (Colonel Wedgwood), if he would explain to the House the loss on the purchase of something like £11,000,000 of gold bullion which has recently taken place. The Chancellor of the Exchequer in reply said that there was no loss. Like the right hon. and gallant Gentleman, I cannot understand how, if you purchase gold bullion to-day, you can do so without paying a premium for it. Obviously, you must pay a pre- mium. Many Tariff Reformers in the House will agree with me when I say that they rejoiced in the depreciated exchange, because it tended to prevent imports from coming into this country, because it penalised imports. Equally, of course, it penalised the import of gold bullion. The depreciation of exchange raises the price by about 30 per cent. when you purchase anything from abroad. Your raw cotton, food, gold bullion or any other import, is increased in price. The right hon. Gentleman in reply says, "Ah, we have foreign currencies, francs, which we may exchange for this gold bullion." But in the purchase of those foreign currencies he must have had to pay a premium, because we have been long under the infliction of depreciated exchange. Still, whatever our views may be—and I do not wish to enter into that matter at this moment—let us at least face the facts frankly and honestly. I think that the right hon. Gentleman, and the Financial Secretary to the Treasury will agree with me, that if you are a purchaser to-day of gold bullion and you purchase it with foreign currency you have to pay a premium for it and, therefore, an increased amount of sterling to purchase the gold bullion. That means that there has been a loss incurred.

I would call attention to what the Chancellor of the Exchequer said in his Budget speech. For the sake of greater accuracy I have possessed myself of the OFFICIAL REPORT, and I will quote two passages from his speech in which he explained to the House on that occasion the basis on which this fund was to be formed. He pointed out with regard to the Issue Department of the Bank of England that: Those of its assets which may consist of foreign currencies fluctuate in terms of. sterling; but so far as its assets consist of gold—including any gold that may hereafter be acquired—-the law requires the gold to be valued at the old par. Thus, the Issue Department cannot, with the exchange at 3.80, add £100 to its gold holding without showing an apparent loss of £28; and, in the same way, it cannot sell £100 of its gold holding without showing an apparent profit of £28. He went on to explain to the House that: In order that the account may at all times precisely balance on this basis, my proposals provide that at any time when a valuation on this basis shows a deficiency resources to the corresponding amount shall be passed from the Exchange Equalisation Account to the Issue Department of the Bank, and that when a surplus is shown that the converse operation shall take place."— [OFFICIAL REPORT, 19th April, 1932; col. 1427, Vol. 264.] That, I think, is very clear. The object of my supplementary question—and it is what I understood from the explanation of the Chancellor of the Exchequer when he introduced his Budget—was to ascertain if he meant that the Treasury is to indemnify the Bank of England when it is buying, as apparently it is to-day, gold bullion at a premium, and that the Treasury and the taxpayer have to make good the difference. If the right hon. and gallant Gentleman the Financial Secretary to the Treasury can explain any other way out I am sure hon. Members will be glad. We are seeking light and truth. I agree with what has been said by hon. Members on all sides of the House, whatever our views are, that the uncertainty is undoubtedly very bad for business. It must be detrimental to all extensions of business. Whatever our views may be, for heaven's sake let us have some certainty and know where we are, so that we can put—those of us who have opinions; and we may not all agree —our views and opinions into the common stock and so endeavour to get order out of the chaos which at present exists.

Hon. Members will, I think, agree that I was one of the first to oppose this fund, and I agree with the right hon. and gallant Gentleman the Member for New-castle-under-Lyme, that as we get to understand the attitude of the Government we shall feel that it is a most serious departure in giving facilities to this or any other Government to borrow to the maximum of £150,000,000 for the purpose of attempting to achieve what I and the right hon. and gallant Gentleman believe to be an impossible action. My adherence to the Gold Standard is not a pedantic adherence. It is due to the fact that I have given a life study to the problem, and it seems to me to be the best-known standard. Some reference was made to it in a previous Debate when I felt very much inclined to intervene. It was referred to by the hon. Member for East Aberdeen (Mr. Boothby) and others who rather incited me to come in and share in the Debate, but on that occasion I restrained myself and left the field entirely to those hon. Gentlemen.

One hon. Member suggested that instead of this fund we ought to have a standard based upon commodities. The right hon. Member for Newcastle-under-Lyme (Colonel Wedgwood) agrees with me that this Exchange Equalisation Fund will not solve the problem, neither will a commodity standard, and for reasons which were well pointed out by an eminent authority who has always been regarded as a very sound economist, Ricardo. It would well repay us in the present generation to read the Debates that took place under similar circumstances over 100 years ago, when we emerged from the Napoleonic Wars. We went through a somewhat similar experience to that we are going through today, very similar speeches were made and many fallacies were advocated in this House. The suggestion was made that we should have a commodity standard. This is what Ricardo said: If it should be conceded, which it cannot be, that the issuers of paper money would be willing to regulate the amount of their circulation by such a test, they would have no means of so doing; for when we consider that commodities are continually varying in value, as compared with each other, and that when such variation takes place it is impossible to ascertain which commodity has increased, which diminished in value, it must be allowed that such a test Would be of no use whatever. The same argument applies to bimetallism, which was referred to by the right hon. Member for Hillhead (Sir R. Home) and the right hon. Member for Sparkbrook (Mr. Amery) who wanted us to increase the use of silver. I believe in all sincerity that hon. Members in time will probably return to the old parity, but we have to contemplate some period of depreciated exchange. I agree with one hon. Member who said that we must have a monetary policy based upon a metallic standard, but he was not very definite about going back to the old parity. It is a moral obligation to get back if possible to the old parity. That was the basis on which the currency notes were issued and on which the provision was made that anyone holding notes could, during business hours, go to the Bank of England and obtain gold of a certain weight and fineness. To go back upon that is a species of repudiation. We have seen France repudiate, and Germany repudiate, but I hope that Great Britain will not repudiate. I am proud of the fact that we restored our currency over 100 years ago and I hope and believe that we shall restore our currency in this crisis. To-day the pound is worth about 15s.

We have had a great fall in values. It is noteworthy that the fall in values which took place in 1919–20 preceded the contraction or so-called deflation. The idea, however, has been put about by the right hon. Member for Sparkbrook and others that the policy of deflation has been the cause of the fall in values. That is contrary to the facts, because the fall in values took place before the contraction. Another fallacy that prevails is that there was a too hasty return to the Gold Standard in 1925, and that that was the cause of our troubles. Anyone who looks at the figures regarding the currency notes and other notes that were issued will find that for the three years previous to the return to the Gold Standard in 1925 there was hardly a variation of £l, so near was the circulation during those three years. Therefore, those fallacies can be disposed of before we approach this question, and we may clear our minds of a great deal of rumour that is not to be relied upon.

If we face the problem with a knowledge of the facts we shall come to a better understanding of what ought to be our policy. I believe that we shall in time come round to the policy which I advocate, and that it will tend to raise the gold prices of commodities. Some hon. Members may say: "How can you argue that a return to the old parity will raise the gold prices of commodities"? Perhaps I may briefly indicate how that will be brought about. It will be a long-term process in this sense that the fact of the restoration of London again as the monetary centre will improve our credit, it will enable the conversion of the National Debt to proceed apace, even at a less rate than 4 per cent., and it will encourage the foreign investors to come in and take a hand in the conversion. Obviously, if the foreign investor can be sure that it will pay him to purchase British Government stock and that Great Britain is again anchored to the Gold Standard, he will be more ready to subscribe to the conversion scheme.

The great losses of the Bank of France took place when we went off the gold anchorage last October. We do not wish to repeat that. If we can replace our currency on a sound foundation our credit will improve, it will enable us to convert our debt and to save £30,000,000 a year, besides placing London once again in her right position as a financial centre, a position which she ought to occupy and which, geographically, she is better situated to occupy than any other capital, including Paris or New York. I do not think that either Paris or New York can compete with us, because they have not the men with the skill and knowledge which is possessed by the City of London. If we have that position again restored we shall have the field ready again for floatations of loans for the development of the Danubian Provinces and our own Colonies, also China, India and Peru. Every loan that is floated in London goes out in goods and services. That will increase employment and make again the wheels of industry go round. I believe, and I hope that hon. Members will do me the justice of believing that I am sincere, that on these lines our true remedy for prosperity in the future lies.


Whenever one rises to take part in a Debate on this subject one is rather terrified by having heard a great many speeches from people who know so much about it but who seem to differ so entirely from one another. I am always more in despair when I have listened to the hon. Member for East Edinburgh (Mr. D. Mason) than when I have listened to anyone else. He seems so extraordinarily academic. I picture him milking that kind of speech with the whole world crashing into bankruptcy around him. I do not think it would make any difference to the hon. Member. He would still go on telling us about the need for the return to the Gold Standard, and so on. Even on the Day of Judgment he would set forth his theories and we should find him saying: "Only wait a little bit and you will get back to happy times." We welcome the Government's proposal because it seems to us a definite breach with the old theories for which the hon. Member for East Edinburgh stands and which, to my mind, are so entirely out of date at the present time.

What has struck me as peculiar in this Debate is that we have had a union of extreme opposites. We have had the right hon. Member for Newcastle-under-Lyme (Colonel Wedgwood), an extraordinarily unorthodox person in everything, and we find him falling in with the hon. Member for East Edinburgh. We expected something eccentric from Paddington and also South Croydon, but with all these counsels we are in a difficulty. There is, however, one theme on which they all seem to agree, and that is that we ought to have a statement from the Government in regard to policy. It is unfortunate that, although we have had lucid speeches from the Chancellor of the Exchequer and the Financial Secretary to the Treasury has given us a great many admirable speeches, and we have had the occasional incursions of the hon. Member for Devonport (Mr. Hore-Belisha), again and again in the Debates on the Budget and the Finance Bill we have heard the appeal: "Can the Government tell us what they mean, and what is their policy"? That appeal does not come from these benches only but from below the Gangway, above the Gangway and on every side. Somehow or other the Government do not seem to have managed to "put it across." They do not seem to have convinced anybody as to what their policy really is. I should like to know whether they follow East Edinburgh, or Paddington, or Croydon or Coventry or any of these various orthodox or heterodox speakers.

I always find myself puzzled when these experts talk. If I meet one expert and talk to him I can generally understand what he means. I may even think that I understand the whole situation, but when once I get into this controversy I begin to sympathise with the Chancellor of the Exchequer. Perhaps the right hon. Gentleman goes back to the Treasury and meets with the same sort of controversy that comes up here—these Gold Standard men, these inflationists, deflationists and reflationists, and perhaps he has not been long enough at the Treasury to sort them out. The point that impresses us on this Bill is that it is all very well to have an academic Debate and that it may be a beautiful work of art, but meanwhile the world is tumbling rapidly down. We understand that the Government hope to take a leading part in bringing about some sort of stability out of the chaos. They hope to bring about a world controversy. [Interruption.] Well, there will be controversy. They hope to have a conference on the whole question of trade and industry and prices, and they hope to get some kind of agreement, but I cannot make out what their policy is.

The Chancellor of the Exchequer tells us very guardedly that he hopes to get a moderate reflation back to 1929 prices. We hear from all sides of the House that it is the general desire that there should be a rise in prices. It is generally thought that that would be a good thing and that it would stimulate trade. But when we come to the actions of the Government it is so different, because most of their actions hitherto have been to impede trade and to stop as far as they could international trade. At home their great aim seems to be to carry out what they call economy, which is only a form of deflation They seem to want to get less and less consumption and to bring everything to a standstill. I cannot understand a policy which at one time says that we must try to get trade busy and try to get some sort of inflation, a rise in prices, and to get people buying, and a policy which at the same time has an entirely different effect.

8.0 p.m.

