HC Deb 11 March 1932 vol 262 cc2123-68

Order for Second Reading read.


I beg to move, "That the Bill be now read a Second time."

On 21st September, 1931, this country left the Gold Standard. To defend the population of an island largely dependent for its sustenance on purchases abroad from the consequences of a depreciation in its currency the Government took prompt precautions. There were two dangers. In the first place, it was thought desirable to obstruct the operations of speculators, who, by selling sterling, might add to our embarrassments. Accordingly, in the Gold Standard (Amendment) Bill, the Treasury sought and obtained from Parliament authority to make orders providing for the taking of all expedient measures in relation to the exchanges. On 22nd September, the first and only Order under this particular head—to the discussion of which, I imagine, we are confined this morning—was promulgated. It forbade British subjects and persons resident in the United Kingdom to buy foreign exchange except for financing normal trading requirements, contracts existing before 21st September, 1931—the crucial date—and reasonable travelling or other personal purposes. So satisfactorily had the position improved by 3rd March, that my right hon. Friend the Chancellor of the Exchequer was able to announce the withdrawal of this restriction, but, if it be safe to withdraw this restriction, it is safer to have the power to reimpose it in case of need, and it, is that power which I am seeking from the House this afternoon. I am asking for a renewal of the power for one further year.

The second danger was concerned, not with the money market, but with the market of food. In order to prevent any cornering or rigging of supplies, the Government introduced the Foodstuffs (Prevention of Exploitation) Bill, which is now an Act. That Act empowered the Board of Trade, wherever the conditions might justify it, to take possession of stocks, to requisition contracts, to give directions with respect to the production, manufacture or distribution of goods, or to do any other necessary thing. In times of a fluctuating currency there is a considerable danger of exploitation, but happily the worst prognostications were not fulfilled, for there intervened certain factors which were not calculable at the time.

When we went off the Gold Standard we were buying abroad annually—I take the figures of the year 1930—£459,000,000 worth of food and drink, but such was the stability of our position, after the Herculean efforts which we made to assure that stability, that many countries decided, either through circumstances or preference, to link their fortunes and their prices to ours, and accordingly they also went off the Gold Standard; so that in respect of £296,000,000 worth of the purchases which I have mentioned we are now dealing with non-Gold Standard countries, with the result that, even if we exclude Canada, the food and drink imported into the United Kingdom from non-Gold Standard countries make 59 per cent. of the whole. That, of course, restricted the area of possible damage that could be done to our household budgets. There was another phenomenon which revealed itself. So powerful was our purchasing power abroad, that even Gold Standard countries had to accommodate themselves or adjust themselves in some measure to our purses. Moreover, the fact may be observed that wholesale prices have fallen in Gold Standard countries themselves by no less than 8 to 9 per cent.—a further restriction of the possible area of damage.

So much for the external factors, which we could only influence by showing our own fortitude and determination, but internally the Board of Trade has kept in constant touch with dealers and retailers, whose moderation during this emergency I am sure the House will wish to recognise, particularly when I give them a comparison of prices. It is astonishing, in view of the fears which were uttered at the time we went off the Gold Standard—


By hon. Members opposite.


And by hon. Members on that side. I have had the advantage of reading the Second Reading Debate. I did not intend to refer to it, but, in view of what my right hon. and gallant Friend says, I must remind him that colleagues of his on that side freely forecast that this would be the worst winter in British history, because prices would rise to uncontrollable heights, and they expressed their perturbations in very striking and sensational language, but happily—it is not a matter for boasting, but for self-congratulation—these prophecies have not materialised. There is generally a lag between a prophecy and its fulfilment—sometimes a lag that is never overtaken.

Bread is on the Food Council scale—a scale which was settled several years ago. The prices of margarine, of eggs, and of milk are exactly the same as they were in September last. Tea, if anything, has slightly diminished in cost, and meat is cheaper than it was. The price of butter from New Zealand is less than it was, and bacon, which was 11½d. per lb. at the time we abandoned the Gold Standard, is now 9d. Further, it may be noticed that the average wholesale prices in this country remain lower than at any time in the year 1930, and the food prices are lower than the average of 1930, by no less than 10 per cent. That is a matter for congratulation, and I hope that hon. Members opposite will join with me in that congratulation. They would certainly have been the first to blame the Government if there had been a rise.

I would not like it to be assumed from this that prices will never rise. The future will decide that. Meanwhile we have the satisfaction of knowing that many eminent economists, and certainly hon. Gentlemen opposite, have now abandoned the doctrine that a low cost of living is necessarily contemporaneous with prosperity. I am glad to recall the words of my hon. Friend the Member for Limehouse (Mr. Attlee), who, speaking on the Wheat Quota Bill, said: We know that prices will rise under ordinary economic circumstances, for they are very low."—[OFFICIAL REPORT, 2nd March, 1932; col. 1138, Vol. 262.] So that whether they rise or not is a matter to be seen. At any rate, they have been kept down up to the present moment. The House may wonder why, in these circumstances, I am asking for a renewal of these powers, for neither under the Gold Standard Act nor under the Foodstuffs Act are any orders at present in operation. It is felt, however—and I am sure the House will agree with me—that it is better to have these powers in reserve, for it gives a certain assurance to the public. Indeed, the Board of Trade, in dealing with the few complaints which have been made, have found the presence of these powers a useful thing. Such powers as these are more honoured in their existence than in their execution, and, to give confidence to the British public, I would ask the House to consent to their extension for a further 12 months.


I propose to deal only with that portion of this Bill which relates to the continuance of the Treasury control over exchange matters. The hon. Member who has just spoken has told us of the dangers of prophecy, no doubt from his own personal experience, because he will remember that he made a somewhat unfortunate reference to the number of unemployed being reduced by the Abnormal Importations Act, and the figures which were disclosed not very long afterwards showed that even his prophecies were not always fulfilled.


If one should beware of prophecy, one should also beware of misinterpretation. I dealt with the number of persons employed, which number had actually increased.


The number in employment then, as we know, had increased. What I say is that shortly afterwards figures were disclosed which showed that they had fallen. I think the hon. Gentleman will find, if he looks at the figures, that I am right in what I say.

We are considering here the question as to whether it is wise and right to continue Treasury control over foreign exchanges, and that, of course, must depend upon the monetary policy of the Government. Whether it is necessary for them to maintain control over foreign exchange must depend upon whether it is necessary to protect our currency—whether that protection has to be carried out in pursuance of some particular policy. I want to ask the House to consider the monetary position at the present moment, and to consider whether it is such that some definite steps should be taken by the Treasury to see that the currency of this country is protected. Last December, on a Motion which we brought before the House, we suggested that a definite line of action should be taken by the Government, that they should disclose some definite currency policy. As far as we know, up to the present time there has been no indication by the Government as to the policy which they intend to pursue. We now suggest the same policy as we then suggested, which was a purposeful management of the currency, not what Lord Bradbury, in a letter this morning in the "Times," describes as "mere futile manipulation," but a distinct and definite management for a definite purpose.

At that time, people who opened their papers in the morning feared lest there should be a tragic fall in sterling suddenly disclosed. Now, precisely the opposite is the state of affairs. The trader now opens his paper in fear that there may a tragic rise in sterling suddenly disclosed. That difficulty, both of the sudden fall and the sudden rise, is not one which is created by any flow of trade. It is not a matter which results from the ordinary balance of revenue, but it does result, very largely, from the violent movement of short-term capital which is either imported to or exported from this country by foreigners from time to time. It was those movements which drove us off the Gold Standard last year, and they are just as liable now to drive us back again, against our will, to a gold parity, unless we take very definite steps to avoid it.

Recent movements in sterling exchange such as were disclosed last Tuesday by a phenomenal rise, when it was said—whether correctly or not, I do not know—that the Bank of England had to step in and buy £23,000,000 worth of foreign exchange in order to stop the rise on Tuesday and Wednesday last, are, of course, very disquieting to industrialists, and far more disquieting than a fall, because a fall does at least give some help to the exporter, whereas a rise gives no help to him. The industrialists, as distinct from the banker, certainly fear that if this uncontrolled fluctuation is allowed to continue, they will suffer very seriously. The right hon. Gentle- man the Member for Hillhead (Sir R. Horne), speaking in his constituency, as reported in the "Manchester Guardian" this morning, said: The most prominent episode of recent days is the increase in the exchange value of the pound sterling. It is at once a tribute and an embarrassment—a tribute because it indicates the surpassing confidence of the world in this country; an embarrassment because it introduces an upsetting factor in a monetary situation which for some time has been comparatively stable. Speaking of the short-term money which was causing this, he said: This is bad money for us to harbour and precarious to hold. It might depart, as its precursors did last year, at the moment when it ill-suited us. In the meantime, it does us the disservice of forcing our pound up to an artificial level. Any increase in the value of the pound which by speculation or otherwise raises it above its true trading value, creates a check and an impediment to every manufacturer in the country and increases the burden of the taxpayer in the payment of the interest due upon the colossal sum of War Debt. It is above all things incumbent upon those who manage our finances to counteract by every means in their power all such subversive tendencies. We believe that the people who should have that power are the Government, for in the last resort we cannot leave a matter so vitally important to the mere ideas which may be possessed by those who control, for instance, the Bank of England. We believe that this speculation which is taking place is entirely caused by the belief of the foreigner that the pound is likely to be forced back on to a gold basis, because it is generally believed that the bankers of this country favour that view, either as a short-term or as a long-term policy. The foreigner is not sending his money here at the present time for the purpose of earning high interest. The dropping of the Bank Rate, even to its present comparatively high level, will not probably make very much difference to the money that is coming here, because it is coming for capital appreciation and not in order to earn high interest. The Chancellor of the Exchequer will remember the happenings of the years 1920–25. The "Times," in a financial article on Wednesday on this spectacular rise in the foreign exchange, said: It is not improbable that some foreign buyers of sterling, remembering the success of their previous speculations in 1920–25, when the pound rose from $3.20 to $1.86, are hoping to repeat it. If so, they are likely to be disappointed, for the chances of the pound rising again to $4.86 seem remote. When this is realised the keenness of the foreign speculator may be checked. Mr. Chamberlain's statement last week that no burden falls on the Budget because the loss in repaying the foreign credits is offset by the higher sterling value of the Bank's gold stock, would he misleading if it were intended as a matter of policy to raise the value of the pound to $4.86. 11.30 a.m.

