HC Deb 25 May 1932 vol 266 cc375-507

The following Amendments stood upon the Order Paper:

In page 12, line 30, to leave out the words "Exchange Equalisation," and to insert instead thereof the words "Price Stabilisation."—[Mr. Mabane.]

In line 32, after the word "the," to insert the words "Price Stabilisation and."—[Sir S. Gripps.]

In line 32, to leave out the words "Exchange Equalisation," and to insert instead thereof the words "Price Stabilisation."—[Mr. Mabane.]

The DEPUTY-CHAIRMAN

The first Amendment in the name of the hon. Member for Huddersfield (Mr. Mabane) is unnecessary. It merely deals with printing. The next two Amendments in the names of the hon. and learned Gentle- man the Member for East Bristol (Sir S. Cripps) and the hon. Member for Huddersfield are out of order. They would require a fresh Financial Resolution.

Mr. ANEURIN BEVAN

I beg to move, in page 12, line 34, at the end, to insert the words: (2) There shall be appointed, as soon as may be, a committee representative of all sections engaged in industry to advise the Treasury as to the control of the account. When the Financial Resolutions were being discussed an attempt was made on this side of the House to secure the appointment to the committee which this Amendment aims at. It has been explained that the purpose of the Exchange Equalisation Account is to try to secure that the Bank of England shall have at its disposal sufficient funds to enable it to prevent any fluctuations in the gold value of sterling which might accrue as a consequence of speculation. If one thing has emerged from the financial discussions of the last few weeks more than anything else, it is that there is grave disagreement in all parts of the House. I cannot do better than base my case upon the very interesting and informative speech of the right hon. Gentleman the Member for Hillhead (Sir R. Home) on the Second Reading. He offered certain criticisms of the financial policy of the country and suggested that an attempt should be made to obtain from the Government a statement as to its future intentions and as to the point at which the Treasury intends to stabilise the external value of sterling and said it was indispensable to the good conduct of business that those engaged in commerce and industry should be able to base their calculations and their contracts upon a stable value for the external value of currency.

We ought to try to elicit from the Government some statement as to its intentions, whether, for example, it intends that the gold value of sterling should be stabilised at its present value and as to whether it should be encouraged to move upwards or downwards. There are some who hold the view that the external value of sterling should be encouraged to go down, there are some who hold the view that it should be encouraged to go up, and there are some who hold the view that it is not very important whether it is higher or lower but that it should stay at the same figure as far as possible, and that, so long as it is kept stable, industry has not very much to fear, because the cost of production and various things can adjust themselves to the new values and business can be carried on provided fluctuations do not take place. It is, therefore, clear from the speeches that have been delivered that not merely Socialists, not merely Liberals, but Conservatives, hold the view that the proper safeguarding of the interests of industry and commerce cannot be entrusted to those who are at present in charge of our financial policy.

The history of the last few years, particularly since 1925, has gone to show that the City and the Bank of England pursue a policy which does not accord with the interests of producers. The financial history of the last seven years has disclosed clearly that the City and the Bank of England are not accessible to influences which are necessary if the interests of industry and commerce are to have a fair share in determining the financial policy of the country. If the men who have to go to the money market or to the Bank for money had had as much influence upon City policy and the policy of the Bank of England as those who live primarily by lending money, we should never have returned to the Gold Standard at the old gold parity in 1925.

4.0 p.m.

I think it is a fair inference to draw from the speeches that have been made that that is the conclusion that has been formed by right hon. Gentlemen in the party to which we are opposed. The organs discharging the two separate functions of providing goods and providing money have got so far apart that there is grave danger of the organ of finance and credit pursuing it own course entirely regardless of commerce and industry. To put it shortly, it is clear from what has been disclosed that industry and commerce in this country have not been able to influence the credit machinery, the policy of the Bank of England, in a manner which would have been, perhaps, more suited to the interests of commerce and industry. Consequently, this Amendment attempts to secure that a liaison shall be established between the organ of finance and credit and those institutions primarily engaged in the produc- tion of goods, and it is a happy feature of this country that our industry is so organised that it is easy for us to put our finger on bodies which can supply the representation of those interests on a committee. Those two interests of capital and labour are in this country more highly organised than they are in any other country in the world. It is also a happy coincidence that those two organisations, the Federation of British Industries, on the one hand, and the Trades Union Congress on the other, have independently issued some observations upon what they consider to be the financial policy of the Bank of England, and as to how our currency could be regulated.

This proposition, therefore, seems to me to be a reasonable one which should secure support in. all parts of the Committee. It is not a party point which is being pushed, but simply the point that the gulf which has developed in the course of years between the City and industry, between the credit machinery and the industrial organisations requiring the use of credit, should be bridged. That gulf is not being bridged at the moment by Treasury control. Experience has shown us that the Treasury is much more under the influence of the Bank of England than the Bank of England is under the influence of the Treasury, and that, therefore, the Treasury cannot properly be entrusted with this task. It would, consequently, appear to me to be a perfectly proper proposition that these two organisations, the Federation of British Industries and the Trades Union Congress, as primarily representing the producers' interest, the proprietary side of capitalism, should form themselves into a liaison committee for the purpose, from time to time, of seeing to it that in the councils of the Treasury and the Bank of England, South Wales and Bradford sometimes get a little say. That is the proposition, and I think hon. Members in all parts of the Committee will agree that it is essentially a modest one. I am not attempting to hinge too much upon it. I am not going to say that if this Amendment be accepted a revolution will be accomplished in the financial machinery of this country. But I am suggesting that, sometimes, when important decisions on financial policy are taken, it will be an excellent thing for a committee of this kind to be able to bring fresh minds to bear upon whatever decision is about to be taken.

One of the major criticisms made against our banking system is that the City of London always knows a lot more about the Antipodes than about Bradford, and is able to give exact information as to the credit of a person in Bermuda, South Africa or Turkey, but is quite uninformed about any would-be borrower in South Wales or Scotland. It is largely, I suppose, the consequence of the history of our banking institutions. Industry, of course, in this country is the parent, whereas on the Continent, I suppose, it would be more true to say that in many cases industry is the offspring of the banking system. As a result, the Continental banks have much more intimate information as to the industrial conditions of their own country than have the banks in this country. How is this diversity of interests to be reconciled? It is a short view to say that there is a fundamental conflict of interests between our banking and industrial systems, but it is perfectly true to say that it is a short view which has generally been taken by our bankers, and that our banking policy in the last six or seven years has so gravely depleted the credit resources of British industry as to undermine the resources under which the banking system itself obtains its credit for foreign investment. If our banking system is to occupy the important place in the financial structure of the world it has had up to now, it can do so only on the basis of a healthy, an efficient and a well-organised home industry to provide those resources which the bankers are so willing to lend to other parts of the world and are so reluctant to lend to Great Britain itself.

I need only point to the last crisis as a justification for the contention I am advancing. The last two or three years immediately preceding saw millions of pounds leave Britain for Germany, though the City of London was running a great deal more risk in lending money to Germany than in lending it to Rhondda or Bradford. It has been a peculiar characteristic of our recent financial history that risks have been undertaken far more readily abroad than at home. The Federation of British Industries has directed our attention to this. They have produced a pamphlet called "A New British Financial Policy," in which they point out that our banking system is insensitive to the demands of British industry. It recommends In the matter of internal investment, the control of the direction of new investment in such a way as to secure the maximum of advantage to British industry in obtaining the necessary capital for desirable developments at home. I would like to ask how this important capital organisation is going to bring its influence to bear on the day-to-day policy of the Bank of England and the Treasury unless it has the means of focussing that influence? The influence in this House cannot be brought to bear in a sustained way on that policy. It cannot be argued that the Bank of England itself is so sensitive to the demands of British industry that this committee is unnecessary. The very opposite has been proved to be the case, because, as has been pointed out by gentlemen whose business experience, obviously, is much more profound than my own, and whose information is much more reliable, our present financial crisis is indeed a crisis of disequilibrium between the lender and the borrower.

The right hon. Gentleman the Member for Hillhead has brought forward his own solution of the difficulty. He would solve the problem by lending more and borrowing more in the hope that inflationary results would follow, so that the Teal burden of the borrower would subsequently be reduced. We are not told what is to be the consequence when there is the inevitable fall in price, and the borrower is more deeply in debt than ever. The right hon. Gentleman's suggestion for our difficulty is this: There are plenty of people with money to lend; there are plenty of persons who are prepared to borrow, but those who are prepared to borrow are unable to borrow because they are not credit-worthy. If we can persuade the joint stock banks to lend more money, or, rather, if we can put the joint stock banks in such difficulties that they are prepared to take more risks—because that is the financial mechanism he has in his mind—and are bound to lend, then the joint stock banks will take more risks, they will find borrowers, and the consequence will be that demands will be made upon goods, the price level will rise, and the total indebtedness, in capital value, of the borrower will be reduced.

I can, of course, understand and sympathise with the point of view which is being put. It is a short-distance solution for our problems. It is not a longdistance solution, because after the credit expansion cycle has reached its consumation, prices cannot rise for ever. That is the difficulty. The remedy of all inflationists is simply a dose of oxygen. They say, "The patient is dying. Let us do something to keep him alive. We cannot make a rapid cure, but we can keep the poor old thing alive in the hope that occult sources will bring about a restoration, and he will be made into a healthy person again." The right hon. Gentleman suggests that we can, by means of credit inflation, by means of pumping this money into the circulatory system, decrease the real burdens of the borrower, and, at the same time, decrease the demands made upon the national income by those who live on fixed interest-bearing securities.

The DEPUTY-CHAIRMAN

I think the hon. Member is attempting to discuss a matter I have already ruled out of order.

Mr. BEVAN

I have been arguing, first, for the setting up of a committee, and trying to show that there is a non-party case for it. I am now seeking to show the direction in which that committee would be likely to influence the credit and financial policy of the country.

The DEPUTY-CHAIRMAN

I would remind the hon. Member that, under Subsection (3), the Treasury can only cause investments in securities or in the purchase of gold for checking undue fluctuations. The hon. Member was getting on to the question of joint stock banks, which is far outside the scope of this Sub-section.

Mr. BEVAN

My difficulty, of course, arises out of the fact that I have been attempting to follow the Second Reading Debate. Perhaps you, Captain Bourne, will guide me. There is nothing at all in the Finance Bill which says that the Exchange Equalisation Account shall be used for any purpose other than the checking of fluctuations in the exchange value of sterling.

The DEPUTY-CHAIRMAN

In the Second Reading Debate it is, of course, always in order to point out what the Government might have done, and not what they have done. I think that the right hon. Gentleman the Member for Hillhead (Sir R. Horne) was dealing with a policy which the Government might have adopted.

Mr. BEVAN

I have read the speech of the right hon. Gentleman the Member for Hillhead with great care. It required careful reading, and re-reading. I gather from the remarks of the right hon. Gentleman that he was not complaining about what was not included in the Bill, but he was speaking as to what could be done with the Exchange Equalisation Account. He was attempting to show that the Exchange Equalisation Account could be used, not merely for the purposes contained in the Bill, but also for the purpose of bringing about internal inflation. But explicit as the right hon. Gentleman was, he did not make it clear to the House as to how the Exchange Equalisation Account was to be used for the purpose of bringing about internal inflation. If he is going to intervene in the Debate, perhaps he will deal with the hiatus in his speech. I submit to your Ruling, Captain Bourne, and I will not attempt to pursue the inflationary argument, except to say that if the stabilisation of the internal value of sterling is in itself a desirable objective, internal stabilisation at a higher level is equally desirable. We want, therefore, to bring this argument to bear upon the financial policy of the country.

We suspect that one of the purposes behind the present financial policy of the Treasury is to secure a rise in internal prices so as to bring about an effective reduction in the purchasing power of working-class people. [Interruption.] The hon. Gentleman the Member for East Aberdeen (Mr. Boothby) says he wishes that it were true, but, whether inflation be voluntary or whether it be involuntary, you cannot reduce the value of the incomes of the rentier class without at the same time reducing the values of the wages of the working class, unless there is an increase in wages to correspond with the reduction of purchasing power. I have yet to be told that simultaneously with the rise in internal prices and the decline in the value of wages the Federation of British Industries will make a handsome contribution to the fighting fund of the Trades Union Congress so as to raise wages at the same time. I have yet to be told that that is their policy. The right hon. Gentleman warned us on the Second Reading that unless this policy was brought about it might be necessary drastically to reduce wages. What he meant was that we might be faced with the political consequences of our compulsory reduction, whereas, if you inflate, it would be very much nicer. It is so much more polite to accomplish the same result in a clandestine manner. You take away the value of working-class wages and they do not see it for a time. Acting upon that argument, the right hon. Gentleman, and the interests which he represents with such eloquence in this House, will be able to make a handsome profit.

We desire to have an instrument at our disposal to bring to bear on the financial policy of this country from day to day the demands, interests and requirements of the working-classes of the country. Not only should the interests of the moneylender be represented, but also the interests of the borrower and the interests of that class in the community upon the preservation of whose purchasing power the ultimate stability of any economic system depends. I was stopped from widening the argument into a general consideration of currency policy and the banking system, but I earnestly urge upon the Committee sympathetic and thoughtful consideration for a proposition which cannot do other than knit together our financial and industrial policies in a way in which they have not been knit together before. I desire to weave them together in a central organisation, so that from the Treasury and the Bank of England there may emerge a policy to satisfy, not only the sectional interests—the shortsighted interests of the moneylending class—but the interests of the whole of the industrial community.

Mr. PRICE

I desire to support the Amendment. I was somewhat surprised at the smile which came over the faces of some hon. Members opposite at the purport of the Amendment. Hon. Members opposite will readily admit that investors in industry have recently been complaining strongly of the fact that Par- liament has no control over the Bank of England, and that the question of money, the stabilisation of currency, the fixing of prices of sterling, and the getting of some system whereby fluctuations shall be steady and shall not violently rise and fall, are very desirable. The Amendment aims at the Treasury being advised by practical men of both sides whose financial interests are in industry. When industry is in a bad way they are the sufferers. Their only possible outlook is to endeavour to get a stabilisation of sterling which will compare with the general position of the country industrially and give, what the industries have never yet had, a voice in the stabilisation of our international and our internal currencies. It is true to say that in recent years our industries, particularly our export industries—take the coal industry, if you wish— have suffered a great deal owing to the fact that currency abroad and sterling have been fluctuating in and out week by week.

The Exchange Equalisation Account, when all is said and done, is a national fund. A sum of £150,000,000 sterling is being found by the nation, and therefore we suggest that in concentrating efforts upon stabilising sterling, the people with, investments in industry, and certainly those who have to obtain their bread and butter from industry, ought to have a say in the giving of advice as to the best way in which to deal with the matter. There can be no more capable bodies than those mentioned by my hon. Friend—the Federation of British Industries and the Trades Union Congress. You have there able and efficient men with interests on both sides; one body representing investors, and the other representing working men whose bread and butter has to be earned in industry. The Government ought to accept the Amendment, for we should then feel that at least a body whose whole interests were staked in industry would have a say in international currency and in the stabilisation of sterling.

Mr. HAMMERSLEY

I think that there will be a considerable amount of sympathy shown by Members of the Committee in all parts of the House with the underlying idea which has actuated those who have moved the Amendment. There is a feeling that the opinion of trade and industry in the decision upon these financial questions is in danger of being overlooked. That feeling is based upon previous experience. The financial policy of this country has been one which followed the recommendations of the Cunliffe Committee, which recommended the return to the Gold Standard. It is a policy which has been adopted and adhered to by all Governments since that time, and a policy which, in fact, has proved to be wrong. There is a legitimate fear in the country of a policy which, though founded upon sound premises—a policy which realises that we are a dual country, a country of producers as well as a rentier country, a country of lenders—has subsequently proved to be incorrect. An appreciation of the fact that more of the interests of industrialists, quite apart from considerations of party, should be brought to bear upon this question is running through the country to-day. The fact is that the country is vitally concerned with the income it gets from foreign investments. A sum of £250,000,000 is the natural expectation of that section of the community's interests which have been protected in the past by the action of the Treasury. The commissions amount to £65,000,000.

4.30 p.m.

When the Treasury put forward the view that it was desirable, in the interests of the country, to protect the inactive interests of the community, because, in their view, the active interests could look after themselves, they were putting forward a view which could reasonably be argued and might have turned out to be right, but which in point of fact has turned out to be wrong. To-day we find that the particular interests which have been protected have failed the country more than the interests which were not protected. There has been a falling short, compared with 1929, in the national income from the inactive sections of the community of something like £120,000,000, whereas the adverse visible balance of trade has only fallen short by something like £30,000,000. So that this policy, which was blind to the fact that interest could only come if you maintained the producers in a condition of profit-earning, proved, both from the point of view of the rentier class and of the producers, an unfruitful policy. It would appear from an im- partial examination of the facts that in the Treasury there are few who realise that you must maintain the trade and industry of this country upon a profit-earning basis; otherwise, the whole structure of our economic foundation is bound to come down. The failure to realise the necessity of helping British trade is to be found in the example of the last few years. Through the money machine £80,000,000 of British money is now held fast in Germany. Frozen credits. Those frozen credits were credits which we refused to any steps to reorganise British industry. How much better it would have been if those £80,000,000 of frozen credits of British money now in Germany had been frozen in this country. Our basic trades, cotton, coal, iron and steel are in some respects out of date and needing new capital, and it is an extraordinary state of affairs that it should be considered a sound policy to lend through the money machine while it is unsound policy to lend direct in order to re-equip the very basis on which this country has built up its trade. I do not propose to follow the Mover of the Amendment in the arguments with which he dealt with the general situation, but it might be pointed out that the exact way in which the Treasury might get outside opinion is perhaps not carried out in the proposed Amendment. The Government ought to be aware that throughout the country as a whole there is a very strong feeling that Treasury opinion should be modified and should take into consideration the opinion of manufacturers and producers through whom and through whom alone we can return to prosperity.

Mr. CHARLES WILLIAMS

I do not wish to go into the obvious fact that, once again, we have a committee recommended as a remedy for our evils, but I wish to make one single point. I have listened to many Debates and speeches on the question of the banks. In the suggestion that we should have a committee, or whatever it may be called, to deal with this matter, we are looking at it from the point of view that it is the primary duty of the banks to help industry in this country. There I agree, but in that assumption we have missed one vital point in the building up of British industry. Fifty or 60 years ago, and even since that time, so far as I am aware, the average person engaged in industry in Great Britain considered it his duty by thrift and care to build up reserves in his own business. That is an essential thing in these days. It was out of those reserves that the business was developed. From time to time, as the reserves grew—

The DEPUTY-CHAIRMAN

The hon. Member is now raising a general discussion. We are discussing whether or not there should be a committee to advise the Treasury or to consult with it for the purpose of ironing out the fluctuations in exchange.

Mr. WILLIAMS

I realise that I was led away by other speeches and I will not develop that point, but I should like to say that it has been stated in connection with the Amendment that the use of the committee would be, for instance, to divert money to the Rhondda Valley. While I do not wish to deprive the Rhondda Valley or any other part of the country of money, I do say that if we appoint a committee of the kind suggested, which will have as its purpose the diversion of money to this or that area, it will be taking out of the hands of Parliament and putting into the hands of a committee the control of money. After all the attacks we have heard on the setting up of committees it is remarkable that the Socialist party should propose the appointment of another committee.

Mr. A. BEVAN

I am sure the hon. Member does not wish to misrepresent me. When I spoke of the Rhondda Valley it was simply in order to make a point. Last year a good deal of money was lent and we were told that it was for the provision of swimming baths in Germany, and now the Germans cannot pay back the money. If we are going to lend money to build swimming baths abroad we might as well keep the money here.

Mr. WILLIAMS

That was last September. Perhaps the hon. Member has forgotten that he supported the Government that was in power at that time. I opposed it. The hon. Member ought not to blame me, unless he thinks that I took up too little time in my opposition. My point in drawing attention to the Rhondda Valley was to say that, while I would have nothing to do with the lending of money outside this country to foreign countries and I should like to divert it to our own country, it ill-becomes a member of the Labour party to say that they want capital, after the numerous attacks on capital that have come from the Labour party in the past. It is a hopeless idea that we can remedy the depressed state of industry simply by setting up a committee of the kind proposed. Industry cannot depend for its prosperity either on the setting up of committees or upon Parliament. If industry is to recover it must recover not by means of committees but by means of its own work within its own industry, by reorganising itself, and thereby being able to command those supplies and resources which are necessary under modern conditions. It is not advisable to set up such a committee to deal with the business of people who in all probability are much better able in their own industries to deal with matters under their own direct concern.

Sir STAFFORD CRIPPS

The hon. Member for Torquay (Mr. C. Williams) seems to be suffering under a most profound misapprehension as to what it is we are discussing. I can assure him that we are not discussing a committee which is going to allocate funds to anybody. We are discussing whether, the House having voted that a fund of £150,000,000 be put at the disposal of the Treasury, this fund should be controlled in the interests of industry, with the direction and assistance of industry, or whether it should be controlled purely by the Treasury and the Bank of England. As the Clause stands and as it has been explained by the Financial Secretary, we understand that the fund, for which the Treasury will assume ultimate responsibility, will be administered from day to day by the Bank of England and that there will be no committee or other body to protect the Treasury—if I may use the word in an inoffensive way—from the policy of the Bank of England.

We do not think that the Treasury at the present time is very well equipped for the purpose of obtaining an insight into the industrial policy and requirements of this country. It is not their function. It is a function that they have never been called upon to perform and a function which, as far as I know, they have not attempted to perform. They have always regarded the Bank of England as their sole advisers in matters of this sort. At the present time from all sides there is a great deal of criticism of the course which the Bank of England has pursued in the past and there are a great many people, among industrialists particularly, who doubt the capacity of the Bank of England, with its present constitution, to be able to take the truly industrial view as against the purely financial view regarding exchange matters and questions of that sort, and those people are anxious that the Treasury should have available in some form or another—whether the form suggested in the Amendment or some other form is a matter of small importance—a source of information and advice upon the purely industrial side of this problem.

The Treasury are assuming a very large responsibility. This fund is a large responsibility from the amount of money they will handle and the risk which they must run. It is also a very large responsibility because by it they can to a great extent control the level at which sterling stands as regards various foreign exchanges, and it is that factor of being not only able to control or iron out the fluctuations but also being able to control the flight of sterling that gives a great many industrialists and workers in industry a good deal of anxiety. They have at the back of their minds the feeling that the policy of the Bank of England may be ultimately to go back to the Gold Standard, whether at the present parity or at some other parity, and they are most anxious that in the administration of this fund especially in the early stages, when the policy under which it is to be administered is being worked ont, representatives of all classes in industry should have the opportunity of putting their views in a confidential way before the Treasury, not through Parliament, because these matters, as the Financial Secretary has told us, are such that very often it is inadvisable to discuss them in Parliament.

Intimate questions of policy are involved, and the right hon. Gentleman would not welcome it if we were to ask him by question and answer, or by putting down Resolutions, or in any other way, to disclose the day-to-day or the month-to-month policy which is being followed in the administration of the fund. If he tells us that it is desirable and he is anxious that the matter should be raised from time to time in the House of Commons we shall be able to take means of raising it, but I take it that ho adopts the attitude, which I think he has already adopted, that this is a matter which he is not willing to have discussed, especially as regards any detailed administration, in the House of Commons, because of the reactions which that publicity might have upon the operations carried out under the fund. That being so we think that there should be some form of advisory or consultative body which could get into touch with the Treasury and put before the Treasury the opinions and desires of industry upon the administration of the fund as against the purely financial interests of the Bank of England.

This fund, which will be operated by the bankers, will to a large extent affect the business which they are doing purely as financiers. A person who has this fund at his back in order to control foreign exchange can be pretty certain in the speculation that he makes upon foreign exchanges. It will be very nearly betting on a certainty if he knows the policy which is to be followed and what is to be done in order to regulate the exchange from time to time. Therefore, there will be a tendency for industrialists to believe that the financial authorities are not always using the fund in the best way for industry as distinct from the best way for finance, and the two matters might very clearly clash, as the history of the past two years has shown. I hope the right hon. Gentleman will give us some assurance that some such method as that indicated in the Amendment will be followed and that the Treasury will in some way or other keep in intimate touch with industry from day to day as regards the administration of the fund, and will not simply leave it for a discussion in. the House of Commons, when we shall be told that it is inadvisable to raise the matter, or purely to administration by the Bank of England, the Treasury alone seeking advice from the Bank of England as regards the determination of their policy.

The FINANCIAL SECRETARY to the TREASURY (Major Elliot)

The request made by the hon. and learned Member for East Bristol (Sir S. Cripps) is reasonable to this extent, that industry should have its interests consulted in the long-term financial policy of this country. Everyone will agree with that proposition. The question then is whether this is the best method by which it can be most easily and effectively secured. Let us see what the fund is. In Sub-section (3) we have these words: The Treasury may cause any funds in the Account to be invested in securities or in the purchase of gold in such manner as they think best adapted for checking undue fluctuations in the exchange value of sterling. Those are the marching orders, the general direction, given in the Sub-section. The policy has been laid down. Now comes the question of the management, the day-to-day management of the details, to ensure that the policy of checking undue fluctuations in the exchange value of sterling is in fact accomplished. I must rule out all the fascinating speculations of the hon. Member for Ebbw Vale (Mr. A. Bevan). I refer him to Sub-section (7) where it says that: The Account shall in every year until it is wound up be examined by the Comptroller and Auditor-General in such manner as he, in his discretion, thinks proper with a view to ascertaining whether the operations on and the transactions in connection with the Account have been in accordance with the provisions of this Part of this Act. I ask him to consider what the Comptroller and Auditor-General would say if he found that the Chancellor of the Exchequer and myself had been conducting the fund in accordance with the fascinating prospect which he unrolled before us? He would certify that we had been maladministering this fund and we should have to make good out of our own pockets enormous sums of money, running into several millions sterling. That would be a financial strain on the Chancellor of the Exchequer and myself.

Mr. BEVAN

There is no indication in the Bill as to the point at which fluctuations are to be ironed out, and that is the whole issue.

Major ELLIOT

It is not a fund for the purpose of pegging the exchange.

Mr. BEVAN

From where and to where is it to fluctuate? If anything fluctuates it must fluctuate around a point. What is the point?

Major ELLIOT

The hon. Member who is acquainted with modern methods of thought will realise that when you are drawing out a graph you make your point high or low within the curve you are making. It is most undesirable to get violent bumps from point to point. You may pour oil on the sea which will have the effect of stopping the waves breaking, but it wall not stop the tide coming in, and the tides of industry cannot be controlled by a fund of £150,000,000 sterling. That is a task beyond the resources of such a fund. The purpose of the fund is set out in the Clause namely, that it is to be used for checking, undue fluctuations in the exchange value of sterling. The policy of the country will be considered elsewhere, by industry, by the Government, and by hon. Members of this House. When they say why should Rhondda and Bradford be left out, I say that Birmingham and Glasgow may be good representatives of Rhondda and Bradford, and the Chancellor of the Exchequer and the Financial Secretary to the Treasury are not unlikely to be acquainted with the views of industry in Glasgow and Birmingham.