We welcome the Exchange Equalisation Account so far as it goes, because it seems to be a departure from the blind trust in Sir Montagu Norman which has gone on for the last 10 years and seems to suggest that we were not so far wrong when we suggested that perhaps the banks were not right. Only about nine months ago no one dared to say a word against the banks of this country, but now you see criticisms of the Bank of England in almost any financial newspaper, suggesting that it is not considered to be the safe institution it used to be. May be it would be better if we had the hon. Member for East Edinburgh and the hon. Member for Paddington, North in place of the Chancellor of the Exchequer and the Financial Secretary, but I doubt whether they would make a very happy team and get along together. But they say that they know all about these matters, they understand these difficult topics of currency, whereas the right hon. Gentleman opposite does not, and the Financial Secretary, with his Scottish outlook which makes him careful, is supposed not to understand them. Still I would rather trust the Chancellor of the Exchequer and Financial Secretary to manage our currency and exchange than the people who have been doing it for the last 10 years. They have put us absolutely in the soup.

We on these benches welcome the introduction of the Exchange Equalisation Account. We think it is the beginning of an attempt to get some sort of policy into finance, but we say that you will have to go a great deal further and we would like to hear from the Chancellor of the Exchequer, not an eloquent disquisition on questions of currency but how he relates it to the question of the prosperity of this country. I do not think that we shall solve our problems by any sort of monetary jiggery pokery. We shall not help the masses up and down the country by some wonderful financial manipulation. I do not think we can. I do not believe that we can solve it in the way suggested by the hon. Member for East Edinburgh, who took us backwards not forwards. You will not get any improvement by going backwards. We must go forward. We should like to hear from the Chancellor of the Exchequer that he is going to give a lead. I believe it is true, it is stated in many financial newspapers and leading journals, that the world is looking to this country for a lead. We are not getting it at the present. The Chancellor of the Exchequer is at the moment the pilot of the leading ship in the sterling convoy, and we should like to know where he is going to lead that fleet. We have been told that it has been going through terrible storms, that it is taking emergency action; but as far as I can see it is now laying to. It never seems to have set any course, never seems to try to get anywhere. It is being blown backwards and forwards by the winds. This country and the world will not get out of our troubles without a clear idea as to our policy on this international exchange and currency problem, and you cannot get it by wrapping it up and talking about it in conferences.

It is about time that this country, which has led the world in finance before, should state quite clearly what it means to do; what is the way out, and lead the world. It may be said that this should have been done long ago. We think that these steps should have been taken long ago, and that the Lausanne Conference should have been called long before. But whenever we have mentioned these matters it has always been said, "hush, hush you must not mention it," because you will at once scare away other countries. It may have been true then, although I doubt it, but the course which is right and safe is always the bold and open course. America is feeling the draught pretty badly just now and there is no doubt that every country in the world would welcome a strong lead. We may not expect to get it at this moment. The Chancellor of the Exchequer may not be able to give us his full policy, but we should as soon as possible give a lead to the world as to what we mean to do, the kind of basis we want for our exchange, whether it is a commodity basis or a gold basis. We want to lead the world; that is our appeal to the right hon. Gentleman.


The hon. Member for Limehouse (Mr. Attlee) has once again appealed to the Government to inform the world at large in a bold and vigorous manner what precisely is the monetary policy which this country intends to pursue. By a slip of the tongue he suggested calling a world controversy upon this subject. That slip of the tongue may perhaps be a little nearer the truth. I cannot imagine a more unhelpful manner of bringing about some agreement in the world than that one country should lay down in a dogmatic manner, without having heard what may be said by any other country, what is the final policy to be pursued by the nations of the world in order to solve world troubles. If ever the time comes for this country to give a lead to the world such as the hon. Member suggests this is certainly not the time or the occasion upon which it should be done. We are engaged in discussing an Amendment to leave out Clause 22, in other words, to abolish the Exchange Equalisation Account, and I failed to discover from the speech of the hon. Member whether he was in favour or against the Amendment. He never even mentioned it, and he certainly gave us no indication as to whether he was rising to support or oppose it.


I did say that we on these benches welcome this particular provision in the Finance Bill as a step in the right direction.


Then I gather that the hon. Member is opposing the Amendment of the right hon. and gallant Gentleman?




I am much obliged, because I should imagine that there will hardly be more than one or two supporters of the right hon. and gallant Member in his proposal to abolish the Exchange Equalisation Account. I want to comment on one or two things which the right hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood) has said. The right hon. and gallant Gentleman said that the change in the situation has brought home to the majority of thinking and knowledgeable people the mistakes which had been made in raising credits and loans in attempting to maintain ourselves on the Gold Standard last August. I wonder whether the right hon. and gallant Member will find any support in this House for that view. I wonder whether it will be said that we could with propriety at that time, without making the slightest effort to defend sterling, have gone off gold and entailed these losses to those who trusted in the stability of sterling, which indeed were not altogether avoided but which we can say we did everything possible in our power to prevent. I do not think that the right hon. and gallant Member will get very much support for his view. Nor do I think it will be agreed that we could to-day in the present circumstances feel such confidence in the stability of sterling as to be able to abandon the proposal in Clause 22. The right hon. and gallant Member suggested that the working of the Account may involve us in heavy losses. In my speech on the Second Reading I stated that it was not possible to avoid the risk of losses on the fund but, on the other hand, that we had to consider its advantages, and I put it to all hon. Members that whatever criticism may be made upon the way in which the Account may be managed in future, whether it cannot be managed without suffering losses or whether it is managed in such a way as to make profits, there would have been still greater criticism if the Government had stood still and watched the exchange fluctuating wildly up and down, with all the consequent injury and damage to trade and industry without doing anything.

As a matter of fact, the course of sterling has been remarkably smooth. It has fluctuated to some extent but within comparatively small limits. Whatever criticism may be brought against the Government, it is certain that trade and industry generally are grateful for what has been done in avoiding greater fluctuations than those which have taken place. The right hon. and gallant Gentleman asked what the Bank had in mind in making purchases of gold, and he found a variety of possible reasons, hypothetical reasons, some of which were extraordinarily fantastic. If there are two ways of accounting for any action, one which is normal and natural and another which is extraordinary and fantastic, the right hon. and gallant Member has a natural preference for the latter of the two. His mind seems to be inclined that way. Is he not aware that the Macmillan Committee in their report, before we had gone off gold, indicated their view that our reserves of gold in this country were too low.


We are now off gold.


When we are off gold it is still more desirable that our reserves should be increased from the low figure at which they stood. Normally, our reserves are about £150,000,000. They fell to £120,000,000, and have now been increased to £130,000,000. The right hon. and gallant Member asks whether there has been a corresponding increase in the note issue. There has; and consequently there has been an increase in credit available, and so far as that influences the course of monetary policy I should imagine that it is in accordance with his desires.

When he comes to speculate whether it is our policy to hoard bars of gold somewhere in the vaults of the Bank of England with a view to paying it out to any holders of War Loan who may refuse to accept terms in some hypothetical conversion scheme, I must assure him that he is penetrating into realms which are far removed from those of reality. The purchase of gold by the Bank of England has nothing to do with a possible or hypothetical conversion operation which may be considered in future.


Does that apply to foreign currency?


The hon. Member for North Paddington (Mr. Bracken) was very sarcastic about the suggestion that bureaucrats from Whitehall, together with a few ignorant Ministers, were going to enter upon the difficult and delicate processes of handling and controlling exchange. The hon. Member for North Paddington is a very faithful follower of his right hon. Friend the Member for Epping (Mr. Churchill), but he has not got his right hon. Friend's knowledge and has not got his wit. Really when he comes forward because he thinks that some reflection has been made on his right hon. Friend in connection with some heterodox suggestion of his, and suggests that that is the way in which the exchange is going to be controlled, he is only exposing his own ignorance. No one here suggests that the Chancellor of the Exchequer or the Financial Secretary is going to occupy his time from day to day in deciding how the Account shall be manipulated.

The working of the Account, of course, will be carried on by the Bank as agents of the Government. In the Bank there are experts in this matter who have as full knowledge as anyone else in the country. It is quite clear that you cannot, that no one can, not the greatest expert can operate an Account of this kind, with a certain knowledge of what is going to be the course of the future, without a possible risk on one side or the other. All we can say is that we believe that the existence of this fund and its operation are necessary for the purpose of steadying the value of sterling and of preventing it as far as possible from rising to undue heights or, it may be in future, from falling to undue depths. When hon. Members repeat over and over again that they do not believe the Government has a policy, and ask why the Government does not explain what is its policy, I must suggest to them that they had better follow the example of my hon. Friend the Member for Graves-end (Mr. Albery), who does not seem to have any difficulty an putting together, from various utterances of the Chancellor of the Exchequer, what seems to me to be an accurate account of the general considerations which have been in my mind from the first. The one correction which I wanted to make was that my hon. Friend appeared to me to be putting into my mouth statements as to what would happen in consequence of the operation and management of this Account, whereas perhaps I had rather stated aims than committed myself to saying that it would be possible on all occasions to achieve those aims.


The right hon. Gentleman has made a very important statement. He does not suggest that this particular account is of the slightest use in achieving the ends that he has laid down? The plans that the right hon. Gentleman had are independent entirely of this Exchange Account?


I am not prepared to say that. I am not prepared to say how far the management of this Account might not conduce towards the achieving of the ends which my hon. Friend quoted as being those to which I had given expression from time to time. I do not say that they always can be completely achieved, but there may be occasions when, by the help of this Account, it may be possible to do something towards achieving those aims. The right hon. Gentleman was right when he said that we want to see wholesale prices rise. But do not let him confine his attention solely to sterling prices. We cannot get away from the fact that we must be affected by gold prices, and we must also remember that an alteration in sterling prices may affect gold prices. All these things have to be taken into account. It is not reasonable to ask that one should lay down in any detail beforehand the exact policy that one is going to follow from day to day. The general aims I have tried from time to time to express to the House. My hon. Friend the Member for Gravesend has shown that he has appreciated the sense of what I have tried to explain. But there must be left to the Government of the day, and to the agents of the Government acting under instructions, a discretion from time to time to see how it is possible to advance towards those aims. That is the best reply I can give to the right hon. Gentleman, and it may be taken at the same time as a reply to the hon. Member for Limehouse.


Would the right hon. Gentleman explain the losses on the purchase of gold bullion?


There cannot be a loss on one single transaction. There must be a purchase and a sale. Up to that point there can be no loss.


I think the Debate has achieved one great object, and that is that we have heard from the Chancellor of the Exchequer what is the main object of this Equalisation Fund. But if I may, I would impress upon the Government that there is a very genuine anxiety in the minds of business men, industrialists and experts in the City, as to whether or not we shall not make a very serious loss over this fund, and whether we are not trying to do exactly the same thing as we did when we tried to keep on the gold basis. We arranged for large foreign credits at that time. Those credits were exhausted and we had to go off gold, but we lost a very considerable sum in doing that. I think it was over £13,000,000. Are the Government not trying to do what other nations have tried to do, and what so many private individuals have tried to do, and that is to stop the working of economic-laws? We have pinned sterling at a price, and we have to pay for keeping it at that price. Take the example of every commodity that has been cornered, or that an attempt has been made to corner, in the history of the world. The individual has always suffered when the corners have been broken. It was tried with coffee.

Is there not very grave risk in dealing with this sum of money? It is a curious fact that the money brokers in the City to-day are extremely busy on the exchange account. But they even up their business every night at 5.30, or whenever their office closes. All their commitments are closed and they start again next morning. When the British Government handle this fund they have to carry it over; they have to take the risk overnight of what is to happen. Suppose that any serious disaster happens in any part of the world. Suppose that America decides to go off gold. Suppose that the worst happens in Germany, and she does not pay any reparations. Is there going to be a tremendous loss in the sums we hold of those currencies? Are we going to buy huge masses of American dollars, to find them depreciated over night and have to face the loss? That might happen also in the case of France. If there is European trouble, or difficulty with regard to reparations, we do not know what is going to happen to the franc. The British Government will be handling a very large sum in French francs. Are the Government not taking a risk which they ought not to take? Are they not trying to fight against the economic law of supply and demand in holding sterling to a price which may be the right price—on that I am not prepared to argue—but which may be the wrong price? If it is the wrong price the loss is going to be serious.