I read that passage because understand that the right hon. Gentleman is to reply in this debate, and I am sure that he will want to verify what is stated in the "Times" that he did not intend to imply, and that his statement was not made with the intention of implying, that we were going to return to the exchange value of 4.86 dollars. I would point out to the right hon. Gentleman that the only way of checking this speculation by the foreigner is to make it clear that he is not betting on a certainty. If we are going back on to the Gold Standard, the foreigner who sends his money here is betting on a certainty, because sooner or later he will get, a capital appreciation on it. The only way in which we can check this undesirable short-term money being sent to this country is to make it clear—and the right. hon. Gentleman is the only person who can do it—that it is no policy of the Government to return to the Gold Standard. Until the last few days, as we know, the Bank of England has been buying foreign exchange to repay advances, and once that operation was completed—it formed, of course, a check upon the rise of the exchange value of the pound—there was immediately this phenomenal feature in the exchange value which I have mentioned, and it was possibly contributed to by the outpouring of the gold hordes not only in this country but in India. The Bank of England clearly had to step in to do something to deal with the situation. How big a step they had to take I, of course, do not know; perhaps even the right hon. Gentleman does not know exactly how extensive their purchases had to be; but, the question that arises is whether the Treasury are going to back the Bank of England not in a definite policy of manipulating the exchange on a sudden crisis, but in a definite policy to manage the currency so as to achieve some certain and definite result. I suggest to the right hon. Gentleman that the proper objective of the Government and the Bank of England should be to get the sterling stabilised on wholesale prices, which should gradually he brought back over a period of time to something like the 1929 level, by an anti-deflation policy or, if one would prefer to call it so, a slight inflation.

Unless something of that sort is done, it will create great difficulties for those other countries which at the present time are trying to keep their currencies based upon sterling. In the events of the last week, it has been impossible for some of those countries, such as the Scandinavian countries, to do that, because of the violent movements in sterling; and, unless we have a declared policy, there will be no chance of achieving a sterling block of any sort. I am sure the right hon. Gentleman will agree with me that it is highly desirable, if we are to remain off gold, that we should get as many people as possible to come into a, block based upon sterling, because only by so doing can we preserve our position as a financial centre; and it will be perfectly possible, if we have a large portion of the world—more than half the trade of the world now is off the Gold Standard—based on sterling not linked with gold, to keep up all the activities of the City of London, not through the means of gold loans but through the means of sterling credits.

I ask the right hon. Gentleman to say something definite, if he can, as regards the aim of the Government, not on the immediate question of what the value of the pound is to be in the next week, for no-one can say that, but as regards the management of currency in this country. It is clearly being managed, of course, and has been ever since we went off the Gold Standard, but I suggest that the only means of stopping the extraordinarily dangerous speculations by the foreigner is for the. Government to give some indication that the foreigner is not betting on a certainty; that is to say, that we are not going back on to the Gold Standard at some comparatively near date. Unless that indication can be given, we can never stop this most embarrassing short-term money coming to this country. I am sure that the right hon. Gentleman will agree with all the authorities—I will not cite any more, but there are a number of them—who are taking the attitude that this sudden rise in sterling and the fluctuations are doing an immense amount of harm to the industries of this country.

Some people have gone to the extent of saying that already the rise in sterling has more than wiped out the possible benefits of a 10 per cent. tariff. It is obvious that, whatever the benefit or the disadvantage may be, it is quite easy to wipe out the whole effect of a tariff by a considerable rise in the value of sterling. As the right hon. Gentleman knows, I myself do not believe that in the long run and on the exchange the tariff is going to bring any general benefit to the country; of course, particular industries always benefit by tariffs, but the export trade will clearly have those benefits wiped out by a rise in the value of sterling. Therefore, I ask the right hon. Gentleman if he will be good enough to give us some statement which will reassure the industrialists of this country as regards the future of their trade, and will deter, definitely deter, the foreign speculator from coming and making sport with our currency, to the great detriment of our industries.


If I understood the hon. and learned Member for East Bristol (Sir S. Cripps) aright, he is anxious that the Government should shape a policy so that the wholesale price level in this country will correspond to prices in 1929. Whether that he the right policy to adopt or not I will not venture for the moment to say. I rise to ask the Government whether they have sufficient powers under this Bill to deal with the speculation which is taking place in foreign exchanges. It must be very gratifying to this country to find that the repayment of sums borrowed some months ago to maintain the value of sterling appear in the eyes of the world to be the outward and visible sign that Great Britain is round the corner. I think that is due to the fact that during the last six months the nation has accepted in the right spirit the cuts made by the present Government. Another reason, I think, is that the taxpayers of this country have shown to the world their readiness to accept the heaviest taxation ever imposed by any Govern- ment in the history of the world. These two facts, coinciding with one another, have revealed to the world the determination of this country to face the ugly realities of the present situation. Great Britain has always surprised the world when her back was against the wall. We are conscious of her own strength, but foreign nationals have at different times been rather disinclined to realise it. The events of the past two weeks are another striking vindication of the fact that once the people of this country are confronted with unpleasant realities they are prepared to look them in the face.

The rise in the purchasing power of sterling to which the right hon. Gentleman has drawn attention is undoubtedly very gratifying to every buyer of commodities, but it creates a distinct hinderance to the sellers of commodities in the markets of the world and my object in rising this morning is to ask whether the Government can take further powers to stop these wide, sudden and sharp fluctuations in exchange. Undoubtedly speculation exists, but how to take wise steps to stop it is a difficult question. Other nations have tried it, generally with little success. Whether the Government, as is indicated in some quarters, should buy foreign exchanges, or, in other words, gamble with the taxpayers' money, is very much open to doubt. Those who have had experience of dealing with foreign exchange know how easily a Government, if they bought largely, might lose considerable sums of money, and I fear the taxpayers would not readily support a policy under which very large sums could be lost.

The hon. and learned Member for East Bristol appealed to the Government to announce their policy in the future. I sincerely hope the Government will be very cautious on that point. As I see it, the situation abroad is still full of uncertainty. There are dangers ahead, not only in Germany but in France, not only on the Continent of Europe but in America. There are still millions of people in America who seem to think that America can prosper and thrive although continuing to receive gold in payment of her war debts. We here know that these debts have created hardship and misery, and until the millions of people in America realise that the world, including America, will suffer while gold is used to repay war debts instead of being used as a basis of credit, we cannot as I see it, endeavour to stabilise the value of the pound. It seems to me that the prostitution of gold to other purposes than use as a basis of credit has led to untold misery, and until that fact is realised in France and in America it appears to me very unwise, if I may say so with all deference, for this country to endeavour to stabilise the pound. Therefore, I hope the Chancellor of the Exchequer will continue on the lines lie indicated when, if I understood him aright some months ago, he said the Government had no immediate intention of stabilising the value of sterling.

I would remind the Government that they were formed above all things to maintain British credit and the financial supremacy of this country, and if the powers under this Bill are not sufficient I hope they will at once come to the House and ask for whatever powers they may consider necessary in dealing with this difficult business and exercise those powers. It is, indeed, a difficult subject, on which many minds differ profoundly, but as it affects the well being of every home in this country I hope the Government will be very chary of moving in the matter.

Passing from that subject I am anxious to draw the attention of the Parliamentary Secretary to the Board of Trade to a point in connection with the price of food. He is aware that wheat is coming to our shores at below pre-war prices while bread is being sold in the shops at above pre-war price—an extraordinary thing as it seems to me. This problem was under the consideration of the late Government during their term of office, although they do not appear to have found out the cause or to have submitted any proposals to this House. Under this Bill undoubtedly the Government have powers to investigate the subject, and when we realise that masters and men who are working to-day selling goods abroad are selling their services at low world prices, while they are being forced to pay high sheltered prices for the commodities which they buy, we see that there is something wrong somewhere. Wheat is sold at world prices, shipping freights are fixed by competition, and directly the wheat comes here it is handled by a sheltered trade. The wheat is carried from our docks by rail or cartage through a sheltered trade, and it is passed on to the millers who form another sheltered trade. The wheat passes over the railways which is another sheltered trade, and it goes on to the bakers, another sheltered trade. The result is that, although the wheat is bought and sold to-day well below prewar prices, by the time it reaches the consumer it is well above pre-war prices. I think that is a fit subject for investigation by the Board of Trade. There may be many reasons for that. The men trading for export markets are selling their services at very low wages, but they are being forced to pay very high prices. Whether that is due to high profits, inefficiency or high rates I do not profess to know, but it seems to me to be a very fit subject for investigation by the Government, and I appeal to the Parliamentary Secretary to investigate it.