The broad general lines of financial policy in relation to industry must be considered not in relation to this Fund but in relation to the general policy of the country. This Fund is altogether too small to have the wide effects which the hon. Member for Ebbw Vale desires. Then comes the question as to whether it is desirable to have such a committee as this to deal with the day-to-day or month-to-month policy. I do not think it is. I do not think that such a committee could be made acquainted with the day-to-day or month-to-month policy of the expert management of such a Fund.

Sir S. CRIPPS

It is the policy of the administration, not the details.

Major ELLIOT

But the day-to-day details are the policy of administration. It is a question of what funds are being bought or sold, what securities are being mobilised or allowed to remain; these are, in fact, the day-to-day transactions. Such a committee as is suggested to represent industry could not have the necessary information communicated to it to be able to consider it unless it made it a whole time task and gave just as close attention to it as if it were an exchange house in the City of London. With every sympathy with the general purpose desired, I ask the hon. and learned Member whether his point is not met not only by the general sketch of the proposals but by the fact that we accepted an Amendment which he proposed for the purpose of clarifying the position, and have in fact incorporated it in this Clause. We accepted an Amendment to insert the words shall be under the control of the Treasury. in the Financial Resolution, and on that Resolution we have founded this Clause. The only other question is as to who will protect the Treasury against the Bank of England. The hon. and learned Member for East Bristol will. The hon. Member for Ebbw Vale will protect the Treasury. The right hon. Member for Hillhead (Sir R. Home) will protect the Treasury. The hon. Member for East Aberdeen (Mr. Boothby) will protect the Treasury against the Bank of England. There are many persons in this House who will represent the views of the country to the Treasury, and the Treasury is not going to be unmindful of these things because the Chancellor of the Exchequer and the Financial Secretary will have to answer in this House for the bias they give to the financial policy of the country. I hope the hon. and learned Member for East Bristol will consider that his point has been met and will withdraw the Amendment.

Sir S. CRIPPS

I do not think the Financial Secretary has really met my point, but at the same time I understand that he has given the Committee the invitation that these matters should be discussed as fully as possible on the Floor of the House. We shall certainly bear that in mind and give the House every opportunity of discussing the operations of the Exchange Equalisation Account and the actions of the Treasury in relation to it.

Major ELLIOT

The hon. and learned Member must not deceive himself. I hope I did not give him that impression; if I did it was quite wrong. I said most specifically that the day-to-day transactions were not in my view suitable for the sort of examination which he desired. but that the long-term financial policy of the country could be discussed. I cannot go any further than that.

Sir S. CRIPPS

I was dealing with the statement that he desired myself and others to protect the Treasury from the Bank of England. We should not like to let that protection remain inoperative for long periods; it should be given from time to time, from month to month. Having welcomed this protection, I am quite sure that he will not now say that he wishes it to be put off to some distant date. I want to ask him to be a little more specific in regard to Sub-section (3). The purpose of this fund, as I understand Sub-section (3), is that the Treasury may use it for the purpose which they think is best adapted for checking undue fluctuations in the exchange value of sterling. Let me take the case which the hon. and gallant Member put of the graph, which goes up and down in a series of saw-like fluctuations. It is obvious that it is possible to iron out fluctuations on two lines, indeed on any line intermediate between two lines, one of them through the maxima and the; other through the minima of the curve variation. One can iron out at the top or at the bottom, or in any intermediate level, and it is the fixation of the level at which the ironing out takes place which is so important from the point of view of the industries of this country. That is a matter which at this stage the hon. and gallant Member can say nothing about. The Government cannot say whether it is going to be on a dollar exchange at 3.60 or 3.20, or at some intermediate point. But they must have in view the ironing out at some particular point, or ironing out with a creep in one direction or another. It may be that they will iron out at 3.5.

The DEPUTY-CHAIRMAN

I do not want to interrupt the hon. and learned Member, but I think he is now dealing with matters which should come up on the question of the Clause standing part. If we have a discussion now, we must not take it then.

Sir S. CRIPPS

These are matters which are so vital that industry should have some say in regard to them. It is not a question of the day-to-day fluctuations, the ironing out on a certain path, but it is the line upon which you iron out which is so important, and it is upon that question that we are anxious that industry should have a say. If the Financial Secretary tells us that it has already been determined upon what line to iron out and that it is only a question of dealing with fluctuations one side or the other of that line, then it becomes a purely mechanical performance. Is the Financial Secretary going to assure the Committee that the line is settled and that the fluctuations will be ironed out on either side of that line to that line; and that there will be no question of altering the line upon which the fluctuations are going to be ironed out?

5.0 p.m.

Major ELLIOT

When we come to Subsection (3) we shall be able to discuss these points. The hon. Member knows that when we make a graph we take the maxima and the minima; and the curve is a combination of the points we have taken. But we are, in fact, dealing with a graph which is still being drawn. While the Equalisation Account may be sufficient to average out the high and low spots it cannot check the whole trend of the curve. That is what I was saying, that is my answer to the hon. and learned Member's question. We cannot settle the curve. It is not in our power with the mechanism that is here proposed.

Colonel WEDGWOOD

This is an Amendment for securing control over policy. I do not think that the Committee would be so anxious to secure that control in this particular way were it not for the fact that we have had experience of control during the last 10 years.

Major ELLIOT

It is not an Amendment for securing control of policy, which the House has, but an Amendment for securing control over administration.

Colonel WEDGWOOD

If the right hon. Gentleman will wait he will see at what I am driving. This is obviously an Amendment to secure control over the use of this fund, and there would not be the same powerful body of public opinion behind the Amendment were it not for the fact that in the past there has been undisturbed control by the Bank of England over what has gone on. The real difficulty that faces us is that we are dealing both with what the right hon. Gentleman calls a short-term policy, a short-range policy, and a long-range policy. I think he will agree that the whole of this Bill deals only with short-range policy. In this Clause we are not dealing with the question of inflation or deflation; that is long-range policy. What we are dealing with solely is the stopping of fluctuations. I thought, when this Exchange Equalisation Fund was first introduced in the Budget, that it was a method of dealing with long-range policy, that we could use this fund for inflation, reflation or whatever we might wish as a long-range policy. But that has been clearly ruled out. It was not the intention of the Government when it introduced the scheme, and still less is it possible under the scheme as we have it now.

The scheme now is simply a short-range policy for preventing fluctuations. On that there is not so much ground for demanding public control in this way. But there is a feeling that there should be public control, because during the last 10 years, and even during the last few weeks, we have seen things going on which are obviously unconnected with short-range policy and do affect long-range policy. We have seen, for instance, the Bank of England buying £3,000,000 of gold. That is a matter which, in the eyes of the Bank or in the eyes of the right hon. Gentleman, may be a mere matter of short-range policy; but it does seem to me to be a matter which affects long-range policy as well. Therefore, I do not see how it is possible to dissociate the idea of flattening out with the ultimate goal at which you are aiming. After all, what is a fluctuation? You cannot say whether a rise in the value of sterling is only a temporary rise or whether it is a permanent climbing up the hill back to the Gold Standard and dollar parity. It is extremely difficult to say what is a fluctuation. If we could only decide that we should all make our fortunes on the Stock Exchange. The difference between a fluctuation and a permanent incline one way or the other is almost impossible to detect. Therefore, it seems to me that before we finally sanction the formation of this fund we must have some indication as to long-range policy as well as short-range policy. They are indistinguishable.

You cannot decide to what sterling is to come back in 10 months or a year's time, and arrange either to sell sterling or buy sterling accordingly. I go further and say that whether this fund is controlled by the public or not, if it is only to serve for problematical purposes of preventing fluctuations, we are investing the people who control this fund with a gigantic power, not of making money for themselves but of losing money for the British taxpayer. Suppose that there is a steady rise in the pound, as there may very well be in reference to the dollar. We do not know whether exchange is to be exchange with the dollar or exchange with the franc. It may very well be a different exchange. Suppose that there is a steady rise in the pound, and suppose that, as I believe has already been the case, the Bank sells sterling and buys dollar exchange or franc exchange. I saw in the papers the other day—I do not know whether this is the fact—that we have £60,000,000 worth of franc and dollar exchange in this country now. Suppose that the pound rises and that the Bank in desperation uses this fund of £150,000,000 to go on buying dollars and francs and selling sterling in the effort to get the pound down. The £150,000,000 will vanish just as £120,000,000 vanished in August last. Whether with the well-intentioned idea—

The DEPUTY-CHAIRMAN

The right hon. and gallant Gentleman is now dealing with matters that should be raised on the Question, "That the Clause stand part of the Bill."

Colonel WEDGWOOD

It is all wrapped up in the question of whether we ought to control the fund. It seems to me that the case for control becomes stronger and stronger as we see more and more how this fund can be used. If it is illimitable and is open for the long-range policy, it cannot possibly be divorced from the long-range policy, and we must ask that there should be some better control over the actual use of this fund in the future. I do not want to go into the past. Everyone knows that for many years the deflation policy ruled at the Bank of England, and that we had industries of this country ruined in consequence. I kept on hoping that they had learned better. We must have two things. In the first place we must have more Treasury control. After all, the Treasury is not a banker. The Treasury can be educated to see the point of view both of the money lender and the money user. We must have more Treasury control, and if we are to have the Treasury educated as to what industry wants, to appreciate that the coming off gold, for instance, may mean a bonus to our export trades in this country—if we are to have the Treasury educated, we must have a chance of Debates in this House on the long-range policy that is actually showing itself in a rise or fall in the value of the pound.

I would not suggest going on with this Amendment if we could have from the Government a real indication that there would be periodic opportunities for debate and perpetual opportunities for questions on this matter in this House, but if we are going on as in the past, if we are to be prevented from asking questions about policy and about the Bank rate, if we are also to be told that it is impossible for the Government ever to lay down a long-range policy because directly they do so there will be an opportunity for gamblers to make money, that the only alternative is this perpetual committee looking after the administration of this fund. I should infinitely prefer this House to be in control rather than any committee. This House could be in control of the Treasury, and the public could know the use that is being made of the fund. It is disastrous that you should have what really amounts to gambling by the Bank of England on the principle of "Heads I win and tails you lose."

You have now the practice of dealing in millions. That sort of thing goes to the head of the people who deal in the millions. No man can safely deal in millions, and when it comes to dealing with millions of other people's money a man goes Kreuger. Far be it from me to suggest that there should be any Kreugerism about the Treasury or the Bank of England. Yet the power to deal in these vast sums, with some undisclosed ideal at the back of the mind which is dealing with them, is extremely dangerous. Lord Bradbury wrote to the papers the other day and suggested that we should buy gold. Although he was the only member of the Macmillan Committee, except Mr. Walton Newbold, who was opposed to the Macmillan Committee's Report, apparently his advice has been taken. He urged the buying of gold in order to keep down the price of sterling. Apparently the Bank has done so. There is lack of control. There must be some means whereby the Treasury can control. If the whole power were put into the hands of the Chancellor I should be satisfied. I know he is not more interested from the point of view of money lending than of borrowing. He does represent the nation. But if you are going to divorce control from this House and from the public over the use of this fund and over the ultimate purpose of the fund, you are banking on exactly the same sort of ruin that overtook Kreuger and Toll.

Mr. HOPKINSON

Both the hon. and learned Gentleman and the right hon. and gallant Gentleman who have spoken from the Front Opposition Bench appear to have a totally wrong conception of this fund. They seem to contemplate that the £150,000,000 will come into the market again and again for the buying or selling of sterling exchange. The probability is that no purchases and no sales will be made in connection with this fund at all. We hope, and I think with reason, that the mere existence of the fund will achieve everything that we want. If, for instance, the right hon. and gallant Gentleman who spoke last decided to try a little flutter in sterling exchange, he would know perfectly well that if he bulls the market, he may find that he is "up against" a bear who has command of £150,000,000. If on the contrary he starts bearing the exchange, he knows that there is a bull waiting to enter the market with £150,000,000 behind him. That is, of course, the real purpose of this fund. Therefore, their idea of this House directly controlling that fund seems to me to show that the two speakers who have supported the Amendment are under a complete misapprehension with regard to it.

The fund itself and the working of it amount to this: Hitherto in these matters we have found that the control of the rudder has been quite sufficient to manoeuvre the ship under normal conditions. That is to say, the action of the Bank in varying the official discount rate was effective in its object. Up to recent years the ship could be perfectly well steered by means of the helm alone. If you put the helm two points to starboard the ship turned all right. But circumstances have altered, the ship no longer answers to her helm, and now it is necessary for her to go ahead with one engine and to go astern with the other. If I may apply a metaphor of that sort to the present proposal, this £150,000,000 represents the possibility of working on twin screws instead of on a single screw and the helm.

Mr. WARDLAW-MILNE

I only intervene in this discussion to point out one objection to the proposed committee which has not been mentioned before. I do so not as one who has more often than not in this House criticised the policy both of the Bank of England and of the country in the pastߞfor we are all responsible for the policy of deflation which has gone on for so many yearsߞbut because I feel that the Government, in the statements which they have clearly and deliberately made in the last two weeks, have definitely indicated to the country that a change is to take place. I should be very averse to the appointment of any committee such as is suggested in the Amendment. Let us see what would happen. Instead of the Government being responsible to this House, instead of the House having the opportunity, so often referred to to-day, of criticising the actions of the Government in this matter, the Government would then be able to say: "There is a committee to deal with this subject, and we have nothing to do with these matters; they have been handed over to the committee."

Thus, the House of Commons would be deprived of the very opportunity for examination to which hon. Members have referred, not because of any strict carrying out of the Rules of Procedure, but by the fact that such a committee had been appointed. I leave aside altogether any question of whether the Government or the House of Commons could select a committee which would be competent in every way to decide the questions of the kind that have to be decided from day to day by the Bank of England. I am certain that people of that sort could not be easily found, if indeed they could be found 'at all. The questions which will have to be decided in connection with this matter could not possibly be referred to a committee. Apart from that objection, however, I would oppose the appointment of any such committee because it would shelve the whole responsibility of the Government to the House and do away with the opportunity of the House to demand that the Government shall show that they are carrying out the policy

which they have declared more than once recently.

Question put "That those words be there inserted."

The Committee divided: Ayes, 48; Noes, 349.

Division No. 196] AYES. [5.18 p.m.
Adams, D. M. (Poplar, South) Groves, Thomas E. Maclean, Neil (Glasgow, Govan)
Attlee, Clement Richard Grundy, Thomas W. Milner, Major James
Batey, Joseph Hall, F. (York, W. R., Normanton) Parkinson, John Allen
Bevan, Aneurin (Ebbw Vale) Hall, George H. (Merthyr Tydvil) Price, Gabriel
Brown, C. W. E. (Notts., Mansfield) Hammersley, Samuel S. Rathbone, Eleanor
Buchanan, George Hirst, George Henry Salter, Dr. Alfred
Cape, Thomas Jenkins, Sir William Thorne, William James
Cocks, Frederick Seymour Jones, J. J. (West Ham, Silvertown) Tinker, John Joseph
Cove, William G. Jones, Morgan (Caerphilly) Wallhead, Richard C.
Cripps, Sir Stafford Kirkwood, David Wedgwood, Rt. Hon. Josiah
Daggar, George Lansbury, Rt. Hon. George Williams, David (Swansea, East)
Davies, Rhys John (Westhoughton) Lawson, John James Williams, Edward John (Ogmore)
Duncan, Charles (Derby, Claycross) Leonard, William Williams, Dr. John H. (Lianelly)
Edwards, Charles Logan, David Gilbert Williams, Thomas (York, Don Valley)
Greenwood, Rt. Hon. Arthur Lunn, William
Grenfell, David Rees (Glamorgan) McEntee, Valentine L. TELLERS FOR THE AYES.—
Griffiths, T. (Monmouth, Pontypool) McGovern, John Mr. Gordon Macdonald and Mr. Duncan Graham.
NOES.
Acland-Troyte, Lieut.-Colonel Cazalet, Capt. V. A. (Chippenham) Foot, Isaac (Cornwall, Bodmin)
Adams, Samuel Vyvyan T. (Leeds, W.) Chalmers, John Rutherford Fraser, Captain Ian
Agnew, Lieut.-Com. P. G. Chamberlain, Rt. Hn. Sir J. A.(Birm., W) Fuller, Captain A. G.
Ainsworth, Lieut.-Colonel Charles Chapman, Sir Samuel (Edinburgh, S.) Ganzoni, Sir John
Albery, Irving James Chorlton, Alan Ernest Leofric Gault, Lieut.-Col. A. Hamilton
Allen, Lt.-Col. J. Sandeman (B'k'nh'd.) Chotzner, Alfred James Gibson, Charles Granville
Allen, Lt.-Col. Sir William (Armagh) Christie, James Archibald Gillett, Sir George Masterman
Amery, Rt. Hon. Leopold C. M. S. Clarry, Reginald George Gilmour, Lt.-Col. Rt. Hon. Sir John
Applin, Lieut.-Col. Reginald V. K. Clayton, Dr. George C. Glossop, C. W. H.
Apsley, Lord Clydesdale, Marquess of Gluckstein, Louis Halle
Aske, Sir Robert William Cobb, Sir Cyril Glyn, Major Ralph G. C.
Astbury, Lieut.-Com. Frederick Wolfe Cochrane, Commander Hon. A. D. Goff, Sir Park
Astor, Maj. Hn. John J. (Kent, Dover) Colfox, Major William Philip Goldie, Noel B.
Bailey, Eric Alfred George Conant, R. J. E. Goodman, Colonel Albert W.
Baldwin, Rt. Hon. Stanley Cook, Thomas A. Grattan-Doyle, Sir Nicholas
Baldwin-Webb, Colonel J. Cooper, A. Duff Gretton, Colonel Rt. Hon. John
Balfour, George (Hampstead) Courtauld, Major John Sewell Griffith, F. Kingsley (Middlesbro', W.)
Balniel, Lord Cowan, D. M. Grimston, R. V.
Barrie, Sir Charles Coupar Craddock, Sir Reginald Henry Gritten, W. G. Howard
Barton, Capt. Basil Kelsey Cranborne, Viscount Guinness, Thomas L. E. B.
Beauchamp, Sir Brograve Campbell Craven-Ellis, William Gunston, Captain D. W.
Beaumont, Hon. R. E. B. (Portsmith, C.) Croft, Brigadier-General Sir H. Guy, J. C. Morrison
Belt, Sir Alfred L. Crookshank, Col. C. de Windt (Bootle) Hacking, Rt. Hon. Douglas H.
Bennett, Capt. Sir Ernest Nathaniel Cruddas, Lieut.-Colonel Bernard Hall, Capt. W. D'Arcy (Brecon)
Betterton, Rt. Hon. Sir Henry B. Davies, Edward C. (Montgomery) Hamilton, Sir George (Ilford)
Bevan, Stuart James (Holborn) Denman, Hon. R. D. Hanley, Dennis A.
Blaker, Sir Reginald Denville, Alfred Hannon, Patrick Joseph Henry
Blindell, James Despencer-Robertson, Major J. A. F. Harris, Sir Percy
Boothby, Robert John Graham Doran, Edward Hartland, George A.
Borodale, Viscount Dower, Captain A. V. G. Harvey, George (Lambeth, Kenningt'n)
Boulton, W. W. Drewe, Cedric Harvey, Major S. E. (Devon, Totnes)
Bowater, Col. Sir T. Vansittart Duckworth, George A. V. Haslam, Sir John (Bolton)
Bower, Lieut.-Com. Robert Tatton Dugdale, Captain Thomas Lionel Headlam, Lieut.-Col. Cuthbert M.
Bowyer, Capt. Sir George E. W. Duggan, Hubert John Hellgers, Captain F. F. A.
Braithwaite, J. G. (Hillsborough) Duncan, James A. L. (Kensington, N.) Heneage, Lieut.-Colonel Arthur P.
Briscoe, Capt. Richard George Dunglass, Lord Hepworth, Joseph
Brocklebank, C. E. R. Eady, George H. Holdsworth, Herbert
Brown, Col. D. C. (N'th'l'd., Hexham) Eastwood, John Francis Hope, Capt. Arthur O. J. (Aston)
Brown, Ernest (Leith) Elliot, Major Rt. Hon. Walter E. Hope, Sydney (Chester, Stalybridge)
Brown, Brig.-Gen. H. C.(Berks., Newb'y) Ellis, Robert Geoffrey Hopkinson, Austin
Burnett, John George Elliston, Captain George Sampson Hore-Belisha, Leslie
Butt, Sir Alfred Elmley, Viscount Hornby, Frank
Cadegan, Hon. Edward Emmott, Charles E. G. C. Horne, Rt. Hon. Sir Robert S.
Caine, G. R. Hall- Emrys-Evans, P. V. Horobin, Ian M.
Campbell, Edward Taswell (Bromley) Entwistle, Cyril Fullard Horsbrugh, Florence
Campbell, Rear-Adml. G. (Burnley) Erskine, Lord (Weston-super-Mare) Howard, Tom Forrest
Campbell-Johnston, Malcolm Essenhigh, Reginald Clare Hudson, Capt. A. U. M. (Hackney, N.)
Caporn, Arthur Cecil Everard, W. Lindsay Hudson, Robert Spear (Southport)
Castle Stewart, Earl Falle Sir Bertram G. Hume, Sir George Hopwood
Cautley, Sir Henry S. Fermoy, Lord Hunter, Dr. Joseph (Dumfries)
Cayzer, Sir Charles (Chester, City) Fleiden, Edward Brocklehurst Hunter, Capt. M. J. (Brigg)
Cazalet, Thelma (Islington, E.) Foot, Dingle (Dundee) Hurd, Percy A.
Hurst, Sir Gerald B. Milne, Charles Shakespeare, Geoffrey H.
Hutchison, Maj.-Gen. Sir R.(Montr'se) Milne, John Sydney Wardlaw- Shaw, Helen B. (Lanark, Bothwell)
Hutchison, W. D. (Essex, Romf'd) Mitchell, Sir W. Lane (Streatham) Shepperson, Sir Ernest W.
Inskip, Rt. Hon. Sir Thomas W. H. Mitcheson, G. G. Simmonds, Oliver Edwin
Jackson, J. C. (Heywood & Radcliffe) Molson, A. Hugh Eisdale Skelton, Archibald Noel
Jamieson, Douglas Morris, John Patrick (Salford, N.) Slater, John
Janner, Barnett Morris, Owen Temple (Cardiff, E.) Smiles, Lieut.-Col. Sir Walter D.
Jesson, Major Thomas E. Morris-Jones, Dr. J. H. (Denbigh) Smith, Louis W. (Sheffield, Hallam)
Joel, Dudley J. Barnato Morrison, William Shephard Smith, R. W. (Aberd'n & Kinc'dine, C.)
Johnston, J. W. (Clackmannan) Moss, Captain H. J. Smith-Carington, Neville W.
Johnstone, Harcourt (S. Shields) Muirhead, Major A. J. Smithers, Waldron
Jones, Henry Haydn (Merioneth) Munro, Patrick Sotheron-Estcourt, Captain T. E.
Kerr, Hamilton W. Nail-Cain, Arthur Ronald N. Southby, Commander Archibald R. J.
Kirkpatrick, William M. Nation, Brigadier-General J. J. H. Spears, Brigadier-General Edward L.
Knatchbull, Captain Hon. M. H. R. Nicholson, Godfrey (Morpeth) Spencer, Captain Richard A.
Knebworth, Viscount Nicholson, Rt. Hn. W. G. (Petersf'ld) Spender-Clay, Rt. Hon. Herbert H.
Knight, Holford North, Captain Edward T. Stanley, Lord (Lancaster, Fylde)
Knox, Sir Alfred Nunn, William Stanley, Hon. O. F. G. (Westmorland)
Lamb, Sir Joseph Quinton Ormiston, Thomas Stevenson, James
Lambert, Rt. Hon. George Ormsby-Gore, Rt. Hon. William G. A. Stones, James
Latham, Sir Herbert Paul Palmer, Francis Noel Storey, Samuel
Law, Sir Alfred Patrick, Colin M. Stourton, Hon. John J.
Law, Richard K. (Hull, S. W.) Peake, Captain Osbert Strauss, Edward A.
Leech, Dr. J. W. Pearson, William G. Strickland, Captain W. F.
Lees-Jones, John Peat, Charles U. Stuart, Hon. J. (Moray and Nairn)
Leighton, Major B. E. P. Percy, Lord Eustace Sueter, Rear-Admiral Murray F.
Levy, Thomas Perkins, Walter R. D. Sugden, Sir Wilfrid Hart
Lewis, Oswald Peters, Dr. Sidney John Sutcliffe, Harold
Liddall, Walter S. Petherick, M. Tate, Mavis Constance
Lister, Rt. Hon. Sir Philip Cunliffe- Peto, Sir Basil E. (Devon, Barnstaple) Taylor, Vice-Admiral E. A.(P'dd'gt'n, S.)
Llewellin, Major John J. Peto, Geoffrey K.(W'verh'pt'n, Bilston) Templeton, William P.
Llewellyn-Jones, Frederick Pickering, Ernest H. Thomas, James P. L. (Hereford)
Lloyd, Geoffrey Potter, John Thompson, Luke
Locker-Lampson, Rt. Hn. G.(Wd. Gr'n) Powell, Lieut.-Col. Evelyn G. H. Thomson, Sir Frederick Charles
Loder, Captain J. de Vere Procter, Major Henry Adam Thorp, Linton Theodore
Lovat-Fraser, James Alexander Pybus, Percy John Todd, Capt. A. J. K. (B'wick-on-T.)
Lumley, Captain Lawrence R. Raikes, Henry V. A. M. Train, John
Mabane, William Ramsay, Capt. A. H. M. (Midlothian) Tryon, Rt. Hon. George Clement
MacAndrew, Lieut.-Col. C. G. (Partick) Ramsbotham, Herwald Turton, Robert Hugh
MacAndrew, Capt. J. O. (Ayr) Ramsden, E. Wallace, Captain D. E. (Hornsey)
McCorquodale, M. S. Rankin, Robert Ward, Lt.-Col. Sir A. L. (Hull)
MacDonald, Malcolm (Bassetlaw) Rawson, Sir Cooper Ward, Irene Mary Bewick (Wallsend)
Macdonald, Sir Murdoch (Inverness) Ray, Sir William Ward, Sarah Adelaide (Cannock)
Macdonald, Capt. P. D. (I. of W.) Rea, Walter Russell Watt, Captain George Steven H.
McEwen, Captain J. H. F. Reed, Arthur C. (Exeter) Wayland, Sir William A.
McKie, John Hamilton Reid, David D. (County Down) Wells, Sydney Richard
Maclay, Hon. Joseph Paton Reid, William Allan (Derby) Weymouth, Viscount
McLean, Major Alan Rentoul Sir Gervais S. Whiteside, Borras Noel H.
McLean, Dr. W. H. (Tradeston) Renwick, Major Gustav A. Williams, Charles- (Devon, Torquay)
Macmillan, Maurice Harold Reynolds, Col. Sir James Philip Williams, Herbert G. (Croydon, S.)
Macpherson, Rt. Hon. James I. Roberts, Aled (Wrexham) Wills, Wilfrid D.
Macquisten, Frederick Alexander Ropner, Colonel L. Wilson, Clyde T. (West Toxteth)
Magnay, Thomas Rosbotham, S. T. Wilson, G. H. A. (Cambridge U.)
Maitland, Adam Ross Taylor, Walter (Woodbridge) Windsor-Clive, Lieut.-Colonel George
Mallalieu, Edward Lancelot Rothschild, James A. de Womersley, Walter James
Mander, Geoffrey le M. Runciman, Rt. Hon. Walter Wood, Rt. Hon. Sir H. Kingsley
Margesson, Capt. Henry David R. Runge, Norah Cecil Wood, Sir Murdoch McKenzie (Banff)
Marsden, Commander Arthur Russell, Albert (Kirkcaldy) Worthington, Dr. John V.
Martin, Thomas B. Russell, Hamer Field (Sheffield, B'tside) Wragg, Herbert
Mason, David M. (Edinburgh, E.) Rutherford, Sir John Hugo Young, Rt. Hon. Sir Hilton (S'v'noaks)
Mason, Col. Glyn K. (Croydon, N.) Salmon, Major Isidore Young, Ernest J. (Middlesbrough, E.)
Mayhew, Lieut.-Colonel John Samuel, Sir Arthur Michael (F'nham)
Merriman, Sir F. Boyd Sandeman, Sir A. N. Stewart TELLERS FOR THE NOES.—
Millar, Sir James Duncan Sassoon, Rt. Hon. Sir Philip A. G. D. Sir George Penny and Major
Mills, Sir Frederick (Leyton, E.) Savery, Samuel Servington George Davies.
Mills, Major J. D. (New Forest) Scone, Lord
Mr. ATTLEE

I beg to move, in page 12, line 35, to leave out Sub-section (2).