It is a terribly difficult problem because at the price at which sterling is fixed just now, we are paying 30 per cent. more for all our raw materials and for all the foodstuffs which we bring into this country. I agree that on the other hand it gives us assistance in selling abroad. It is for the Government in their wisdom and in the wisdom of their experts to say what is the right price at which to pin sterling. I think that sterling ought to be allowed to take its natural course. If it goes further down that means, I know, that we shall have to pay more for our supplies of raw materials. On the other hand, it would give the manufacturers in this country a better opportunity of selling abroad. If sterling goes up, I do not think that we can make such a heavy loss, because we shall be buying our raw materials at a lower price, which may or may not compensate for the loss of the assistance now given in the selling of our goods abroad.

I bow to the judgment of the Chancellor of the Exchequer on most matters, but I do not quite agree with one statement which he made to-night. He said that this was not the time to give the world a lead. He said that at this moment, when we were dealing with this Amendment, it was not opportune to disclose secrets. I think the Chancellor of the Exchequer has disclosed his programme or, rather, has Confirmed what the hon. Member for Gravesend (Mr. Albery) suggested was his programme— that this very large fund was for the purpose of stabilising or pinning sterling.


I never suggested that the fund was for the purpose of pegging sterling; I said it was for the purpose of steadying sterling.


I accept at once the hon. Gentleman's statement, but I think that this is the time to give the world the lead. The world is looking to Great Britain for a lead. Half the world have gone off gold and gone on to sterling. Those who remain on gold are very worried and nervous about it. Those holding huge masses of gold do not quite know what they are going to do with it. In view of the fact that a conference has been or is about to be called, the Government ought to consider carefully whether this is not a very opportune moment at which to suggest a policy which might settle some of the difficulties of the world. International trade is crumbling. International business becomes less and less, and unemployment increases and still increases, and the only Power to which we can look in this emergency is Great Britain. I press the Chancellor of the Exchequer to reconsider that aspect of the matter, and to see if he, either by himself or through the Government, cannot give what is needed more than anything else to-day and that is a lead to the world.


I only intervene because of some remarks which have been made in the course of this Debate and particularly by the hon. Member for East Willesden (Mr. D. G. Somerville). I think everyone would wish the Government to give a lead at the right and proper time but we are bound to realise that a conference is shortly to take place in which the nations of the world are to take part, and we must ask ourselves: Is it wise or prudent to lay down any fixed course of action or to fix a figure at which it is wished to stabilise the pound before we have entered into negotiations with those other nations? Conditions in the various countries are so different and the policies of the nations have been so conflicting, and yet, at the same time, the need for common action is so great, that however determined a country may be to give a lead, that country in ordinary prudence ought not to commit itself beyond a certain point when it has before it within the next few weeks a conference with the other nations. The views of those other nations must be taken into account before we can fix the precise course which this country ought to follow. I should have thought that what the Chancellor of the Exchequer has said in reference to the speech of the hon. Member for Gravesend (Mr. Albery) was a sufficient indication of the views of the Government to satisfy anyone who wanted to know the kind of course that the Government would take. But in prudence the Government could not go further until they had been in consultation with the other countries and had ascertained the views of the other countries.

8.30 p.m.

There are two other considerations which I would put to the House. The hon. Member for East Willesden made a point as to letting sterling take its course and I know the arguments which are used in favour of that policy or rather lack of policy. But there are two considerations to be borne in mind. Temporary fluctuations in sterling may take place quite rapidly and may be very considerable fluctuations. On the other hand there may be long-term movements coming like waves. Supposing that the cost of production in this country were to rise appreciably for instance? These movements are of different kinds and if, when the pound is off the gold standard, we were to let sterling take its course would it not mean that sterling would be subject to temporary movements of capital which might alter the exchange level within the space of 48 or 72 hours? I should have thought that it was precisely those movements which anyone who had the power would wish to "iron out" and prevent, from the point of view of their effect upon British industry. I have had some experience in the old days of fluctuations in currency. One of the greatest difficulties with which one had to contend in those days was the difficulty that a currency might run away with one in the actual course of the negotiations over a contract. I have known of a case of a currency appreciating almost 20 per cent.—


You could always insure at six months.


Perhaps the hon. Member would wait for a moment. In the case with which I had to deal a currency appreciated 20 per cent. between the time when the contract-was arranged and the time when it was signed. No prudent person would have bought his exchange—at least not in the case in which I was concerned—until the contract had been not just provisionally arranged but actually signed. Not only in those cases but in many others is it of importance to keep the price of sterling as free from temporary fluctuations as possible and that is why I, for one, apart from any other considerations or criticisms, support the establishment of this Exchange Equalisation Account. No doubt you run a risk. No one can help running a risk if they want to carry out a business of this kind but it is not a gamble by any means. Far from it. It is one of the things which ought to be carried out in the interests of industry.

The hon. Member for Limehouse (Mr. Attlee) said that economy by a Government meant more and more deflation. I do not see that it need mean that. Economy by a Government means that money is left for the ordinary citizen to possess and spend which otherwise is taken for Government purposes, and from the point of view of industry, what is needed is not only the amount of money, but also that confidence which forms the velocity of credit as well. Prices are never the result of the amount of money alone; they are always the result of the combination of the amount of money and the velocity, the rapidity, with which it is used. The first is mechanical and the second psychological, and the more the Government at this time take from the ordinary public by taxation the more they diminish confidence still further below the point that it has passed. From that point of view, it seems to me that far from economy by the Government meaning more deflation, it is really one of the conditions under which confidence can be restored and thereby prices maintained and industry prosper once more.


I should like to confine myself rather more narrowly to the Amendment and the substance of it than some of the speeches which have been delivered have done. The precedent was begun by the right hon. and gallant Gentleman moving the Amendment, in a speech which, coming from him, struck me as rather humorous, because logically it consisted of one long lament that we were now off the Gold Standard. Once we are off the Gold Standard, which gives us automatically some means of liquidating the international balances of payment, I suggest that there is no escape from the fact that the central banks must hold assets in one another's currencies. That inevitably means the risk of loss, so I do not think there is any substance in the objection to the policy of the Government that they are running a risk. That is inevitable.

Hon. Members who make that objection all dislike the Gold Standard. They want to have their cake and to eat it too. If they want us to have a currency which is not internationally linked with all other currencies by means of gold, and I am there somewhat inclined to agree with them, they must face the consequence that our own central bank must inevitably have assets in other currencies, which may mean loss. Nor, on the other hand, do I think it useful to follow, as other speakers have followed, the hon. Member for Gravesend (Mr. Albery) in widening this discussion into a general discussion of monetary policy, because as I ventured to point out in some earlier remarks on the subject, this fund can have either an inflationary effect, a deflationary effect, or no effect of the kind whatever. Therefore, it is not relevant, when we are considering an Amendment which deals exclusively with the Exchange Equalisation Account, to ask the Government, even if they were disposed to answer, for a statement on general monetary policy.

I should like, therefore, to confine myself purely to this fund for the purpose for which it purports to be inaugurated, namely, for handling variations in the exchange value of sterling, and the first point that I wish to emphasise is this: Members in various parts of the House always seem to suppose that as soon as currency goes off gold it goes on to sterling. Would that it did! As a matter of fact, it is entirely inaccurate to say, as was said this afternoon, that something like half the world have gone on to sterling. What has happened is that so far nearly all those currencies which have gone off gold have relapsed into the chaos of unrelated and unregulated currencies from which we suffered shortly after the War, and the immediate relevance of that point to this discussion is that with regard to all those currencies this fund is irrelevant. With regard to those currencies which are definitely linked with sterling, such as the rupee, obviously the manipulative mechanism was already there and was operative. With regard to those currencies where dealings are quite unreal, this fund is of no service, and that covers unfortunately the majority of currencies to-day. Quotations are meaningless. Someone finds a Hungarian pengo under his blotter and sells it to some sanguine person in Zurich and calls it a quotation; it does not mean anything. You cannot in fact get your exchange in these currencies.

Therefore, in regard to all these currencies, this fund is irrelevant. What follows from that? Surely this fund is really a gold exchange standard fund, with one important qualification. Really and truly, criticisms of recent purchases of gold hardly seem to suggest that those who make them quite appreciate what is the technical position at the present moment. This gold bugbear is becoming a nuisance in these controversies. The actual position with which anybody is faced in handling sterling exchange from the point of view of international trade to-day is almost, I think it is true to say, confined to one major point, that is to say, the ratio of sterling to gold. The dollar and the franc, whatever we may do, are, and are likely to remain, gold currencies. Much the biggest part of our trade, as far as it is not definitely with the two classes of currencies to which I have referred, is with gold, and therefore the policy which is to be carried out by those who are utilising this fund is really a gold exchange policy. That is entirely irrespective of whether we are going back to gold ourselves in the near future, in the far future, or never. As long as France and America are on the Gold Standard, it is true that the principal preoccupation of those who are in charge of our currency, in so far as it deals with international trade, is the buying and selling price of gold. There is one qualification in saying that this fund is a gold exchange standard fund similar to that which handles the rupee exchange, and that is that we have not, quite deliberately and quite rightly, tied ourselves to any fixed exchange ratio. While our business is to handle the sterling gold ratio, we have not tied ourselves to any particular value.

From that, I venture to draw a conclusion on which I should like to know the views, on some occasion, of the Chancellor of the Exchequer, if they could be expressed. If the question is not indiscreet, it is this: If the principal business of this fund is precisely to determine from time to time the price of gold, as I have suggested, will it not be a most useful development to bear in mind as a possibility for the future; and if, as I think most Members of this House contemplate, this fund is inevitably to remain in existence for some time, so long, that is, as we are not on gold and America is, would it not be well to consider publicly stating from time to time, just as we do the Bank Rate, what are the sterling prices of gold at which the Bank is prepared to buy and sell? That would automatically get rid of the principal speculative activities, and it would avoid committing the country to all the dangers, of which we are well aware, of permanently going back to gold which is not in our control. But it would be far more effective than merely mysteriously endeavouring to exercise some control, unstated, over the price of gold in sterling; it would do that, even if the price had to be varied every week, still more if it could be held for weeks or months, and would get some at least of the advantages of both worlds. It would give us the advantage of a free market in gold by which small movements from time to time could be liquidated without tying ourselves permanently to a sterling gold ratio which might lead to serious industrial effects if the commodity value of gold in the United States and France were altered.

There is another observation I would like to make on this fund viewed in its narrow aspect as an exchange fund. It seems rather curious to me that in all the Debates we have had on this subject no mention has been made of an institution which is vitally concerned in this matter. Again, if it is not indiscreet, I should like to know, if it is possible, the views of the Government on this matter. If I am right in arguing that we are really discussing the control of the gold sterling ratio, the institution to which I am referring is vitally concerned. It is the Bank for International Settlements. It is unfair to lay the whole burden of handling this ratio on the Bank of England. I am well aware that the Bank for International Settlements is not a Government institution, but the Bank of England has, of course, a representative on it and the Bank of England is our agent in this matter. Moreover, it is true that, unlike the Bank of England, the Bank for International Settlements is barred from operations in currencies in any country without that country's permission. That, however, would be no bar to any action such as I am suggesting because the policy of the Federal Reserve Board is entirely one with our own. I hope we can be assured that the action of the Exchange Equalisation Fund and the Bank of England together has been running in full accord with, and has the full support of, the Bank for International Settlements. I believe that if in this matter the Bank of England, the Bank for International Settlements, and the Federal Reserve Board act together, they can to a great extent control gold prices at their will, but neither can act alone.