I should like, if possible, to clear out of the way one issue which has been raised by every speaker this afternoon, and that is speculation. Speculation has one great advantage. It is a very easy thing to attribute every difficulty which we are in to something else. At, one time almost every difficulty was attributed to the Socialist Government, but now it, is the speculator; before that it was the Jews. Without speculation, it is much more difficult for people who require foreign currency, or goods or shares to get a close price. People want to pay a proper price, and mere speculators help; therefore it is beside the mark to talk about speculation as being only a cause of trouble; and as there is selling as well as buying prices are not permanently affected. If it is not speculation that is ruining us, apparently it is the short-term money which is coming to London. I have not the slightest objection to short-term money coming into my pockets if I want it, even if it does involve the risk of the gentleman who has lent it to me taking it back again. My objection at the present time to short-term money is not that it is coming to London for use in trade but that it is not wanted and has been attracted by an abnormally high Bank Rate. Short-term money is useful to us if we want, it badly enough to pay four per cent. for it. We do not want that, and as long as the Bank of England is prepared to pay 4 per cent. there is obviously a loss to us, and we are, in effect, bribing short-term money which we do not need to come to London. We cannot blame the man who lends the money, but we should blame the folks who pay too much for it. The Bank of England is apparently to be blessed—and the Chancellor of the Exchequer—because it has dropped the Bank Rate from 5 to 4 per cent. In the interests of the industries of this country I think the Chancellor of the Exchequer should have done that four months ago, and then we should not have been troubled with short-term money. If trade revives and there is a need for short-term money to enable our trade to develop and credit to be given, that would be the time to raise the Bank Rate in order to attract money back into our markets.

Neither speculation nor short-term money are bad in themselves. Speculation, based upon the idea of what the Government is going to do when it manages the currency and attracted by artificially high Bank Rate, is creating a difficulty at the present time. I can assure the hon. and learned Member for East Bristol (Sir S. Cripps) that this Bill was not introduced in order that the Government may manage the currency. The Government are managing the currency. We have been told that frequent interviews have taken place between the Chancellor of the Exchequer and the Bank of England, but currency and the balance of trade are no more managed by the Bank of England than by myself. It is managed by the Chancellor of the Exchequer, and the Government have been trying artificially to raise the price of sterling. Their one obsession has been somehow to raise the value of sterling, and they have done it by putting on a tariff, keeping the Bank Rate artificially high, and putting an embargo on foreign securities. The Government have been so successful in raising the value of sterling within the last three days that they have been terrified with the results of their own success.

I ask the House to observe that speculation is not confined to the wicked foreigner or the wicked Jew. The Chancellor of the Exchequer has been gambling on the pound remaining low, and he has been buying francs and dollars when they were dearer than they are to-day. He has been buying them, and, faced by the horrible fact that when he paid off these foreign credits he was bound to make a loss on the business, he said, "Yes, it is true that I shall make a loss. I borrowed francs and dollars when they were cheap, and I am paying them off when they are dear. It is true that on that transaction I shall make a loss, but it is all right, because it is all balanced by the rise of the value of the gold in the Bank of England. If sterling keeps low, we shall have made a profit on the value of the gold in the Bank of England, and we can write off the one against the other and all will be well." The Chancellor of the Exchequer has discovered here a source of revenue that no one else had thought of. It only needs to be carried a little further. With 60,000,000 gold sovereigns in the Bank of England, if we can only send down sterling to 1s., those 60,000,000 gold sovereigns in the Bank of England will appreciate, and will be worth, not £60,000,000, but £1,200,000,000 sterling, and we can scrap taxation altogether and live on the profits. The Chancellor of the Exchequer is all right if only sterling will go down, but God help him if it goes up, for he will lose all his profits, and will be faced with a deficit of £40,000,000 on his Budget, which he will have to meet. Therefore, I can assure the foreign speculator that there will be no possible chance of the Government managing the currency of this country in the direction of sending the pound sterling back to 20s. They would be cutting their own throats, as well as the throat of all the trade and industry of this country.

12 n.

Now we have Lord Bradbury in the field again—Lord Bradbury, who managed the currency of this country with such conspicuous success, the author of the Minority Report of the Macmillan Committee, the one man who stood for honesty. We have gone off the Gold Standard in spite of him. Now he has become completely reconciled to going off gold, as is everyone else at the Treasury, and he is horrified at the recent rise in the price of sterling, and is suggesting to-day that the Government should adopt another method of managing the currency. He was wrong before, and I fear he will be wrong again. The method he proposes now is that the Government should buy foreign currency, or, if they cannot buy that, should buy gold. There was a period after the War when all the fools in this country were buying marks. They all last on it, and I do not recommend this Government to buy dollars or francs. They might find that they would slip up on that, just as they slipped up on borrowing those credits of £80,000,000 in August last. As for buying gold, I thought that one of the conclusions to which sane people in this world were coming was that gold was rather a risky proposition that currencies based on gold were perhaps not likely to be a permanent feature of commerce for all time. I have a sort of idea that people even in France, where they own all the gold in the world, are getting a little nervous as one country after another goes off gold and comes on to sterling. The Americans are now adopting inflation—reasoned inflation, or, as I think we now call it, reflation. "Inflation" is rather an unfortunate word; we avoid it; we say "reflation". America is coming round to that. Presently it may be the turn of France too, and then where will gold be? Therefore, whatever else the Treasury speculates in, I do not recommend them to speculate in gold. People in this country are selling gold at the present time. I think they are wise, for, once we are off that standard all over the world, once our currency is based upon the prices of selected raw materials, there will be a considerable slump in the price that the public and the nations of the world will be prepared to pay for this discredited currency. [Interruption.] Is the hon. Member thinking of the value of gold for slave bangles? I do not want our Government to manage the currency; I do not want them to repeat the mistakes of the past; I do want them to let us have a little more freedom, so that the currency may achieve its natural level.

Now that we are off gold, trade balances itself. Fluctuations may come about through speculation, or through short-term money being unwisely attracted to this country, but, in the long run, it is much better to let trade balance itself. If our imports continue too great, and our exports too small, the pound will go down, and, as the pound goes down, so imports will be prevented from coming in and exports from our shores will be stimulated. I wish the Government appreciated the position of our export trades to-day. Those trades have never been worse than they are now. They were not so bad even at the time when the gold crisis came about. To-day the export trades of this country, after having seen for a short time the possibility of recovering their position—for when we came off gold there did appear to be a chance for the textile trades, the heavy woollen trades, the coal trade, the pottery trade, and so on—after having seen that chance, they have seen it go again, they have seen the price of sterling rise, and they have seen their chance of recovery vanish. The Government will keep their eye fixed on the protected home trades of this country; they are the only people about whom they think; but the big trade on which we in this country live is the export trade, and the one chance for the export trade is a fall in the value of the pound until exports can rise to match the imports which come into this country.

Every hon. Member who has spoken to-day has spoken as though the benefit to the export trade would be only temporary if there were a fall in the pound; but it is permanent until the pound rises again. It is not so much fluctuations that hit the export trade; it is a rise in sterling that hits the export trade. Fluctuations are an inconvenience, but a rise in sterling is a permanent tariff against our exported goods. The people of this country, the Press, and everyone else in the world, have apparently been so educated in the idea that prosperity depended on a high price for our currency that, when we open our paper in the morning and see that the pound has fallen to 14s. 3d., or whatever it is, we groan. We ought to cheer. The only chance of a revival of trade comes from a fall in the value of the pound. [An HON. MEMBER: "No."] The people who say "no" are the people who lend money. We have all lent money and we have lost it. As long as we go on saying "No, we shall never do anything again; till you pay me my pound of flesh," trade will not recover. The money lenders, the bankers, of course, want the pound high. They hate the idea of inflation. They have been behind the whole of this movement for deflation. They have strangled not only this country but the trade of the world ever since the War by demanding deflation and their pound of flesh. I think the Press, and even the bankers, are beginning to realise that the chance of business in future depends upon wiping off these old debts and starting afresh. The lower the pound falls, the better the chances for a recovery. We who lent the money have lost it. For goodness sake, let us give the country a chance of starting once more unfettered by the debts of the past incurred at times when prices were twice what they are to-day.


I will not attempt to follow the very interesting speech we have just heard because an examination would cover too much ground, but I will take just two or three sentences that fell from the right hon. Gentleman's lips and offer an observation or two upon them. He poured some scorn upon the lending of money. He forgets that overseas investment today is a national industry. If we did not lend money abroad, we should not he able to export our goods or find business for our ships or for our bankers, or our very valuable trade in insurance, or pay for imports with income on our loans oversea.


I am all in favour of lending abroad, but the Government stopped it.


Then the right hon. Gentleman must not do anything with currency values to discourage people giving their savings to that national industry called oversea investment to help the export trade, and lending undoubtedly does help. If you are going to juggle with currency in any way that might discourage men from lending money to other countries, you would damage your export trade. We do not very often agree with the right hon. Gentleman when he takes his ninepins out of his toy Noah's Ark expecting us to be serious and play with them, but he has to-day given a few shrewd knocks at the hon. Gentlemen on that Socialist bench with whom he has been associated for a number of years.