5.30 p.m.

The Debate on the last Amendment closed on the note of the necessity of this House keeping entire control over this fund. Now we have a provision to the effect that the Treasury may at any time, if they think it expedient, cause the Exchange Equalisation Account to be wound up forthwith. As a matter of fact, we have tried in these Debates to get some kind of control over this Account, and some kind of information about it, but we have been assured from the Treasury Bench, over and over again, that it is absolutely necessary to have a kind of hush-hush business about it, that we must not know what is going on, that it is all to be kept very quiet, and that if anything is allowed to slip out, some people will make money who ought not to be allowed to do so. Well, let it be so. This House may rise on the 12th July, and hon. Members will be dispersing themselves and dealing with their financial affairs, strong in the belief that there is this Account in being, when, as a matter of fact, the Treasury may quietly have wound it up forthwith without Members knowing anything about it.

I would like to know why they want this power suddenly to wind up the Account. In the second part of the Subsection there is a definite provision that in a certain event the Account will be wound up, an event perhaps that is not very likely to happen, but what is the reason for requiring this power suddenly to wind up the Account? Why should it be given to the Treasury? Why should they not come to this House and ask this House to abolish this fund, if it is thought desirable to abolish it? I think we are getting rather too fond of giving powers to outside bodies. This House has practically surrendered a great deal of its right to tax and handed it over to three gentlemen, and now we are handing another power over to the Treasury.

It may be said that the Treasury is under the control of this House. It is true that we can ask questions of the Financial Secretary to the Treasury, though, if it is inconvenient, we may not get an answer, and we gather that it is extraordinarily inconvenient for him sometimes to give us an answer. We have been told that there are not to be questions about the Exchange Equalisation Account. I hope that we shall have some reason given us for the Treasury having this exceptional power. What are the circumstances under which they think the Account should be wound up, apart from the eventuality mentioned in

the latter part of the Sub-section; and if they want it wound up, why cannot they come to this House, tell the House about it, and ask the House to pass a Resolution to wind up the Account?

Major ELLIOT

I am asked under what circumstances we should wind up this Account. This Exchange Equalisation Account is in connection with what is at present a managed currency, but if the currency ceased to be managed, there would be no necessity to have this Account. One such case is given in the latter part of Sub-section (2). Clearly, under such circumstances, if you had sterling again related to the Gold Standard, there would not be any need, as the hon. Member for Mossley (Mr. Hopkinson) said, for steering the ship with both the screw and the rudder. That is the answer to the question. Then the question is, If we were going to wind up the fund, why not let the fund go on until it could be terminated by this House? When we are making preparations for setting up the Account, it is equally desirable to make preparations for winding up the Account as well, and that is why it is put in here. The procedure for winding it up is set out here, and the circumstances are set out here, and I hope the hon. Member for Lime-house (Mr. Attlee) will find himself able not to press the Amendment.

Question put, "That the words proposed to be left out, to the word 'and' in page 13, line 1, stand part of the Clause."

The Committee divided: Ayes, 336; Noes, 45.

Division No. 197.] AYES. [5.36 p.m.
Acland-Troyte, Lieut.-Colonel Beauchamp, Sir Brograve Campbell Burton, Colonel Henry Walter
Adams, Samuel Vyvyan T. (Leeds, W.) Beaumont, Hon. R. E. B. (Portsm'th, C.) Butt, Sir Alfred
Ainsworth, Lieut.-Colonel Charles Belt, Sir Alfred L. Cadogan, Hon. Edward
Albery, Irving James Bennett, Capt. Sir Ernest Nathaniel Campbell, Edward Taswell (Bromley)
Allen, Lt.-Col. J. Sandeman (B'k'nh'd.) Bevan, Stuart James (Holborn) Campbell, Rear-Admiral G. (Burnley)
Allen, Lt.-Col. Sir William (Armagh) Blaker, Sir Reginald Caporn, Arthur Cecil
Amery, Rt. Hon. Leopold C. M. S. Boothby, Robert John Graham Castle Stewart, Earl
Applin, Lieut.-Col. Reginald V. K. Borodale, Viscount Cautley, Sir Henry S.
Apsley, Lord Boulton, W. W. Cayzer, Sir Charles (Chester, City)
Aske, Sir Robert William Bowater, Col. Sir T. Vansittart Cayzer, Maj. Sir H. R. (Prtsmth., S.)
Astbury, Lieut.-Com. Frederick Wolfe Bower, Lieut.-Com. Robert Tatton Cazalet, Thelma (Islington, E.)
Astor, Maj. Hn. John J. (Kent, Dover) Bowyer, Capt. Sir George E. W. Cazalet, Capt. V. A. (Chippenham)
Bailey, Eric Alfred George Bracken, Brendan Chalmers, John Rutherford
Baillie, Sir Adrian W. M. Braithwaite, J. G. (Hillsborough) Chamberlain, Rt. Hn. Sir J. A.(Birm., W)
Baldwin, Rt. Hon. Stanley Briscoe, Capt. Richard George Chapman, Sir Samuel (Edinburgh, S.)
Baldwin-Webb, Colonel J. Brockiebank, C. E. R. Chorlton, Alan Ernest Leofric
Balfour, George (Hampstead) Brown, Col. D. C. (N'th'l'd., Hexham) Chotzner, Alfred James
Balniel, Lord Brown, Ernest (Leith) Christie, James Archibald
Barrie, Sir Charles Coupar Brown, Brig.-Gen. H. C.(Berks., Newb'y) Churchill, Rt. Hon. Winston Spencer
Barton, Capt. Basil Kelsey Burnett, John George Clarke, Frank
Clarry, Reginald George Hornby, Frank Pearson, William G.
Clayton Dr. George C. Horobin, Ian M. Peat, Charles U.
Clydesdale, Marquess of Horsbrugh, Florence Percy, Lord Eustace
Cobb, Sir Cyril Howard, Tom Forrest Perkins, Walter R. D.
Cochrane, Commander Hon. A. D. Hudson, Capt. A. U. M. (Hackney, N.) Petherick, M.
Colfox, Major William Philip Hudson, Robert Spear (Southport) Peto, Geoffrey K. (W'verh'pt'n, Bilst'n)
Colville, John Hume, Sir George Hopwood Pickering, Ernest H.
Conant, R. J. E. Hunter, Capt. M. J. (Brigg) Potter, John
Cook, Thomas A. Hurst, Sir Gerald B. Powell, Lieut.-Col. Evelyn G. H.
Courtauld, Major John Sewell Hutchison, W. D. (Essex, Romf'd) Procter, Major Henry Adam
Cowan, D. M. Inskip, Rt. Hon. Sir Thomas W. H. Pybus, Percy John
Craddock, Sir Reginald Henry Jackson, J. C. (Heywood & Radcliffe) Raikes, Henry V. A. M.
Cranborne, Viscount Jamieson, Douglas Ramsay, Capt. A. H. M. (Midlothian)
Craven-Ellis, William Janner, Barnett Ramsbotham, Herwald
Croft, Brigadier-General Sir H. Jesson, Major Thomas E. Ramsden, E.
Crookshank, Col. C. de Windt (Bootle) Joel, Dudley J. Barnato Rankin, Robert
Cruddas, Lieut.-Colonel Bernard Johnston, J. W. (Clackmannan) Ratcliffe, Arthur
Davidson, Rt. Hon. J. C. C. Johnstone, Harcourt (S. Shields) Rawson, Sir Cooper
Davies, Edward C. (Montgomery) Jones, Henry Haydn (Merioneth) Ray, Sir William
Denman, Hon. R. D. Kerr, Hamilton W. Rea, Walter Russell
Denville, Alfred Kirkpatrick, William M. Reed, Arthur C. (Exeter)
Despencer-Robertson, Major J. A. F. Knatchbull, Captain Hon. M. H. R. Reid, David D. (County Down)
Dickie, John P. Knebworth, Viscount Reid, William Allan (Derby)
Doran, Edward Knox, Sir Alfred Rentoul, Sir Gervals S.
Dower, Captain A. V. G. Lamb, Sir Joseph Quinton Renwick, Major Gustav A.
Drewe, Cedric Latham, Sir Herbert Paul Reynolds, Col. Sir James Philip
Duckworth, George A. V. Law, Sir Alfred Roberts, Aled (Wrexham)
Dugdale, Captain Thomas Lionel Law, Richard K. (Hull, S.W.) Ropner, Colonel L.
Duggan, Hubert John Leech, Dr. J. W. Rosbotham, S. T.
Duncan, James A. L. (Kensington, N.) Lees-Jones, John Ross Taylor, Walter (Woodbridge)
Dunglass, Lord Leighton, Major B. E. P. Rothschild, James A. de
Eady, George H. Lewis, Oswald Runge, Norah Cecil
Eastwood, John Francis Liddall, Walter S. Russell, Albert (Kirkcaldy)
Edmondson, Major A. J. Lister, Rt. Hon. Sir Philip Cunliffe- Russell, Hamer Field (Sheffield, B'tside)
Elliot, Major Rt. Hon. Walter E. Liewellin, Major John J. Rutherford, Sir John Hugo
Ellis, Robert Geoffrey Lloyd, Geoffrey Salmon, Major Isidore
Elliston, Captain George Sampson Locker-Lampson, Rt. Hn. G.(Wd. Gr'n) Samuel, Sir Arthur Michael (F'nham)
Emmott, Charles E. G. C. Loder, Captain J. de Vere Sassoon, Rt. Hon. Sir Philip A. G. D.
Emrys-Evans, P. V. Lovat-Fraser, James Alexander Savery, Samuel Servington
Entwistle, Cyril Fullard Lumley, Captain Lawrence R. Scone, Lord
Erskine, Lord (Weston-super-Mare) Mabane, William Selley, Harry R.
Essenhigh, Reginald Clare MacAndrew, Lieut.-Col. C. G. (Partick) Shaw, Helen B. (Lanark, Bothwell)
Everard, W. Lindsay MacAndrew, Capt. J. O. (Ayr) Shaw, Captain William T. (Forfar)
Falle, Sir Bertram G. McCorquodale, M. S. Shepperson, Sir Ernest W.
Fielden, Edward Brocklehurst MacDonald, Malcolm (Bassetlaw) Simmonds, Oliver Edwin
Fuller, Captain A. G. Macdonald, Sir Murdoch (Inverness) Sinclair, Maj. Rt. Hn. Sir A.(C'thness)
Ganzoni, Sir John Macdonald, Capt. P D. (I of W.) Skelton, Archibald Noel
Gault, Lieut.-Col. A. Hamilton McEwen, Captain J. H. F. Slater, John
Gibson, Charles Granville McKie, John Hamilton Smiles, Lieut.-Col. Sir Walter D.
Gillett, Sir George Masterman McLean, Major Alan Smith, Louis W. (Sheffield, Hallam)
Gilmour, Lt.-Col. Rt. Hon. Sir John McLean, Dr. W. H. (Tradeston) Smith, R. W. (Aberd'n & Kinc'dine, C.)
Gluckstein, Louis Halle Macmillan, Maurice Harold Smith-Carington, Neville W.
Glyn, Major Ralph G. C. Macpherson, Rt. Hon. James I. Smithers, Waldron
Goff, Sir Park Macquisten, Frederick Alexander Sotheron-Estcourt, Captain T. E.
Goldie, Noel B. Maitland, Adam Southby, Commander Archibald R. J.
Goodman, Colonel Albert W. Mander, Geoffrey le M. Spears, Brigadier-General Edward L.
Graham, Fergus (Cumberland, N.) Margesson, Capt. Henry David R. Spencer, Captain Richard A.
Grattan-Doyle, sir Nicholas Marsden, Commander Arthur Spender-Clay, Rt. Hon. Herbert H.
Greaves-Lord, Sir Walter Martin, Thomas B. Stanley, Lord (Lancaster, Fylde)
Griffith, F. Kingsley (Middlesbro', W) Mason, David M. (Edinburgh, E.) Stanley, Hon. O. F. G. (Westmorland)
Grimston, R. V. Mason, Col. Glyn K. (Croydon, N.) Stevenson, James
Gritten, W. G. Howard Mayhew, Lieut.-Colonel John Stones, James
Guinness, Thomas L. E. B. Merriman, Sir F. Boyd Storey, Samuel
Gunston, Captain D. W. Mills, Sir Frederick (Leyton, E.) Stourton, Hon. John J.
Guy, J. C. Morrison Mills, Major J. D. (New Forest) Strauss, Edward A.
Hacking, Rt. Hon. Douglas H. Milne, Charles Strickland, Captain W. F.
Hall, Capt. W. D'Arcy (Brecon) Milne, John Sydney Wardlaw- Stuart, Hon. J. (Moray and Nairn)
Hamilton, Sir George (Ilford) Mitchell, Sir W. Lane (Streatham) Sugden, Sir Wilfrid Hart
Hammersley, Samuel S. Mitcheson, G. G. Sutcliffe, Harold
Hanley, Dennis A. Morris, John Patrick (Salford, N.) Tate, Mavis Constance
Hannon, Patrick Joseph Henry Morris, Owen Temple (Cardiff, E.) Taylor, Vice-Admiral E. A.(P'dd'gt'n, S.)
Harris, Sir Percy Morrison, William Shephard Templeton, William P.
Hartland, George A. Moss, Captain H. J. Thomas, Rt. Hon. J. H. (Derby)
Harvey, George (Lambeth, Kenningt'n) Muirhead, Major A. J. Thomas, James P. L. (Hereford)
Harvey, Major S. E. (Devon, Totnes) Munro, Patrick Thompson, Luke
Haslam, Sir John (Bolton) Nail-Cain, Arthur Ronald N. Thomson, Sir Frederick Charles
Headlam, Lieut.-Col. Cuthbert M. Nation, Brigadier-General J. J. H. Thorp, Linton Theodore
Heilgers, Captain F. F. A. Nicholson, Godfrey (Morpeth) Todd, Capt. A. J. K. (B'wick-on-T.)
Heneage, Lieut.-Colonel Arthur P. Nicholson, Rt. Hn. W. G. (Petersf'ld) Train, John
Hepworth, Joseph North, Captain Edward T. Tryon, Rt. Hon. George Clement
Hills, Major Rt. Hon. John Waller Nunn, William Turton, Robert Hugh
Holdsworth, Herbert Ormsby-Gore, Rt. Hon. William G. A. Wallace, Captain D. E. (Hornsey)
Hope, Capt. Arthur O. J. (Aston) Palmer, Francis Noel Ward, Lt.-Col. Sir A. L. (Hull)
Hope, Sydney (Chester, Stalybridge) Patrick, Colin M. Ward, Irene Mary Bewick (Wallsend)
Hopkinson, Austin Peake, Captain Osbert Ward, Sarah Adelaide (Cannock)
Warrender, Sir Victor A. G. Wills, Wilfrid D. Wragg, Herbert
Watt, Captain George Steven H. Wilson, Clyde T. (West Toxteth) Young, Rt. Hon. Sir Hilton (S'v'noaks)
Wayland, Sir William A. Wilson, G. H. A. (Cambridge U.) Young, Ernest J. (Middlesbrough, E.)
Wells, Sydney Richard Windsor-Clive, Lieut.-Colonel George
Weymouth, Viscount Womersley, Walter James TELLERS FOR THE AYES.—
Whiteside, Borras Noel H. Wood, Rt. Hon. Sir H. Kingsley Sir George Penny and Major
Williams, Charles (Devon, Torquay) Wood, Sir Murdoch McKenzie (Banff) George Davies.
Williams, Herbert G. (Croydon, S.) Worthington, Dr. John V.
NOES.
Adams, D. M. (Poplar, South) Grundy, Thomas W. Milner, Major James
Attlee, Clement Richard Hall, F. (York, W. R., Normanton) Parkinson, John Allen
Batey, Joseph Hall, George H. (Merthyr Tydvil) Price, Gabriel
Bevan, Aneurin (Ebbw Vale) Hirst, George Henry Rathbone, Eleanor
Brown, C. W. E. (Notts., Mansfield) Jones, J. J. (West Ham, Silvertown) Salter, Dr. Alfred
Buchanan, George Jones, Morgan (Caerphilly) Thorne, William James
Cape, Thomas Kirkwood, David Tinker, John Joseph
Cocks, Frederick Seymour Lansbury, Rt. Hon. George Wallhead, Richard C.
Cripps, Sir Stafford Lawson, John James Wedgwood, Rt. Hon. Josiah
Daggar, George Leonard, William Williams, David (Swansea, East)
Davies, Rhys John (Westhoughton) Logan, David Gilbert Williams, Edward John (Ogmore)
Duncan, Charles (Derby, Claycross) Lunn, William Williams, Dr. John H. (Lianelly)
Edwards, Charles Macdonald, Gordon (Ince) Williams, Thomas (York, Don Valley)
Greenwood, Rt. Hon. Arthur McEntee, Valentine L.
Grenfell, David Rees (Glamorgan) McGovern, John TELLERS FOR THE NOES.—
Griffiths, T. (Monmouth, Pon'yoool) Maclean, Neil (Glasgow, Govan) Mr. Duncan Graham and Mr. Groves.
Mr. MABANE

I beg to move, in page 13, line 1, to leave out from the word "forthwith," to the end of the Sub-section.

The words I am proposing to leave out allow the Treasury to wind up the Account not later than six months after the date on which Sub-section (1) of Section 1 of the Gold Standard (Amendment) Act ceases to have effect. That, in our opinion, clearly contemplates a return to the Gold Standard, and our objection to the retention of these words depends upon our objection to any contemplation of the return to the Gold Standard. It is not really necessary to have these words in in order that the Treasury should have the power to wind up the Account when it chooses. That power is provided by the first part of the Clause, and this particular part can have no relevance unless it is contemplated at some time—we may even say at some time in the near future—that there shall be a return to the Gold Exchange Standard. We desire to elicit information from my right hon. and gallant Friend on that point. We want to know exactly what is the intention of the Treasury in using this particular fund. We believe that the Government were returned to restore prosperity and not to restore the Gold Standard, and there is a considerable ground for the belief that a restoration of prosperity and a restoration of the Gold Standard are irreconcilable, at any rate at the present time. I am confirmed in my opinion in that I hear my hon. Friend the Member for East Edinburgh (Mr. D. Mason) disagree with me.

The question of the Gold Standard is intimately linked up with our industrial success and prosperity. There can be little doubt that the trouble which has beset us, particularly since the War, has been a trouble which we may condense in a phrase—a trouble of falling prices. Those falling prices are merely a symptom of the conditions under which the Gold Exchange Standard has operated since the War and of the condition of the Gold Exchange Standard at the present time. So long as the ratio is preserved between gold and goods prices must continue to fall, because it is a fact that the amount of gold in the world is not substantially increasing and is certainly not increasing at anything like the rate at which commodities are increasing. In consequence, the ratio between goods and gold is altering and prices continue to fall. I would suggest that the crisis which besets us at the present time might very well have occurred in the nineteenth century. It ought to be understood that this crisis of continually falling prices was merely staved off in the nineteenth century by the accident that the production of gold tended to correspond with the increase in the production of goods, although it did not correspond exactly. Consequently you can quite well trace a similarity in the gold production of the world and the course of prices in the nineteenth century. We find, for example, that up to the middle 'fifties prices were falling. Then Californian and Australian gold came into production with the consequence that prices rose and trade improved. Then the gold production fell off again and prices fell, and there was again something like the industrial trouble with which we have been beset. Gold production increased again in the middle 'nineties, and again prices rose and trade improved.

If we are to go back to the Gold Standard at a time when the defects of the Gold Standard are likely to cause more trouble than they have ever caused in the past, we shall be doing a thing that can only be classed as the height of folly. Our task at the present time is supremely that of providing the machinery whereby man may reap the benefit of his own productive capacity. The present distress is unlike many distresses in the past that were the result of pestilence or famine. It is not the result of a certain atrophy of man's faculties; it is the result of the increase in the productive capacity of man, and our supreme task is to organise the machinery whereby that productive capacity can be used to the benefit of mankind. That machinery is really a machinery of currency, and we shall destroy our chance of evolving a new modern machinery which shall maintain some stability of prices if we contemplate for a moment any return to the Gold Standard. The words which it is proposed to leave out must be read in connection with Sub-section (3), which says that the object of this Account is to check undue fluctuations in the exchange value of sterling. As has been said before this afternoon, a fluctuation is of necessity a relative thing. If sterling fluctuates, it must fluctuate in terms of something else. It may be intended to prevent fluctuations in sterling in terms of gold. We want to know whether that is the intention of the Treasury. It may be the intention to prevent fluctuations in terms of Gold Standard currencies. It may be, though I do not think it likely, that the object is to prevent fluctuations of sterling in terms of commodities which would preserve price stability.

I want to refer to the second possibility, that the object is to prevent undue fluctuations of sterling in terms of Gold Exchange Standard currencies. That is a return to the Gold Standard at second hand, and if that be the case and if we take the sterling exchange in terms of dollars, then quite certainly that we shall have a return to the Gold Standard and we shall have brought with it a recurrence of our past and present troubles. I want to bring one other set of facts to the notice of the Committee in support of my contention that currency is at the root of our troubles and that the price fall which we have been deploring is not a real price fall, but is artificial and merely in terms of gold. If you examine the prices of commodities in the last few years, you will find that while they have fallen in terms of gold they have not fallen in terms of one another. At some trouble I have taken out these prices. If I take, say, four representative foodstuffs and four representative raw materials, and relate their present prices to the prices in 1929, I find that while in terms of gold the fall has been tremendous, in terms of one another their prices have remained almost stable. I was astonished by the result. There is only one exception in the prices I have taken out. If I take grain and flour, beef and mutton, butter and sugar, I find that, taking 100 as the 1929 price, the price of sugar in 1931 is 52; of butter, 57; of beef and mutton, 55; and of grain and flour, which is the exception, 40. The fluctuation as between one mother is much smaller than the fluctuation as between these commodities and gold.

The result is more surprising when you examine raw materials. I have taken raw wool, raw cotton, iron ore, and hides and skins more or less at random as representative raw materials. If we take 100 again as the 1929 price, the 1931 price in each case is as follows: raw wool, 52; raw cotton, 52; iron ore, 51.5; hides and skins, 55. There is practically no change whatever in relation to one another. That seems sufficient support of my contention that the price fall which we are all deploring is not a real price fall, but a price fall merely in terms of gold. For that reason we who support this Amendment want to be assured that it is not contemplated that there shall be a return to the Gold Standard. We want to be assured even that it is not contemplated pegging our exchange in terms of gold, but that this fund will be used in a way calculated not to secure merely the stability of the exchange in terms of gold, but a wider and much more useful thing, namely, stability of prices.

Mr. BOOTHBY

I rise to support the Amendment which has been so ably moved by my hon. Friend, and to which my name is attached, and I would like to point out to the Committee that, as opposed to the Amendment moved by the Opposition, if the Government accept this Amendment, Sub-section (2) will read: The Treasury may, if at any time they think it expedient to do so, cause the Exchange Equalisation Account (in this Part of this Act referred to as 'the Account') to be wound up forthwith. 6.0 p.m.

I do not really know, and I would like very much to find out, why the Financial Secretary to the Treasury thinks that any more than that is necessary. It seems to me that the part of the Sub-section which this Amendment proposes to delete can only act in the event of our going back to an uncontrolled international Gold Standard and contemplates that possibility; and I am bound to say that my anxiety was not relieved by the speech of my right hon. Friend the Financial Secretary upon the last Amendment when he said that, in the event of our currency ceasing to be managed, then this second part of the Sub-section would at once become operative. I want to say that I hope our currency will never again cease to be managed. Surely we had enough of an uncontrolled international Gold Standard during the last 10 years to learn not to try it on again. One of the real difficulties in considering this Sub-section, and this Amendment in particular, is that we do not know what is the ultimate objective of the Government, what is their real monetary policy. They have been very firm in their refusal to give the House or the Committee information as to their ultimate aims. Perhaps that is what accounts for the prevailing despondency among some Ministers of the Crown at the present time.

I would like to point out one real danger. Suppose the present policy of reflation in the United States succeed,. There is some reason to think that it may not succeed, but supposing it does succeed, and a rise takes place in gold prices, which is what we all want to see, and which they are striving hard to attain on the opposite side of the Atlantic. That will be followed immediately by a rise in the exchange value of sterling, which might very easily and in quite a short time bring sterling back to something like the old parity. Does the right hon. Gentleman really contem- plate that in that event it might be possible to link sterling once again to gold without any international understanding? That is the real underlying danger of this particular Sub-section, if sterling approaches the dollar again in exchange value, there is bound to be an agitation, just as there was in 1924 and 1925, as my right hon. Friend the Member for Epping (Mr. Churchill) well knows, for a restoration of the Gold Standard, and for our going back to gold. That is a demand which will have to be resisted, and resisted to the end, and that is the main objective of this Amendment. We should lose the whole advantage of what I may, perhaps, describe as the modest premium upon exports which our going off the Gold Standard has given us. "Once bitten, twice shy."