The hon. Member for Central Southwark (Mr. Horobin) explained that this Exchange Equalisation Fund can be used for the purpose of inflation or for deflation or for neither such purpose. He thereupon proceeded to deprecate the fact that this discussion had covered the whole field of monetary policy and said that he could not understand how any hon. Gentleman could really have had the effrontery to ask the Government for some statement of their general monetary policy. It seems to me that this is an admirable opportunity for discussing this question. The fact remains that the Debate has covered that very wide field, which is perhaps the most important of any field which comes within the ambit of the discussions of this House at the present time. I have long been convinced that Aberdeen is superior to Edinburgh. I would urge the Chancellor of the Exchequer, through any right hon. and gallant Friend the Financial Secretary, who is neutral in this matter, to direct his attention and his sympathies to the views that come from Aberdeen rather than those that come from Edinburgh. As I listened to what my hon. Friend the Member for East Edinburgh (Mr. D. Mason) described as his long-term argument in favour of our going back to the Gold Standard at the old parity, I could not help reflecting that the result of the policy which he advocated was a world lying in absolute ruins in the midst of plenty.

I cannot see really that there is any defence to be made at this juncture for a policy of going back to an uncontrolled international Gold Standard. It has been pointed out by many Members in this House and by people of repute that the condition of the survival of the capitalist system is a stable measuring rod of value. The reason that the Gold Standard broke down was that it did not afford to the nations of the world a stable measuring rod of value. Gold is still valued in terms of commodities, and that is the prime cause of our troubles. When, as the result of an international conference, we can persuade the nations of the world to co-operate with us in order to stabilise the value of gold in terms of commodities, I shall be prepared to go back to an international Gold Exchange Standard. Until that can be brought about, God help us from ever going back to the Gold Standard.

The more one considers this Exchange Equalisation Account, the more one listens to speeches from the Front Government Bench, the more one is compelled to doubt its value. I doubt its use, and I suspect its dangers. If the events of last autumn proved anything, they seem to me to have proved that in the case of a real run, either for or against sterling, a fund of £150,000,000 would be absolutely no use whatever. How long did it take for the £80,000,000 that we borrowed to be absorbed when there was a real run against sterling? It was only a matter of days, and I believe that if there were a real determined run on the part of the rest of the world, either in favour of or away from sterling, and that run continued, as it might well do, for as long as a week or 10 days, this £150,000,000 would not be of the slightest use to stave it off one way or the other. The right hon. Member for Tamworth (Sir A. Steel-Maitland) said that it might be useful for ironing out small fluctuations in the exchange value of sterling. That may be so, but I doubt if it is necessary to set up an Exchange Equalisation Fund for that purpose.


I do not know whether I said "small," but I meant temporary fluctuations, which might be very considerable.


I doubt if this fund could iron out a considerable fluctuation, but that of course is a matter of opinion. What I am really frightened of is that the Government, through the Bank of England, are in fact going into the exchange markets of the world to play about with the taxpayers' money in some of the most complicated, intricate and difficult exchange operations against some of the most expert operators. If they do, I am afraid they are going to burn their fingers, and without getting any real advantage for this country. The Chancellor of the Exchequer said, "Ah well, we have at the Bank of England experts in these matters of exchange and monetary policy who can hold their own with anybody." I can only say that the performance of the Bank of England on and off for the last 10 years has not justified hon. Members in having absolute confidence in the omniscience of its experts. They have certainly known how to be wrong from time to time, and if they make mistakes—and we are all fallible, even if we are connected with the Bank of England—in the handling of this fund in the exchange markets they will lose the taxpayers a good deal of money. For what purpose? And if they do lose it, we are not to be told anything about it.

That brings me to another point which makes me doubtful about the wisdom or value of setting up this Exchange Equalisation Fund. In a discussion about constitutional precedents I said earlier that I was all in favour of a little bit of constitutional undermining from time to time, but I am not sure that I am so much in favour of this financial undermining of the control of the House of Commons, and I think it is a dangerous precedent for this House to let go, as it will tomorrow, of about £150,000,000 as a contingent liability of the British taxpayers, without any further control over its use, not having been told how it is to be applied, or having been told only in the most hazy way, and without being vouchsafed either monthly or biannual information as to the state of the fund at any particular moment. I am not going into the Division Lobby in support of my right hon. Friend who moved this Amendment, and, in fact, I do not think he will get a Teller, because the official Opposition are apparently not in support of his Amendment, but I think it does afford an opportunity of expressing grave doubts as to the wisdom of the setting up of this fund.

There is one point which has been brought out in this Debate on which I would like to ask the Financial Secretary a question or two. What is the reason for these continual purchases of gold by the Bank of England now? They are going on at the present time, and at an astonishing rate. I canot believe it is at all necessary from the point of view of this country, or desirable in world interests. If these purchases of gold by the Bank of England continue, this House will have a perfect right to ask the reasons for it, and to express some misgivings as to the policy which is being pursued by the Bank of England, for which this House, as has so often been pointed out, cannot divest itself of responsibility however much it would like to do so. There can be no doubt that this Exchange Equalisation Fund will be used for the purpose of purchasing gold if this policy is carried through—that is one of the reasons which has been set out—and why I am apprehensive about their results is this: If we earmark gold which we have purchased either in Paris or New York for our own purposes against a rainy day later on, or if we draw out gold from Paris or New York, we are aggravating the difficulties both of America and of France in trying to get a certain measure of internal inflation by contracting their basis for credit. We are intensifying world deflation at the same time by withdrawing to London so much gold from the basis of credit in the Paris and New York markets, or by earmarking it there at a time when we do not really require it so much as do America and France, who are contending with even greater difficulties than we are, particularly so in the case of the United States. I would like to know whether it is the policy of the Bank of England to continue purchases of gold, and, if so, what is the object of that policy?

9.0 p.m.

That brings me to the last point I want to put to the Government. It is a point made in every speech delivered in these Debates, and it is, What are the general lines of the monetary policy of the Government? The Chancellor of the Exchequer, in a speech of supreme importance, seemed to me to implement the speech of the hon. Member for Gravesend (Mr. Albery) and to lay down in more or less general terms some admirable objectives. I wish we had had that statement from the right hon. Gentleman put more emphatically, put more clearly and upon a more important occasion than the present one, because, however much members of the Government may claim that their monetary and financial policy is known, or ought to be known, the fact remains that they have not made it clear to the mass of trading 'and commercial opinion either in this country or the rest of the world. It has not been sufficiently emphasised. There is an apparent lack of grip about the Government so far as monetary and financial policy is concerned, and if they have a policy it is all the more unfortunate that that impression should have been spread, not only in this country but in Europe and in the United States as well. The point I want to emphasise is that there need be no necessity for us even to give the impression that we are trying to dictate to the rest of the world. If we lay down pretty clearly the sort of financial and monetary policy we think we ought to pursue, I believe it would be of great assistance. I do not believe it would jeopardise the success of the forthcoming international conferences, as my hon. Friend the Member for Limehouse (Mr. Attlee) said. On the other hand, I believe, with my hon. Friend who sits behind me, that the world is waiting for nothing so much at the present time as a lead from this country on these particular matters, and that this country is more capable of giving a lead in monetary and financial policy at the present time than any other country.

Even the policy of going back to the 1928–29 price level was very half-heartedly enunciated by my right hon. Friend the Financial Secretary to the Treasury, who does not usually flinch from making a bit of a splash when he is delivering a speech. If it is the intention of the Government to go back to the 1929 price level, that is a most tremendous thing. It should have been announced to a tense, expectant House, in answer to a Private Notice question at the end of questions, and blazoned in headlines in every newspaper in this country. That is the way; instead of mumbling a rather shamefaced admission to the Treasury Box, in reply to a Debate on some rather obscure Amendment on the Finance Bill. I think this Government is extraordinarily modest, unnecessarily so. They ought to blow their own trumpet, they ought to be convinced of their own rightness and ability to a far greater extent than they are. Either they are unnecessarily humble, or else they are so afraid of offending a colleague if they announce a policy of any sort that they do not desire to do so very clearly.

Another point raised in the Debate to which I would like to draw my right hon. Friend's attention is the question of economy. I think there is the most frightful public muddle about economy in this country. The Government are in a muddle about it. There is no distinction between public economy and private economy, no distinction between productive expenditure and unproductive expenditure. If the right hon. Gentleman is going to use this Exchange Equalisation Fund as well as he can to raise prices to the 1929 level and to keep down the value of sterling that must involve, alongside that policy, a policy of credit expansion inside this country. We all agree, those who think that inflation is a desirable thing and those who are opposed to inflation, that if you are to get credit expansion you have to persuade the people to borrow, to expand and to carry through enterprises of various kinds.

I believe that the Government will be forced to give a lead in this matter, and that they will be forced, within the next two years, to revise the whole of their policy with regard to public expenditure on productive works, re-equipment, slum clearance, agricultural development and transport. I believe that all that policy will have to be revised inside this country if we are to achieve the internal inflation and expansion, and the rise of prices that is more desirable than anything else. At the same time it must be coupled with far more ruthless economy in purely unproductive expenditure than has yet been contemplated by the present administration. These are two entirely separate and distinct things, and there is confusion in the public mind about them, and even more than the confusion between public and private expenditure.

The right hon. Gentleman the Member for Billhead (Sir R. Home), speaking on this question of the Exchange Equalisation Account, said that a civilisation based upon a complicated system of credit would die if a spirit of hoarding prevailed. All the tremendous talk about dire sacrifices, tremendous taxation, more burdens and more ruthless economy in private expenditure does nothing but encourage that spirit of hoarding, and aggravate the problem with which we are trying to deal by means of this Exchange Equalisation Account. I am only pointing this out as part of a general plea for a clear statement of policy on the part of the Government. I am sure there is confusion on this matter of economy, and I am sure that there is confusion as to the ultimate objective of the Government. I would only repeat that if it is the policy of the Government to go back to the 1928–29 level, they will not have to encourage hoarding and private saving, but encourage productive expenditure in this country if they wish to carry through that policy.

I am all for international conferences and co-operation of any sort or kind, but I would say that Lausanne may get so far, but it is very doubtful if it is going to solve the problem. Ottawa will probably help a great deal, but I do not see that we can, or that we ought, in this country, to rely entirely upon international action to get us out of our present difficulties within a very short time. We have to rely, to some extent, upon ourselves. That is why I deprecate the speeches of hon. Gentlemen who make out that there is nothing to be done in this country, and that there is no possible solution or hope of our getting out of our difficulties unless we can get France and the United States of America to agree with us on every point. I do not believe that that is true. I believe that this country can do a tremendous lot to help herself, and that is why some of us have been pressing, and will continue to press, for a distinct policy from His Majesty's Government. If we can give a lead to the world I am convinced, as the Chancellor of the Exchequer himself admitted, that sterling will influence gold, and that sterling prices may influence gold prices, and through a rise in sterling prices we may get a rise in gold prices, and that revival of trade which we all desire to see. it is falling prices which are the primary cause of our trouble at the present moment. That is admitted on all hands. If we can obtain international co-operation to raise prices, then do not let us leave any stone unturned to try to keep prices up in this country.


I do not propose to go into the whole question of the monetary policy of this country, or to advise the Government on their methods of publicity, as has just been done by the hon. Member for East Aberdeen (Mr. Boothby). I must, however, take the opportunity of criticising one or two points in his speech which seemed to show very great mental agility. Not many hours ago in this House the hon. Member was saying how desirable it was to remove food taxes from the purview of this House in order that any operation might take place apart from Government action when necessary. Now he conies here protesting that the Exchange Equalisation Fund is to be removed from the control of this House. I would like to ask him why he approves in one case and not in the other. He would like to see independent action on food taxes, but not on the Foreign Exchange Account. That may explain why some people approve of food taxes being removed from this House, but in regard to other things they strongly object.