I should like to deal with one or two remarks that were made by the hon. and learned Gentleman the Member for Bristol (Sir S. Cripps). He wandered very widely over the field and he seemed bothered that foreign speculators should make money out of exchange. It is very unpleasant that they should manipulate exchange to their profit. On the whole that was the essence of his speech. He asked the Chancellor of the Exchequer here and now, before we go home to-day to our constituencies, to state what the monetary policy of the Government is. I have no doubt my right hon. Friend has no intention in the world of complying with such a demand. If he were to do so, he would be, I think, very ill advised. Everything is now in a state of flux and no one can say what is going to happen to-morrow with regard to sterling, or gold currencies or exchange or international payments especially while the War debt position is not straightened out. No man on earth can now say what should be done permanently about sterling. The hon. and learned Gentleman went on to tell the same old story, a little inflation, juggling with the index number, now 76 as compared with 100 in 1928–9. He wants to make 76 equal to 100. Why not go further and call 45 minutes an hour and 27 inches a yard? It is only dishonesty. Let us be honest and call 100 100 and 76 76. Let us get away from the idea of taking a £1 note tearing it into four pieces and calling it £4. That is what inflation means.

I have no contact with the City; I look at these currency matters from the point of view of a manufacturer. It is a terrible thing that we should be faced with violent oscillations in exchange. It is one of the greatest curses we could have. Whatever we do, let us know exactly what we are going to buy and sell at, over periods of time. It cannot be done by inflation. I do not believe in inflation. I do not believe in manipulating the pound. I think we must sit still and see what happens. The hon. and learned Gentleman is quite right in saying these violent rises in exchange do us harm. The recent rises sterilise whatever advantage we have been getting out of the import duties. But this is not the time to deal with the future policy of currency.

I should like to ask the Chancellor of the Exchequer about the Bill as it stands. It is legislation by reference with a vengeance. I recall a good deal about the workings of post-war currency policy in the past, but I have had to dig out references to the 1925 and 1931 Acts and to the Bank Act of 1844. The main principle of this Bill is contained in Section (1), which deals with Section 1 (3) of the Gold Standard Amendment Act, 1931. That Act authorises the Treasury to make and vary certain orders about the exchanges for meeting difficulties arising in connection with the suspension of the Gold Standard. Under its provisions we have been able, very properly in my opinion, to control exchange transactions.

I want to ask my right hon. Friend whether fresh ramifications with regard to exchange have been considered by the Treasury. If they have, will he tell us what the measures are that they consider expedient? Something has happened since the Act of 1931 became law. For instance, the drain of gold from India. Some 30 years ago, when large quantities of gold came out of the new Transvaal mines, India took much of it and has been doing so for years; this draining of gold to India preventing a catastrophic rise of prices in Europe. India has been taking gold from the time of Darius. Not long ago the earliest known examples of coined money, that issued by Darius, 500 years before the Christian era, were found in the Khyber Pass. Even to-day you will find Chandra-Gupta gold coins, going back 300 years B.C., in the quicksands of gold in India. It has been said that there is still £500,000,000 of gold in India, much of it ready to come out if the price attracts it. I do not know whether that is true, but I should think that it is more likely that there is £1,000,000,000 worth of gold Bunk in India. We saw yesterday in the "Daily Telegraph" an estimate made by Professor Cassell that there might be up to £1,300,000,000 gold to come out of India. No one knows. No one can know the amount, but gold is in India and much is coming out. Something has happened since passing the Act of 1931, which was entirely unforeseen, namely, that we have received between that time and now £40,000,000 of gold from India. This has had a most helpful, beneficent, advantageous and unexpected effect upon our exchange position here. It has enabled us very greatly to help sterling and to pay our debts in gold both to the United States and to France.

If the present Bill—and this is the point which I want to make, and I must apologise to the House for drawing attention to what is purely a technical matter, if the present Bill, in the reference to Sub-section (3) of Section 1 of the Amending Act of 1931—does not cover the point which I will explain, I think that the point, ought to be covered in this Bill by some suitable words being put in on the Committee stage, or, if necessary, by a new Clause being added. The right hon. Gentleman opposite made a particular point of saying how disastrous a violent rise or fall in exchange is to us manufacturers. He is quite right. I do not want to see either a violent oscillation, or an inflation of credit with all the mischief which it may bring. The proposal I make is for the purpose of avoiding a violent disturbance in credit or currency.

In 1931 the Act which we are continuing removed the obligation of the Bank of England to sell gold against payment in its own notes. That is the law. Under Section 4 of the Bank of England Act, 1844, which I turned up to-day, any persons, in my opinion, may still demand from the Bank's issue department, Bank of England notes for gold bullion at the rate of £3 17s. 9d. per standard ounce.. I may be wrong—the Chancellor of the Exchequer may tell me that I am wrong—but I do not recall any repeal of the particular section of the Act of 1844. It compels the Bank, faced with an offer of gold in large or small volume, or from India, it may only be the recent £40,000,000 and even that is more than the Transvaal produced in the last six months, or gold in floods from France or America, to buy the gold and pay £3 17s. 9d. for it per ounce.

When it was my duty from that Box to, move the Second Reading of the Currency and Bank Notes Bill in May, 1928, I drew attention to Clause 2 of the Bill giving powers to the Bank of England in consultation with the Treasury to reduce its fiduciary issue of Bank of England notes when faced with an abnormal influx of gold. We have had more than an abnormal influx of gold; £40,000,000 in the last six months from India is more even than an abnormal influx of gold. I foresaw in 1928, when making my speech upon the Bill, that even under the Currency and Bank Notes Act, which gave life to the one pound and the ten shilling notes which we have in our pockets, we might be faced with an importation of gold which we might not want, and that it might clog and injure the whole of our currency system. We therefore included a Clause to check the possible and unnecessary increase of credit arising from a large influx of gold into Britain, which would, in turn, create an unneeded number of Bank notes and at the same time inflate credit.

An abnormal influx of gold, as I envisaged it when the 1928 Bill was before the House, could be dealt with and sterilised, if it were not too great an influx. It could be done by the Bank of England selling for a certain limited period a certain limited amount of securities. Whether that method could deal with a very large amount is a question which was then out of my mind. But to-day we have a Bill, the essence of which is to continue the power of the Treasury to take certain measures in relation to exchanges, and, as has been said, during the last few days there has been a violent upward leap in the sterling value of exchanges. I will not go into the reasons. They may be based upon some genuine causes arising out of international business transactions, or, what is worse, they may arise out of speculation by people who are ever willing to wreck a nation or anybody if they can get 21 per cent. out of it by way of commission or profit—they are the unscrupulous speculators. Or the reason for the fluctuations may be based upon blind unreason, or folly. I do not know.

There is, however, no doubt about one thing, whether you call it a flight from the dollar or a flight from the franc, there has certainly been a flight to the pound sterling. Whether it will continue no one can say—I will be very cautious and express no opinion, as I am as much in the dark as anyone else in the world—hon. Members can correlate the factors pro and con which are causing and will continue to cause sterling to rise and fall. A further rise may take place, and the hypothetical abnormal influx of gold which we have provided for in the Currency and Bank Notes Act of 1928 may well become a probability. Apart from the economic collapse in the United States, they have embarked upon an inflationary money policy, and are attempting internally to put up the price levels there by help of a Bank Act which has lately become law. Their policy and internal commitments are of such a kind that their export trades are going, many people are being thrown out of work, factories are closing, panic is taking place resulting in banks being embarrassed and people are drawing money from the banks and bankrupting the banks. We have seen the result in the last few weeks and the shipment of gold from the United States to France. There is a great hoarding of U.S.A. currency. In France we have also seen a similar state of affairs, namely, the falling off of the export trade there and the almost entire collapse of the French tourist trade.

These two sets of circumstances in the United States and in France may result in a flight from the dollar in America to the pound sterling, and if there is a flight from the dollar to sterling in America I will go as far as to say that that will be reflected to France by a flight from the franc to sterling. France and America will take shelter behind the ramparts of sterling and something will occur which we have barely foreseen. The House of Commons could scarcely be attracted towards my opinion without further examination and proof. I do not want to be committed to it—but I fear that if there were the beginning of an American bank panic and then a flight from the dollar and from the franc we should see a very unusual result. Not only would we see America and France forced off the Gold Standard, but we should be forced back on to the Gold Standard whether we liked it or not. That has not been provided for. Does Sub-section (3) of Section 1 of the Gold Standard (Amendment) Act, 1931, which the present Bill seeks to continue, defend us against the disadvantages which would certainly arise if we were confronted with a large influx of gold values from the United States and France, with the Bank of England compelled, under Section 4 of the Bank Act of 1844, to buy the gold against its own notes? I cannot remember that Section ever having been repealed.

No Measure such as that before us which my right hon. Friend the Chancellor of the Exchequer can introduce can deal effectively with the new position in the light of the warning which we have received during the last few days, and of the operations which we have witnessed in the exchange market this week, unless it contains definite provision—here I go a little way on the road which the hon. and learned Member for East Bristol (Sir S. Cripps) indicated—for the whole world to see. Those provisions are that not only can the Treasury under this Bill take steps to make orders for meeting certain difficulties arising out of the suspension of the gold standard, but that, conversely, it can also take measures to meet difficulties arising from and caused by circumstances originating in foreign countries which may have a direct effect of forcing us back on to the gold standard in conditions and at a time which we may consider totally disadvantageous to our own interests.