If anything has been proved since the War to have broken down and failed utterly, it is an uncontrolled international Gold Standard. My hon. Friend who moved this Amendment gave very cogently the principal reason why, in existing conditions, it cannot possibly work. In normal circumstances world production ought to expand at the rate of about 3 per cent. per annum. It is known beyond a. doubt or peradventure that the world supplies of gold available for monetary purposes in the future not only cannot expand at the rate of 3 per cent. per annum but, will inevitably contract, and, therefore, if the world is ever to link itself to gold again, I submit it can only be after a full and complete international conference has arrived at an understanding to maintain the value of gold stable in. terms of commodities and to economise its use. That was recommended by the Genoa Conference, and it is because we went back to the Gold Standard without ensuring that these preliminary understandings and agreements were arrived at that we find ourselves in the tragic plight in which we are to-day. One has only to look at the condition of industry, at the condition of agriculture, not only in this country but all over the world, to see a standing warning, a danger signal, against any contemplated or possible return to an uncontrolled Gold Standard.

I would only say in conclusion that I am sure my right hon. and gallant Friend the Financial Secretary knows very well that we cannot go back to an automatic international standard, and when he talked about currency ceasing to be managed he did not really, I believe, contemplate it as an actual possibility of the future. If he did, then the outlook is dark indeed. Even the Macmillan Committee not once, but on several occasions, pointed out that we had got consciously to exercise control over our currency and monetary policy, whether we go back to an international standard by agreement or not. They said that an era of conscious control had now succeeded an era of natural evolution. We cannot allow these great economic forces to rip in the modern world. We cannot allow the price of gold and the price of primary commodities to continue their course unchecked and uncontrolled. I agree that the ultimate end is to achieve international co-operation, to attain price stability through, if you like, the stability of gold or the stability of any other international medium of exchange; but, in default of that international co-operation, I believe there is hardly any Member of this Committee, with the possible exception of the hon. Member for East Edinburgh (Mr. D. Mason) who would really recommend our going back once more to an uncontrolled international Gold Standard after our bitter sufferings during the last 10 years, and I beg my right hon. and gallant Friend to give us some assurance that that, at any rate, is not contemplated by the Government.

Mr. H0PKINS0N

The hon. Member for Huddersfield (Mr. Mabane) pointed out that he had made the discovery, the striking discovery, that although prices expressed in sterling or gold had fluctuated very widely in recent years, that when he came to analyse the exchange value of one commodity with another, he found a remarkable stability, that there was not that vast difference which appeared in the money prices. I intervene to save him some trouble and possibly also other hon. Members who nave been impressed by what he has been saying. If he considers the point more deeply, he will see that in default of some very grave change in the general tastes of the nations of the world, or in default of some very grave shortage in production of one or other of those commodities, or in default of some very great increase in the production of one commodity without the others being increased, this remarkable fact is in the nature of things, and must be so.

Mr. AMERY

My two hon. Friends have done a useful service in drawing attention to the wording of the latter part of this Sub-section. May I suggest to them that the wording is even more objectionable from their point of view than they have assumed it to be, because it is based on the assumption not merely that we return to an uncontrolled Gold Standard but that we return to the old Gold Standard of £3 17s. 10|d. per ounce, the same assumption as is embodied in certain other sections of this and the following Clause? That is a very grave assumption. The whole atmosphere, if I may put it so of these two Clauses is that we are living in a temporary and anomalous situation. The permanent overriding basis of £3 17s. 10½d. per ounce troy has been for a moment suspended, but the eternal laws of nature must and ought to be resumed after an interval, and that we must therefore go back that way. I regard that as an absolutely futile notion; and from that point of view I believe these words to be sheer, unnecessary verbiage. But they are serious in this respect, that they show that the old notion still persists in the minds of those who advise the Government, upon whose advice they frame the wording of the Clauses. They are advised by some who, like the Bourbons, have learned nothing and forgotten nothing, and from that point of view I think it is a great pity that these words stand, and I feel a useful service has been performed by the hon. Member for Huddersfield (Mr. Mabane) and the hon. Member for East Aberdeen (Mr. Boothby) in reminding the Committee that we ought to get away from those things. We have got to deal with the monetary question with a forward view, facing the world as it is to-day, facing the tremendous problems which have arisen out of the mismanagement or the non-management of monetary policy, and we should not continue to confuse our minds with the ideas of the old system.

Mr. J. JONES

This Debate takes me back 30 years. I remember the late Lord Balfour, who was then a Member for a Lancashire constituency, and a very great advocate of bimetallism; and a large number of other Members of all parties in the House were also supporters of that policy, believing that the best way in this world was to get the best you could out of the world, and that you must have two standards of purchasing power, gold and silver. Silver and gold have I none, but I understand the economic implications of the Amendmentߞ[Interruption.] I always am wrong, because you are a banker.

The CHAIRMAN (Sir Dennis Herbert)

No, I am not.

Mr. JONES

I hope I shall be absolved, Sir Dennis, from any idea of contaminating you by calling you a banker, because all through these discussions on finance the bankers have been in trouble. They have been in the dock, being the villains of the piece. I am not a banker, although I have played it. You may orate as long as you like about currency being in gold or silver or notes, but when you get down to brass tacks the real things that matter are the commodities which the people produce. What is the trouble? As far as I have learned from the experts who have addressed the Committee, the trouble is that there is not enough gold in the world to enable the people to buy back the things they have produced. Gold has not increased in proportion to our general power to increase the consuming opportunities of the people if they have the money to buy.

We are suffering from the lack of consuming power on the part of great masses of the people. Therefore, we have all these modern necromancers advocating a change from one form of currency to another. I am here representing Labour, which is the most important consideration in regard to this question. You can juggle as much as you like with the currency, but even then you have not solved the problem. I do not pretend to be an expert except on one or two subjects upon which I will speak later. I want hon. Members to realise when they are talking so much about currency that it is necessary to come down to brass tacks, and remember that, after all, the man at the bottom has to pay the lot. We hear a lot of talk about making the Gold Standard permanent, and restoring it to its full value, but it cannot be done. If that were possible you would not bridge the gulf between the small wages of the workman and the high prices which he has to pay for what he requires.

Hon. Members have said a great deal about the necessity for increasing prices, but what guarantee have the workers that if prices are increased wages will increase in the same proportion? Nothing whatever has been said upon that point. There has been a good deal of talk about increasing prices and restoring trade prosperity, but is there any guarantee that, in the event of prices being increased, wages will go up to enable the workers to buy as much as they did before prices increased? Wages have gone down to the extent of £200,000,000 since the War, and prices have not gone down to the same extent. [HON. MEMBERS: "Much more!"] Let hon. Members go to a man who is living on 15s. 2d. a week, or men working short time in the docks, and tell them that they are better off than they were when prices were low. Hon. Members are simply talking nonsense on this question, and they know it. It is true that in some instances prices have gone down. A halfpenny has been taken off the price of a 4-lb. loaf; at the same time, we all know that there has been a substantial reduction in the purchasing power of money.

It is all very well for those with regular incomes to talk about reduced prices, and tell us how things are improving. I ask hon. Members to consider the case of the ordinary manual labour. We have been told that this Amendment has been introduced in order to stabilise prices, but at what level? Not at a level that manual labourers can afford to pay. Let us have a real stabilisation, and let us have a fair relationship between the cost of production and the price the workers have to pay for commodities. Merely talking big about the Gold Standard, and trying to paralyse the people with figures, does not really mean anything at all. I am prepared to support this Amendment. Although I do not know what it means, I will back it. If it means any improvement, I shall support the Amendment, although it seems to me that it means bi-metallism restored under a new name.

The CHAIRMAN

I think the hon. Member is now getting to a different Amendment altogether. I find it hard to discover any connection between his remarks and the Amendment now before the Committee.

Mr. JONES

I am prepared to support any Amendment against the Government.

Major HILLS

In order to improve trade, a rise in prices is essential, and to no class of the community is it more essential than to the workers. I feel some difficulty in talking about this Equalisation Account. When gold went off the pound we lost £80,000,000, in trying to get gold back again. We are now going to spend £150,000,000 on stabilising the pound in terms of another gold currency. All the quotations of the pound are given in terms of dollars or francs, and they are based on gold, and therefore, although we do not quite realise it, we have a Gold Standard, and we are still on a Gold Standard at one remove. The whole efforts of the Treasury are being devoted to keeping our currency stable in terms of another gold currency. I want to see us disregard gold, and, by some means or other, get on to a currency which is stable in terms of commodities. The difficulty is that the primary producers producing wheat or wool do not v. ant to barter their commodities for other commodities. The primary producer must take cash payments. A largo part of the primary producers' outgoings, money payments, such as rent, mortgage interest and wages, and in all these money payments the form of the currency brings down the possibility of profit. That is why a fall in prices hits the primary producer in all countries especially hard.

Now what can we do? The right hon. Gentleman the Member for Hillhead (Sir R. Horne), in the Second Reading Debate suggested certain ways of increasing prices, and one was a low bank rate, the Bank of England buying securities, and various means of that sort. A low bank rate is no good when there is no disposition on the part of the lender to lend, and unless you get industrial prosperity, you will not attract much money to industry. You cannot get industrial prosperity until you have increased prices, and so you look like being in a vicious circle. I believe that even- tually we shall leave gold altogether, and I look forward to an unrelated paper currency resting on the stability of the Empire, and attracting to its ambit countries that are on sterling now and who will stay on sterling.

That means a managed currency, managed not by the Government but by some quite independent body who will be charged with the job of keeping prices level in terms of goods. I do not believe that you will get that in any other way. I am certain that you will not get it in the way the Government arc following now by the method of having a fund to see that the pound does not rise too high in terms of gold currencies. They should only regard the exchange value of the pound in terms of currencies which are not on the Gold Standard. I hope that we shall get to something more definite. I agree that the Government have to go slowly and feel their way, but I regard these words which we are talking about as the wrong road to take, I should prefer some form of exchange. I hope that we shall get some sort of assurance from the Government on this point. I have been in the House many years, and I very rarely found more unanimity of opinion, and that has been arrived at by a process of difficult thought. It is a hard road to follow, and much as I have admired the House of Commons, much as I have recognised its power to tackle difficult questions, I do not think that it has ever shown itself more clear-sighted than the way in which all parties have fought for a change in our currency system.

6.30 p.m.

Major ELLIOT

We are now discussing what is, after all, an hypothesis, and an hypothesis to which the House has already assented. The House has already, in the earlier words of this Clause, given the Treasury power to wind up the Exchange Equalisation Account at any time that they think it expedient to do so. Surely it is not necessary to discuss at great length an example of an occasion on which it would be expedient to do so. I have said quite clearly that, if we returned to a metallic currency, we should of course wind up the Exchange Equalisation Account, as everyone agrees it would be natural to do. The Clause gives one example. It was not with any desire to wave the red flag, or perhaps the yellow flag, before the advocates of deflation, that we gave the example that we did, but merely because there is an Act on the Statute Book, the Act of 1925, fixing a certain price, which is temporarily suspended by the Emergency Act passed last autumn, and, if that temporary suspension came to an end, the Act would come into force and the 1925 policy would again be pursued.

Let me reassure my hon. Friend the Member for East Aberdeen (Mr. Boothby) and my hon. Friend the Member for Huddersfield (Mr. Mabane), whose thoughtful speech was of great interest to all sections of the Committee, that the Government have no intention whatever of going back to gold, at any rate while gold prices behave as they are doing now. I hope that that assurance will comfort my hon. Friend, and that he will not find it necessary further to press the present Amendment. These words, as he will see do not in any way prejudice the ultimate solution, as, indeed, he himself has admitted. He himself has admitted the desirability of trusting the Government in this respect, since he is willing to leave in the power of the Treasuryߞ that is to say, the Governmentߞof winding up the Account at any time that they think it expedient so to do, and, therefore, with the assurance I have given, I hope that, he will find it possible not to press his Amendment. A very interesting subject has been ventilated, an assurance which I think meets the whole desire of the House has been given, and I would ask the Committee to consider that there are many other subjects of great interest which the Committee desires to discuss, and to hear the right hon. Gentleman the Member for Hillhead (Sir E. Home) and others upon subjects which they have made their own. Therefore, I would ask the Committee if it is not now possible to pass to a new subject.

Sir S. CRIPPS

The right hon. and gallant Gentleman is apparently relying on the fact that he persuaded Members by means of the Whips to vote against the last Amendment, in order to treat this Amendment as if it had been already passed by the Committee. [Interruption.] The Amendment is split into two halves. The original Amendment was to delete the whole Sub-section. What the right hon. and gallant Gentleman has said seems to us, at any rate, to be a very poor excuse for leaving in the second half of the Sub-section. He says that this is only an example of one of the occasions on which the Treasury might wish to act. I would point out to him that it is nothing of the sort. It is obligatory, in the event of the Gold Standard (Amendment) Act, 1931, ceasing to have effect, to wind up this fund. It is not a question of the Treasury acting in these particular circumstances. We agree entirely with the speeches that have already been made on the question of a return to the Gold Standard and I do not propose to elaborate the points any further; but we believe, as we have said on many occasions already in the House, that the only possible criterion of a currency basis is a wholesale price index, and that, until we get to that criterion, we shall never have a satisfactory basis for our managed currency.

On this Amendment we shall certainly vote against the Government, as we did on the last, because we believe that these words could never have been inserted unless it was intended to warn the House and the country that there was a liability to a return to the Gold Standard at some date not very far distant. The right hon. Gentleman says that there is no intention to go back so long as gold behaves as it does now. I really do not know what the right hon. Gentleman means by "so long as gold behaves as it does now." He can come to-morrow and say it is behaving in a different way for all that I know, but it is not any real assurance. Is he prepared to assure the House that in no circumstances whatsoever, however gold happens to behave, will he or the Chancellor of the Exchequer or the Treasury return to a Gold Standard so long as this Government is in power? If he will give that assurance, I dare say the Committee might be prepared to pass to the next Amendment.

Colonel WEDGWOOD

I really cannot understand the right hon. and gallant Gentleman saying that he wants to get on with the Bill. He could perfectly well accept this Amendment without in the least altering the powers in the Bill; the Treasury has power under the words which have already been passed. Our real objection to these words is that they indicate the whole gold mentality of this Bill. The Bill has been drafted by people who want to get back to gold. If we take out these words, it will indicate to the House, to the country, to the Treasury, and to the banks that we do not want to get back to gold at the old parity. Unless the Financial Secretary is bound hand and foot by his absent Chancellor of the Exchequer, there is no sort of excuse for not accepting this Amendment. He has not put forward any excuse. He puts in an example, but one of the most elementary lessons that we have heard in this House is that we ought not to put superfluous verbiage in an Act of Parliament. This is superfluous verbiage. It will not make a bit of difference if these words remain in or if they are taken out, but, if they are not taken out, it will be an indication to the country that the Government are making for the old bad desire to get back to the Gold Standard. I beg the Financial Secretary in this case either to accept the Amendment or allow the Committee a free vote on it. If we could have a free vote, we should find the hon. Member for East Edinburgh (Mr. D. Mason) and the hon. Member for Farnham (Sir A. M. Samuel) in one Lobby, and the rest of the Committee in the other. It is rather absurd to hold a committee, in which there has been a unanimous expression of opinion from all sides, tied by the Whips for no earthly reason except that the Chancellor of the Exchequer has not allowed the right hon. and gallant Gentleman to accept the Amendment.

Mr. BOOTHBY

I want to point out, on behalf of my hon. Friend who moved this Amendment and myself, that, with the best will in the world, we cannot accept the assurance which the right hon. and gallant Gentleman has given to the Committee. After all, he has admitted that, as the Clause would stand if he accepted the Amendment, the Treasury would have the power to wind up this Account forthwith. The only possible reason for or explanation of the presence of these words in the Bill is that the Government still contemplate the possibility of going back to the Gold Standard and to the old Gold Standard parity. I am quite sure that that is opposed to the wishes of the vast majority of hon. Members in all quarters of the Committee. If the right hon. and gallant Gentleman assures us that that is certainly not the intention of the Govern- ment, then I agree with my right hon. Friend the Member for Sparkbrook (Mr. Amery), who pointed out that it is no use encumbering Finance Bills with useless verbiage. On these grounds, I am afraid that we cannot accept the assurance which has been given by my right hon. and gallant Friend.

Sir GEORGE GILLETT

I do not agree with the Financial Secretary in thinking that there is any great hurry to proceed to a vote on this Amendment, because I cannot imagine any more important matter connected with the Finance Bill than this question of the return to the Gold Standard. In the history of this country we have already made two serious mistakes during the last 10 years. There is one aspect of this matter which has not been referred to by any of the speakers, even those who have supported the Amendment, and that is that the depreciated sterling currency which we have to-day, if once we have an adjustment in prices corresponding to the fall, is going to have a very important influence upon the burden of our internal debt. Our competitors in the export markets of the world, France, Germany and Italy, have practically relieved themselves of a great part of their internal debt, while this country has something like £6,000,000,000 to £7,000,000,000 of internal debt, and I would ask the Government to remember that the question we are considering to-day is bound up with this larger question of the burden of our debt.

The first mistake that the Government of the day made in connection with this question was when they began the policy of deflation, about the year 1920, without having in any way tackled the internal debt in terms of the depreciated money of that day. There was a too hurried return to the Gold Standard in 1925. I think that possibly the right hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood) and myself are the only two Members us the House of Commons to-day who warned the Government at that time that their action was too hurried, and that they might probably live to regret it. It is interesting, I am sure, to my right hon. and gallant Friend, as it is to me, to see that many right hon. Gentlemen who to-day are criticising that return to the Gold Standard have found that, at any rate to a certain extent, he and I were truer prophets than they thought at that time.

It seems to me now that what we want to know from the Government is that they fully recognise the extreme seriousness of this question. Financial and industrial depression has crept all over the world like a disease, both in countries which had a Protective system and in countries which had a Free Trade system, and I cannot help thinking that the monetary question has been very closely connected with that process. That is why I feel that it is extremely important that the Government should recognise how very serious the matter is. The country wants to be assured that there is going to be no hurried return to the Gold Standard, and certainly not to the pre-War standard or the standard of 192D, and that the House of Commons will not once again be hurried into a decision without having full opportunities of knowing exactly what is happening. I cannot conceive of anything that can he done until international conferences have taken place. Therefore, if the hon. Member who moved the Amendment is going to take a vote upon it, I shall support him, as an indication of the seriousness of the question which it raises and in the hope that it may draw the attention of the Government to it and induce them to avoid any haste in coming to a decision on this matter.

Sir ROBERT HORNE

I would venture, if I might with great humility, to make a suggestion to my right hon. and gallant Friend the Financial Secretary to the Treasury. It is that he should agree to consider the whole question, in the light of the Debate that has taken place, against the Report stage of the Finance Bill. I think that he must recognise, and that the Government must recognise, that there is a very strong feeling in the House on this question. Undoubtedly, the first part of the Clause gives the Treasury all the powers that they require. The second part is not only mere verbiage, but is worse than mere verbiage, because it gives unfortunately a very false impression.

I do not think any of us contemplate that at any time we are likely to return to the Gold Standard at the old parity. Many of us believe that some day, by international action, when proper stipulations are made, we may return to gold at a different parity, but no one in the House believes that we shall ever go back to gold at the parity we had up to September of last year. The reason why I urge that the matter should be reconsidered is this: Not merely are these words unnecessary, but they undoubtedly give the impression to any intelligent foreigner who looks at the Bill that Britain's intention is to return to the Gold Standard at the old parity, otherwise these words would not be there.

I can tell the House from my own experience, which I am sure can be supported by that of the Lord President of the Council, that the statement by the Cunliffe Committee in 1921 that it was Britain's policy to go back to the Gold Standard was because of the vast amount of sterling that was being purchased here, the money being used by speculators. What it cost us it would be impossible for anyone to say. In respect that the Financial Secretary has admitted that these words really give him no powers which he does not have under the first part, and in respect that I am sure they have a misleading effect, not so much in this country, where perhaps the explanation given by the Financial Secretary will be understood, but all over the world, where people are already far too prone to speculate in sterling because they think it is the only reliable currency in the world, I would very strongly urge my right hon. and gallant Friend to reconsider the subject, because undoubtedly the House looks upon the matter very gravely.

Major ELLIOT

Of course, such an appeal from a source of such great authority is one that I am bound to take into consideration. An ex-Chancellor of the Exchequer, and ex-Financial Secretary to the Treasury and other Members in other parts of the Committee have pressed upon me that this might be misinterpreted, and my right hon. Friend has asked me in the most reasonable fashion whether I will give an undertaking to consider the question between now and Report. I think it is the wish of the Committee that the matter should be further considered and I will, therefore, gladly give the undertaking that is desired. I hope, with that undertaking and with the further assurance that I have given in the name of the Government that they have no intention whatever, as long as gold behaves as it is doing of returning to the Gold Standard, it will be found possible not to press the Amendment.

Mr. CHURCHILL

The Committee, I think, will be well advised to accept in their fullest sense the assurances that have been given us by the Financial Secretary. I was, unfortunately, not in my place when he gave the specific assurance that there was no intention to return to the Gold Standard at normal parity while gold was behaving as it is. Of course, the Bill on which we are engaged is an annual Bill, and makes provision only for the year. One cannot reasonably expect that gold will once again return to propriety and normal, decent behaviour in such a short space of time and, therefore, I think the assurance he gave was one in which there was, as he said, a very great measure of solidity. When my right hon. Friend rose just now, he greatly reinforced and confirmed all these impressions and drew attention to the important character of the statement that he had made on the subject of the non-return to gold at normal parity in the immediate future or in any period which is practical and worth while considering, a statement made by him on behalf of the Government and on behalf of the Chancellor of the Exchequer, who is unhappily not with us to-day. Therefore, I think the hon. Member who moved the Amendment and my hon. Friend opposite have achieved all that they could expect to achieve, and all that a Parliamentary Debate entitles them to achieve at this stage in its influence upon the policy of the Government and in the declaration which it has evoked from the administration. There was one expression in the first speech of the Financial Secretary upon which I must comment. He said we ought to get this out of the way and pass on to more important topics. There are no more important topics. Search the world and you will not find a topic more important than this grave, grim money problem. You may not see the solution. We may not be able to propose the solution. There may be many conflicting solutions, but this is the supreme topic that concerns the whole nation. Every class is concentrating its mind and its intelligence, as far as it can comprehend it, upon it. Do not let us imagine that in dismissing this matter, we are passing to more important topics. We are passing to topics, whatever they are, incomparably petty compared with this.

Mr. MABANE

I thank the right hon. and gallant Gentleman for the assurance he has given me. I am sure it will be a gratification not only to the House, but to the country and, therefore, in accordance with his request I ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Colonel WEDGWOOD

I beg to move, in page 13, line 8, to leave out the words "or in the purchase of gold."

The object of this Amendment is to deprive the Treasury of the power of purchasing gold. Sub-section (3) is a vital part of the Clause: The Treasury may cause any funds in the account to be invested in securities or in the purchase of gold in such manner as they think best adapted for checking undue fluctuations in the exchange value of sterling. I deprecate giving the Treasury at this time of day the power to buy gold. Throughout the Press of this country, and indeed of the entire world, there has been for the last two years incessant complaint of the hoarding of gold by France and America. A great deal of the breakdown of the currency systems of the world has arisen from the fact that America and France, because they were barred out by their high tariffs from taking goods, have had to take gold. Three-quarters of the gold of the world has been concentrated in those two countries, with the result that the constant demand for gold by the debtor countries in order to satisfy America has sent up the price of gold relatively to commodities. There can be, and has been, no apparent rise in the price of gold, but there has been a constant, damaging fall in the price of commodities measured by gold, because there has been this scramble for a limited commodity. Now we are giving power to the British Treasury to do exactly what we have been blaming France and America for doing. We are giving them power to go into the market, where the demand is already too high, and still further force up the price of gold in terms of commodities. You are making the inter- national situation worse than before. You are taking steps here to drive still further down the prices of raw materials. Why? I do not know. Why has the Treasury or the Bank of EnglandߞI do not know whichߞbought £3,000,000 of gold in the last fortnight? They have been cursing other countries for doing it. Why have they done it? There must be some reason. Could we have, before the Debate on this Amendment closes, the reasons which have actuated the Treasury or the Bank in buying that £3,000,000 of gold? I suspect it is the desire to return to the Gold Standard.

7.0 p.m.

Then I should like to know who bought this £3,000,000. Who has been the deciding factor? Was it the Treasury or was it Mr. Montagu Norman? Was it Lord Bradbury who advised it? I would ask a further question. What are you going to do with it now that you have got it? I cannot believe that you are going to hoard it. If it remains in the vaults of the Bank of England, what use is it going to be to us or anyone else? You take it off the market where it is wanted. Are you going to increase the fiduciary issue? We are taking powers under the next Subsection to borrow money to pay for this gold. We shall have to pay interest on the money that we borrow, whereas the gold in the Bank of England will bring in no interest. There is a dead loss to the taxpayer on it. Are you going to sell it again, and, if so, how soon? The longer you hold it the greater the loss. Lastly, is this an indication of the long-range policy of the Government about which we have heard so much? Is this an indication of the policy of securing for ourselves reserves, just exactly as we collected gold before 1925? For years we collected gold then, so that we could get back on to gold. Are we doing the same thing now, in spite of the wishes of the country, in spite of the ruin of the export trades, in spite of the effect it will have of lowering the actual tariff on all goods coming into this country today? Is that the long-range policy indicated by the purchase of gold? I know that the right hon. Gentleman, who answers for the Government on this occasion, is not Chancellor of the Exchequer or Financial Secretary to the Treasury. He is, however, a former Financial Secretary to the Treasury, and I have keen recollections of his speeches on this question in the past, although I have not looked them up, as I did not know that he was going to reply. So many things have changed, fiscal views have changed, that perhaps his currency views may have changed, too, but in old days he was rather on our side about the return to the Gold Standard. I am afraid that he will not be able to answer my questions, not because he has not been coached, but because the answers will not be altogether in accord with what he would himself have wished. We expect from him as clear an answer as the Treasury can at present give to three of the four points-why was this gold bought, who bought it, and what are they going to do with it?

Mr. O'CONNOR

Much as I sympathise with what the right hon. and gallant Gentleman has been saying about the accumulation of gold, I feel that the effect of excluding these words would be exactly nil, because, if we excluded the words "or in the purchase of gold" we would still leave in the words

in such manner as they think best adapted for checking undue fluctuations.

Colonel WEDGWOOD

No, it would be confined to the purchase of securities. The Clause would then read: to be invested in securities in such manner as they think best adapted for checking undue fluctuations.

Mr. O'CONNOR

I beg the right hon. and gallant Gentleman's pardon. On reading it again, I see he is obviously right. The object of retaining this power is that of preventing fluctuations in sterling. It is no use girding at gold as long as the rest of the world uses gold. If you deprive the Treasury of this weapon, you deprive them of one of the most formidable weapons with which to secure the object at which we are aiming. Many of us hold that the policy of this country should not be to accumulate gold, but that is not the policy we are pursuing nor it is the policy in this Clause. My own view is that of the right hon. Gentleman, that, having left gold behind, we ought to consider gold irrelevant. The further accumulation of gold, except as a means of stabilising sterling, ought not to be the policy of the Government, but, if the Amendment were adopted, it would deprive the Government of one of the strongest weapons it could use in. the face of the world for the achievement of the purpose for which this Clause is designed.