I would like to say a word about one point which was raised by the right hon. Gentleman the Member for Tamworth (Sir A. Steel-Maitland). He spoke about the difference between temporary fluctuations and the long-term movement in exchange. I do not know how, except from a historical retrospect, anybody can tell which movement is taking place at a particular time. If one could say to-night, "Some exchange movement is starting. This is a temporary fluctuation so we must operate with our Exchange Fund"; or on the other hand, "Oh, this is the beginning of a general tendency, so we must not operate with our Exchange Account," the matter would be comparatively easy. In actual practice, when a movement starts, it seems that one has to decide, without knowing whether it is a temporary movement or a long-term movement, as to whether one has to operate with the Ex- change Fund. If it turns out to be a long-term movement, the inevitable effect will be that the Exchange Fund, as the hon. Member for East Aberdeen has said, will be very rapidly exhausted. If we could distinguish between the two, I think there might be something to be said for what the Chancellor of the Exchequer suggested, which is that the fund will be merely used for the purpose of ironing out temporary fluctuations. What I should like the Financial Secretary to the Treasury to explain is how, on a given day, anybody in the world is going to tell that the movement which starts up or down is one which has to be "ironed out" by the foreign exchange fund, or one which has to be left alone because it is part of a long-term movement. That raises the whole point as regards the policy of the Government.

The right hon. Gentleman the Member for Tamworth said that it could not be expected that the Government could make a declaration as to the point at which they would fix their exchange. I do not think anybody has asked them to do that. On the other hand, it is extremely important, unless they are going to lose this £150,000,000 by speculating against the long-term exchange movement, that they should have some definite view as to how they intend, in association with other people, to try to regulate the exchange against other countries. There is at the present time a violent effort being made in America to have a policy of expansion and thereby to raise prices. The Chancellor of the Exchequer has stated that this Government desires to see a gradual return to the price level of 1929, so far as it is practical. There at least you have two great countries with the same objective, and the more that the various countries can agree upon an objective, the less will be the liability for long-term fluctuations in exchange. Once one can get countries to agree to try to bring their exchanges to a certain point on the commodity level index, the danger of a long-term fluctuation, which is the real danger from which this foreign exchange fund suffers, will be diminished, and the foreign exchange fund will have become a useful method of bridging over periods in which it is not found possible for countries to move at the same speed to the desired objective.

It would be of enormous assistance to America and to countries which are fixed to sterling at the present moment if a perfectly clear declaration were made by the Government that they were prepared in association with other countries who would join them, to work towards getting back commodity prices on their currency to 1929 level, not fixing them on a Gold Standard or linking them to gold, but with the object of getting currencies, all of which were kept stable on the 1929 level on a price index. I only give that as an example of the sort of declaration of policy which we are seeking. If some such objective could be, not in any way attempted to be forced on the world, but put forward by this country as a suggestion for a combined objective, I think there would be very much less danger of this £150,000,000 being lost by reason of a violent exchange movement between this country and other countries. It is that type of declaration of policy which we are asking. We are not asking for the fixing of a particular exchange value, but for an expression of an objective, and an encouragement and a request to other countries to associate themselves with us in that objective. We think that the Government of this country ought to give a lead in trying to get the world to travel along the road to that objective.


In my opinion, the Government are making a grave mistake in entering into a business which they do not understand. The exchange business is very complicated. It is not carried on merely for the purpose of exchange, and in this development the Government appear to be ignoring that fact. The exchange business is carried on for the purpose, primarily, of the business world—for the purpose of paying for international purchases and financing international sales; and anything that the Government may do to restrict that business will certainly defeat the object which they have in view of stabilising the price of commodities. We have seen, in the short time for which the Government have been in office, that they are quite unable to achieve any of the supposed objects that they had in view. They have had no effect upon the exchange world. There were some few speculators who tried to make a certain amount of money, but only in a small way, by speculating in exchange, just as people speculate on the Stock Exchange or in the markets. We have seen the small fluctuations that have taken place in the last few weeks.

We have seen the American Exchange vary between about 3.65 and 3.73–3.71. We have seen the French exchange vary from about 85–86 to about 93. But at the present time there is certainly no speculation going on, and there is very little business in international finance. We have taken certain steps in this country, in response, I might say, to the accumulation of gold in France. They have been accumulating gold in France for political purposes, so that they could influence exchange as they liked. We have seen in America in the last few years an enormous accumulation of gold, also for political purposes, their object being primarily to try, if they could, to get all the gold in their hands for the purpose of political ambitions throughout the world. But we have not seen any success attach to any of those movements. We saw the. French, who had accumulated gold in the United States, withdraw that gold when they wanted to injure the United States.

We in this country have considered it advisable to intervene in this fight that is going on, and in this Bill we are authorising the Government to raise a sum of £150,000,000, as and when required, for the purpose of speculating in exchange, and, as must follow, of speculating in other things, like the price of Stock Exchange securities, as to which suggestions have been made, but which I will not touch upon. We have seen the way in which the French have acted with their enormous surplus of gold. At the present moment we have in this country a credit for £150,000,000. In France they have actual gold at their disposal to the amount of some £600,000,000 or £700,000,000 to do what they like with; and we have seen the Americans accumulate an enormous amount of gold, anywhere between £800,000,000 and £1,000,000,000 sterling, which they have locked away to be used when the time arrives for political or other purposes. The American Legislature have just passed a vote to create a credit of £1,800,000,000 for the purpose of stabilis- ing American exchangee, as they say in their Bill, but for the purpose, no doubt, of frightening the world into submission to their wishes, whatever they may be.

The primary use for exchange is, as I have already said, to pay for the international commerce of the world, which at one time came almost entirely to us. At the present time it is distributed in different parts of the world, but England does the bulk of it even now. When people are making shipments of various articles, foreign sellers generally prefer a London credit to a Continental or American credit, because they have been let down so often by those methods of payment. We are told, also, that the purpose of this proposal is to assist in stabilising the price of commodities. We are told that it is the wish of the Government to get the prices of raw materials and manufactured goods on a higher level. But I absolutely defy the Government to carry out that policy. I have been in business as a merchant banker for 60 years. As an instance of what has been happening, I may mention that the price of tin to-day is about £115 per ton. When I went into business, the average price of tin was from £35 to £45 a ton. It went up during the War to something like £225 a ton; since the War it has come down by 50 per cent., to about £115. You can take any commodity you like, and you will find that the results have been very similar. You cannot artificially put prices up and down at your own will. I have seen many firms ruined by trying to speculate in that way. So long as you go on buying, you can corner any article you like, but you cannot go on buying for ever. I remember that, when my own firm were agents for the Japanese Government in the sale of their camphor, which is quite a small article of commerce, Colonel North thought he could corner camphor because it was a small article, and he commenced buying. The price went up as long as he kept on buying, but the day he wanted to sell, when he had the stock of the world in his hands, he was ruined because there were no buyers, for everybody knew that the commodity would have to come down in price.

It is impossible artificially to control the commodities which the world produces. If you take coal or any other article, you have seen the repetition, time after time, of people, who know nothing at all about the various trades, going to the bankruptcy court and paying for their inexperience because they would not learn by the experience of others. I warn the Government that if they try to carry out the ambitions of probably some outside friends, not entirely disinterested, or of officials who wish to create a position for themselves, and if they try to control everything, and especially the money market of the world, they are bound to come to grief, and the unfortunate taxpayer will have to pay the price. I think it was the last speaker who mentioned joining with America and France in regulating the monetary position. It was asserted that we should join with America to regularise or stabilise the price of commodities. I want to warn the Government again on this subject. Our interests are not identical. The United States are great producers not only of raw materials but of manufactured goods. They have their wheat and they would be delighted if they could double the price of it. They have their copper and they would be delighted if they could double the price of that They have their cotton, which is at a very low price at present, and they would accept any suggestion on the part of the British Government to put up prices. But what are you going to get in return? Will they take off their duties to enable us, after buying their cotton or their raw copper, to dispose of the products of those commodities in the United States? Our interests there are diametrically opposed to each other.

It is the same with France. They have high tariff walls and certain products in regard to which they would be delighted to assist in putting up prices, but always at the expense of this country. We should have to pay, or rather the taxpayers would have to pay through the nose if they wanted to get anything out of it. The only thing that is likely to bring about a resumption of prosperity is for this country to rely upon itself. We in this country created an international market and we carried it on for years with the greatest success without any Government assistance. In fact, I go further. We carried it on successfully in spite of the interference of Governments, and I contend that we could still do so if the Government would have confidence in the people who have been capable of doing this for 100 years or 50 years, and if they would give them a free hand and assistance when asked for, and not interfere in every possible way with the free circulation of money and of merchandise, both manufactured and raw materials.

9.30 p.m.

We have everything in our great Empire that we require and there are many countries which require our products and raw material more than we require theirs. I feel confident that now we have made a start with Protection we shall be capable, not only of holding our own, but of recovering lost ground both in finance and merchandise. The financial position of this country is thoroughly sound, and if the Government do not interfere, we shall retain and increase our power and our capacity and get over our difficulties. I implore the Government, before they interfere with everything and everybody and put the world into a chaotic situation, to consider that the people who have conducted the finance, commerce and industries of this country are capable of doing it now.


I beg to move, in page 16, line 10, to leave out from the word "forthwith" to the end of line 15.

I have no desire to detain the House on this particular point because, as a result of the long discussion on the Committee stage, the Financial Secretary indicated that the Government would reconsider this Amendment on the Report stage, and it is with some gratification that I see there is an Amendment on the Order Paper, subsequent to this one, which virtually gives me and my hon. Friends all we want. The object of the Amendment was to remove the feeling that the Government were contemplating a return to the Gold Standard, and probably at some very early date. It is clear from the Debate which is just ended that there is considerable diversity of opinion in the House as to what policy the Government should pursue with regard to monetary affairs. It is perfectly plain, however, from the Debate on the pre- vious occasion, that the House is determined on one thing—that this country shall not return to the Gold Standard very soon. It has been said by the Financial Secretary that the Government have no intention whatever, as long as gold behaves as it is at present, of returning to the Gold Standard. We are glad to hear that, but, none the less, we ought to bear in mind that as long as sterling remains virtually pegged in terms of Gold Standard currency, we are on gold, as long, that is, as the dollar is on gold and sterling remains pegged at a value of 3.70 dollars to the pound, so long are we in effect on gold.

There is one other point I want to make. We are anxious to prevent a return to the Gold Standard because we feel that it would mean a further depression of the general price level. Prices must rise, but it is not sufficient that prices should rise. They should remain stable at the price to which they have risen. We feel that the acceptance of the sense of the Amendment will assist towards that end and that this House and the country will give a sigh of relief that the Government has seen fit to remove these words which so many of us felt contemplated a return to the Gold Standard, which neither we nor the country desired.


I beg to second the Amendment.

I look on the horizon as being extremely dark, as do many others, but I see a break in the clouds just the size of a man's hand. I believe that some Members of the Government and many other Members are beginning to appreciate that the financial policy that has been adopted during the last few years is very largely the cause of the depression in which the country finds itself. Many old houses are said to have had underground passages and perhaps this honourable House has an underground passage which leads to the Bank of England. Perhaps there is more easy access to those who represent banking interests than to those who represent the general needs of the commercial part of the country. It may be very desirable to return to 1928 and 1929 prices, but I would ask what effect that is going to have on consumers unless the policy is carried still further and unless sufficient money is put into circulation to enable people to buy the goods. No one will disagree when I say that the poor people, as we call them, have made big enough sacrifices already without having their commodities made dearer. The hope of everyone who is in touch with the commercial world lies in the fact that we are beginning to understand and appreciate that, unless the currency question is dealt with, and unless not only prices rise but more money is put into circulation, undreamt of and terrible events will happen. The illustration has been given of the shoemaker who is drawing unemployment pay while there are people with no shoes to their feet. I am afraid I have put the case very badly, but I am perfectly honest and sincere. There have been hundreds of business men who have built up very big and stable businesses who are to-day in their graves, dead of broken hearts through fighting against odds which no man can fight against. It is nonsense to say we must stabilise the pound unless more money is put into circulation in order that people may buy the goods.


This Amendment is in substance the one that the hon. Member moved on an earlier stage of the Bill, and I then gave an undertaking that there was no desire on the part of the Government, either formally or by implication, to commit us to a return to the Gold Standard at a parity of 4 dollars 86. We should certainly accede to his request that we should do nothing of that kind, and for that reason the Amendment of the Chancellor of the Exchequer is cm the Paper for the purpose of securing that the words that might give rise to that suspicion should be moved out of the Clause.