I would offer a word of warning to the Chancellor of the Exchequer, with all respect, that if this Bill does provide us with a defence against an unwanted influx of gold, the fact should be clearly stated, so that there may be no misunderstanding. If the Bill does not provide that, then, in my opinion there should be inserted in the Bill, by means of fresh wording or by an additional Clause, information to the effect that I have outlined. We must defend ourselves against a flow—it may be a Niagara—of undesired gold being forced upon our monetary credit and currency structure from foreign countries. Foreign countries will have no compunction whatever about inconveniencing us with an excess of gold, if they think that it is to their advantage to send gold to London. The way currency policies are handled, it seems to me, by the United States, if I may say so without offence, is quite childish. They take short and restricted views and work their financial and credit systems in mental isolation. They do not realise what they are doing. France, however, does know very clearly what she is doing in regard to currency. She will wrap up her actions in polite phrases, but she will continue to have regard for nobody's convenience but her own and will consider no other nation but herself entitled to consideration in matters of currency. If the Chancellor of the Exchequer has not had an opportunity of reflecting on this point I will not press it now, but I will raise it again on the Committee stage on the Motion "That the Clause stand part." I would say, however, although I may repeat myself, that the possibility of an unwanted influx of gold into this country cannot be left unprovided for.

12.30 p.m.


What the hon. Gentleman has just said in regard to America seems rather to indicate what he termed inflation, but I think he will agree with me that so long as they maintain the convertibility into gold I do not think it is quite correct to characterise the action of America as inflation. The idea of the currency legislation over there is to give greater powers of discounting and issuing of currency, and I do not think we may look forward to a period of inflation there so long as the convertibility into gold is maintained.


The hon. Member overlooks the fact that one of the main objects was to put the price levels up. That is inflation.


If there was an excessive issue of paper notes so that there was depreciation of the currency then inflation would ensue, but so long as they maintain convertibility into gold it is a good and sufficient check against inflation. I regret exceedingly to find myself on this occasion in opposition to the hon. and learned Member for East Bristol. He suggested going back to 1929. What virtue is there in that year. It would undoubtedly be creating inflation to take that year as the standard. The hon. and learned Member seemed to suggest to the Chancellor of the Exchequer that he should stabilise on the basis of prices in 1929. Might I remind the hon. and learned Member what is the basis of our currency. The hon. Member for Farnham (Sir A. M. Samuel) referred to the Currency Act which he introduced in 1928. The original basis was the Currency Act which gave to a noteholder the right to go to the Bank and to demand gold for his notes. That principle has been maintained in the various Acts that have been presented up to the present time. In this particular Bill that we are now discussing, although it is only contained on one sheet of paper, deals with a vital question of our monetary policy and is perhaps one of the most important Measures that has been introduced since the General Election. It goes to the very root of all our transactions in trade, commerce and agriculture, and to suggest, as the hon. and learned Member suggested, that we should go back on that principle that the noteholder is entitled to receive an equivalent in gold for his notes is quite wrong. [Interruption.] Certainly, the whole basis of our legislation is based upon that. People often ask what is the pound sterling. How would you define it? A Committee was formed after the Napoleonic Wars when we were going through troubles very similar to those through which we are now passing, and a witness was asked by the Committee to define the pound sterling, and he said that it had been with us before we adopted gold, and that every English gentleman knew what it was. Sir Robert Peel stated that the pound sterling meant a certain quantity of gold. The pound sterling is the equivalent of 123¼ grains of standard gold.


No. Sterling is the unit in which the Government keeps its accounts and in which we pay taxes. It is not the same as the golden sovereign.


I think I am quite correct in my definition and that the pound sterling, as I have described it, was accepted by Sir Robert Peel, namely, that it is the basis of our currency. Various Acts specifically refer to it, and when the hon. and learned Member for East Bristol suggests that we should stabilise on the basis of 1929 he is guilty of suggesting repudiation.


What I suggested was that as we are not on a gold basis at all at the present time but merely on a managed paper currency we should go on to a definite wholesale prices index which should be slowly worked back to the 1929 prices.


Thank you. That is quite consistent with his earlier remarks, but is still a departure from our original contract. It is quite true that we are off the Gold Standard but we hope to return to it, as we did in 1925. I took some part in the agitation for a return to the Gold Standard and I congratulated the right hon. Member for Epping (Mr. Churchill) for his courage at that time. Many people have argued that the return to the Gold Standard was not popular or successful$—


Not wise.


—but if you have regard to what took place prior and subsequently to 1925 you will find that it had nothing whatever to do with the Gold Standard or the inferiority of gold as the standard. You must have a standard if you desire to get rid of the fluctuations to which the hon. and learned Member for Bristol East (Sir S. Cripps) has referred. You cannot get rid of fluctuations entirely even with a gold standard. It does not prevent them, but it is the most suitable standard; and that is all we claim for it. If we can get back to a Gold Standard it will bring about stability in the prices of commodities and stabilise our exchange, and to suggest that we should adopt a new method and go back to the basis of 1929 is unquestionably repudiation. The basis of all these various Bills and Acts, is that we hope to get back eventually to former parity. Those who took the action in 1925 deserve our approbation. They were not able to maintain the Gold Standard.

What is the history of that period and the subsequent period? The hon. and learned Member for East Bristol is not responsible for all the acts of his party but the Labour party and the Conservative party, and my own party, have all been equally guilty in pursuing since the War a policy of extravagance and waste, which they were not entitled to pursue. We have had an expenditure which has been running this country into debt at the rate of £1,000,000 per week and presenting us with a deficit of over £120,000,000. No Gold Standard will stand that. You cannot maintain this delicate instrument unless you have drastic economy and sound finance. To blame the restoration of the Gold Standard as the cause of our unemployment and distress is to miss what has been the foundation of our credit and our good name in the past. A bill on London was regarded as being as good as gold, and we were able to build up a foreign trade before the War second to none in the history of the world.

In Section 1, Sub-section (3) of the Gold Standard Act of 1931, it is provided that the Government shall take such powers as they may consider expedient for meeting the difficulties arising in connection with the suspension of the Gold Standard. Might I suggest that one of the difficulties of maintaining the Gold Standard, one of the principal reasons why we were unable to maintain the Gold Standard after 1929, was the excessive size and extent of the fiduciary note issue, which was fixed at £260,000,000. Many bankers were unable to arrive at a definite figure as to what would be the correct figure to fix. In the main our note issue and currency is governed by trade; it is not trade that is governed by the note issue. The trade of the country governs the currency and if the note issue is excessive it leads to a depreciated exchange and creates immense difficulties for the Bank of England, in being able to maintain its gold reserves; that is if your note issue is excessive. Mr. F. C. Goodenough, one of our leading bankers in his address to the Barclays Bank in January of this year said: It is important to understand how imports have been stimulated by the inflation of credit arising out of too large a fiduciary issue, with the result that much harm has been done to our industrial interests and an immense amount of money has thereby been lost. This excessive issue of fiduciary note issue has been one of our principal handicaps during the last two years. One must have regard to the fact that our exports of gold bullion which in one year amounted to £80,000,000 have had little or no effect on the exchange. In previous years when we were on the Gold Standard an export of £1,000,000 or £2,000,000 would affect the exchange favourably; but during these years, when we were exporting about £80,000,000 to France and the United States, when these enormous exports of gold were taking place, it did not have the effect on the exchange it should have had. The effect of an export of gold bullion in previous years when we were on the Gold Standard created for the time being a temporary fall in prices, which in turn stopped the excess of imports and therefore tended to turn the exchanges in our favour; which is what we were aiming at when the Bank of England put up the rate of discount to protect itself. During these years there were large ex- ports of gold bullion from this country but they did not have any effect on the exchange. The Governor of the Bank of England will tell you that the difficulties and anxieties which eventually led to a breakdown in his health, were that he could not under our present system and with the excessive fiduciary note issue, turn the exchange in our favour; because we were working under an excessive note issue. There is only one way to improve that and it is a method which is well known to those who have made a study of these problems; that is to reduce and contract our note issue. Our note issue is fixed at £260,000,000, and powers are given to the Bank of England to apply to the Treasury to reduce the figure.

Had the Bank of England appealed, as they might have done, to the Treasury to contract the note issue below the amount fixed, then £260,000,000, I believe the exchanges would have responded. But what have we done? In August last the Bank of England, instead of applying to the Treasury for the right to contract or reduce the fiduciary issue, applied for the right to increase it by £15,000,000, and it stands to-day at £275,000.000. I do not suggest that that was the sole cause of going off the Gold Standard, but certainly it was a contributory cause. It tends to depreciated exchanges, with the result that your gold export is stimulated, and that, coupled with the waste and extravagance of the then Government and a combination of circumstances, led to the withdrawal of the confidence of foreign houses, who withdrew their balances—many from lack of confidence, many because bullion dealers in Holland and France found it profitable to do so. Bullion dealers went to the Bank of England and obtained gold and presented it to the Bank of France and made a profit.