Mr. BOOTHBY

For the reasons put forward by the hon. and learned Member for Central Nottingham (Mr. O'Connor), I do not see the point of this Amendment. If the Treasury and Bank of England buy dollar securities or French securities, it is, for all practical purposes, equivalent to buying gold. It really does not matter so much what the Exchange Equalisation Fund is entitled to purchase as the use to which the purchases are put. On that there is one point which I would like to put to the right hon. Gentleman, as it is causing some apprehension. I have been told that the Bank of England and the Treasury have made purchases of francs recently in order to stabilise the exchange. If they have not, they may do so. We are of course, not to know what they purchase at any time, as their purchases are to be kept completely secret, and there are not to be even monthly returns made to us. Suppose the Bank of England and the Treasury were to purchase francs and then to exchange those francs into gold and earmark that gold and leave it in the Bank of France. Or, suppose that they were to purchase gold in America and earmark it in the vaults of the Federal Reserve Bank against the rainy day in order to have a means of stabilising sterling. That, in itself, would be very undesirable indeed, because it would definitely have a very deflationary effect from the world point of view. It would withdraw at this critical time so much more gold, which might be made the basis of credit. Suppose that the Bank or the Treasury withdraw the gold from Paris and bring it over here, that might in its turn enable the French to start drawing gold out of America and taking it back to France to replace the gold that we took from Paris. That, in itself, might jeopardise the policy of reflation which the Federal Reserve authorities are endeavouring to put into operation on the other side of the Atlantic.

These are real, potential dangers. If the Bank and the Treasury are going to purchase gold, then the Committee ought to have some assurance that that gold is not going to be withdrawn from the basis of credit, but is going to be used for the purposes of credit extension here. Otherwise, I see in the whole of this business a further world deflationary effect at a very critical time, especially if we do—as there is a real fear in some quarters of the City that we may do— earmark certain amounts of gold in France or America against future dangers to sterling. To that extent it will jeopardise the attempt made in America and elsewhere to start things going again and to get some reflationary movement, and will put back the whole movement for the expansion of trade in the next few months. I beg my right hon. Friend to give the Committee some assurance that the fund and the purchases of the fund will not be used for a deflationary purpose, but that the Government and the bank will take great care that nothing they may do, in so far as they can possibly help it, will hinder the movement to raise commodity prices.

The MINISTER of HEALTH (Sir Hilton Young)

I shall deal first with the last question of the hon. Member for East Aberdeen (Mr. Boothby). There will be no difficulty in giving the hon. Member satisfaction on the point which he has raised. This is rather a minor point of banking technique, and is not a question of broad policy. In the control of so great a fund as this, when it is contemplated taking gold as part of the assets of the fund, it must be a matter of consideration for those who are managing the fund that that should not be done in such a manner as to have a deflationary effect upon the credit supply of the world. I do not myself think at first sight that the mere taking of gold as part of the assets of the fund would have that effect. The gold would still remain as a basis of credit. Certainly, as a matter of policy, there can be no two opinions about what the hon. Member said, but it is rather a question of banking technique.

As to the merits of the Amendment as a whole, I may possibly be able to persuade the right hon. and gallant Member who moved the Amendment and other hon. Members that this is not really a well-directed Amendment for the purpose which the right hon. and gallant Gentleman has in view. The power to take gold as part of the assets of the fund can have no relation whatever to the policy of this country as regards its currency. It has no relation to it. Considering this as a practical banking question, quite apart from the aspects we were discussing on the previous Amendment, what is the necessity for having the power to have gold as part of the assets of the fund? It is—and this, again, is a matter of the technical business of banking—that the possession of gold may in certain contingencies be the more economical manner and in certain other contingencies the only manner, of getting possession of certain foreign currencies of which we are in need for the major purpose, the maintenance of the stability of the exchange. There is another matter for which one may want gold as one of the assets of the fund. It may be the most economical way of dealing with the balance of financial credit, which is an essential part of the mechanism of stabilising the exchange. It is necessary to give the fund power to carry out its purpose in the most efficient way. In some circumstances this is the only way in which it can be carried out. In a word, this is a necessary part of the mechanism of the fund in order to give it proper flexibility in the achievement of its main purpose.

I understood from the speech of the right hon. Member that one of the things he feared was lest the demand for gold as an asset of the fund should increase the scarcity of gold and have a further effect on the general fall of prices. I do not think that there is any reason whatever to apprehend that. I believe that it is quite out of proportion to the use that will be made of gold in connection with this fund. In the second place, what is the specific purpose of the fund? It is to maintain the stability of sterling; in other words, to prevent a sharp rise in sterling at the present time. The purpose of the fund at the present time is to prevent a sharp rise. As long as we do that and keep sterling down to its present level, the result is to draw gold out of its hoards all over the world. Between £50,000,000 and £60,000,000 of gold has been drawn out of its hoards in India. That is a most desirable object.

Colonel WEDGWOOD

Is it desirable that private people should cease hoarding gold and that the Bank of England should begin hoarding gold?

Sir H. YOUNG

I am afraid that in order to follow this argument it is necessary to follow two steps at once, and that is always difficult. It is essentially a part of the mechanism of maintaining the situation, the effect of which is to bring out gold, that you should enable the fund to do its work in the maintenance of sterling. The right hon. and gallant Gentleman asked questions about the recent purchase of £3,000,000 worth of gold. That has nothing whatever to do with the Bill, the Clause, or the Amendment. It took place before the Clause was passed, and therefore it does not concern the powers granted under the Clause. The Committee naturally may be interested in the matter, and it may not be out of order if I deal with the questions asked by the right hon. and gallant Gentleman. The gold was purchased by the Issue Department of the Bank of England. For what purpose was it purchased? It was purchased in the normal course of banking business, a normal seasonal operation at this time of the year. At this time of the year the Bank of England is normally strengthening its holdings in the Issue Department against the coming demand of exchange in respect of the movements of the corn and cotton crop. What will be the effect of this upon the credits? It can have no deflationary effect at all, because, being carried out by the Issue Department of the Bank of England, it represents an equivalent issue of notes.

Colonel WEDGWOOD

Is there an in crease in the fiduciary issue based upon the increase of the holding of gold?

Sir H. YOUNG

Certainly not of the fiduciary issue. The notes come into existence against the increase in the gold total. Those notes are the basis of credit. I think I have dealt with the principal contentions which have been advanced, and I hope that the. Committee will now see their way to come to a decision upon the matter.

Colonel WEDGWOOD

I am very loth to withdraw the Amendment as I am unconvinced by the arguments of the right hon. Gentleman. I would ask him to make one point clear before we come to a decision upon the matter. He said that the purchase of £3,000,000 worth of gold took place before the passing of the Bill. There have also been recent purchases of £60,000,000 worth of foreign bills-of-exchange. I wish to point out to the hon. Member for East Aberdeen (Mr. Boothby) that the purchase of bills-of-exchange is for goods and not gold. [Interruption.] We cannot afford gold wedding rings nowadays; the only purpose for which we can use gold is for our teeth.

Mr. BOOTHBY

Gold is a commodity.

Colonel WEDGWOOD

It is a commodity of exchange. The whole point is that a bill of exchange is an order for goods. If I buy a thousand dollar bill of exchange it is exactly the same as ordering a thousand dollars' worth of goods from America. The gold lies in the Bank of England. It is somnolent. A bill of exchange means value and employment; it is a different thing. We want to know whether the Account starts clear of all the transactions which have been carried out in the past. We hear already that the Account is debited with a loss of £8,000,000 on the borrowing of dollars and francs. Is that all? Are those recent purchases, whether of gold or of bills of exchange, also to be debited to the Account? Are they part of the assets of the Account? Are the transactions which have taken place during the last two months to be embodied in the fund when the Finance Act has passed? There are so many mysterious transfers going on between the Issue Department and the Treasury that we ought to know whether the transactions which have taken place in the past are to be debited or credited to the new fund. It is obvious that one of the reasons for starting the fund was, I will not say to conceal, but to get round the difficulty that there was a loss of £8,000,000 in paying back the dollar and the franc loans which we borrowed last autumn. Is any subsequent transaction also to be embodied in this new Account? May I have an answer to that question in order that I may know where we are as regards the transactions of the last few weeks?

Sir ARTHUR MICHAEL SAMUEL

My right hon. Friend has given us to understand that the purchase made by the Issue Department of the Bank of England was not made in relation to the Clause because the Clause has not been passed. Am I right in saying that? If I am, what has been happening with re- gard to the Exchange Equalisation Fund during the last three or four weeks? We have passed a Resolution, and the whole world has thought that £150,000,000 worth of credit set out in the Clause has been used in some way to flatten out the curve or to stop speculation in exchange. If that is so, how does he differentiate between the purchase of gold by the Issue Department of the Bank of England and dealing with the £150,000,000 which he has power to deal with under the Resolution, and which we thought had been used in keeping the exchange steady in the last few weeks.

Sir H. YOUNG

In answer to the question of the right hon. and gallant Gentleman, and to convince him that there is no mystery at all about the £3,000,000 worth of gold, I repeat that it was purchased by the Issue Department of the Bank of England and therefore has no relation to the fund at all.

Colonel WEDGWOOD

Will it be transferred?

Sir H. YOUNG

May I finish my argument? It leaves something outstanding. It leaves outstanding the difference between the par price of the gold purchased and the market price. That, as the right hon. and gallant Gentleman will fully appreciate, is the difficulty of all transactions at the present time. We have to account for the difference between the par price and the market price. In order to complete the information put at the disposal of the Committee on the matter, I would say that this is the only part of the transaction which will make any difference to future funds. It will make a difference in this way. In order to provide for the difference, payment has to be made out of the existing Exchange Account. That diminishes the existing Exchange Account. Since the existing Exchange Account has diminished there will be a proportionate amount to be brought into the new Exchange Equalisation Fund. It will be smaller by the amount of the difference between the par value and the market value. But that is not a real loss to the fund, because against that, as the Committee will appreciate, there is the actual greater value of the gold asset which is only shown at its par value in the Account. I am afraid I do not fully appreciate the point of my hon. Friend the Member for Farnham (Sir A. M. Samuel) as to transactions up to the present time. Since the Exchange Equalisation Account did not exist there cannot be any transactions on that Account. It will start afresh when it comes into existence.

Sir A. M. SAMUEL

We understood that it was used the first time. We have now got to know something which we did not know before. We had violent fluctuations of the exchange some weeks ago, and the steadying of that oscillation was not due to the operation of the £150,000,000 voted in the Budget Resolution. That is news to us.

Colonel WEDGWOOD

Is that the only debit, or is there a debit on the balance of exchange as well? Suppose the dollar falls, will the difference be debited to the Exchange Equalisation Account?

Sir H. YOUNG

I am sorry, but I do not appreciate to what the right hon. and gallant Gentleman refers. If he refers to the transactions of the Bank of England, I must acquaint myself of them before replying. I can only tell him the general nature of the principle on which the transaction is involved. In future transactions, when there is a loss such as that to which I have referred, an apparent loss between the market value and the par value of gold, it will have to be provided for by writing off the assets of the Exchange Equalisation Fund, but against that writing off you will have the actual asset of the greater value of the gold than the value at which it stands in the account.

Colonel WEDGWOOD

I am sorry to be persistent, but the matter is very important. As far as gold is concerned, we know where we are, but the Issue Department of the Bank of England has been buying dollars and francs. The total is stated to be £60,000,000. At some future time those dollars and francs will be sold. There may be a loss on the transaction when it is completed. The Issue Department of the Bank of England has bought that exchange. Will any loss or any profit on selling those dollars or francs be debited to the Exchange Equalisation Account on the ground that sterling has been sold and foreign exchange bought in order to keep sterling down? Are both a gold transaction carried out by the Issue Department, and a foreign exchange transaction carried out by the Issue Department, to be treated as liabilities or assets of the Exchange Equalisation Fund?

Sir H. YOUNG

The right hon. and gallant Gentleman, I am sure, will acquit me of any desire not to give every possible assistance upon this matter. He has asked me a hypothetical question as to transactions, the nature of which I do not recognise, on an Amendment to which they have absolutely no relation whatever. If I can identify the transactions to which he referred, and if I can discover that any such transactions as those hypothetical transactions to which he referred are ever likely to occur in the future then at the appropriate time, if it ever becomes relevant to the Amendment before the House, I will give him the fullest possible information at my disposal. At the present time I can only say that I am certainly unacquainted with any loss of the nature to which he refers. I should like a further opportunity to examine the matter because it is not relevant to the Amendment. I am confident that no loss has occurred up to the present time.

Colonel WEDGWOOD

May I, in view of the very kind offer of the right hon. Gentleman, ask questions on the matter of the Financial Secretary to the Treasury? Does the right hon. Gentleman indicate that we may in future inquire what use has been made of the fund, and what has been debited or credited to the fund? We have been told that we are not to find out anything of the kind. Now is the time to ascertain what will be done with the Equalisation Account when the Government have got it. Once the proposal is through our mouths are sealed, and no question will be allowed. The whole of the transactions will be wrapt in mystery until the next Budget comes. As the Committee seem to take a light-hearted view of this matter, I would remind them that it is the House of Commons that is being muzzled and not merely the Opposition.

Question put, "That the words proposed to be left out stand part of the Clause."

The Committee divided: Ayes, 343; Noes, 42

Division No. 198.] AYES. [7.32 p.m.
Acland-Troyte, Lieut.-Colonel Duggan, Hubert John Kirkpatrick, William M.
Adams, Samuel Vyvyan T. (Leeds, W.) Duncan, James A. L. (Kensington, N.) Knatchbull, Captain Hon. M. H. R.
Agnew, Lieut.-Com. P. G. Dunglass, Lord Knox, Sir Alfred
Albery, Irving James Eady, George H. Lamb, Sir Joseph Quinton
Allen, Lt.-Col. J. Sandeman (B'k'nh'd.) Eales, John Frederick Lambert, Rt. Hon. George
Allen, Lt.-Col. Sir William (Armagh) Eastwood, John Francis Law, Sir Alfred
Amery, Rt. Hon. Leopold C. M. S. Eden, Robert Anthony Law, Richard K. (Hull, S. W.)
Applin, Lieut.-Col. Reginald V. K. Edge, Sir William Leech, Dr. J. W.
Aske, Sir Robert William Ellis, Robert Geoffrey Lees-Jones, John
Bailey, Eric Alfred George Elmley, Viscount Leigh, Sir John
Baldwin, Rt. Hon. Stanley Emmott, Charles E. G. C. Leighton, Major B. E. P.
Baldwin-Webb, Colonel J. Emrys-Evans, P. V. Lennox-Boyd, A. T.
Balniel, Lord Entwistle, Cyril Fullard Levy, Thomas
Banks, Sir Reginald Mitchell Erskine, Lord (Weston-super-Mare) Lewis, Oswald
Barclay-Harvey, C. M. Essenhigh, Reginald Clare Liddall, Walter S.
Barrie, Sir Charles Coupar Evans, Capt. Arthur (Cardiff, S.) Lister, Rt. Hon. Sir Philip Cunliffe-
Barton, Capt. Basil Kelsey Evans, R. T. (Carmarthen) Liewellin, Major John J.
Beauchamp, Sir Brograve Campbell Faile, Sir Bertram G. Liewellyn-Jones, Frederick
Beaumont, M. W. (Bucks., Aylesbury) Foot, Isaac (Cornwall, Bodmin) Lloyd, Geoffrey
Beaumont, Hn. R. E. B. (Portsm'th, C.) Ford, Sir Patrick J. Lockwood, John C. (Hackney, C.)
Belt, Sir Alfred L. Fraser, Captain Ian Loder, Captain J. de Vere
Betterton, Rt. Hon. Sir Henry B. Fremantie, Lieut.-Colonel Francis E. Lovat-Fraser, James Alexander
Birchall, Major Sir John Dearman Fuller, Captain A. G. Lumley, Captain Lawrence R.
Bird, Ernest Roy (Yorks., Skipton) Galbraith, James Francis Wallace MacAndrew, Lieut.-Col. C. G. (Partick)
Blindell, James Ganzoni, Sir John MacAndrew, Capt. J. O. (Ayr)
Boothby, Robert John Graham Gillett, Sir George Masterman McEwen, Captain J. H. F.
Bossom, A. C. Gilmour, Lt.-Col. Rt. Hon. Sir John McKeag, William
Boulton, W. W. Glossop, C. W. H. McKie, John Hamilton
Bower, Lieut.-Com. Robert Tatton Gluckstein, Louis Halle Maclay, Hon. Joseph Paton
Bracken, Brendan Goff, Sir Park McLean, Major Alan
Braithwaite, J. G. (Hillsborough) Goldie. Noel B. McLean, Dr. W. H. (Tradeston)
Briscoe, Capt. Richard George Goodman, Colonel Albert W. Macmillan, Maurice Harold
Brocklebank, C. E. R. Gower, Sir Robert Macquisten, Frederick Alexander
Brown, Col. D. C. (N'th'l'd., Hexham) Granville, Edgar Magnay, Thomas
Brown, Ernest (Leith) Grettan-Doyle, Sir Nicholas Maitland, Adam
Brown, Brig.-Gen. H. C.(Berks., Newb'y) Graves, Marjorie Mallalieu, Edward Lancelot
Browne, Captain A. C. Greaves-Lord, Sir Walter Margesson, Capt. Henry David R.
Burnett, John George Greene, William P. C. Marsden, Commander Arthur
Burton, Colonel Henry Walter Grenfell, E. C, (City of London) Mason, David M. (Edinburgh, E.)
Butt, Sir Alfred Griffith, F. Kingsley (Middlesbro', W.) Mayhew, Lieut.-Colonel John
Cadogan, Hon. Edward Grimston, R. V. Merriman, Sir F. Boyd
Caine, G. R. Hall- Guinness, Thomas L. E. B. Millar, Sir James Duncan
Campbell, Edward Taswell (Bromley) Guy, J. C. Morrison Mills, Sir Frederick (Leyton, E.)
Campbell, Rear-Adml. G. (Burnley) Hacking, Rt. Hon. Douglas H. Mills, Major J. D. (New Forest)
Caporn, Arthur Cecil Hales, Harold K. Milne, Charles
Castle Stewart, Earl Hammersley, Samuel S. Milne, John Sydney Wardlaw-
Cayzer, Maj. Sir H. R. (P'rtsm'th, S.) Hanley, Dennis A. Mitchell, Harold P.(Br'tfd & Chisw'k)
Cayzer, Sir Charles (Chester, City) Hannon, Patrick Joseph Henry Mitchell, Sir W. Lane (Streatham)
Cazalet, Thelma (Islington, E.) Harbord, Arthur Molson, A. Hugh Eisdale
Cazalet, Capt. V. A. (Chippenham) Harris, Sir Percy Monsell, Rt. Hon. Sir B. Eyres
Chalmers, John Rutherford Hartland, George A. Morris, John Patrick (Salford, N.)
Chamberlain, Rt. Hon. Sir J. A.(Birm., W) Harvey, George (Lambeth, Kenningt'n) Morris, Owen Temple (Cardiff. E.)
Chapman, Sir Samuel (Edinburgh, S.) Harvey, Major S. E. (Devon, Totnes) Morrison, William Shephard
Chorlton, Alan Ernest Leofric Haslam, Sir John (Bolton) Moss, Captain H. J.
Christie, James Archibald Headlam, Lieut.-Col. Cuthbert M. Muirhead, Major A. J.
Clarry, Reginald George Hellgers, Captain F. F. A. Munro, Patrick
Clayton, Dr. George C. Heneage, Lieut.-Colonel Arthur P. Nail, Sir Joseph
Cobb, Sir Cyril Hepworth, Joseph Nail-Cain, Arthur Ronald N.
Cochrane, Commander Hon. A. D. Hills, Major Rt. Hon. John Waller Nation, Brigadier-General J. J. H.
Colfox, Major William Philip Holdsworth, Herbert Nicholson, Godfrey (Morpeth)
Colville, John Hope, Sydney (Chester, Stalybridge) North, Captain Edward T.
Conant, R. J. E. Hore-Bellsha, Leslie Nunn, William
Cook, Thomas A. Hornby, Frank O'Connor, Terence James
Cooper, A. Duff Horne, Rt. Hon. Sir Robert S. O'Neill, Rt. Hon. Sir Hugh
Copeland, Ida Horobin, Ian M. Ormiston, Thomas
Courtauld, Major John Sewell Horsbrugh, Florence Ormsby-Gore, Rt. Hon. William G. A.
Craddock, Sir Reginald Henry Hudson, Capt. A. U. M. (Hackney, N.) Palmer, Francis Noel
Cranborne, Viscount Hudson, Robert Spear (Southport) Pearson, William G.
Craven-Ellis, William Hunter, Dr. Joseph (Dumfries) Peat, Charles U.
Crooke, J. Smedley Hurd, Percy A. Penny, Sir George
Crookshank, Col. C. de Windt (Bootle) Inskip, Rt. Hon. Sir Thomas W. H. Percy, Lord Eustace
Crookshank, Capt. H. C. (Gainsb'ro) James, Wing-Com. A. W. H. Perkins, Walter R. D.
Croom-Johnson, R. P. Jamieson, Douglas Peters, Dr. Sidney John
Cruddas, Lieut.-Colonel Bernard Janner, Barnett Petherick, M.
Davidson, Rt. Hon. J. C. C. Jennings, Roland Peto, Geoffrey K.(W'verh'pt'n, Bilst'n)
Davies, Edward C. (Montgomery) Jesson, Major Thomas E. Pickering, Ernest H.
Davies, Maj. Geo. F.(Somerset, Yeovil) Joel, Dudley J. Barnato Pickford, Hon. Mary Ada
Denville, Alfred Johnston, J. W. (Clackmannan) Potter, John
Despencer-Robertson, Major J. A. F. Johnstone, Harcourt (S. Shields) Procter, Major Henry Adam
Dickie, John P. Jones, Henry Haydn (Merioneth) Pybus, Percy John
Dower, Captain A. V. G. Jones, Lewis (Swansea, West) Raikes, Henry V. A. M.
Drewe, Cedric Ker, J. Campbell Ramsbotham, Herwald
Duckworth, George A. V. Kerr, Hamilton W. Ramsden, E.
Ratcliffe, Arthur Shaw, Helen B. (Lanark, Bothwell) Templeton, William P.
Rathbone, Eleanor Shaw, Captain William T. (Forfar) Thompson, Luke
Rawson, Sir Cooper Shepperson, Sir Ernest W. Thomson, Sir Frederick Charles
Ray, Sir William Simmonds, Oliver Edwin Thorp, Linton Theodore
Rea, Walter Russell Sinclair, Maj. Rt. Hn. Sir A.(C'thness) Titchfield, Major the Marquess of
Reed, Arthur C. (Exeter) Sinclair, Col. T. (Queen's Unv., Balfast) Todd, Capt. A. J. K. (B'wick-on-T.)
Reid, David D. (County Down) Skelton, Archibald Noel Todd, A. L. S. (Kingswinford)
Reid, Capt. A. Cunningham- Slater, John Train, John
Reid, William Allan (Derby) Smith, Louis W. (Sheffield, Hallam) Tryon, Rt. Hon. George Clement
Remer, John R. Smith, R. W. (Aberd'n & Kinc'dine, C.) Turton, Robert Hugh
Rentoul, Sir Gervais S. Smith-Carington, Neville W. Ward, Lt.-Col. Sir A. L. (Hull)
Renwick, Major Gustav A. Smithers, Waldron Ward, Irene Mary Bewick (Wallsend)
Reynolds, Col. Sir James Philip Somerville, Annesley A. (Windsor) Ward, Sarah Adelaide (Cannock)
Roberts, Aled (Wrexham) Somerville, D. G. (Willesden, East) Warrender, Sir Victor A. G.
Roberts, Sir Samuel (Ecclesall) Soper, Richard Watt, Captain George Steven H.
Robinson, John Roland Sotheron-Estcourt, Captain T. E. Wells, Sydney Richard
Rosbotham, S. T. Spears, Brigadier-General Edward L. Weymouth, Viscount
Ross Taylor, Walter (Woodbridge) Spencer, Captain Richard A. Williams, Charles (Devon, Torquay)
Rothschild, James A. de Spender-Clay, Rt. Hon. Herbert H. Wills, Wilfrid D.
Runge, Norah Cecil Stanley, Lord (Lancaster, Fylde) Wilson, Clyde T. (West Toxteth)
Russell, Albert (Kirkcaldy) Stanley, Hon. O. F. C. (Westmorland) Wilson, G. H. A. (Cambridge U.)
Russell, Alexander West (Tynemouth) Stevenson, James Windsor-Clive, Lieut.-Colonel George
Russell, Hamer Field (Shef'ld, B'tside) Stones, James Wise, Alfred R.
Rutherford, Sir John Hugo Storey, Samuel Withers, Sir John James
Salmon, Major Isidore Stourton, Hon. John J. Womersley, Walter James
Samuel, Sir Arthur Michael (F'nham) Strauss, Edward A. Worthington, Dr. John V.
Samuel, Samuel (W'dsworth, Putney) Strickland, Captain W. F. Wragg, Herbert
Sandeman, Sir A. N. Stewart Sueter, Rear-Admiral Murray F. Young, Rt. Hon. Sir Hilton (S'v'noaks)
Sanderson, Sir Frank Barnard Sugden, Sir Wilfrid Hart
Savery, Samuel Servington Summersby, Charles H. TELLERS FOR THE AYES.—
Scone, Lord Sutcliffe, Harold Captain Sir George Bowyer and
Selley, Harry R. Tate, Mavis Constance Commander Southby.
Shakespeare, Geoffrey H. Taylor, Vice-Admiral E. A.(P'dd'gt'n, S.)
NOES.
Adams, D. M. (Poplar, South) Hall, F. (York, W. R., Normanton) Milner, Major James
Attlee, Clement Richard Hall, George H. (Merthyr Tydvil) Parkinson, John Allen
Brown, C. W. E. (Notts., Mansfield) Hicks, Ernest George Price, Gabriel
Buchanan, George Hirst, George Henry Salter, Dr. Alfred
Cape, Thomas Jenkins, Sir William Thorne, William James
Cocks, Frederick Seymour Jones, J. J. (West Ham, Silvertown) Tinker, John Joseph
Cove, William G. Jones, Morgan (Caerphilly) Wallhead, Richard C.
Cripps, Sir Stafford Kirkwood, David Wedgwood, Rt. Hon. Josiah
Daggar, George Lansbury, Rt. Hon. George Williams, David (Swansea, East)
Davies, Rhys John (Westhoughton) Logan, David Gilbert Williams, Edward John (Ogmore)
Duncan, Charles (Derby, Claycross) Lunn, William Williams, Dr. John H. (Lianelly)
Edwards, Charles McEntee, Valentine L. Williams, Thomas (York, Don Valley)
Grenfell, David Rees (Glamorgan) McGovern, John
Griffiths, T. (Monmouth, Pontypool) Maclean, Neil (Glasgow, Govan) TELLERS FOR THE NOES.—
Grundy, Thomas W. Maxton, James Mr. Duncan Graham and Mr. Gordon Macdonald.
Mr. AMERY

I beg to move, in page 13, line 9, after the word "gold," to insert the words "or silver."