Amendment, by leave, withdrawn.

Amendment made: In page 15, line 12, leave out from the word "which," to the end of line 15, and insert instead thereof the words: the Commons House of Parliament resolve that the Account is no longer required for the purpose for which it was established."—[Major Elliot.]


I beg to move, in page 16, line 7, to leave out the word "certify," and to insert instead thereof the words "report thereon."

I believe it is your desire, Sir, as it is certainly ours, that we also take the Amendment in my name in line 8, to leave out from the word "Parliament" to the end of the Clause, because they are both related. The point that we are anxious to safeguard concerns a cardinal principle which has been recognised in regard to all financial matters, namely, the degree of control which this House should exercise at all times over financial expenditure embarked upon on behalf of this House. For the purpose of exercising that vigilance which the House desires in regard to financial expenditure, there is in existence a Public Accounts Committee, which reviews the expenditure of the Government, not in regard to the current year but in regard to the previous year. For instance, this year the Public Accounts Committee is actually reviewing expenditure for the year ended March, 1931. In regard to the subject that we are now discussing, a matter of grave importance has arisen. There is in existence a Dollar Exchange Account. Whenever a financial year ends, the Comptroller and Auditor-General, who is a financial officer of the House, reports, and he has reported upon the state of the Dollar Exchange Account.

If hon. Members will look at the Civil Appropriation Accounts for this year they will find, in the final passages of the report of the Auditor-General, an actual statement of the present state of the Dollar Exchange Account. What alarms us is that if the present proposals as now presented in the Bill remain unaltered, the Comptroller and Auditor-General will be precluded, as I understand the position, from giving even that measure of detailed account or report such as he has this year presented with regard to the Dollar Exchange Account, so that all that he will be told to do in future will be to certify that the Exchange Equalisation Account has been conducted in accordance with the purposes laid down in the Act bringing the Account into existence. That is, in our judgment, a very substantial and even a grave departure from the practice which has hitherto been observed.

I do not propose to argue any further what has been argued so fully already as to the reasons for the existence of the Exchange Equalisation Account. That has been covered. But I am entitled to make the following observation. Hon. Members in all parts of the House have offered violent objection to the creation of this fund. They will, as good sportsmen, accept defeat in view of the decision of the House, but although defeated they are entitled to have a guarantee that the fears which they have apprehended in regard to the conduct of this fund shall be removed from time to time by the presentation of as full an account of the operation of the fund as is possible. As things are now, however grave their fears may be, there is no means whereby their fears can be removed except by the presentation of a mere bald certificate by the Accountant-General. I wish to make one observation on the position of the Accountant-General in this matter, because, as hon. Gentlemen know, I and many of my colleagues in the House are members of the Public Accounts Committee.

It seems to be extremely unfair to the Accountant-General himself to put him into the position of merely having to report in that simple and limited way concerning the position of the fund. After all, he is the finance officer of the House of Commons. He is answerable to the Public Accounts Committee, speaking on behalf of the House of Commons, and if, therefore, a Member of the Public Accounts Committee at one of its meetings asks the Accountant-General the position of the fund, I am afraid that all that he will be able to say is: "I certify it as being used in accordance with the instrument setting up the fund, and more than that I must not say." It is a most unjust position into which to put him. It is unfair to him. He would, obviously, desire to place at the disposal of the Committee as full information as he has at his disposal, but he is limited in his functions. In accordance with this particular Sub-section he cannot give any other answer than that the fund has been used properly in accordance with the functions of the Act of Parliament.

It is not only unjust to the Auditor-General as the finance officer of the House of Commons, but it is unjust also to the Public Accounts Committee, which is the body charged with the task of reviewing expenditure from time to time. Therefore, I suggest that some other provision over and above that which is contained in Sub-section (7) should be provided, so that all who are in agreement with the fund, and even those who are in disagreement with the fund, shall be guaranteed—I have heard the word used, and I shall use it without implying any bad faith—that no gambling of an irresponsible kind shall be indulged in connection with the fund. What would happen if the Amendment which I have moved were carried to-night? I have already indicated that at the present time, indeed this week, we have only just concluded our examination of the accounts of the Government for the year ended 31st March, 1931. If, therefore, we carried the Amendment, at the very earliest the accounts of this fund could not, in practice, be reviewed by the Public Accounts Committee until January, 1934, nine months after the end of the financial year. [Interruption.] The first full year's accounts of the fund will not come to an end until 31st March, and therefore it would not be reviewed until January, 1934, which is, perhaps, the more correct way of putting it. But if the Government still wanted to avoid too early a discussion, if January, were too early to review the year 1932–33, clearly they could, if they cared, put words into the Bill so as to provide that the full annual accounts were not presented to Parliament until after 31st March, 1934. But the fundamental question which the Government must answer is, What possible ground can there be for apprehending any danger from anywhere from the disclosure of accounts which have been closed nine months previously? What possible harm can there be in it? I have met hon. Members of all parties who are concerned in this matter, and they have discussed it with me, and all of them seemed to be agreed in that they did not see any reason for apprehending that any difficulty might arise from the disclosure nine months after the annual account has been closed. Therefore, the Government really must, if only to remove apprehensions of the misuse of the fund and to give confidence in regard to its proper use, give us rather more than is contained in the Sub-section, and it is in order to guarantee that that shall be done that I have moved the Amendment.


As my hon. Friend the Member for Caerphilly (Mr. Morgan Jones), who is Chairman of the Public Accounts Committee, has said, this matter has been under consideration by the House on more than one occasion, and it has, I think, come down to a point at which there is no very great difference in the practical proposals which are before the House. That is to say, it is clear that in all parts of the House it is agreed that no disclosure should be made forthwith, and indeed that no publication of the state of these accounts at intervals, either weekly or monthly, could reasonably be required. That is the first proposal which was brought forward. It is therefore agreed on all sides that there is no reason to expect that the accounts should be examined until after the end of the financial year and the accounts have been made up, when they will be submitted to the Auditor-General. That is to say, that nothing whatever can take place before the 31st March next year at the earliest, and, as the Chairman of the Public Accounts Committee has said, they may not be examined until the end of that year, or possibly even later.


By the Public Accounts Committee.


By the Public Accounts Committee. It has been agreed that this Account shall be subject to audit by the Comptroller and Auditor-General, who shall report whether the Account has been used in accordance with the instrument setting it up. The Comptroller and Auditor-General is not solely an officer of this House, since he is appointed by the Crown. He is in the same position as a judge. He is in the position of reporting on this account for the benefit of a Committee of this House. It is proposed by the Government that the Comptroller and Auditor-General shall say whether the transactions in connection with the account have been in accordance with the provisions of this part of the Act. It is suggested that that will be unjust to the Comptroller and Auditor-General, since he may be asked to disclose certain things. I do not think it is unjust to him. I think the Comptroller and Auditor-General reporting to a Committee of this House will be quite in order and will not be doing anything unusual in rendering this report to a Committee of the House, under terms which the House as a whole assented to and laid down when the proposal came before them.

It is further suggested that it would be unjust to the Public Accounts Committee, since they would not be able to have essential facts which they would require in order to discharge their duty to this House. That also is not wholly true, since it is only a Committee of this House. Admittedly it is a great and important Committee, but as a Committee of this House it is governed by the instrument drawn up by the House as a whole and cannot reasonably be asked to go beyond the terms which were remitted to it under the Act which set up the body whose accounts it is examining. Therefore, it is not unjust to the Comptroller and Auditor-General or to the Public Accounts Committee. We are agreed that, in the first place, there should be an examination of the accounts by the Comptroller and Auditor-General, and, secondly, that no disclosure should take place before the 31st March. We are now at the narrow point when after that time there should be any further disclosure of the state of the account. The hon. Member for Caerphilly said that the Dollar Exchange Account was disclosed in considerable detail to the Public Accounts Committee. That is true, but that was a one-purpose account which dealt only with one currency and with a very limited purpose, that of paying remittances in settlement of the debt which we owed to the United States of America. The Exchange Equalisation Account, by hypothesis, is an account which may be operated in more than one currency and which may be operating both in buying and selling and under conditions which are more difficult to foresee than it was to foresee the straightforward course of an account whose business was merely to amass dollars for the purpose of transferring from time to time the whole of those dollars to the coffers of the United States Treasury.

10.0 p.m.

Are we taking any risk and doing any damage to the traditions of this House or the control of this House by awaiting the results of nine months' work, until we see how we get on with the Exchange Equalisation Account, between now and the 31st March, 1933, at which time the account will be made up? I think we are not, and I think it is unwise for the House to press for a greater disclosure than is provided for in this instrument. Another opportunity will occur at a stage before any practical disclosure will have taken place, namely, the introduction of the next Finance Bill, when all these matters will be brought under review. At that time we can discuss the matter with the advantage of the knowledge of nine months' working of the Exchange Equalisation Account, which will be open to all of us, not in a scrutiny of the books of the account but in the working of the exchange from day to day. That will be the occasion on which we can review the working of the account in the light of experience.

It may be said: "Yes, but as the account will have to be made up on the 31st March, the Comptroller and Auditor-General will not begin to examine them before that date, and they will not come before the Public Accounts Committee until perhaps the month of June, and by that time the Finance Bill may be through and Members will, have lost opportunities for criticising the Government if they are determined to continue to observe the policy of secrecy in connection with the fund." To meet that point I am perfectly willing to give a pledge to the House and to the hon. Member for Caerphilly, the Chairman of the Public Accounts Committee. First of all, the account will be made up on the 31st March next. The question of the publication of the year's result cannot arise Until after that date. Secondly, there is adequate Statutory authority for enabling it to be published with a report by the Comptroller and Auditor-General without making any Amendment in the existing Bill. If we find when the time comes that the accounts can be published, without detriment to the public interest, the Government undertake that they will certainly publish it, but if it seems necessary to them to withhold it from publication, they will before reaching a decision upon it consult with the hon. Member for Caerphilly, or whoever is at that time Chairman of the Public Accounts Committee, before the introduction of the Finance Bill, or at an early stage of its passage through the House.

That seems to meet the point that there is a certain lack of confidence by the Government in the House of Commons as a whole. The Chairman of the Public Accounts Committee is not a servant of this House, and he is by tradition a Member of the Opposition. Therefore, to that extent the position of the Opposition is recognised. It will have the opportunity, which it may take if it desires, of criticising the Government for its action in this matter. By this means I propose to the House procedure which I think we can usefully ask the House to adopt between now and the introduction of the next Finance Bill. All that the Comptroller and Auditor-General is expected to do is to make a report upon the state of the account. The responsibility for disclosure or for withholding is taken by the Government, and the Government give the House an assurance that it will not take its decision until after it has taken the Chairman of the Public Accounts Committee into consultation and in plenty of time for him to convey the information to the Members of the Committee, so that they can criticise the action of the Government at the appropriate time, namely, during the passage of the Finance Bill. Therefore, I hope it will be possible for my hon. Friend not to press his Amendment.


As this is not a party matter I hope the Financial Secretary will not take adversely the criticisms which I propose to make on the statement he has just made. I have carefully reviewed what he said during the Committee stage when he promised to consult the Chancellor of the Exchequer, and I cannot see that he has advanced very much. The Chancellor of the Exchequer might still be at Harrogate for all the change that I can see. I admit that this Account is far more complicated than the Dollar Exchange Account. In that case we were dealing with several sets of exchanges instead of one, but on the point of secrecy there is no difference. The reason for secrecy in the Dollar Exchange Account was that we should be able to buy dollars to the best advantage. It was no doubt an advantage that New York should not know at what particular moment London was buying dollars. As far as secrecy is concerned the circumstances are somewhat similar. As I understand, the Financial Secretary says that the Government are not going to put anything into this Finance Bill unless the House of Commons forces them because there will be ample opportunity for doing it next year when the Government know what has happened during the first nine months of the existence of the fund. It seems to me to be exactly the same thing as starting a public company and deciding that there shall be no audit for the first year until you know the result of the first year's working. You are going to wait and see as to whether you have made a profit or a loss, then it is quite time enough to decide whether to appoint auditors.