If you wish to protect your credit, the only way to do it is to take the necessary measure, and the necessary measure, with a depreciated exchange, is to contract your note issue. I hope that the right hon. Gentleman the Chancellor of the Exchequer will not respond in any sense of the word by stabilising or attempting to stabilise at the present rate. I recognise that to return to the old parity will take time. The Government came into office under three particular principles. One was the restoration of the pound, the second was getting rid of reparations, and the third was the restoration of our trade. My regret is that so far they have taken very few, if any, steps to restore the pound. I wish to see the pound restored. Some may say "That will penalise your export trade." It is true that a depreciated exchange gives some temporary advantage when you have goods to sell, but it equally penalises the importer. The importer of raw cotton would rather have a pound worth 4.86 dollars than one worth 3.7 dollars. Agriculture may be helped by wheat quotas and tariffs, but in the end it depends on the industries of the North of England working at full pressure; the recovery of agriculture depends on industrial recovery generally. If the Chancellor of the Exchequer desires to take measures to offset the falling away which resulted from the suspension of the Gold Standard, he will bear in mind that a gradual contraction of the fiduciary note issue will tend to improve his credit, will enable him to improve the value of the pound, and will go a long way towards restoring that prosperity which we all desire.


In view of the fact that a good many Members wish to take part in this very important Debate, I shall be brief. My hon. Friend who moved the Second Reading of the Bill gave a short account and history of what had happened. There were two things which he particularly emphasised. One was that even when this country had been forced off the Gold Standard it still continued to exercise a very important influence upon international finance and even upon world prices. The second was that in effecting the results which we achieved it was not so much the particular powers then given to the Government which achieved that object, but it was rather the concerted endeavour and action of our people. I do not imagine that any other country could come through the kind of financial crisis that we came through in the way that this country came through it. We came through it in that wonderful way principally because of the cooperation which we received from the whole Empire.

The Government are again asking for powers. I agree that they need these powers. But I would draw attention to the fact that these powers alone will never achieve any great purpose, either here or in any other country, unless they carry with them again the co-operation of the people. The last time these powers were asked for their object was quite evident to everyone. The pound bad suffered a severe fall and everyone had to do his best to prevent the fall from continuing, to mitigate it and to save sterling from any chance of collapse. Everyone joined in that effort. But to-day I think the country will need, and I trust the Chancellor of the Exchequer is going to give it, some further indication as definite as possible of what is required, because whatever he has in his mind to achieve in this matter of currency, has its best chance of being successful if it has been made clear to the people what it is desired to attain, so that they may again have that full opportunity of co-operating with him in achieving the purpose. There can be no doubt that a fluctuating sterling exchange is not only detrimental to industrialists in this country, but that it is also a detrimental influence upon the trade of the world. The right hon. Member for Newcastle-wider-Lyme (Colonel Wedgwood) referred to speculations, and rather implied that the large volume of money which has recently poured into this country was coming here for speculative purposes.


The high Bank Rate.


The right hon. Gentleman is under some delusion regarding the Bank Rate. He seems to think that the Bank Rate is the rate at which money can be lent, instead of which it is the rate at which money is borrowed. So long as this country has a currency which is divorced from gold, there will to some extent be two competing currencies in the world. The strength and the importance of this country in international finance is such that it has, contrary to any general belief that it was possible, become in fact a competing currency in the world. So long as these two currencies exist, so long as the ultimate position of sterling remains undefined, every transaction of every kind must have in it a large element of speculation. The only thing that made investment possible in the past was the relationship which every investment or commercial undertaking had to a gold basis. To-day people throughout the world are unsettled in their minds as to whether gold is any longer the kind of security which they believed that it was.

The reason why money moves about from one financial centre to another in large volume is not so much speculation as because it is constantly seeking a security which it is not always able to find. The money which has come to this country lately has come principally because the feeling has been growing that in these times of great uncertainty this country is perhaps the most secure place to which money can come. I, therefore, think it of the greatest importance that our Government should at the earliest possible moment give some clear indication as to the course along which it is intended to guide the financial destinies of the country. I hope that the Chancellor of the Exchequer will tell us, if he can, something about his intentions regarding the Ottawa Conference. I trust that at any rate plans are being thought out for consultation on these vital questions—vital not only to the British Empire but to the world—and that plans are also being prepared to discuss these questions with the representatives of our Dominions.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

We have had a number of speeches on this Bill all of which I think have given great pleasure to those who delivered them. They have been characterised by an extraordinary diversity of view. Hardly a single hon. Member has risen who has not assured me that I should pay no attention whatever to the views expressed by those who preceded him. The hon. and learned Gentleman who opened the Debate took a view which was entirely different from that of the right hon. and gallant Gentleman the Member for Newcastle-under-Lyme (Colonel Wedgwood) who followed him and he has been followed by other speeches from this side which took the line that he was heterodox in his views. The hon. Member for East Edinburgh (Mr. D. Mason) was I think alone in his expression of the opinion that this was the most important Bill which we had had to consider since the General Election. I suppose that comes of being chairman of the Sound Currency Association. To my mind this is little more than a formality that we are discussing this afternoon. What is the Bill? It is to continue for a, further space of 12 months, powers which were given to the Treasury six months ago, powers which have been used by the Treasury in a particular Order, now withdrawn, powers which we do not anticipate for one moment we shall require to use again, but which we think we ought to retain in our hands. In these unsettled times, especially with the fact that there are great matters affecting the nations of the world still quite unsettled, we think it unwise to be without such powers.

My hon. Friend the Member for Farnham (Sir A. M. Samuel) has raised a question as to the converse of the position which we have been contemplating. He suggests that as we have not repealed Section 4 of the Act of 1844 that the Bank would still have to buy on demand gold at 77s. 9d. That is quite true and that, of course, prevents the pound from going above 4.86 dollars. But surely the contingency which he contemplates is so remote as to make it hardly necessary for us to consider it at all at this stage, The great efflux of gold from India, to which I think he referred as one of the most remarkable phenomena of these remarkable times, and the production of gold from hoards or from ornaments in this country would cease if the pound went back to 4.86 dollars, and the only possible source of the vast supplies of gold which my hon. Friend is thinking of would be France and America.

1.0 p.m.


If the United States and France went off the Gold Standard, they would not stick at 4.86 or 5 dollars to the pound. They would force gold in here at any price so long as you would take it.


I think my hon. Friend is mistaken in the view that there is any probability of the United States being forced off the Gold Standard. His suggestion as to the effect of the measures which are being taken there does not seem to me to be well-founded. On the contrary, I, myself, am inclined to the view that those measures have been wisely conceived, and that they will have effects in the United States which may, perhaps, prove to be beneficial not only to that great country, but to the whole world. The right hon. and gallant Gentleman the Member for Newcastle-under-Lyme told us a somewhat fantastic story about the operations of the Chancellor of the Exchequer, to whom he attributed far greater powers than I have found him to possess. The right hon. and gallant Gentleman's idea of the views which have actuated the Government in the supposed transactions which he described was certainly not only far from true, but, in fact, the very reverse of the views which the Government hold.




The right hon. and gallant Gentleman must realise that he said, first, that speculation was not a crime. In fact he rather suggested that it was a good thing. Secondly, he said that the speculation had been brought about because speculators were tempted by the high Bank Rate in this country, and that the high Bank Rate was the result of manipulation by the Government who were endeavouring and had been for some time endeavouring to raise the value of the pound.


Not speculation, but excess of short-term money caused by the high Bank Rate.


The right hon. and gallant Gentleman said that the Government had exhausted themselves in efforts to raise the value of the pound.


Quite so. I think they have—by the tariff, by the Bank Rate, and by these restrictions on foreign purchase.


Very well, the right hon. and gallant Gentleman did not explain all that, but he did set out that that was the one aim and object of the Government—to raise the value of the pound. I say that that is the very reverse of the truth. The hon. and learned Member for East Bristol (Sir S. Cripps) appeared to us to-day in the guise of a financier, and if he will allow me to say so, I prefer him in that guise to the guise of the demagogue. Although I do not agree with or accept what I think is the ultimate conclusion of his policy, namely the desirability of nationalising the Bank of England, yet in a great deal of what he said I find myself in considerable agreement with him. I agree with him and with some of my hon. Friends behind me that violent fluctuations and oscillations in the value of the pound are most detrimental to industry. The right hon. and gallant Gentleman opposite does not agree with that. He thinks that industry does not mind about these oscillations and that the one thing it minds is a final and permanent rise in the value of the pound. Really, one would Suppose that the right hon. and gallant Gentleman had never been connected with industry himself. Anyone who has had to conduct industrial operations must know that the uncertainty which arises out of these constant fluctuations is the worst thing possible for industry. It renders it most difficult to make contracts or indeed to carry on business at all.

Of course, these fluctuations are one of the consequences of going off the Gold Standard. There are advantages, no doubt, in that connection, but there are disadvantages too, and one of them is that we have not got the stability which we had when we were linked up to gold. The hon. and learned Gentleman opposite is mistaken, I think, when he suggests that the speculation which has been taking place in sterling is due to the belief, on the part of foreign houses or foreign operators, that this country intends, at some date not too far distant, that the pound shall be restored to parity at 4.86. That is not what influences speculators. I think they are not concerned with anything so remote as that. They have come here for the simple reason that they think the pound is going to rise, and if the pound is acting to rise, there is room for a profitable little operation, provided everything goes well; and, so long as it rises, it does not matter to them whether ultimately it will go to 4.86. If they can buy at 3.40 and sell in a comparatively short time at 3.70, 3.80, or 3.90, there is quite sufficient margin there to tempt the speculator over here.