This Amendment, which stands in my name and also in the names of the right hon. Member for Hillhead (Sir R. Horne) and other colleagues of mine, has as its only object the object stated on the Order Paper. I should like to reassure the Government at the outset, in asking for sympathetic consideration, that the Amendment does not commit them, nor is it intended to commit them, to any far-reaching scheme of bimetallism. It does not commit them to anything. It is permissive and not mandatory. It gives them the power, if they wish it and if they find it convenient, to open, narrowly or widely, a door which at the present moment is shut by the Clause as it stands, and shut somewhat illogi- cally from the point of view of the purpose of the Clause itself. The object of the Exchange Equalisation Account is made perfectly clear in this Sub-section. The object is to check undue fluctuations in the exchange value of sterling. That does not mean in the exchange value of sterling in relation to gold alone, but in relation to any other currency systems in the world. That that is so is made clear by the definition in Clause 22 (7) of what is meant by the securities that may be purchased on account of the fund. Those securities include foreign securities and assets in foreign currency in whatever form held. The Amendment in the name of the Chancellor of the Exchequer makes it clear that not only foreign but Empire currencies may be included. The object of the fund is by the purchase of external securities or currencies of any kind whatever to endeavour to correct exchange fluctuations between this country and any particular currency. Indeed, under the definition in Subsection (7) of Clause 22 the fund is empowered to buy silver as long as it is in the shape of foreign currency. It can buy rupees from the Indian Government reserve, Mexican pesos, Chinese taels, and even buy Chinese paper based upon silver; but it is precluded from buying silver itself. In the case of the Amendment moved by the right hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood) for excluding the purchase of gold the Minister of Health very rightly replied that to deny the Government the power of using the means which may in some cases be the most convenient and in other cases essential would be the height of imprudence.

All we suggest in this Amendment is that for a certain limited purpose, in so far as we may be concerned with the stability of the exchange with silver using countries, it might be a great convenience to be able to buy not only securities, notes and coins based on silver, or made of silver, but actually silver itself, just as the fund is in a position to buy gold. While gold has loomed largest in our horizon so far in considering the purpose of this fund, it is probably in some respects the most difficult case to apply, because to maintain permanent stability with gold standard countries may be to stultify the very object which the Chancellor of the Exchequer himself has put forward—namely, the raising of the sterling price level in terms of commodities. It is difficult to combine a rational policy of price raising and price stabilisation with a policy of permanently correcting exchange fluctuations with gold standard currencies.

In practice the value of this fund will be found to lie quite as much if not more in maintaining stability with currencies which are attached to sterling rather than to gold. Even in maintaining stability between sterling and silver currencies the problem is infinitely smaller than in the case of gold-using countries. The power of a very small portion of this fund to prevent fluctuations in silver prices is very much greater than it is when you are dealing with the immensely larger monetary volume of Gold Standard currencies. At the same time stability with silver-using countries is not a thing which we can afford to despise from the point of view of British industry. The market of China itself, although it is nothing to what it might be if peace and order were restored and if China was developed, is even to-day a market of the very greatest importance to this country, and more particularly to the textile industries of this country. The development of that market is hampered all the time by the erratic condition of the sterling silver exchange. Therefore, if we were to secure stability even on what I may call the short-range fluctuations at the present prices of silver and sterling it would in itself be of real value to our industries.

The Clause does not, however, confine itself to short-range fluctuations, and I would suggest that one thing would be done if the Amendment were accepted; and that is, we could do something to correct the very serious undue fluctuation in the silver price of sterling or the sterling price of silver, which ever way you like to put it, which has taken place in the last two or three years. During that period the value of silver in terms of sterling has been reduced by about 50 per cent., with the most serious consequences to the whole export trade of this country to the Far East, and, incidentally, it has accentuated the world price fall by currency dumping, by the sale of depreciated currency goods from China. That fall has not been a mere casual result of economic circumstances. It has not resulted from a glut in production of silver from the mines. On the contrary, for the last 10 years there has been an actual shortage in the production of silver from the mines, as compared with the demand, of something like 328,000,000 ounces.

The depreciation in the value of silver has been the result of artificial governmental action. It began in 1921 with the decision of this country to debase its silver currency, and we threw something like 100,000,000 ounces of silver on the market. We were followed by France and Belgium, and by other countries of the old Latin Union, which got rid of their silver coinage to the extent of another 100,000,000 ounces and substituted paper and aluminium for it. Three years ago the Government of India decided to go upon the gold bullion basis, a decision which it is easy to criticise to-day but for which there may have been good reasons at that time. The consequences of the sale of something like 83,000,000 ounces of silver by the Government of India, and the threat of a reserve of over 400,000,000 ounces still being held and to be sold if the policy had been fully carried out, has had a tremendously depressing effect on silver. This was accentuated again in 1930, when the French Government in Indo-China sold a further 100,000,000 ounces of silver. It is the sale of some 400,000,000 ounces of government silver that has counteracted and obscured the actual shortage in the silver supply and brought about this very serious fall.

If we can correct that fall by action on the part of this fund, if we can correct this undue fluctuation, we should undoubtedly materially help the recovery of this country and of the world. We should certainly improve our trade with China and also our trade with India, and we might also improve the whole political and social conditions in that country. It is true that India is not on a silver basis; the rupee is linked to sterling, and to that extent is a managed currency. But while the rupee is the official currency of India aide by side with it there has always gone on an unofficial reserve currency in silver. Every peasant in India, regardless of the fluctuations in silver and the de-monetisation of silver in 1893 which inflicted infinite injury, has gone on putting his savings into silver, savings which are brought out in the case of famine or a wedding or a funeral. Undoubtedly if the millions of India knew that their reserve store of value was worth more their whole attitude towards economic problems would be affected. They would be readier to purchase, and to that extent India would be a better market for us, while from the point of view of social contentment they would feel more sure of their position. India is our greatest single market and China is not the least important of our markets, therefore we have a very direct interest in correcting the grave and undue fluctuations in the sterling silver price which have taken place in the last two or three years. To do that is not a task which would seriously tax the resources of the Exchange Equalisation Account.

At present prices 10 per cent. of the fund would more than suffice to buy up the whole of the. world's silver production in the present year and probably double the price of silver, restore it to the same level, if not higher than, it was in 1928–29. I am not asking that even that amount of the Exchange Equalisation Account should be spent on the purchase of silver, but I am suggesting that results of great value to British trade and to the world situation would accrue, and that only a very small proportion of the fund would be called for, even if we were acting single handed.

Let me say a word on the world situation. If we did raise the purchasing power of India and China, if we checked the action upon world markets of depreciated currency raw material exports from China, we should be doing something to set in motion again a rise in the wholesale price level. The trouble is how to get the process of a restoration of prices in motion. We have realised that the mere giving of credit will not help, people are not prepared to take credit, there is not sufficient confidence in industry. Here at any rate you have one method by which the process of restoring world prices might be given a fillip. I do not wish to exaggerate the importance of the matter, but I will say that, even apart from the real importance to the industries of this country, any action we can take to correct the recent severe fluctuation in the price of silver and currencies which are based upon silver would be a step worth taking.

8.0 p.m.

I know that there is an immense amount to be said, although I need not say it on this occasion, as to the general position of silver in the world monetary system. I have no doubt that sooner or later we shall have to come to some ordered world monetary system. When the question is taken into review, when you consider how far a great part of the world is still unable to dispense altogether with a metallic element in its currency or with the use of a precious metal for international clearing purposes, and when you consider also the fact that, according to all the best calculations, there will by 1940 be a shortage in the annual supply of gold of something like £49,000,000 as compared with the requirements of the world for a precious metal basis of credit and exchange, obviously the desirability of bringing silver into the picture again at some definite ratio with gold, and with sterling, will have to be considered.

I am not proposing to-night to go further into that question. It is not a question which can be settled by the Exchange Equalisation Fund by itself. It is certainly not a question which this country can deal with alone, though I do believe that there is a great and growing readiness on the part of countries both inside and outside the Empire to deal with the matter, and it may well be that the matter may come to a head in international discussions much sooner than is generally thought. Certainiy it will come to a head in some form or another in our inter-Imperial discussions in the next few months. The Governments of the Empire have made it clear that they wish to discuss the whole currency question with us. If so, I think they are certain to raise the question of silver. Whether or not we come to any definite conclusion at Ottawa on that particular question, it may well be that the view of the British Empire will be in favour of co-operation with other nations on some definite line of policy. If that is the view taken at Ottawa, it may then also well be that the Exchange Equalisation Account could be effectively and fruitfully used to further that policy.

I am not prepared at this moment to say that such action should be taken, or that necessarily it should be taken on the Exchange Equalisation Fund. All that I urge is that the Government, in this respect as in all others, should go to Ottawa with a free hand, not restricted by the wording of this particular Clause in such a way as to be unable to do what it might then desire to do without having to come to this House for fresh legislation. In this Amendment I am not asking for anything which will embarrass the Government or put it into difficulties. On the contrary, it is, if I may use again the Minister of Health's phrase, modifying a Clause which at present denies them the power to do in the most convenient way what they might want to do either on a small scale in steadying minor fluctuations between this country and markets of great value, or on a somewhat larger scale in correcting the grave fluctuations which have recently taken place. Even if it should happen that at Ottawa or in international discussions we might wish to use this fund on a larger scale, we ought not to be precluded from doing so.

Sir ROBERT HORNE

I promise not to detain the Committee more than a. very few moments, because I recognise two things: In the first place, the particular shape of the Clause does not allow of full discussion upon the silver problem, and, in the second place, at this particular hour it is perhaps not very appropriate that one should keep Members longer than one can help. I would like, however, to make a personal reference at the outset. Hon. Members who do not already know ought to be informed that I am chairman of two mining companies which produce silver in conjunction with lead and zinc and copper. Those who may be somewhat sinister-minded may think that I am animated by some personal motive of my own, but at least my own friends know very well that I was a bimetallist long before I had any connection with business at all, and at a time when my sole ambition was to be connected with a profession which would have kept me far away from the ordinary rough and tumble of industrial life, I followed the lead of Lord Balfour, who then was the protagonist of bimetallism, in the Nineties of last century. Accordingly the Committee will take it from me that this is a cause which I long ago espoused and in which I have had profound convictions ever since.

I support everything that has been said by my right hon. Friend who moved the Amendment. What is proposed here is nothing which is at all novel. As my right hon. Friend said, there would be an opportunity to buy silver currencies even within the strict terms of the Clause. One knows that under the provisions of the Currency Act of 1928 it is within the power of the Bank of England to hold, as against currency issue, £5,500,000 of silver coins. Accordingly there is nothing startling in suggesting it in dealing with this particular fund some portion might be devoted to the holding or purchase of silver. As my right hon. Friend said, the power that is sought is purely permissive. It is within the power of the Bank of England, acting with the Treasury, to buy silver or not as they choose. At the present time they are in complete control of the purchase of currency and of gold, and it is only if it should seem suitable that they need purchase silver under the Clause as we pro-post it should read.

It may be asked, what is the vital need to insist upon this now? My answer is simply this: I think it would be a good thing if we could get rid of the modern gold metallic mentality, and if we could begin to think seriously in terms of the new situation with which we are faced. It is all the more important because of great conferences at which we shall have to be present within a very short time. There is to be the Conference at Ottawa. The House of Commons in Canada has been much less dilatory in discussing this question than we have been here. Some time ago there arose a very important Debate in the Canadian House of Commons, and a report of that Debate I have before me. Under the direction of the Minister of Commerce, Mr. H. H. Stevens, who is well known to be a bimetallist, a Resolution was passed in these terms: That in the opinion of this House, the Canadian representatives at the coming Imperial Economic Conference should initiate and support measures for the stabilisation of the currencies of all British countries in such manner as to facilitate trade between the component parts of the Empire and to promote economic unity therein. While that Resolution embodies no specific statement with regard to the adoption of silver as a part of the base for the currency of the Empire, the course of the Debate showed that the question of silver was one of the most prominent matters in the minds of the members, and Mr. Stevens himself, in concluding his speech, made special reference to those who believe in a currency with a metallic basis. He said: As I intimated a moment ago, one of the difficulties in connection with the Gold Standard, in which I think all the leading authorities are in agreement, is that there is insufficient gold in the world properly to sustain the Gold Standard and facilitate trade. He indicated that in his view silver must be an auxiliary to gold if the trade of the world was to be productive upon a currency with a metallic bask. Accord- ingly we may take it that our Government will require to make up its mind before it goes to Ottawa what its policy upon this matter is to be. I anticipate that one of the first questions with which they will be faced will be the question of currency. Indeed, if the Debates in this House in recent weeks count for anything, they show that the currency question lies at the root of all other problems. In that respect accordingly I suggest that the Amendment would at least keep the matter open so far as the future is concerned, and if decisions should be arrived at in Ottawa conformable to the views which some of us hold and which many in the Dominions hold, the legislation need not require to be altered in order to accommodate the use of this Equalisation Fund to the conditions which would then be created.

But the matter goes much further than that. I have recently had evidence that a group or committee has been formed in the Parliament in France for the purpose of advocating the use of silver along with gold as a metallic basis of currency. As hon. Members are well aware, M. Caillaux, a great authority on international finance, is already a convinced bimetallist. My right hon. Friend the Member for Epping (Mr. Churchill) not long ago made the suggestion that tentative proposals might be made to the United States of America for an international conference upon currency questions. As I understood the answer given by the representative of the Government on that occasion, that was a suggestion which they were very ready to adopt. What is the position of America upon this matter? If any such international conference as that which has been suggested is held, then, without a doubt, one of the main problems with which the members of that Conference will be confronted is the problem of what they are going to do about silver. As early as January of last year a unanimous resolution was passed by the Senate of the United States asking the President to call a conference upon the question of silver. I am informed—I cannot speak with authority upon this matter—that tentative suggestions were made by America to the Government of this country, but they were not received with enthusiasm at that time, and, accordingly, the matter dropped.

Since then, matters in America have progressed much further. A coinage Committee of Congress has been at work upon this problem now for some time and they issued their first report in February of this year when they laid down very clearly that they regarded the re-monetisation of silver as a first essential to the revival of trade with the East. They have since produced another report which only came out two or three days ago, and in that second report they have laid down a thesis which is almost identical with that adopted by the Macmillan Committee in this country. It is stated from the American angle and in a phraseology which is sometimes more emphatic than that which would be employed on this side of the Atlantic but, in terms, it comes to exactly the same result with regard to the world's difficulties and lays down that a rise in prices is the only means by which the world can be brought back to prosperity.

They go on to say that in their belief that can best be done by a strengthening of the metallic bases of currencies by means of international co-operation, and then they arrive at certain recommendations, part of which I should like to read to the Committee. These recommendations are striking, and I think hon. Members would be interested to hear the results arrived at by this committee, which did not contain a single member from any of the silver States. Usually it has been said that the attitude taken up on this question by certain Senators and members of Congress in America has been due to interests in the mines in the silver States, but, as I say, this committee had not a single representative from any of the silver States. This is one of their recommendations: We recommend therefore that the President of the United States immediately issue a call for a conference of all nations interested in the restoration of the commodity price level through the stabilisation of the international exchanges by restoring the equilibrium in the metallic bases of the money systems or otherwise.

The DEPUTY-CHAIRMAN

I think the right hon. Gentleman is now perilously near dangerous ground. As he said himself in the beginning of his speech, this Amendment is not very wide and, even if carried, it could not possibly affect the relations between gold and silver.

Sir R. HORNE

I venture to submit that I am raising a perfectly relevant issue in connection with the Clause for this reason. I am pointing out that at any international conference such as has been proposed and such as it has been suggested the Government would welcome with America, upon questions of currency, this matter of silver will arise. For that reason I suggest that this Clause should at least leave open the opportunity for dealing with the American Government without having our hands tied. That seems to be a relevant issue, and if the Committee will forgive me and if you, Captain Bourne, will allow me, I should like to give a short quotation from the Congress Committee's recommendations on this matter: We recommend that it be conveyed to the proposed conferees that as debts of all natures are fixed and measured in money, but in fact are paid in commodities or their proceeds, the problem should be approached from the angle of the price level which can be most effectively controlled through the money systems, because these systems have a disproportionate power of leverage on the large body of commodities through the price level which regulates their movement. All these systems, whatever their local nature, have their bases in the two precious metals, so that a normal relationship between these two is pre-requisite to equilibrium in money and, through money, in the price level of commodities. That is a very striking announcement by this impartial committee of the Congress of the United States. I agree with those who say that no ultimate solution of our troubles can be gained through our action alone. It requires the co-operation of other countries and in particular the cooperation of the United States. In these circumstances I suggest to the Committee and to the Government that when we find that the question of the position of silver in the monetary systems of the world bulks so largely in the views of those with whom we are about to confer, we ought to make provision in this Bill, enabling us to go forward upon a system which can, at least, conform to decisions which may be arrived at, but which in the meantime, cannot commit our Government to any definite action contrary to their wishes.

Sir A. M. SAMUEL

I should like to deal with some of the points which have been raised first by my right hon. Friend the Member for Sparkbrook (Mr. Amery) and secondly by my right hon. Friend the Member for Hillhead (Sir R. Horne). I have taken down carefully some of the observations which have fallen from them. There was of course no doubt about the view held by my right hon. Friend the Member for Hillhead upon this question, because in his speech of 9th May he said: The proclamation which got rid of the Gold Standard for the time, only suspended the obligation of the Bank of England to buy gold."—[OFFICIAL REPORT, 9th May, 1932; col. 1575, Vol. 265.] I cannot understand how the right hon. Gentleman bases his argument as to this matter, on the premises which he indicated then. He went on to say in the same speech that we might be able to put a silver lining in the clouds.

Sir R. HORNE

It should be "sell" not "buy."

Sir A. M. SAMUEL

If my right hon. Friend bases his argument on the statement which I have here then the word "buy" vitiates the whole of his argument. I listened with surprise to what he said on that occasion and I read his speech, and I know that this may be a slip of the tongue, but if he says that the word ought to be "sell" then if I may say so without disrespect his argument becomes mere nonsense. If on the other hand he sticks to the word "buy" then I would point out to him that under Section 4 of the. Bank Act of 1844 the Bank of England at this moment, notwithstanding anything in the Financial Emergency Act which we passed a few weeks ago, must buy every ounce, every pound, every ton of gold offered to it at 77s. 9d.

Sir R. HORNE

And who will offer it at that?

Sir A. M. SAMUEL

But the right hon. Gentleman was putting forward an argument based upon those premises.

Sir R. HORNE

It is quite obviously a slip of the tongue.

Sir A. M. SAMUEL

Yes, of course, and I accept my right hon. Friend's correction. But I would point out that later in the same speech he made it clear that he wanted to put a silver lining into the dark clouds; bimetallism. I should like to regularise my thoughts as to where we are in regard to this problem of currency. What is the position with which we are faced? The supply of gold to-day has become segregated into two hoards, one in America and one in France and the result is that the metallic basis of currency and credit has become sterilised and useless and prices have fallen. We are therefore now put into trouble, and are driven ultimately into passing this Exchange Equalisation Account Clause. Importing into that Clause something about silver, my two right hon. Friends have put forward the argument that bimetallism is now to become part and parcel of our Imperial currency system. If their proposal is carried, we shall have in future two metallic bases of our currency instead of one. But, in the conditions in which we live, with tariffs in the United States of America and France and with war debts unsettled, every ounce of gold seems to go to those two countries; how much better off shall we be if we import silver into our schemes? The two metals will drift into those hoards instead of one; and with two metallic bases we shall have no better basis for our currency and trade than we had before with one metal base.

Mr. CHARLES DUNCAN

We shall start on lead then.

Sir A. M. SAMUEL

While the War debts questions are, unsettled and while the fiscal position remains as it is in America and in France, this proposal of my two right hon. Friends will not work as a metallic basis for currency and credit. Then, it is said, the position of silver ought to be regularised to raise the purchasing power of India and China. Before dealing with that question of the East, I would refer to some observations made by my right hon. Friend the Member for Hillhead when he said that the Americans are very eager for a conference on silver. Of course they are, because they have silver, which has fallen to a very small price, and they produce three-quarters of the world's output of silver. Of course they would like to get a conference and sell silver to us. They have tried for years to come to an arrangement with India, which has already 15,000 tons of silver to sell, from redundant coinage of which she wishes to get rid. The Americans say, "Come to an arrangement with us; and we will put up the price of silver," but the arrangement is, "You in India are not to sell your silver, but we are to sell ours." Heads America wins, tails India loses, and the result is that both India, which has silver to sell, and Spain, also with silver to sell, will not come into the arrangement. It is a very childlike proposal which is being made by the Americans, with three-quarters of the world's production of silver in their own hands. I do not, therefore, pay much attention to their asking for a conference on silver, because they have everything to win, and we have a great deal to lose if we accept their terms at such a conference.

8.30 p.m.

My right hon. Friend the Member for Sparkbrook made a. point as to the increased purchasing power of India and China if we rehabilitated silver by taking it under our wing in this Clause. The position of India is, however, quite different from that of China with regard to silver. China is a silver-currency country, although the Chinese Government would like China to go on to gold. India is not on a silver standard at all and India uses silver merely as token money and for ornaments. It does not matter to India whether the price of silver goes up or down, because India, as my right hon. Friend truly said, uses silver either for hoarding, or for token money, or for ornaments, and especially the last-named. They use silver in India just as our working people use the extra little decorations for their houses when times are good. When times are good in India, the Indian ryot or peasant buys silver and uses it as bangles, or puts it round his wife's or daughter's arms, or hides it in his hut, and when times of trouble come, he will sell it and turn it into the necessities of life. But thus far he is not selling silver.

The DEPUTY-CHAIRMAN

I think the hon. Baronet is getting a long way from the Amendment, the only purpose of which is to enable the Treasury to invest in silver. I do not think we can go into the entire question of the possibilities of the monetary use of silver.

Sir A. M. SAMUEL

I am the last person in the world to disobey your Ruling, Captain Bourne, and I will keep as closely to it as I can, but when you were not in the Chair the right hon. Member for Sparkbrook brought in India and China and stated that if we used silver in this currency proposal, it would help both India and China to trade with us. I assume that Sir Dennis Herbert allowed that argument to be used.

The DEPUTY-CHAIRMAN

The Chairman informed me that the right hon. Member for Sparkbrook (Mr. Amery) coupled his argument about China and India with the value of silver in preventing undue fluctuations in the exchange. I am waiting for the hon. Baronet to do the same.

Sir A. M. SAMUEL

There will be no steadying of silver value or of the exchange by using silver simply because, as the right hon. Gentleman argued, India uses it or China uses it. He also said that if we stopped these fluctuations of silver it would improve our trade with China very much. The idea at the bottom of this Amendment is to put up prices and our Eastern trade right, but I disagree with my right hon. Friend about China; I do not think the Amendment would help the China trade a bit. China buys about £124,000,000 worth of goods from the rest of the world, and we trace that she sells about £84,000,000, but some more goods go out via the north by caravan, which we are not able to trace. If by this Amendment the price of silver goes up, it will make it twice as dear and difficult for us to buy the goods which China wants to sell in order to pay for the goods which she buys from us. If my right hon. Friends repeat that our Eastern trade will benefit by putting silver as one of the metals for the equalisation of the exchange, I reply that thorn will be created no Eastern price stabilisation, and no good done to China.

Here is a speech made by the Chairman of the Hong Kong and Shanghai Bank at Hong Kong a few weeks ago, which I think will interest the Committee and supply the answer, without the slightest doubt, to my right hon. Friend the Member for Sparkbrook. On this speech I base my opposition to his proposal, and not only on my own opinion, and therefore I shall vote against the Amendment. The Chairman of the Hong Kong and Shanghai Bank says: Many Chinese as well as foreigners hold the view that the stabilisation of the rate of exchange between silver and gold would be a mixed blessing to China, and that a sudden artificial rise would have extremely harmful results. It is frequently argued that a rise in the purchasing value of silver would render China a better customer of the world's goods. This is true to the limited extent to which silver might be brought out of hoard for the purchase of foreign products, but … China, like all countries, buys her imports by means of her exports, and it is upon the quantity of the latter, and not on the price of silver, that her capacity to buy from abroad really depends. Silver is merely the medium of exchange, the intrinsic value of which is of purely temporary importance. That puts my right hon. Friend's China argument out of court—that alone. If he says that we shall help our Eastern trade by the use of the silver Amendment, quite apart from my own knowledge of the Indian aspect of the question, I think this argument of the Chairman of the Hong Kong and Shanghai Banking Corporation is sufficient reason for opposing the Amendment.

Mr. AMERY

Before the hon. Baronet sits down, might I answer him out of the mouth of the same gentleman, Sir Charles Addis, and of Mr. Montagu Norman, who in the joint evidence given before the Committee on Indian Currency laid stress on the interaction between gold and silver prices, and indicated that an undue fall in the price of silver would have undesirable effects not only on the Chinese market, but on prices in the Gold Standard world as well.

Sir A. M. SAMUEL

The report which I have in my hand is that of a speech of Mr. Mackie, chairman of the Hong Kong and Shanghai Bank. The speech was not given by Mr. Montagu Norman or by Sir Charles Addis. The answer to the right hon. Gentleman is that the cheaper silver is in India the more purchasing power the ryot will have left, after he has bought the silver ornaments, to buy Manchester cottons. The cheaper silver is for the Indian, the better he can buy English goods. He does not buy less merchandise because silver has fallen in price. He buys more merchandise and more silver ornaments.

Lieut.-Colonel SANDEMAN ALLEN

I rise to support the Amendment, not because I want to introduce bimetallism, but because I want to see that it is not prohibited from being brought in in future. The Amendment is purely permissive and does not make bimetallism mandatory. The very fact of introducing permission to deal with silver bullion will have the effect of introducing a bull into the market, with the result that the price of silver should rise. My hon. Friend the Member for Farnham (Sir A. M. Samuel) said that China could only import against her exports, but that if she got a higher price for her exports she would be able to import more.

Sir A. M. SAMUEL

If the price of silver goes up and we have to pay twice as much as before for an ounce of silver with which to buy the goods of China, the result will be that the price change will operate against the exports of China. If we have to pay 3s. for silver instead of 1s. 6d., it will be a tremendous clog on China exporting her goods and operate as a hostile tariff against the export trade of China, depriving her of power to buy our merchandise.

Lieut.-Colonel SANDEMAN ALLEN

If they pay more for our goods in exchange we win in the long run. If this Amendment is accepted, there will be no call upon the Treasury to deal in silver at all. It will merely enable them to deal with it. The effect will be to assist in the release of gold because people will fear the introduction of bimetallism. That will immediately have the effect of reducing the value of gold. The value of gold has risen far above the value of commodities. If you can by any means reduce its value, gold will be released from the vaults of the banks. The very fact that you have a threat in this £150,000,000 can be of use in reducing the value of gold, and it will then throw more on to the market. The Minister of Health pointed out that £60,000,000 worth of gold had been freed in the past six months. If we can use as a weapon the threat to bring silver into the account, more gold will be brought out and trade will be assisted.