; The auditors are appointed in this Bill.


But he cannot do anything, he can only say that the money has been spent for the purposes laid down in the Bill. He cannot, as the Clause stands, make any report upon whether the money has been lost or not. The Financial Secretary says that the Comptroller and Auditor-General has statutory authority for publication if he thinks it can be done without detriment to the public interest. I should like to know where that statutory authority is given. Does the Financial Secretary mean that whether it is put into the Bill or not the Comptroller and Auditor-General can do what he likes, can report or not? All the information we have is the other way. I am sure that the hon. Member for Caerphilly (Mr. Morgan Jones) would not have made the speech he did unless he is certain about it. I hope that the Financial Secretary will tell us that it is absolutely certain that if the auditor thinks there is something in this account which should be reported he is able to do so.


If I said that I must have given a wrong impression. What I said was that there is adequate statutory authority for enabling it to be done, that is to say for publication with a report by the Comptroller and Auditor-General without any amendment of the existing Bill. That is what I said. It is possible for it to be published with the report of the Comptroller and Auditor-General without any amendment of this Bill. If the hon. and gallant Member says that the Comptroller and Auditor-General has the power to make this report without any instigation from anybody else and without any Amendment of the Bill that is not so. He has only power to make that report under the Act of 1921 if required to do so by the Treasury. He can only report upon it if asked to do so by the Treasury; and if not asked to do so he cannot so report.


That is not what we are after. We want him to report because the House of Commons wants him to report, not because the Treasury thinks it safe that he should report.


I want this to be quite clear. That is what I said. I am not in a position to give the hon. and gallant Member and the hon. Member for Caerphilly what they want without this Amendment; that I admit. I said that there should be a report about this matter, but I ask them not to press a fresh obligation on the auditor to make this report but to leave it to the discretion of the Government. That is my case.


It is not my case, I agree. I am sorry that I misrepresented the Financial Secretary. As I now understand it the Comptroller and Auditor-General may render a report if the Treasury asks him to do so. That is quite right, but the point we are trying to drive home, and which the Financial Secretary is not prepared to concede, is that he should make a report on the state of this account on the principle laid down by the President of the Board of Trade, who said that: The particulars of the operations of this Account a long time after the account is the utmost the House should ask for. The President of the Board of Trade thereby admitted that it was not an unreasonable thing, not an impossible thing that this request should be conceded. Now there has been a reversal of form, as so often is the case in many fields, and the President of the Board of Trade gives way to the Financial Secretary, who ignores his statement. The President of the Board of Trade was quite prepared to say that there was a case, and all we are saying is that no case has been made out for withholding subsequent disclosure. No one is pressing for immediate disclosure, but the House of Commons is asking that when these sums of money are put at the disposal of the Government of the day, whatever their political complexion may be, for the handling of which they are ultimately responsible, it is only right and proper that the House of Commons should have a report from time to time through the properly constituted authority as to what has happened to the fund.

The Financial Secretary says that it will be time enough to deal with this next year. I disagree. When you are setting up a fund is the time to make arrangements for dealing with it. There is nothing likely to happen to need an auditor's report unless it is something no one wants to give away, which we hope will not occur, but when the Financial Secretary says that it is a great concession on his part to offer at an early stage of the Debates next year, some time after the opening of the Budget, to consult with the hon. Member who happens to be Chairman of the Public Accounts Committee as to whether or not the accounts ought to be audited, I should say that it is putting that hon. Member, whoever he may be, in an impossible position. In order to strengthen that argument the Financial Secretary says that the Chairman of the Public Accounts Committee is a Member of the Opposition. I put it to him, if he was in Opposition and a Government came and said:" There has been a terrible collapse of this Exchange Equalisation Account; there is no money in it, and I have come to make this disclosure to you and ask you whether you think the House of Commons should be told—he would be in an awkward position, because presumably he would, in honour bound, be precluded from consulting even his own political friends. He would have to take a decision which the Government of to-day ought to take.


The hon. and gallant Member has admitted as right the statement I have given to the House. These are technical matters which it is difficult for anyone to grasp on first reading, but I do ask my hon. and gallant Friend to consider whether in fact the statement which I made bears any relation to what he has just said. He said that the Government of the day would throw upon the Chairman of the Public Accounts Committee the responsibility of deciding whether a disclosure was to take place or not. I said nothing of the kind. I said that if it is found that the Account can be published without detriment to the public interest the Government will certainly publish, it, but if on the other hand it seems to them necessary to with- hold or postpone publication they will before reaching a decision consult with the Chairman of the Public Accounts Committee. "They will before reaching a decision." The decision will be the Government's. They only consult with the Chairman of the Public Accounts Committee, giving him full information beforehand which will enable him to have an opportunity, which he would otherwise lack, of raising the matter. That is not throwing any responsibility on the Chairman of the Public Accounts Committee. It is giving him an opportunity to criticise the Government of the day.


My right hon. Friend and I will agree to differ on the interpretation of what he has read out. He was good enough to let me have the words of the declaration that he has made, and I said that I would consider them, and the result is not as favourable to them as he would like. I put it to him still that now he has said, "If they want to, the Government can publish." That is agreed. If they do not want to publish the responsibility is upon them not to publish, but they will give due notice to the Chairman of the Public Accounts Committee, who can do what? Raise it in the House of Commons. He could do that anyhow. It seems to me that really the Financial Secretary has with great gusto conceded absolutely nothing. The full and adequate discussion which could be raised could obviously be raised at any time, and the responsibility would be with the Government. The right hon. Gentleman admits that. Why does he drag in the Chairman of the Public Accounts Committee, an unofficial Member of this House? If I were in that position I should feel that I was put in a very false position by the Government of the day. I leave the hon. Member for Caerphilly (Mr. Morgan Jones) to answer for himself, because he happens to be Chairman of the Public Accounts Committee now.

The solution of the matter is so simple. It is to adopt this very good Amendment. I notice that it is in the form in which I put it down for the Committee stage. Hon. Members opposite know where to pick out the good things sometimes. After what the President of the Board of Trade said at an earlier stage I do not think that any harm could come to the Government by adopting the Amendment, because everyone who speaks on this sub- ject must be actuated by the gravest of responsibility. I hope the right hon. and gallant Gentleman will realise that in this matter nobody is trying to twist the tail of the Government. There will be, no doubt, plenty of opportunities for doing so if we require them. But we must all realise that this is an intensely serious matter. This is a sum of £150,000,000, and we are trying to safeguard it and to see that this account is audited in the interests of the House of Commons. I hope that the right hon. and gallant Gentleman will recognise that, even if some of us have to divide against him on this question, we do so because we feel that our point of view, and not his, is the right one.


I have listened carefully to the speeches of the hon. Member for Caerphilly (Mr. Morgan Jones) and the hon. and gallant Member for Gainsborough (Captain Crookshank), both of whom are members of the Public Accounts Committee. As a previous chairman of that committee I wish to say that if a Financial Secretary of the Treasury, not a member of the party to which I happen to belong, came to me and put the question to me which has been suggested this evening, in regard to this account, I would not listen to him. I would not take the responsibility which has been suggested. Here is a sum of £150,000,000. I would not know how this account had been working. The whole system of the House of Commons is based upon the idea that the House is to have control of money matters, and the Conservative party should be the last party to lessen the power of the House of Commons to supervise what is being done with public funds.

I do not intend to embarrass the Government or to twist the Government's tail, as the hon. and gallant Member for Gainsborough has suggested, but I put this question to the Government. Whist harm can be done by divulging to the Public Accounts Committee, through the proper officer, what has been going on in connection with this fund? Why should the Government dig in their toes on this question? Nothing can be done to hurt the public weal because nine months will have elapsed since the transactions which are being dealt with in the account. We do not want to know even what the transactions are. I speak as a member of the Public Accounts Committee in saying we would not ask what the transactions were, whether they were in gold or in francs or in radium or in any other abstraction. All we should want to know is what had been done with the public money, and it would be our duty in the Public Accounts Committee to include in our report, without touching questions of policy at all, our opinions as to what had been going on in connection with the account. As has been said to-day, you can very easily lose on a sum of £150,000,000 in supporting exchanges. It will not be a case of dealing with one exchange alone, because the whole exchange stream of the world converges on London, and it is with that we shall have to deal.

I am not going into the Lobby against the Government, but I am trying to advise them as to what I think I would do if I were still chairman of the Public Account Committee in the circumstances which have been suggested this evening. I certainly would not accept the responsibility which the Financial Secretary apparently would seek to put upon me. If he came to tell me that there had been any disaster in connection with this matter, I would say to him, "You ought to have told me of this long ago before the money had disappeared." I warn the Chancellor of the Exchequer and the Financial Secretary that they will be ill-advised if they do not meet us in some way on this question. As Members of the Public Accounts Committee we ought to be enabled to keep some kind of guiding eye on these matters. We are not irresponsible people who will "blab" in such a way as would do the country harm. It is more likely, since we are a secret committee, that we shall keep everything quiet and do nothing except what will help the operations of the fund, and what will be in the interests of the country.

Although I have sat through practically the whole of this Debate, I do not know even now, nor does any member of the Public Accounts Committee how this account is going to be worked. I have not asked any questions, and I do not seek to have divulged anything which might do the country harm. I do not know whether this fund is to be used to buy dollars or francs or anything else, or whether it is to be made use of as a jackpot into which to put the profits that may be made out of the buying and selling of exchange, and out of which to take the money to meet losses which may have been incurred, or to support the exchange in order to keep it reasonably steady, so that we manufacturers may know what we are buying and selling. So much am I in the dark-I cannot speak for my hon. and gallant Friend on the right, but I do not believe that either he or the hon. Member for Caerphilly know any more than I do how the fund will work. It is all the more necessary, therefore, that the two right hon. Gentlemen representing the Treasury, without in any way giving way for the moment, should think how they can, without rendering it possible for any divulgence of what is going on, where the transactions are, who is carrying them on, at what time, or in what countries, allow one of the most important committees of this House to keep its watchful eye on the public purse, as (has always been the custom hitherto.


I think there is very little in what the right hon. and gallant Gentleman has offered us, and I have looked to see what he was really giving us. The whole point of keeping a check on something is not to know when things go right, but to know when things go wrong, and here he is suggesting that if there is anything going wrong, the Government can refuse to have any disclosure made. If it is going all right, then the Committee can see it. I think the hon. and gallant Member for Gainsborough (Captain Crookshank) was right when he drew a comparison with the question of auditing a company's accounts. What would be the good of having a company's accounts audited if the chairman of the company could say whether or not the auditor should report, and whether or not the shareholders

should have any knowledge of the accounts? That would be very good for the Jabez Balfours and the Hatrys, but not for the shareholders, and I think my right hon. and gallant Friend is offering us nothing at all, because he is allowing to the possible delinquent the power of saying whether or not his transactions shall be disclosed.


I wish just to express my concurrence with the views of the hon. and gallant Member for Gainsborough (Captain Crookshank), and to say that I am entirely in accord with the very moderate suggestion of reporting on these accounts. It is a very mild proposal, and I hope the Chancellor of the Exchequer will see his way to agree to it.


By permission of the House, I would like to say a word in reply to the offer which the right hon. and gallant Gentleman opposite has made to me. I am not speaking on behalf of the Public Accounts Committee, but merely on my own behalf and on behalf of those on this side who are interested in public finance. I am obliged to the right hon. and gallant Gentleman for having tried to meet my point, but I regret that I am not able to accept his offer, because we feel that we must stand for the fundamental principle of publicity in regard to all financial transactions, especially when they are of such an extensive character as this fund involves. Perhaps the right hon. and gallant Gentleman gave a wrong impression concerning what he offered to me when he used the word "consult." Probably he meant notify rather than consult. That, I think, expresses what he intended rather more accurately than the word which he used.

Question put, "That the word 'certify' stand part of the Bill."

The House divided: Ayes, 277; Noes, 52.