It is not the first time that speculations of this kind have taken place. Those who have embarked upon them have sometimes made large profits, and not infrequently they have followed those very large profits by even larger losses. It is possible that that may happen again in this instance. It is very tempting, if you have had a successful coup, to try to repeat the process, and it is just that temptation which has been so often the undoing of speculators in the past. I do not deny that speculation in the meantime is disturbing and possibly injurious to our trade, and I do not desire to see it continued any more than I desire to see the pound at this time taking up a position considerably higher than that at which it stood for sonic little time recently.

As to the question of managing the currency, if you call it a managed currency, obviously the difficulty of managing the currency is very much increased, when you have, as you have at present, such an enormous volume of short money available throughout Europe. That means to say that if you are going to manage the currency, it has got to be on a very large scale indeed, and those are things that have to be taken into account in considering how far you are going to use it. I have no hesitation in saying that we do not desire to see the pound forced up to a rate which will be injurious to industry, and I do not know if the hon. and learned Gentleman really wished to ask me to say what was to be the ultimate policy, as I think it is apparent to the House that at this time it is not possible to say what is going to be the ultimate rate or the time at which it will be possible to stabilise the pound.

If I may express my own personal view, I am not attracted by the idea of a, managed currency. I think that sooner or later we shall find that we have got to link our currency, our sterling, once again to a metallic basis. I will not say anything as to what that basis will be, whether we should stick to gold or try to mix up gold with something to help gold out. I am not going to be dogmatic on that subject, although I confess I do not see any better basis than the gold which has in the past served us well. For the time being our currency is a managed currency, and I think the sort of index which the hon. and learned Gentleman had in mind is probably the sort of thing that one naturally would look to for the purpose. Still, I do not want him to think that we have in mind that that is going to be the permanent monetary policy of this country.

Let me, finally, say that hon. Members who have read the extremely interesting and valuable report known as the report of the Macmillan Committee will remember that the question of the management of the currency is there investigated and considered at some length, and the Macmillan Committee came very definitely to the conclusion that if management there was to be, that management ought not to be in the hands of the Government, but in the hands of the central banking institution. With that view, I entirely concur. The right hon. and gallant Member for Newcastle-under Lyme is always suspicious when he hears that I have had any conversations with a director of the Bank of England.


No, I wish you would have more.


I thought the right hon. and gallant Gentleman believed that the result of the conversations which I have had has been so disastrous that it was high time they came to an end. In any case, I shall continue to have conversations with the authorities of the Bank of England from time to time as it seems desirable, because, while the independence of the central banking institution is, I think, essential in the interests of the country, at the same time I think there ought at all events to be the greatest possible communication and cooperation between the central banking institution and those who are for the time being responsible for the policy of the Treasury. I say again, that while this Bill has formed the opportunity for a very interesting discussion, I think the House will realise that it is not in itself a very important matter, and certainly, I think, not a controversial one, but is only a sort of precaution which we think it advisable to have in our hands.


We should not be doing our duty on this side of the House if we did not raise one important point on the other subject mentioned in the Measure now before the House. I must confess my incompetence to touch upon the intricate subject of the Gold Standard, the exchange or anything of that kind, and I must say that the more I hear speeches of experts the less I know about these questions. I was, however, able to understand my hon. and learned Friend, the Member for East Bristol (Sir S. Cripps), and the Chancellor of the Exchequer more than some of the experts who have spoken this morning.

The few words I desire to utter to-day have relation to the smaller part of the Bill with which we are dealing. I think it would be wrong, as I have just indicated, if we allowed this Bill to pass without asking the representative of the Board of Trade a few questions with regard to the provisions contained in this Measure to re-enact the Foodstuffs (Prevention of Exploitation) Act, 1931. I do not know whether we shall be able to get a reply to-day, but probably the Parliamentary Secretary will be good enough to take notice of one or two points that I wish to put to him. In the original Act there is provision whereby the Board of Trade If it appears to the Board of Trade, that by reason of the action of any persons in exploiting the present financial situation there is, or is likely to arise in Great Britain or in any part thereof, any shortage of or any unreasonable increase in the price of any article of food or drink of general consumption. As a matter of fact, though the House has been dealing since 11 o'clock with the Gold Standard, the Act in question at the very beginning refers us to the possibility of exploitation consequent upon going off the Gold Standard. I would like to know whether the Board of Trade is taking any steps whatsoever to use its powers in that Measure? Has any machinery been set up to find out what exploitation, if any, has taken place? I am sorry to say on that point there will be a difference of opinion at once as to what is really expedient in this connection. What would appear to us on this side of the House to be sheer, downright exploitation, would mean to the average capitalist nothing of the kind, but I do think that there are cases where the word could be brought in within certain limits. There was one point which the hon. Gentleman mentioned this morning, and which was followed up by the hon. Member for Greenock (Sir G. Collins), and I would like to contribute something towards destroying the fallacy which is, obviously, in the minds of hon. Members on the Government side, that provided the prices of commodities remain the same, the trader does not exploit anybody. The case put forward by the hon. Member for Greenock was a very good one as an illustration, and I want to pursue it. If the price of wheat declines by 25, 30 or 40 per cent., and the price of bread to the consumer remains the same throughout, surely that is a case of exploiting the consumers of bread. The price of bread ought to fall, or to have some relation to the price of wheat coming into this country. I would be glad, therefore, if the hon. Gentleman would deal with that point at some future date.


On Monday.


It is not good enough to say that as long as prices remain the same, there is no exploitation of the people, when, in fact, the raw material has declined in price to such an extent that the difference ought to be passed on to the consumer. Let me give one case as an illustration. The people of Manchester have had to pay an increased price for their milk recently. Strangely enough, although the consumers in Manchester paid more for their milk, the farmers who supplied the milk to the wholesale dealers in that city complain that not a farthing of the increased price paid by the consumer has gone into their pockets. A case like that, in my view, should be the subject of an inquiry by the Board of Trade, but the Board of Trade takes the point of view, it seems to me, that as long as the figures in the return from the Ministry of Labour are all right, that the cost of living is 45 points above the figure of 1914, all is well. If the cost of living went up to 50, they might then think that something was wrong.

I have tried to deal with one fallacy. Let me deal with another. If the cost of living in this country remains stationary, and the wages of the workpeople decline by 10 or 15 per cent, it is, in my view, a subject for inquiry by the Board of Trade as to whether there is undue exploitation of the people. If the purchasing power of the people is decreased, and the cost of living remains stationary, surely the difference between the two figures ought to be the subject of inquiry by the Board of Trade. The hon. Member has admitted, in part, that there is some exploitation actually going on. If I understood him rightly, he made a statement to the effect that a few com- plaints had already been received at the Board of Trade. We are entitled to know what those complaints are, and, on that score, let me say that it, is not sufficient for my purpose, at any rate, to look at the price of commodities only, and stop there—to go to a dealer in London and say, "What have you paid for those commodities, and what price are you getting from the wholesale dealer?" We want the Board of Trade to have some regard not only to the price paid by the wholesale dealer to the main buyer, but we want the Board of Trade to take an interest in what the consumer has to pay to the retail shopkeeper.

From the little knowledge I possess of the retail and wholesale trades, it is quite possible to have everything going on smoothly as between the original buyer and the wholesaler and the dealer, but very often the problem of exploitation arises as between the retail shopkeeper and the consumer. The Board of Trade, apparently, never trouble about that. They stop at asking the retailer what he has been charged for the commodity, and never come down to the consumer to see what he is paying to the retailer for that commodity. To show what can happen, the hon. Gentleman has told us this morning that the price of New Zealand butter is declining. He has not told us about the price of Danish butter. I have a list of prices here, and I must confess that, on the whole, his statement was quite correct, that the price of commodities has not gone up in this country. But I ought to warn him that I am positive, from the little information I have already got, that as a result of tariffs and the Customs Duties which have recently been imposed, there will be a tendency among wholesalers and retailers not only to pass on to the consumers the amount of the Customs Duties under the. Act of Parliament, but they will actually make profits by putting that transaction into operation.

Let me give an illustration. I have heard Chancellors of the Exchequer in the past say they were going to increase the duty on beer amounting to ¾d. a pint. Lo and behold! the brewer and the publican do not charge an extra ¾d. a pint; they put on 1d., and, therefore, the brewer makes more profit by virtue of the fact that there has been an increase in the price of beer consequent upon an increase in taxation. I would like the hon. Gentleman to be good enough to bear that point in mind, because I am confident that some dealers in this country will try to make profit, not from the transactions of ordinary trade, but by virtue of the fact that a tariff imposed upon a certain commodity gives them an opportunity for exploitation. I have already written to the Treasury about one case which does not belong to this particular problem of food, but I think it is worth while putting forward for the enlightenment of some hon. Members. A firm in the North of England, before the pound collapsed, ordered certain goods from the Continent at the price of £35, but as soon as the pound fell, the firm asked for £42. The duty was put on later, and it was increased by another £10, so that the total transaction, instead of £35, amounted to £52. We have so often heard that the foreigner pays all the duties that I was very much enlightened to learn that in this case the consumer in this country pays. I have asked the Treasury to be good enough to explain how that little sum was arrived at.