Trade depressions have always occurred during times of deflation. The hon. Member for Huddersfield (Mr. Mabane) made that clear when he said that the crisis might have occurred during the nineteenth century. Crises have been on the point of occurring for many centuries like the crisis through which we have been passing, and they have always been saved by inflation. That has not always been by means of gold. It has sometimes been by means of silver and sometimes by the discovery of another gold-field. For example, in the fifteenth century, when the Roman coinage for gold was disappearing from Europe to India, Europe was saved by the mines of Mexico and Peru being opened up to the world. The deflation that followed the Napoleonic wars, which was known as the "Hungry Forties," was saved by the discovery of gold in California and Australia. There was a further deflation in 1873 when Germany left the Silver Standard and went on to the Gold Standard. That was saved again by a further discovery of gold, in other words, by inflation. Thus constant inflation has come to the rescue. We want inflation of some sort to-day, and we want it either by the introduction of paper, which is national inflation, or we want it by the introduction of silver or some other precious metal, which is world inflation —unless of course we can get another gold mine.

We cannot, however, afford to wait and hang on for another gold mine. We have to use our wits, and it surely cannot be beyond the wit of man to devise some means, either by bimetallism or by getting gold into circulation. The threat of bimetallism will help enormously to bring gold back into circulation, and it will by no means injure the Treasury to introduce this Amendment. There will be no necessity whatever to use it. If we are not going to behave like Mrs. Dombey and die for the lack of effort, something has to be done; and, if the mountain will not go to Mahomet, Mahomet must go to the mountain. I will not go into the question of bimetallism, much as I should like to do so. The point is that that threat will do no harm. I want to emphasise that the Amendment is merely permissive. It is a threat that might be extremely useful, and I hope that the Treasury will see their way to use it to the full and accept this Amendment.

Mr. HUTCHISON

I rise to oppose the Amendment, because I believe that there are certain dangers in carrying the Exchange Equalisation Account through gold into silver. I have great doubts as to the advisability of the Exchange Equalisation Account from several points of view. The present position of the world is such that we cannot afford to buy vast sums of currency belonging to any of the great Powers. I am certain that the position is much more critical than people in this country realise. Therefore, I view with apprehension the idea of being able to carry this Account through to silver. The right hon. Member for Sparkbrook (Mr. Amery) mentioned the case of India and rupees and the fact that, although it was not the official currency of the country, silver was an unofficial currency. Surely if silver is going to be bought, and if we give a certain price for silver currency, that will raise the price of silver immediately. In India a great deal of money in the past, both gold and silver, has been buried. All that money will have to come out, and will come out, and we shall have to continue to buy all that silver money as long as there is any on the market; and as long as there is a price we shall have to get it on the market. We shall not therefore know how far we shall have to go in spending money to buy silver.

As to China, the hon. Baronet the Member for Farnham (Sir A. M. Samuel) said the question of trade in China was a question of credit. Trade all over the world is a question of credit, and that is why I am quite convinced this question of silver and gold is one that we should look at with a little care. We have already seen that most of the great Powers of the world have had to go off gold, and that gold is not really representative of what it should be. If we enlarge this Amendment to include silver, we shall arrive at a position in which silver is locked up in certain countries just as gold is locked up to-day. There are different prices for gold in different countries. I believe I am correct in saying that gold is cheapest at the moment in Egypt, but that fact has not helped Egypt at all. The reason why it is cheap is the same as in the case of silver in India. The Egyptian peasant, when he is doing well, buys a great deal of gold in the shape of anklets and bangles for his wife, and when gold became marketable the Egyptian peasants came into the towns and sold their gold ornaments. That is the reason why gold is so cheap to-day in Egypt, but that does not help in liberating gold, because gold cannot be trans-shipped from Egypt to other countries. You cannot trans-ship gold from one country to another at the present moment. I am quite convinced that if this Amendment is carried it will be a grave mistake and one which we shall sincerely regret.

Mr. HAMMERSLEY

The two hon. Members who have spoken against this Amendment appear to have based most of their objections to it on a misapprehension of what it proposes. The hon. Member who spoke last said we cannot afford to buy vast sums of currency. There is no proposal in this Amendment to do so. He said that if anything were done to raise the price of silver a vast hoard of silver would come out of India, and there would be a necessity for us to buy that hoard. That expression of opinion is directly contrary to historical evidence, because, in point of fact, when silver has been very high in price silver has not come out of India. When silver is low in price there is a tendency for it to be exported from India. The important consideration to bear in mind is the limitation in this Amendment. It is not an Amendment to introduce bimetallism by a back door; it is not an Amendment, as the hon. Baronet the Member for Farnham (Sir A. M. Samuel) said, to introduce a bimetallic system of currency; it is not an attempt to fix the price of silver in relation to gold; it is not an attempt to force up the price of silver by some arbitrary measure in a forceful way. What the Amendment does propose is; to allow silver to be used in this Exchange Equalisation Account exactly in the same way as gold is used, but to a smaller extent; and in considering whether silver ought to be so used we should take into account the arguments put forward in support of the view that gold should be so used.

The Minister of Health pointed out very forcibly, in opposing a previous Amendment, that it is advisable to have the right to purchase gold in order to have gold as part of your reserve, in order to iron out the fluctuations in exchange in respect of Gold Standard currencies. It should be clearly understood that the gold will be purchased at the market price. It will not be purchased as a currency, but as gold off the Gold Standard. What we propose in respect of silver is that it also should be bought at the market price, that it should form and be used as a reserve, just in the same way that it is proposed that gold should be used as a reserve, but to a limited extent. We say that is right and proper, because there are millions of people in the world who are on silver standard currencies just as there are millions of people on Gold Standard currencies. China has been mentioned, and India. China is definitely on a silver standard. India, though not on a silver standard, does use silver as a store of value, and, to my view, the considerations which lead the Government to say that it is advisable to have gold as a reserve are identical with the considerations which ought to be in their minds as regards silver; because at is not proposed by this Amendment to do other than give permission to the Treasury to buy silver at the present market price and use it as a reserve.

Silver has fallen in price by over 50 per cent. in recent years, and that fall which has had great repercussions in the purchasing power of the people of the East, has not been caused by a lack of demand for silver for commercial purposes, but caused entirely by the lack of desire of particular nations to use silver as a monetary medium. As my right hon. Friend the Member for Sparkbrook (Mr. Amery) pointed out, no less than 400,000,000 ounces of silver have been thrown on the market because silver has been demonetised, and those who object to this Amendment can only object to it because they are willing to see silver fall still lower in value. What does that mean? I can reply to all the arguments of my hon. Friend the Member for Farnham by a quotation from the British Economic Mission to China. They examined this question carefully, and said: Finding it increasingly difficult to buy, for payment in gold, goods from abroad, China will be driven to discover ways and means of producing her own requirements. Should she continue to remain on a greatly depreciated silver basis for some years, it is obvious that she will, of necessity, not only quickly enlarge her industrial capacity, and manufacture goods now made in foreign countries, but will be able to export many of such goods to markets abroad now being served by Great Britain. Those observations of the British Economic Mission are being proved by facts. The continuous lowering of the price of silver, due entirely to monetary means, is giving them a bonus on their exports, and is enabling them to compete more with us, and is also interfering very largely with the purchasing power of the people of the East, who form the main markets for Lancashire goods. The Amendment is a mere gesture. It is not an overwhelmingly important Amendment, but it does do this: It leaves the door open; it does not close the door on those widely important considerations which are now being put forward by many men in many countries. In my view it is a reasonable Amendment, which should be accepted, and I think the Government will make a great mistake if they allow a rather prejudiced Treasury view to override all the considerations which have been put forward so forcibly in the course of this Debate.

Mr. GURNEY BRAITHWAITE

I desire to associate myself with this Amendment and it emphasises the curiously difficult times in which we are living that it should be on the Paper at all. Indeed, were not the times so extraordinarily difficult one cannot imagine this House authorising a Government to set up an Exchange Equalisation Fund. But that fund, being set up, and the House having agreed to that procedure, it does seem logical and necessary that we should make it and its powers as elastic as we possibly can. The Committee will recall that when the suggestion was first mooted hon. Members in various parts of the House were pressing the Chancellor and the Financial Secretary to give particulars as to what was to be done with this fund when established. The Financial Secretary said that before he could inform the Committee of the use he was going to make of the soldiers when mobilised, the soldiers had to be recruited, and that was a very true and just analogy. Now that the soldiers are in course of being recruited it does seem logical and necessary that we should empower the Government to send those soldiers to any particular front upon which danger may threaten.

9.0 p.m.

This Amendment is, in no sense, an instruction to the Government to purchase silver here and now, or indeed at all, but it does give that elasticity to see that the Exchange Equalisation Account is used in whatever direction may seem requisite at any particular moment. We have heard from the Treasury Bench that it may not be necessary only to buy gold, and that they may seek to purchase other foreign currencies or foreign securities. Surely we should extend to them the power, if necessary, of purchasing silver. I should like to associate myself with the hon. and gallant Member for West Birkenhead (Lieut.-Colonel Sandeman Allen) who, in his interesting historical review, pointed out to the Committee that difficult situations of this kind had been saved in the past by the timely discovery of more gold in various parts of the world, and that new gold mines had been discovered and that that might happen again. We cannot afford to gamble on that possibility, or await the possibility of the discovery of more gold, any more than we can afford to await the possibility that, within a few months, the United States and France may be hawking their gold all over the world because it has ceased to be a medium of exchange and has become a sterilised commodity. That may happen, but it is by no means a certainty, and we must apply the slogan that the Government should have a free hand to deal with a difficult financial position which looks like becoming even more difficult. Having been sent to support the Government in taking any step or steps which they may think necessary to deal with the crisis, surely it will be an advantage if we place in their hands an additional weapon to use this Equalisation Account, if they think fit, for the purpose of silver as well as gold and other foreign currencies. I beg the Government to accept this very reasonable and necessary Amendment.

Colonel WEDGWOOD

There is no doubt that if, at the present moment, the Treasury went into the market and bought silver the large silver-holding countries would profit by it, and buying silver would not help us. The right hon. Gentleman the Member for Sparkbrook (Mr. Amery) drew attention to the case of Australia, but, if we gave the Treasury power to buy wool, it would have exactly the same effect in that case as giving them power to buy silver. The Government have a free hand, and why should they not include articles like Australian wool, rubber and other articles in order to increase the basis, giving the largest possible range of articles to be used as the basis of credit.

Sir H. YOUNG

This has been a most interesting and important Debate. Issues have been raised of the greatest gravity and of real magnitude, but rather disproportionate to the Amendment. I do not want to forejudge those issues on this occasion. I am most anxious to keep the wider question in view. There are two specific reasons why we should keep the wider issues raised by the right hon. Member for Sparkbrook (Mr. Amery) and the right hon. Gentleman the Member for Billhead (Sir E. Home) open at the present time. It is impossible to say now what is to be the future figure for the stabilisation of the pound but I think we should take advantage of the interval to discuss all the fiscal circumstances and factors which ought to be taken into consideration when the time for stabilisation comes. Therefore, our proceedings on this Amendment, so far as they raise questions relating to the position of silver in our future standard, can be nothing but purely appropriate and useful. In the second place, questions such as those which have been raised by my right hon. Friend the Member for Sparkbrook must receive close attention and careful and prolonged discussion at the Conference at Ottawa; and, if that be so, what could be more imprudent than in any way to forejudge the issues now? If, before I come to the specific arguments for this Amendment, I ask my right hon. Friend not to press it, for reasons which I shall give, I am not to be taken as forejudging any of these wider issues.

The first issue raised is, perhaps, the widest. My right hon. Friend said: "Do not, by omitting silver from the possible assets of the Exchange Equalisation Fund, forejudge the possibility of adding silver to gold as part of the metallic standard of currency." That is a wide issue, and, certainly, I do not desire to forejudge it, still less to discuss it at any length. It must be thrashed out before we come finally to our fresh standard of currency. When it comes to be thrashed out, there will be advantages to consider, some of which have been mentioned this evening, and there will also be difficulties to overcome.

We shall have to overcome the difficulty of the amount of silver that there is in the world. An increase by but 10 per cent. in the value of the world's existing gold supply would need, I am told, some 4,000,000,000 ounces of silver—an extrava- gant amount—putting silver at its present price. That is a practical difficulty which would have to be overcome. Then we should have to overcome the practical difficulty of trying to establish a joint silver-gold standard in any limited area, if it could not be done at once for the whole world. A possible and, indeed, almost necessary consequence of the partial establishment of such a system would be that, owing to the premium on silver inside the bimetallic area, and the disadvantage of gold in the bimetallic area, all the gold would drain out of and all the silver would drain into the area, seriously upsetting the currency standard of the bimetallic countries. That is a difficulty which must be thrashed out and overcome. Then, if you had a universal bimetallic system, you would have to overcome the difficulty referred to by my hon. Friend the Member for Farnham (Sir A. M. Samuel), as to whether, as soon as you have your fresh metallic standard under existing conditions, all the silver is not going to follow down the bad path which the gold has already followed, and whether it would any longer have any advantage. I just mention these issues because I think it is important that the minds of those who are so actively concerned with the subject as has been disclosed to-day should confront the issues when they arise.

A second very important and very wide issue was raised by the Amendment of my right hon. Friend. He says, "At any rate put silver into the possible assets of the fund, in order that you may make a start with the second important policy in connection with silver, namely, the increase of the purchasing power of silver by increasing its value, in order to promote international trade by increasing the purchasing power of the silver currency countries, and of China in particular." That, again, is a very wide issue of policy, which it is far from my intention in any way to forejudge. The course of the discussion this afternoon indicates that clearly it is a matter which is peculiarly appropriate for discussion by the assembled members of the Imperial family at Ottawa, where such great silver interests may be expected to be represented.

The advantages of such a policy have been pointed out clearly by my right hon. Friend the Member for Sparkbrook. I do not think anyone would doubt that it would have advantages, particularly in the case of China. After all, however, we have not only to consider those countries whose trade might be expected to benefit by some increase in the purchasing power of silver, as would be the case in every considerable country where silver is used as an active currency. There, again, there will be difficulties to be considered and arguments to be thrashed out, which we must not forejudge without very careful consideration. I have always wondered whether we ought not to take an example from this question. A sharp increase in the value of our own standard of currency, namely, gold, is generally agreed to have been one of the principal causes of our misfortunes in this country, because, as has been pointed out, the depression has been caused by a sharp fall in prices reacting on the currency. If that be so as regards our own standard of currency, why should we expect any different effect from a similar movement in the standard of currency of China? Suppose that a sharp rise in the value of silver occurred in China, together with a fall in prices in China, why should not we expect just as bad an effect in China as we have seen in this country? That, certainly, is a consideration which needs attention.

I do not think anyone will dispute that some moderate rise in the purchasing power of silver might be expected to benefit Chinese trade and customers of China, but, after all, what we are concerned with here is not the benefit of the world at large, but the benefit or our own trade. Ought we not to consider that what really concerns us in discussing this proposal in relation to China is not the gold value of silver, not the value of silver all over the world, but the sterling value of silver? If you increase the sterling value of silver, you increase the purchasing power of China in this country; but if you increase the gold value of silver, you increase the purchasing power of China, not only in this country, but everywhere else equally, and that is not so much to our advantage. Therefore, any mere indiscriminate increase in the value of silver is certainly not a thing that we should seek. Our policy in this regard should be to seek measures for increasing its value in relation to our currency. Let me remind the Committee of an interesting circumstance. Since we went off gold, the sterling value of silver has risen by 16 per cent., and, at the same time, the gold value of silver has fallen by some 5½ per cent. There is a difference now of 21½ per cent. as compared with what there was before. Can anyone say whether there has been any remarkable benefit in our Chinese trade from that movement? I do not know; opinions might differ; but it is well worth having evidence on that subject. If there has not been any such benefit, it is a warning that we ought not to place too much confidence in the possibility of benefit to Chinese trade from these measures.

I come now more closely to the Amendment, and I would state here the reason why I would ask the Committee not to press for this Amendment. Whatever opinion one may hold upon this big question of policy as to the increase of the value of silver—and, as I have pointed out, there are many arguments pro and con—I would seriously deprecate making the Exchange Equalisation Fund an instrument for carrying out that policy. The truth is that the fund does not exist for that purpose. It exists for the specific purpose which has been so often and so well described to the Committee, and its efficiency for that purpose can only be qualified by introducing other considerations in sketching out the lines on which it should be administered. Secondly, to put the burden of the valorisation of silver upon this Account would be a most dangerous and, indeed, an intolerable burden for the Account to bear. You get a misdirection of policy and you might get the most dangerous and severe losses. The burden is too great. Apart from that, must we not recognise that it is a policy that can only be efficiently carried out by international agreement, and especially by inter-Imperial agreement, and that we ought not to be expected to bear the whole burden of it alone?

India has been mentioned in this connection and it deserves mention, although the matter has to be argued from the point of view of China. There has been a clear recognition of a circumstance which is sometimes not so clearly recognised, that India is not a silver standard country, that the rupee is a silver note which is related to sterling, and that India would obtain no direct benefit from the valorisation of silver though she would receive indirect benefit in a high measure, and let us recognise that on the other side of the account. The Government of India have a very strong interest in the value of silver. My right hon. Friend referred to the people of India as hoarders of silver, but it is not so clear or so certain that the interests of the Indian people are so great in silver hoarding as is sometimes supposed. It is worth a word of caution that the course of the evolution of the habits of the Indians has been very much away from silver hoarding and in the direction of the hoarding of gold where that is possible, and later even of paper.

Now I come to the third principal contention that has been raised on the Amendment. Why not put silver in as a matter of convenience, for the same reasons as I gave for gold on a previous Amendment? It is said that, after all, this is a merely permissive Amendment and, therefore, harmless. I am afraid it is not possible to accept that contention. It is not the intention at present to hold silver as part of the Exchange Equalisation Account and, therefore, it would, I fear, be very mischievous to pass even a permissive Amendment. It could not but give the strongest impression to the silver market that there was an intention to make purchases of silver for the Account. The effect upon the market would be most unfair and must upsetting. Then why should it not be put in for the convenience of the Account, as I said gold was? None of the reasons that apply to gold apply to silver. Gold was necessary in order to purchase foreign currencies and to make international payments. For neither of these purposes is silver of any practical value at all. My right hon. Friend said it would be useful to smooth out the exchanges, at any rate in the silver-using countries. I think that is a little theoretical and not practical. The real practical purpose of the Exchange Equalisation Account is to use it as a counterweight to sudden and large changes. That is the kind of feature that we have to deal with in the modern world and the modern exchange market. China is the only country concerned in the use of silver for that purpose, and there are no sudden or large changes as between this country and China.

For these reasons, it is not a very practical service to have silver as part of the assets of the fund. In order to achieve the purpose described by my right hon. Friend of using silver to plane out and balance the exchanges between this country and China, we should have to do a great deal more than he contemplated. We should have to do nothing more nor less than control the world price of silver, and that is a task too big for the fund to achieve and too big to be achieved by any kind of silver holding that could be contemplated. We have raised for the first time to-day in a useful manner, and at a most appropriate time, some very big issues which will have to be discussed, and, we hope, advanced very much at the Ottawa Conference, and certainly settled before we come to the stabilisation of our currency. We are not forejudging it in any way by the presentation of this Clause. As a matter of fact, the passing of the Amendment would make no difference whatever to the presentation of silver as a partner with gold in our currency, because silver in the Exchange Equalisation Account has no effect on our currency at all. The Amendment would have no effect at all on the question of the increase in the valorisation of silver. It is not really a necessary or useful part of the mechanism of the fund. For these reasons, I trust my right hon. Friend will see his way not to press the Amendment.

Mr. AMERY

It is difficult for me, after a reply which in its broad lines is so sympathetic to the object that we had in view in moving the Amendment, to press it further. My right hon. Friend has given us the assurance that matters most, that in the eyes of the Government these important questions are not forejudged, but will be approached with an open mind and with anxiety to find the best possible solution at Ottawa and subsequently. I could, no doubt, if there were any advantage in it, follow my right hon. Friend's speech by controverting some of the points that he raised. He balanced his arguments extremely fairly. I think he made one very interesting argument in pointing out that, if we could increase or stabilise the sterling value of silver, we should have a competitive advantage in the China market. I think that that argument, carried to its conclusion, is in favour of buying silver on a moderate scale through the Exchange Equalisation Account. I differ from the right hon. Gentleman in the view that any large proportion of that fund would be required to secure that end, because really the relative scale of silver as compared with gold is so small. At the same time, I do not wish to debate the matter further with him, but rather feel that our Amendment has achieved its object in drawing a sympathetic reply from the Government, and that we can now feel hopeful that this question will continue to receive further study, not from the old narrow point of view that used to govern our whole consideration of monetary problems, but from the newer and broader point of view, which looks upon a precious metal as one element in a complex world monetary situation which cannot work by any mere automatic law, but which will require intelligent control and direction, and as part of that control the Government may find themselves well advised to make use of more than one precious metal. With the permission of the Committee, I beg to ask to withdraw the Amendment.

HON. MEMBERS: No!

Question, "That the words 'or silver' be there inserted," put, and negatived.

Colonel WEDGWOOD

I beg to move, in page 13, line 24, to leave out from the word "money," to the end of the Sub-section, and to insert instead thereof the words "by Ways and Means advances."

We have dealt with the question of how the money is to be spent, and now we come to the question of how the money is to be raised. It is set out in Sub-section (5): For the purpose of providing for the issue of sums out of the Consolidated Fund under the last preceding Sub-section or for the repayment to that fund of all or any part of any sums so issued, the Treasury may raise money. 9.30 p.m.

Then there follows the way in which the Treasury may raise the money. The wording of the rest of the Clause may not be clear to the Committee, but it amounts to this, that for the purpose of purchasing foreign exchange or gold, the money may be raised only by State borrowing in this country, either on Treasury bills or long-term loans. If we follow the Bill as it stands at present, the money can only be raised by borrowing on long or short terms. The one way which is ruled out by this Sub-section is borrowing on Ways and Means advances. The reason for that is clear. If the money required by the Exchange Equalisation Account was raised upon Ways and Means, which means by an overdraft on the Bank of England, that would cause inflation, and the drafters of this Bill have been careful to draft it so that no inflation can follow the use of the Bill. If the money is borrowed by Treasury bills, there is perhaps something inflationary in it, but if the money is borrowed on long terms there is nothing inflationary. The issue is clear, therefore. It is that in moving this Amendment to change the method in which the money may be borrowed we are moving an Amendment which is definitely inflationary as against the Bill's deflationary intentions.

I do not know whether it is necessary at this time of day to stress the advantages or disadvantages of inflation, but during the Debate the Government have made it clear that the Exchange Equalisation Account is to be used to prevent an undue rise in sterling. They are intending to prevent the obvious loss to the fund that would follow an appreciation of sterling. There have been indications that public opinion generally is coming round to the advantage of at least so much inflation as would restore prices to the 1928 level. It is quite true that a restoration of prices to that level would have certain disadvantages. It would, for instance, increase the cost of living in this country, and would affect the purchasing power of wages. It must not be imagined that we on these benches are blind to that unfortunate result of any rise in prices, even in wholesale prices.

We have seen during the last two years that the fall in wholesale prices has not been followed to any great extent by a fall in retail prices, and we may fairly judge that a rise in wholesale prices, which is naturally caused by a fall in sterling, would not be translated to any great extent into a rise in retail prices, but we do realise that this is undoubtedly an objection to inflation. It is the objection put forward so strongly by Professor Gregory, and one which we must accept. Any fall in sterling and any rise in wholesale prices must ultimately be translated into some small sise in retail prices which will reduce the purchasing power of wages. What have we to set against that? What we set against it is this, that the fall in the price of sterling will benefit our export trade, enable us to compete better in the neutral markets of the world, and thereby lead to increase in employment. In the second place, a rise in wholesale prices will inevitably be followed by an expansion of trade, and by the encouragement of the development of industry. In fact, a rise in wholesale prices will principally have a psychological effect upon the recovery of trade. Therefore, there is that to be said against the increased cost of living caused by any subsequent rise in retail prices. I wish to put it quite fairly, because those two sides have to be understood by the people of this country.

There is a further point. Our trade during the last 12 years has been increasingly handicapped, more particularly our export trade, because all our competitors have already depreciated their currency. Every industry in Germany, France, Belgium, Italy, Czechoslovakia, and Austria has wiped off all private debts. We are apt to talk about the National Debt, but the real effect of deflation and inflation is seen in private industry. All factories in those countries have wiped off their debenture shares, preference shares, and overdrafts at the bank. They have completely obliterated all those charges by the depreciation of their currency. Here, it has not been so. Here, until six months ago all the money borrowed in the past, whether it was borrowed at prices which were twice what they are to-day, has been hanging like a millstone round our necks so that overhead charges upon industry in this country are out of all proportion to the overhead charges of our competitors in foreign countries. A fall in sterling here, as far as it goes, puts us in a better position to compete with those countries which have depreciated their overhead charges. To wipe off a quarter of the debt would mean a reduction of from 25 to 33 per cent. of our overhead charges. In France they have gone much further and have wiped off four-fifths. But any fall in sterling, any inflation, as far as it goes, improves our chances in competing, and therefore puts us in a better position to take advantage of any ultimate recovery of trade.

The overhead charges upon industry today are often considered to be merely the charges of the salaried staff. I sometimes think too much is made of that fact. The principal overhead charge is the enormous cost of paying interest on borrowed money. We know that most of the money has been borrowed since the War at a time when prices were ridiculously high, much more than twice what they are to-day. It is not fair to ask our manufacturers and our industries to compete, or to take advantage of any possible recovery in trade, when they are strangled by money borrowed at such prices. All the deflation which has gone on during the last 12 years has been directed towards increasing the burden of that debt, reducing wholesale prices, and leaving the various industries to continue to pay the full interest on the debts.

That process wants reversing. I believe that every industrialist in this country must see the advantage of reversing the process of deflation. It was thought that when the Finance Bill set up the Exchange Equalisation Account it would be a step towards reversing that process, to cause inflation as against deflation. I ask the Committee to observe that it does nothing of the sort. There is no hint of inflation in the Bill. There may be no more deflation. If gold is bought there will be, but if foreign exchange is bought there may not be. If the Amendment is accepted and we limit the Treasury in their method of raising the money necessary to buy gold or foreign exchange to Ways and Means advances, we shall immediately get inflation, which can be regulated exactly by the amount of money the Treasury raises and transfers to the Exchange Equalisation Account. Ways and Means advances really mean overdrawing your account at the bank. If you borrow £1,000,000 by Ways and Means, you overdraw your account at the bank by £1,000,000. It means an increase in the currency of the country, and not of the fiduciary issue.

The DEPUTY-CHAIRMAN

The right hon. and gallant Gentleman in his argument has overlooked one point in the Amendment. He says that Ways and Means involves a borrowing from the Bank, but he omits the machinery by which the Bank is compelled to lend.