Division No. 224.] AYES. [10.30 p.m.
Acland-Troyte, Lieut.-Colonel Barclay-Harvey, C. M. Brocklebank, C. E. R.
Adams, Samuel Vyvyan T. (Leeds, W.) Barrie, Sir Charles Coupar Brown, Brig.-Gen. H. C.(Berks., Newb'y)
Agnew, Lieut.-Com. P. G. Beaumont, Hon. R.E.B. (Portsm'th. C.) Browne, Captain A. C.
Apsley, Lord Birchall, Major Sir John Dearman Buchan-Hepburn, P. G. T.
Aske, Sir Robert William Bird, Ernest Roy (Yorks., Skipton) Burgin, Dr. Edward Leslie
Astbury, Lieut.-Com. Frederick Wolfe Bird, Sir Robert B. (Wolverh'pton W.) Burnett, John George
Atholl, Duchess of Borodale, Viscount Butler, Richard Austen
Atkinson, Cyril Bossom, A. C. Butt, Sir Alfred
Bailey, Eric Alfred George Boulton, W. W. Campbell, Edward Taswell (Bromley)
Baldwin, Rt. Hon. Stanley Bowyer, Capt. Sir George E. W. Campbell, Rear-Adml. G. (Burnley)
Baldwin-Webb, Colonel J. Braithwaite, J. G. (Hillsborough) Caporn, Arthur Cecil
Balfour, Capt. Harold (I. of Thanet) Broadbent, Colonel John Carver, Major William H.
Castlereagh, Viscount Horsbrugh, Florence Ramsden, E.
Castle Stewart, Earl Howard, Tom Forrest Ratcliffe, Arthur
Cautley, Sir Henry S. Hewitt, Dr. Alfred B. Ray, Sir William
Cayzer, Sir Charles (Chester, City) Hunter, Dr. Joseph (Dumfries) Rea, Walter Russell
Cayzer, Maj. Sir H. R. (P'rtsm'th, S.) James, Wing. Com. A. W. H. Reed, Arthur C. (Exeter)
Cazalet, Thelma (Islington, E.) Jamieson, Douglas Reid, William Allan (Derby)
Cazalet, Capt. V. A. (Chippenham) Johnston, J. W. (Clackmannan) Remer, John R.
Chamberlain, Rt. Hon. N. (Edgbaston) Johnstone, Harcourt (S. Shields) Rentoul, Sir Gervals S.
Chorlton, Alan Ernest Leofric Jones, Sir G. W. H. (Stoke New'gton) Renwick, Major Gustav A.
Christie, James Archibald Jones, Lewis (Swansea, West) Reynolds, Col. Sir James Philip
Clarry, Reginald George Ker, J Campbell Rhys, Hon. Charles Arthur U.
Clayton, Dr. George C. Kerr, Hamilton W. Rosbotham, S. T.
Cochrane, Commander Hon. A. D. Kimball, Lawrence Ross, Ronald D.
Colfox, Major William Philip Kirkpatrick, William M. Ross Taylor, Walter (Woodbridge)
Conant, R. J. E. Knatchbull, Captain Hon. M. H. R. Ruggles-Brise, Colonel E. A.
Cook, Thomas A. Knebworth, Viscount Runge, Norah Cecil
Cooke, Douglas Lambert, Rt. Hon. George Russell, Albert (Kirkcaldy)
Courtauld, Major John Sewell Law, Sir Alfred Russell, Alexander West (Tynemouth)
Croft, Brigadier-General Sir H. Law, Richard K. (Hull, S.W.) Russell, Hamer Field (Shefid, B'tside)
Crooke, J. Smedley Leech, Dr. J. W. Salt, Edward W.
Croom-Johnson, R. P. Lennox-Boyd, A. T. Samuel, Sir Arthur Michael (F'nham)
Crossley, A. C. Levy, Thomas Samuel, Rt. Hon. Sir H. (Darwen)
Cruddas, Lieut.-Colonel Bernard Liddall, Waiter S. Samuel, Samuel (W'dsworth, Putney)
Culverwell, Cyril Tom Lindsay, Noel Ker Sandeman, Sir A. N. Stewart
Dalkeith, Earl of Llewellin, Major John J. Sanderson, Sir Frank Barnard
Dawson, Sir Philip Liewellyn-Jones, Frederick Savery, Samuel Servington
Denville, Alfred Lloyd, Geoffrey Scone, Lord
Despencer-Robertson. Major J. A. F. Loder, Captain j. de Vere Selley, Harry R.
Dickie, John p. Lovat-Fraser, James Alexander Shaw, Helen B. (Lanark, Bothwell)
Dixon, Rt. Hon. Herbert Lumley, Captain Lawrence R. Simmonds, Oliver Edwin
Dower, Captain A. V. G. McCorquodale, M. S. Skeiton, Archibald Noel
Drewe, Cedric MacDonald, Malcolm (Bassetlaw) Smiles, Lieut.-Col. Sir Walter D.
Dugdale, Captain Thomas Lionel Macdonald, Sir Murdoch (Inverness) Smith, R. W. (Ab'rd'n & Kinc'dine.C.)
Dunglass, Lord McKie, John Hamilton Smith-Carington, Neville W.
Eden, Robert Anthony McLean, Major Alan Somervell, Donald Bradley
Edmondson, Major A. J. McLean, Dr. W. H. (Tradeston) Somerville, D. G. (Willesden, East)
Elliot, Major Rt. Hon. Walter E. Macquisten, Frederick Alexander Soper, Richard
Ellis, Sir R. Geoffrey Magnay, Thomas Sotheron-Estcourt, Captain T. E.
Elmley, Viscount Making, Brigadier-General Ernest Southby, Commander Archibald R. J.
Emrys-Evans, P. V. Manningham-Buller, Lt.-Col. Sir M. Spencer, Captain Richard A.
Entwistle, Cyril Fullard Margesson, Capt. Henry David R. Spender-Clay, Rt. Hon. Herbert H.
Erskine, Lord (Weston-super-Mare) Marsden, Commander Arthur Steel-Maitland, Rt. Hon. Sir Arthur
Essenhigh, Reginald Clare Martin, Thomas B. Stones, James
Everard, W. Lindsay May hew, Lieut.-Colonel John Storey, Samuel
Fermoy, Lord Merriman, Sir F. Boyd Stourton, Hon. John J.
Foot, Isaac (Cornwall, Bodmin) Mills, Sir Frederick (Leyton, E.) Strauss, Edward A.
Ford, Sir Patrick J. Milne, Charles Strickland, Captain W. F.
Fox, Sir Gifford Mitcheson, G. G. Stuart, Hon. J. (Moray and Nairn)
Fuller, Captain A. G. Moreing, Adrian C. Stuart, Lord C. Crichton-
Ganzoni, Sir John Morgan, Robert H. Sueter, Rear-Admiral Murray F.
Gilmour, Lt.-Col. Rt. Hon. Sir John Morris, John Patrick (Salford, N.) Sugden, Sir Wilfrid Hart
Gledhill, Gilbert Morris, Owen Temple (Cardiff, E.) Summersby, Charles H.
Glossop, C. W. H. Morrison, William Shepherd Sutcliffe, Harold
Gluckstein, Louis Halle Moss, Captain H. J. Taylor, Vice-Admiral E. A (P'dd'gt'n, S.)
Goff, Sir Park Munro. Patrick Templeton, William P.
Goldie, Noel B. Nail, Sir Joseph Thomas, James P. L. (Hereford)
Goodman, Colonel Albert W. Nation, Brigadier-General J. J. H. Thompson, Luke
Gower, Sir Robert Nicholson, Godfrey (Morpeth) Thomson, Sir Frederick Charles
Graham, Fergus (Cumberland, N.) Nunn, William Titchfield, Major the Marquess of
Grattan-Doyle, Sir Nicholas O'Donovan, Dr. William James Todd, Capt. A. J. K. (B'wick-on-T.)
Graves, Marjorie Oman, Sir Charles William C. Todd, A. L. S. (Kingswinford)
Greene, William P. C. O'Neill, Rt. Hon. Sir Hugh Touche, Gordon Cosmo
Grenfell, E. C. (City of London) Ormiston, Thomas Turton, Robert Hugh
Griffith, F. Kingsley (Middlesbro, W.) Ormsby-Gore, Rt. Hon. William G. A. Vaughan-Morgan, Sir Kenyon
Gritten, W. G. Howard Palmer, Francis Noel Ward, Lt.-Col. Sir A. L. (Hull)
Guinness, Thomas L. E. B. Patrick, Colin M. Ward, Irene Mary Bewick (Wallsend)
Gunston, Captain D. W. Pearson, William G. Warrender, Sir Victor A. G.
Guy, J. C. Morrison Penny, Sir George Wells, Sydney Richard
Hamilton, Sir George (Ilford) Perkins, Walter R. D. White, Henry Graham
Hannon, Patrick Joseph Henry Petherick, M. Whiteside, Borras Noel H.
Harbord, Arthur Peto, Geoffrey K.(W'verh'pt'n, Bilst'n) Williams, Herbert G. (Croydon, S.)
Hartington, Marquess of Pickford, Hon. Mary Ada Wills, Wilfrid D.
Hartland, George A. Pike, Cecil F. Wise, Alfred R.
Harvey, George (Lambeth, Kenningt'n) Potter, John Womersley, Walter James
Harvey, Major S. E. (Devon, Totnes) Powell, Lieut.-Col. Evelyn G. H. Wood, Sir Murdoch McKenzie (Banff)
Haslam, Henry (Lindsay, H'ncatle) Pownail, Sir Assheton Worthington, Dr. John V.
Haslam, Sir John (Bolton) Procter, Major Henry Adam Wragg, Herbert
Hellgers, Captain F. F. A. Pybus, Percy John
Henderson, Sir Vivian L. (Cheimsford) Ramsay, Alexander (W. Bromwich) TELLERS FOR THE AYES
Hope, Sydney (Chatter, Stalybridge) Ramsay, Capt. A. H. M. (Midlothian) Mr. Shakespeare and Major George
Hore-Belisha, Leslie Ramsay, T. B. W. (Western Isles) Davies.
Hornby, Frank Ramsbotham, Herwald
Adams, D. M. (Poplar, South) Grundy, Thomas W. Mallalieu, Edward Lancelot
Albery, Irving James Hall, F. (York, W.R., Normanton) Mason, David M. (Edinburgh, E.)
Attlee, Clement Richard Hall, George H. (Merthyr Tydvil) Morris, Rhys Hopkin (Cardigan)
Batey, Joseph Harris, Sir Percy Parkinson, John Allen
Bevan, Aneurin (Ebbw Vale) Hicks, Ernest George Peat, Charles U.
Boothby, Robert John Graham Hirst, George Henry Pickering, Ernest H.
Briant, Frank Holdsworth, Herbert Price, Gabriel
Cape, Thomas Hutchison, W. D. (Essex, Romf'd) Salter, Dr. Alfred
Cocks, Frederick Seymour Jennings, Roland Shaw, Captain William T. (Forfar)
Cripps, Sir Stafford John, William Tinker, John Joseph
Crookshank, Capt. H. C. (Gainsb'ro) Jones, J. J. (West Ham, Silvertown) Williams, David (Swansea, East)
Daggar, George Jones, Morgan (Caerphilly) Williams, Edward John (Ogmore)
Davies, Rhys John (Westhoughton) Kirkwood, David Williams, Dr. John H. (Llanelly)
Duncan, Charles (Derby, Claycross) Lawson, John James Williams, Thomas (York, Don Valley)
Edwards, Charles Leighton, Major B. E. P.
Foot, Dingle (Dundee) Logan, David Gilbert TELLERS FOR THE NOES.—
George, Megan A. Lloyd (Anglesea) Lunn, William Mr. Gordon Macdonald and Mr.
Greenwood, Rt. Hon. Arthur Maclay, Hon. Joseph Paton Duncan Graham.
Grenfell, David Rees (Glamorgan) Maclean, Neil (Glasgow, Govan)