Let me say this without any bias, and if the working people would care to listen and to read what I have to say, it might do them some good: I am convinced that a food council with authority given by a government of this kind to inquire into exploitation will be of no avail because the more the capitalists exploit the people, the less exploitation they will think takes place. The only proper food council that has ever existed in any town is an efficiently managed cooperative society. That is the only food council that can do its work efficiently. I admit that the wholesalers and retailers of this country are, on the whole, straightforward and honest people; I have no hesitation in saying that; but laws are passed in order to prevent the few dealing unfairly with their fellows. I therefore support this Bill, and trust that the Board of Trade will be good enough to take note of the two or three pertinent points that I have raised.

1.30 p.m.


The hon. Gentleman the Member for Farnham (Sir A. M. Samuel) told us that it was very dishonest to take a pound note and say that it is worth only 10s. The opposite process of saying that it is worth £2 did not seem to stir him or the other experts so much. Yet it is that policy of deflation, of increasing the value of gold, that has been the cause of most of the present distresses of this country and the civilised world. Some years ago I read an interesting speech by the late Dr. Walter Leaf, a distinguished classical scholar and then chairman of the Westminster Bank. He said that immediately after the War we were faced with the problem of how to pay for the War. Should the burden be placed upon the old and rich people, or upon the younger generation who had not much money but had the power to work? He said that, as a deliberate act of policy, it was decided that the burden should be placed upon the young in order to stimulate them to work harder. The result has been that they have worked very hard, and have paid off a great deal of debt; yet the burden of debt has been increasing far more rapidly than they have been able to pay it off. A remarkable speech was made a fortnight ago by Sir Josiah Stamp, which was not reported as fully in the Press as it deserved to be. Sir Josiah said that since 1920, as a result of deflation, the burden of the National Debt had been trebled. Since 1924, the dead weight of the Debt had increased by £4,000,000,000. Of course, simultaneously all fixed interest-bearing securities had increased in the same way. He said that since last March, this increase in the burden of Debt had gone on at an even faster rate; and I understood him to say that the Debt was now increasing ten times faster than it was being paid off. That is an enormous burden which is crippling industry and destroying trade. The Lord President of the Council, in a speech a short time ago, said that we must avoid at any price a situation occurring in this country that has occurred in Germany, when the mark went to nothing and was destroyed, and the French Army was occupying the Ruhr. I do not think that there is a chance of anything like that happening in this country. But we must remember that the destruction of the mark was a deliberate act of the German Government, and, disastrous as it was to in- dividuals, and tragic as was its operation, Germany would have been in a much worse position to-day if it had not happened. It would have been in an impossible position, because by taking that step it cleared off the whole of its internal debt. Sir Walter Layton has stated that if reparations and war debts were done away with, Germany would be left with a debt of only £8 per head, and this country with a debt of £150—


Do I understand the hon. Member to suggest that the action of the German Government, which pauperised the working classes, should be followed by the Government of this country?


I have said that there is no chance of anything of the sort happening in this country, and that, tragic as it was in its operation, it has rendered it possible for Germany to carry on; otherwise, it would have been crushed by its internal debts doubling and trebling as a result of world deflation. As I was saying when the hon. Member quite rightly interrupted me, the result is that, if all reparations and war debts were cleared away, we would have a debt of £150 a head, whereas Germany would have a debt of only £8. That is a point which is worthy of reflection by every thinking person. This is the problem of the day that has to be tackled, because the future is not always going to be mortgaged to the past, and those who are engaged in constructive and productive industry, whether employers or employés, will not for ever allow themselves to be strangled by the rentier, the moneylender, and the financier.


I want to, ask the Government one or two questions which are necessary on these occasions, particularly as we have no Opposition in these days. It is necessary that the interests of the House of Commons should be looked after. This Bill is for all practical purposes an Expiring Laws. Continuance Bill. In the Debate of 21st September last, the then Chancellor of the Exchequer made it plain that the first Bill dealing with the Gold Standard was a temporary Measure for six months. Now, however, when the position has totally changed, we are being asked to carry it on for a further 12 months. I do not object to that, but I do object to the fact that in one Bill we are dealing with the Gold Standard and the Foodstuffs (Prevention of Exploitation) Act. It is not right that the House should be asked to deal with two emergency measures in one Bill. We have heard little or nothing on the Foodstuffs Act and a great deal on the Gold Standard. It is obvious that there is not such an emergency that both Bills are needed for a further period of 12 months. Will the Government tell us whether it is their intention to keep these powers under the Gold Standard (Amendment) Act?

I gathered from the excellent speech with which the Bill was introduced that in the main they are not using their emergency powers, and that one Order was withdrawn the other day; and in giving them these tremendous powers for a further period we ought to have some assurance that if things are anything like normal next year they will withdraw them. The dangers are obvious. One had only to listen to the speech of the hon. and learned Member for East Bristol (Sir S. Cripps) welcoming these emergency powers. He was mild; but if it had suited his purpose he could have made an excellent speech showing that these emergency powers might be very valuable in the course of the next three or four years if it were desired to manage the banks entirely. [HON. MEMBERS: "Hear, hear!"] My opinion is receiving confirmation. The real reason why the so-called Opposition like this Bill is because they realise that such powers may be useful in the future, if the Government are so foolish as to leave them in existence. Therefore, I ask for an assurance from the Government that when they feel the present troubles have passed they will withdraw the Bill. If the Government are in any doubt as to whether this is an emergency Measure or not, I would remind them of the speech of the late Chancellor of the Exchequer, in which he said more than once that for all practical purposes it was an emergency Measure and in the excellent speech made in introducing this Bill it was said that the steps taken by the Government had been successful, in spite of the prophecies of Mr. Henderson and others. As those steps have been successful, although it may be necessary to keep these powers in reserve for a further 12 months, we are entitled to an assurance that the Government do not intend to keep them in reserve definitely, because if there were a change of Government other uses might be made of them.

There is a further point which I wish to put forward. The hon. Gentleman in introducing the Bill said an Order under the Gold Standard (Amendment) Act had been withdrawn a few days ago, but that certain powers are retained in regard to the Foodstuffs (Prevention of Exploitation) Act. As far as I was able to understand his speech, I do not think any orders have actually been put into force under the latter Act. As far as the first Act is concerned, I hope the end of the emergency may come very quickly; but as regards the question of food prices, I frankly bold the belief that just as we have had a drop in prices over a long period so a sudden rise in prices may come about. Therefore, I think it is very necessary to leave the powers in respect of food prices in the hands of the Government, because I am genuinely afraid that when the rise in prices comes unfair advantage will be taken of it. Personally, I have come across only one or two instances of difficulty. There was one case affecting the farming community. They had the price of their feeding stuffs put up owing to the fall in the value of the pound. I wrote to the Minister of Agriculture at the time, and I believe that he was able to stop it, in the main. At any rate, we ought to have an assurance from the Government that they have the necessary powers to deal with a question which does affect the farming community.

I apologise for having troubled the House for so long. [Interruption.] I have no doubt the hon. Member is glad to hear me; that has been his privilege on a good many occasions. Purely out of kindness, I had not intended to say anything with regard to the position of gold, but there has been considerable discussion about it, and I would like to express a point of view which I do not think is very far from the truth. From the sequence of speeches on the Gold Standard which we have had from more or less learned Members one gathers that the only real use of gold currency is to serve as a weighing machine for the purpose of weighing goods, and that ever since the War one country after another has been playing the fool with the machine, if I may so express it. One country has "gone off marks or francs," or whatever it may be, and then we went off gold, and undoubtedly for a time we did gain a considerable advantage for our export trade but directly the "stop" came we ceased to get any advantages at all. I do not think for one moment that we can fix the value of the pound at 20s., as it used to be, or at 15s., but it is essential for this country and for every other country to have a recognised standard for the use of money for the purpose of weighing goods.

Mr. DEPUTY-SPEAKER (Sir Dennis Herbert)

From a point of Order which the hon. Member himself raised some time ago, I understand that what he himself is now saying cannot be in order.


I do not think I said anything was out of order.


I hope the hon. Member will take care to keep his own remarks in order, because on this Bill we cannot go into questions of currency and the Gold Standard generally.


I do not think I said anything was out of order, because if I had done so, it might have seemed that I was critical of the Chair, and that is the last thing I should desire to be. After all, this is a currency Bill and we have discussed currency the whole of the morning, and I believe that it will be essential, sooner or later, to come to some stabilisation of the currency. Whether the Government will need special powers to deal with that stabilisation I do not know. It is no use imagining that you can get a permanent advantage by dealing with the currency in this way. We ought to settle the question of the currency, and I do not think that we ought to have many more composite Bills of this character.


I only desire to reassure the hon. Member for Torquay (Mr. C. Williams) that on these benches we do not desire to emulate him in the business of talking. The business of an Opposition is to oppose those things which they do not wish to see passed. We state our views on the Measures which the Government bring forward, but we do not wish to bore hon. Members on a Friday by making speeches which often have no relevance to the subject under discussion. I have often admired the hon. Member for Torquay, especially when he is dealing with such a subject as grey seals, but that kind of thing only wastes time. On these benches we only oppose Government Measures when we really wish to oppose them. It happens that the Measures placed before us this afternoon are Measures with which we thoroughly agree, and we are glad that they are to be extended for another year. We should have liked to amend them, but we cannot do that, because they are simply continuing previous Measures. In these circumstances, perhaps we may be allowed to go home early.

Question put, and agreed to.

Bill read a Second time.

Bill committed to a Committee of the Whole House for Monday next, 14th March.—[Captain Margesson.]