Colonel WEDGWOOD

The Treasury at the present time borrow continually by Ways and Means. I do not understand the point of the Deputy-Chairman.

The DEPUTY-CHAIRMAN

It is quite true that the Treasury borrows by Ways and Means, but it is not now the purpose to borrow £150,000,000 by Ways and Means. Suppose the Bank do not raise the amount, how does the inflationary argument come in? There is nothing to compel the Bank to lend money to the Government.

Colonel WEDGWOOD

I do not know what compels the Bank to lend money to the Government now, but they do. I do not know the exact figure, but we are overdrawn to the extent of about £40,000,000 at the present time. If you overdraw at the Bank, you pay interest as usual. There is no question of raising £150,000,000 at once. In fact, we have been told by the hon. Member for Mossley (Mr. Hopkinson) that this fund will never be used at all. I hope that he is correct in his diagnosis.

Mr. HOPKINSON

There is some hope that it will not be used.

Colonel WEDGWOOD

And I join in that hope. I cannot imagine any Government or any Treasury, or even the directors of a Bank of England borrowing £150,000,000 at once. In so far as the fund is used, the Amendment, if carried, would enable inflation to take place. If the Amendment be rejected, whatever else the Exchange Equalisation Account does, it will not tend to inflate the currency or to depress the value of the pound, and any hope which we may have that this will in fact help industry by depressing the value of sterling will be gone. The Amendment is clear, but I cannot hold out the slightest hope that it will be accepted, because I remember that when the subject was discussed before in the House the dictator, the right hon. Gentleman the Member for St. Ives (Mr. Runciman), said quite frankly that whatever else the Government did, they would not raise the money by Ways and Means advances because it would have a direct inflationary effect. Therefore, I cannot hope that a mere Financial Secretary to the Treasury will give me much hope in regard to the matter. The Government are divided into two different schools of thought on this matter. There is the rigid orthodoxy which comes from the President of the Board of Trade, a rigid orthodoxy which I regret to say is never extended to Free Trade, and there is the more tolerant, elastic view of the President of the Board of Education and, I hope, of the Financial Secretary to the Treasury. If hon. Members want reasonable inflation, regulated by the Treasury, they should vote for the Amendment. If they do not, if they want to stabilise at the present figure, they ought to vote for the Government. There is a clear-cut issue and we can vote on that.

Mr. HOPKINSON

My right hon. and gallant Friend is not quite correct when he suggests that the Amendment would effect inflation. It is true that a Ways and Means advance is in the nature of an overdraft, but the money so raised will presumably be used for the purpose of purchasing gold or sterling or other securities. It will not be disbursed in return for something worthless, which is a true element of inflation. If that money was borrowed and then issued as doles, subsidies or the like, it would be true inflation, but as it is to be used for purchasing something which is of value, or which is supposed to be of value, it is not inflation in the true sense.

Mr. BOOTHBY

It depends on the way that a Ways and Means advance is used whether it is inflation or deflation. If this fund is to be raised by a Ways and Means advance it cannot possibly be deflation. It may not be inflation, but I do not think it can possibly be deflation. If, on the other hand, and that is why the Amendment is of considerable importance, the fund is to be raised by the issue of Treasury Bills there is no question that it will be deflationary in effect, and it is to that point that I would ask the Financial Secretary to give some reply. If the Government are to raise £150,000,000 by issuing Treasury Bills and are not making available to the market the necessary one-tenth in order to enable the market—the joint stock banks and other institutions—to take up these Bills without loss to themselves then it will definitely have a deflationary effect, and that is what every hon. Member, with one or two exceptions, is anxious to avoid. We are having a very hard fight in these days to persuade the Government to take up an inflationary policy, but we are winning point by point and step by step, and I am certain that before the end of the Debate and before we see the last of this Finance Bill we shall have converted the Government to the true faith. This Amendment is a small but an important means of impressing our views upon the Government.

I am sure that the Financial Secretary will not deny the deflationary effect of an issue of Treasury Bills. The really desirable thing is a period of active inflation in the country at the present time. The joint stock banks in this country regulate their lending policy in accordance with the amount that they themselves hold in cash at the Bank of England. Therefore, if you diminish their cash reserves at the Bank of England they are bound to contract. If you make an issue of Treasury Bills in order to raise this money, you are bound to diminish pro tanto the reserves which the joint stock banks held in cash at the Bank of England, and the joint stock banks will be bound to contract credit and to call in loans, with all the devastating effect that that will have upon trade, commerce and industry in this country. If, on the other hand, you raise the money largely by Ways and Means advances, at least if you do not have inflation you do not have a deflationary effect.

The most urgent necessity to-day is an abundant supply of money. Make money cheap and plentiful and you have a chance of regaining some sort of prosperity. What do the joint stock banks do when money is cheap and plentiful? Supposing, for example, the Bank of England were to purchase Government securities—which is one method of inflation, just as a Ways and Means advance is another—that makes so much more money in cash available to the joint stock banks. It is argued by many deflationists that there is no real demand at the present time for money. There are ample supplies of money. There is plenty of opportunity for people who have openings for profitable trade to get money if they wish to do so but you cannot force money on to traders. You cannot force people to borrow if they are not willing to do so and have not the courage and enterprise to do so. What do the joint stock banks do if they find themselves in a position to extend credit and to lend more money? If they have more money upon their hands they must do something with it.

I will tell the Committee what, in the end, the banks must do under present conditions. They purchase Government securities, and since there has been an expansion of credit since February of this year, that is exactly what they have been doing during the last three months, with the result that the deposits in the joint stock banks since February have risen to a remarkable extent. If the Bank rate had been reduced before it was reduced and if money had been made cheaper and more plentiful earlier I believe we should have seen a greater revival of trade than we have seen during the last three months. In proportion as the joint stock banks are obliged to go into the gilt edged market to buy long-term British Government securities, the value of the long-term British Government securities is driven up, which is wholly desirable to those of us who wish to see a conversion scheme carried out within the measurable future. In the second place, what do the people do who sell those British Government securities? They must do something with their money and they put it into securities which are not of so high a value but are likely to bring them in a greater yield. So you carry on the process indefinitely, and finally, but not at once, by the process of cheaper money you get the infiltration of money into the best class of industrial efforts.

That is how, sooner or later, you get the wheels of commerce and industry going in this country. That is the answer to the people who say you cannot force people to borrow. True, you cannot force people to borrow. The world and this country have been frozen through the lack of the machinery of exchange, through the lack of the lubricating oil of money and currency which are necessary if the wheels of commerce, industry and trade are to be kept going. It has been argued that we cannot by ourselves and in isolation produce inflation which will be effective. The only possible cure for the present situation is a rise in world commodity prices, and we cannot obtain that without the co-operation of the United States of America and France, the two other great creditor nations. But there is a growing accretion to the sterling area. Having balanced our Budget and having approximately balanced our trade payments as a result of the action of the present Government we have re-established for ourselves the economic leadership of the world.

The DEPUTY-CHAIRMAN

The hon. Member is making a Second Reading speech.

Mr. BOOTHBY

I agree. I admit that in my enthusiasm on a subject which makes me feel very strongly I allowed myself to be carried away, but I was not as entirely out of order as I might have been. The Amendment is designed primarily to stop deflation if not to achieve inflation, and my main argument was addressed to the urgent necessity for doing that. I ask the Financial Secretary to give us some assurance that if the money for this fund is to be raised by the issue of Treasury bills the Bank of England shall be authorised to put up a sufficient amount, usually it is one-tenth, so that the deflationary effect which would otherwise be caused by forcing the market to take up these bills will be obviated. If we cannot have inflation for heaven's sake do not let us have any more deflation.

Major ELLIOT

I cannot follow the hon. Member for East Aberdeen (Mr. Boothby) into the alluring recesses of his argument, although on another occasion I should like to have a short discussion with him as to whether the way in which to restore prosperity is to create great opportunities for getting into debt. I have always found it very easy to get into debt but very difficult to get out of debt, and I have hoard of more people being ruined by getting into debt than by getting out of debt. May I direct his attention to Sub-section (7) which says that the Comptroller and Auditor-General has to report as to whether the operations and transactions of the fund have been in accordance with the provisions of the Bill? If he will refer to the provisions of the Bill, he will find that— The Treasury may cause any funds in the Account to be invested in securities or in the purchase of gold in such manner as they think best adapted for checking undue fluctuations in the exchange value of sterling. The hon. Member for East Aberdeen and the right hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood) wish these investments to be made in such a fashion as to cause undue fluctuations in sterling, or at any rate a steady move in sterling. I doubt very much whether the Auditor-General would be satisfied with such a process as that which the hon. Member proposes, and which the right hon. and gallant Member clearly indicated to the Committee.

Mr. BOOTHBY

Is it the intention of the Government to keep the exchange value of sterling at its present level; and, if so, why?

10.0 p.m.

Major ELLIOT

I do not know how that comes into the question of stopping the Treasury from borrowing in any other way than by Ways and Means advances, but at any rate it seems to me that it is drawing a very distant connection between the two, and, if the hon. Member will excuse me, I will address myself to his argument rather than to his interjections. The Mover and the Seconder of the Amendment frankly stated that they desire to see inflation. I do not propose to enter into that controversy. The questions as to whether this fund can be used as a method of inflation, and whether the Auditor-General would exonerate me from using it in that way, are questions to which I must reply in the negative and, therefore, it is impossible to accept it.

Mr. COCKS

The Financial Secretary says that the hon. Member for East Aberdeen (Mr. Boothby) wishes him to take a certain action which would bring about a measure of inflation. What the hon. Member really wants is to take action to prevent the Government acting in such a way as would tend in the direction of deflation. He does not wish to inform them that they must deflate, but he wishes to prevent certain action which would inevitably lead to deflation.

Major ELLIOT

I roust ask him to consult the right hon. and gallant Member for Newcastle-under-Lyme. I never heard clearer language. The right hon. and gallant Member most vigorously said that it was his desire; and the hon. Member for East Aberdeen did so as well.

Colonel WEDGWOOD

I really must say a word. I have the highest authority for saying that it is inflation. I have the authority of the President of the Board of Trade, who says that to borrow on Ways and Means is inflation. [Interruption.] It all depends on how you spend the money. You raise this money and you buy foreign securities. You buy so many thousand dollar bonds. In so far as you are buying dollar bonds and putting them into the Bank of England you are inflating currency. You are doing exactly the same thing as if you spent it on a printing press. [Interruption.]

Major HARVEY

May I ask whether it is in order for the right hon. and gallant Member to make a persona) explanation and then proceed to make a speech?

The DEPUTY-CHAIRMAN

I understood that the hon. Member for Broxtowe (Mr. Cocks) gave way in order that the right hon. and gallant Member might make an explanation, but he seems to rather have taken advantage of the situation.

Colonel WEDGWOOD

I thought that my hon. Friend the Member for Broxtowe had exhausted himself.

Mr. COCKS

I have not exhausted myself, and when I gave way to the right hon. and gallant Member I certainly did not think that he was going to give us a lecture. I did not hear the speech of the right hon. and gallant Member, but I should never think of denying that he is in favour of inflation, because we all know that he is. I was taking the point of the hon. Member for East Aberdeen who, although in favour of inflation, wishes to take a course which would prevent the Government using this fund in such a way as to bring about deflation. I am not at all convinced that the Government, apart from certain individuals, including the Financial Secretary, are not still in favour of the old policy of deflation. Certain powerful Ministers in the Government, if we can judge from their speeches, are strongly in favour of deflation, and their advisers for the last 10 years have been in favour of deflation. The Financial Secretary said earlier in the evening that the Treasury could be trusted to be protected by this House against the Bank of England. I do not know that the Treasury want to be protected. In the last 10 years they have been absolute allies. The Treasury is a warren of Montagu Norman's. If you want to find people who are fishers in the deep waters of deflation you will find them in the Treasury. Therefore it is very necessary that we should not take the word of the Government in this way, that they do not intend to carry on in this deflationary way. I strongly support the Amendment, not that it will do a great deal of good, but because it will be a protest against this action, and will show that we are still suspicious that the Government are carrying on a policy which, if continued, will ruin not only the capitalist system but civilisation itself.

Question put, "That the words proposed to be left out," stand part of the Clause.

The Committee proceeded to a Division.

The CHAIRMAN stated that he thought that the Ayes had it, and, on his decision being challenged, it appeared to him that the Division was unnecessarily claimed, and he accordingly called upon the Members who supported and who challenged his decision successively to rise in their places, and he declared that the Ayes had it, nine Members only who challenged his decision having stood up.

Colonel WEDGWOOD

I beg to move that the names of those who challenged your decision be taken.

The CHAIRMAN

The right hon. Gentleman cannot move that Motion.

Mr. KIRKWOOD

On a point of Order. There are certain Members who say, "This is the way to deal with us." Are we not within our right in doing what we have done? Are you not being just a bit too strict in asking us to stand up? Is it not our right, as private Members, to act in the manner that we have done, without it being pushed in this way, as you have pushed it?

The CHAIRMAN

The hon. Member is strictly within his right in doing all that he has done, and in the circumstances I think I was perfectly within my rights in having done what I did.

Mr. McGOVERN

Further to that point of Order. I understand there was a quite legitimate Amendment moved, and a number of Members of the Committee desired to take part in the Division upon it. I want to know why Members of the Committee were deprived of the opportunity of recording their vote in the Division Lobby, according to their views.

The CHAIRMAN

As I have said, the hon. Member and those who acted with him were perfectly within their rights, but the Standing Orders make certain provisions that I thought I was entitled to exercise, and I did exercise them. There is nothing more to be said about it.

Mr. BUCHANAN

Because of the number that challenged your decision, I beg to give notice that at the appropriate time I want to challenge your conduct, because it was contrary to the number that stood up.

The CHAIRMAN

The hon. Member has no need to give notice now about that; he can put it on the Order Paper.

Colonel WEDGWOOD

I beg to move, in page 13, line 37, after the word "to," to insert the words: reporting on the use of the Fund and to. With the Amendment incorporated Subsection (7) of the Clause would read: The Account shall in every year until it is wound up he examined by the Comptroller and Auditor-General in such manner as he, in his discretion, thinks proper with a view to reporting on the use of the Fund, and to ascertaining whether the operations on and the transactions in connection with the Account have been in accordance with the provisions of this Part of this Act, and he shall certify to the Commons House of Parliament whether in his opinion, having regard to the result of the examination, the operations on and the transactions in connection with the Account have or have not been in accordance with the provisions of this Part of this Act— [Interruption.] I find it rather difficult to compete with Dumbarton Burghs at the end of a long day.

Mr. KIRKWOOD

Everybody knows that you cannot compete with Dumbarton.

Colonel WEDGWOOD

All that is asked of the Comptroller and Auditor-General is that he shall certify that the fund has been carried on in accordance with the provisions of the Act, just as in the case of an ordinary limited liability company the report of the auditor is a purely colourless certificate that everything has been done in accordance with the law. All that is to be reported to the Public Accounts Committee in this House is that nothing illegal has been done in connection with this Account. The Committee, I think, will agree that that is by no means all that the House and the country ought to know about the conduct of the Account. No information at all is to be given unless there is an actual transgression of the instructions as to how the money is to be used. A pretty free hand is to be given to those controlling the Account as to what they may buy or how they may raise money. They are, unfortunately given a free hand as to how much they may lose and how much they may gain. Whether at the end of the year the taxpayer is out of pocket or in pocket is none of their business. All that they are asked to record is whether the law has been adhered to or broken. I think there has never been a case in which we have handed over £150,000,000 to an organisation which we cannot say clearly is controlled either by the Bank of England or the Treasury. We are not merely giving a blank cheque. We are not even to be allowed to see the results of their yearly operations.

The Financial Secretary just now explained that the Auditor-General would not give his certificate if there had been anything except the prevention of undue fluctuation in the exchange. But it is inconceivable that, a year from now, the exchange should be the same as it is today. Are we to understand that, if a year hence the exchange is not what it is to-day, the Auditor-General will refuse his certificate? The Auditor-General must know that changes in the exchange value of the pound sterling will not be caused only by the use of this fund in buying or selling sterling. They may be caused by outside matters and principally by the consideration of whether our Budget is balanced or not. The main thing to make clear is that we need from the Auditor-General a report, not merely on whether the law has been kept but on the success or otherwise of these operations. We want as clear a statement from this £150,000,000 trust, as ordinary shareholders in a limited liability trust would demand from directors who had been managing their money in an undertaking of this magnitude.

This is a trust company. It is a company which is going to sell sterling and buy foreign exchanges. It is going to buy gold; it is going to buy the exchange of any country on earth—good exchanges and bad exchanges—and it is going to make enormous profits or losses. I cannot believe that the results of a year's trading of that kind are to be concealed from the taxpayers when it is their money that is being paid. No private company would stand such a proposal for a moment and the Amendment, which, I believe, will commend itself to the common sense of hon. Members, is that there should be a report upon the use of the fund. All we are asking is that there should be, not merely a bald certificate that the law has been kept, but a report on the success or otherwise of the operations of this trust during the year. I cannot conceive what objection there can be to that, from the public point of view. I can see lots of objections to it from the point of view of the directors of trust companies, who often prefer to conceal the financial success or otherwise of the companies which they have been conducting, but those arguments cannot apply here.

The public whose money is being floated to-night to the tune of £150,000,000, have a perfect right, or ought to have, to know how that money has been used and with what success. We may find a year hence that the pound is up from 3.66 dollars to 4.10, say. Have we not a right to know whether that change has been brought about by the use of this fund? We may find at the end of the year that we are £50,000,000 out of pocket, owing to having bought gold which has subsequently become a drug in the market. Are we not to be cold? Is this a sort of secret organisation working with unlimited powers? The National Government, with their national confidence and their national effrontery, have done a good many funny things, but I think that to use £150,000,000 in this way, and then never to let the public know what effect it has had or how it has been used, is the acme of distrust of the public, which has always been held to be the negation of democracy.

Mr. BOOTHBY

I rise to support the Amendment in a few words, and I apologise for my constant interventions and assure the Committee that it is my last this evening. My only excuse is that the topics which have presented themselves in succession this evening have been of overwhelming interest and importance to the Committee and the country as a whole. If the Committee applies itself to this proposal, I think it is bound to come to the conclusion that it is almost unprecedented. It may be very desirable. I am quite ready to be reasoned with by my right hon. and gallant Friend the Financial Secretary, but I think he would be the first to admit that it is an odd business for the Government to ask the House of Commons for £150,000,000 for the purpose of managing the monetary policy and the exchanges, and then to say that we are not to know how the money is to be raised, for what purpose it is to be raised, or what is being done with it ever, at all.

In so far as we have been vouchsafed any information whatsoever by the Government—and in all conscience it is scanty enough—we have been told that the Treasury and the Bank of England are going to use this money in order to manipulate the exchanges against every technical expert exchange operator all over the globe. I have no doubt that the Bank of England and the Treasury between them possess some of the most competent technical brains in the world, but everybody knows that the business of exchange dealings and operations is one of the most highly technical and difficult tasks known, and the Government of this country will be more or less in competition with these expert exchange operators in every open exchange market in the world during the next few months. It is by no means impossible, if the Government are really going to embark on this course, that we may find ourselves involved in very substantial losses in the future, and I submit to the Committee that we ought from time to time to be told something about the state of this fund. I do not think it would do any harm. I see my hon. and gallant Friend the Member for Gainsborough (Captain Crookshank) opposite. He has talked often about the necessity for the control of expenditure by the House of Commons. I cannot think that he is going quite placidly to hand over £150,000,000 to the Government and not to desire the Government to give any information as. to where that £150,000,000 may be, or what is being done with it, or how it is being operated.

The Macmillan Committee laid great stress upon the desirability of adequate statistics being published of aggregate holdings of foreign balances. We are asking only for an annual statement of the position of the fund. Even if we get that, the very fact that we are handing over this large sum to the Government with which to deal in foreign exchanges without anything in the nature of a weekly or even monthly information as to the state of the fund, is bound to make nonsense of the weekly Bank returns. After this Bill is passed, there will be no possible opportunity for any hon. Member or anybody in the country to know exactly the state of our balance of payments from time to time, and it is not an unreasonable request to make of the Government that we should have submitted to us a report at least once a year of the actual state of the fund. Otherwise, not only will valuable statistics be withheld from this House and the trading community, but the House of Commons may have committed the taxpayers to losses on a very substantial scale. We should not part with all control. Although I am willing to grant the Government the greatest latitude in the matter, the Committee ought not without full information from the Government to part with all control of what is a large sum of money.

Mr. HOPKINSON

The Mover of this Amendment made it obvious that what he had in his mind was that the Auditor-General should at intervals report upon the way in which this fund is being used, not just specifically whether it is being used in accordance with the provisions of the Act, but with criticisms of the policy and the methods of carrying it out that had been adopted.

Colonel WEDGWOOD

Not criticise, only explain.

Mr. HOPKINSON

The whole trend of the right hon. and gallant Gentleman's speech was to the effect that the Auditor-General should not be limited in his report within the scope of the Clause as it stands in the Bill, but that he should be able to go further. In what direction could he go further? The suggestion made with regard to the case of the joint stock companies cited by the right hon. and gallant Gentleman amounted to this, that he thought, apparently, that the auditor who is called in by a joint stock company to audit its accounts ought to be allowed to criticise the general policy of the concern whose accounts he was auditing, and in the same way the Auditor-General should be able to criticise the way in which this fund was being used. There is one great practical difficulty there. It is that the Auditor-General is a gentleman, and his successors are likely to be gentlemen, who above all things will refrain, unlike Members of this House, from talking tripe about things of which they understand nothing whatever.

10.30 p.m.

Captain CROOKSHANK

I have on the Paper a better Amendment than the one which has been proposed, but I understand that it is not to be called. My Amendment is not for a report on the use of the fund, but for a report on the state of the fund. That would be more valuable because if the present Amendment were accepted, the Auditor-General might make a report different from that which the Clause envisages. I have no doubt, however, that the Government will accept some form of words such as I propose, so I will not argue it at any length. The hon. Member for East Aberdeen (Mr. Boothby) went too far when he said that the House would not know for what purpose the fund was being used. The words of the Clause make that quite clear. The hon. Member may not agree with the object but the object is there in black and white. It seems absolutely essential, as he said, that if this House is to put a great sum of money into the control of the Treasury it should keep some hold on it for the future. We would, indeed, be departing from every precedent in financial procedure, quite apart from the merits of this Bill, if we allowed this fund to disappear altogether, and merely had a report once a year from the auditor to say that the money has been used, so far as he could tell, for the purposes of the Act, that is to say, has been used for dealing with exchange and not for financing housing schemes or for the Road Fund or any other purpose for which a Government, seeing a large sum of money lying about, might be disposed to make use of it. But according to the Clause that is all the auditor has to tell us: "Yes, there was a certain sum of money there, and to the best of my knowledge it has been used for the purposes set out"—and leave it there. Whether it has been used well or ill-advisedly, whether there has been a profit or a loss, whether at the end of the year there is £150,000,000 there or whether £150,000,000 is owing to the fund he is not concerned with, according to the words of the Clause.

I think the House ought to foe told, at any rate once in the year, what has happened with regard to this fund. When the Auditor-General makes a report to the House, in effect, probably, very few Members worry about the report at all; but that report is printed in the ordinary form of printed papers, and in due course it comes under the purview of the Public Accounts Committee, which is composed of Members of this House, which Committee, if it finds anything wrong, will in its turn report to the House what has happened. It does not mean that every Member of the House has to wade through the accounts, but that those Members whom the House thinks fit to deal with this duty will do it when the time comes.

Our case has been won. We are really beating the air in discussing it much further. At an earlier stage some hon. Members pressed the Government for fairly frequent returns, and the Government spokesman rather turned it off, and said it would be ridiculous to have weekly or monthly returns, because there would be great disadvantages from the speculative point of view if these details became available so frequently. The President of the Board of Trade, who was the Government spokesman on that occasion, said this, and if there is any doubt in regard to it I refer the Committee to the OFFICIAL REPORT of 27th April, Col. 508, Vol. 265 where he said: It would be quite impracticable to publish weekly returns of stocks held. With which I agree. I suggest that publishing the particulars of the operations of this account a long time after the Account is the utmost the House should ask for—the utmost; and even that ought to be done with very great caution."—[OFFICIAL REPORT, 27th April, 1932; col. 508, Vol. 265.] It is common knowledge that the accounts which are audited by the Auditor-General do not, in fact, get audited and printed within about eight or nine months from the end of the year with which they deal, and they do not ordinarily get dealt with by the Committee concerned or by this House until sometimes 18 months or so from the time to which they refer, and surely that should be enough to comply with the words of the President of the Board of Trade. He says that he does not think the account ought to be published immediately, and we agree, but that the utmost the House should ask for is their publication a long time after the account-has been closed, and I submit that a period of eight or nine months after the conclusion of the account is a reasonable interpretation of the words used by the President of the Board of Trade, speaking on this very question, less than a month ago. For that reason I do not see how the Government can possibly avoid conceding us some sort of Amendment on these lines.

Mr. MORGAN JONES

I desire, on behalf of my hon. Friends on this side of the House, to associate myself with the Amendment which has been brought before the Committee by the right hon. and gallant Gentleman the Member for Newcastle-under-Lyme (Colonel Wedgwood). I do not intend to traverse the same ground as that which has been traversed by the right hon. and gallant Gentleman, but I would like to say one or two words in regard to the merits of the question, as I see it from the point of view of the Public Accounts Committee. The hon. and gallant Member for Gainsborough (Captain Crookshank) has just reminded us that this matter has already been under discussion on a previous occasion, and, in the concluding words of his speech, the hon. and gallant Gentleman referred us to the speech of the President of the Board of Trade. As I conceive it, the promise that was made by the President of the Board of Trade on the occasion to which the hon. and gallant Member opposite has referred was a promise which was, as I understood —I may be wrong and if so I apologise in advance—a little wider than the actual terms of this particular Clause. In my view, there is a departure from precedent in the proposal which is embodied in the Bill before us to-night, and in support of my contention I should like to refer—I am precluded by the traditions of the House from referring to this year's Public Accounts Report, but that does not matter because the point is covered in a previous report—to the report for 1924–25 which was reviewed in 1926. The Committee will find that on that occasion, in reviewing the Exchange Account, as reported upon by the Auditor-General, a series of questions—if you like, they were unimportant questions—were put bearing upon the state of the Exchange Account at that time. I could, if necessary, give the House the general tenor of those questions which were put with a view to eliciting the state of that Account at that particular time.

I submit that any one of the questions to which I have just referred could not be put at any future Public Accounts Committee in relation to this fund which we are now discussing. The Exchange Account was originally started with £53,000,000. This is a fund with £150,000,000. In relation to the £53,000,000 a number of questions could be put, and were put, with a view to eliciting the state of the fund. In this case all that can be done is to ask, "Do you certify that the state of the fund is so and so?" or, "Do you certify that the fund has been kept in accordance with the terms of the Act?" and the Auditor-General can give no further certificate than that. It seems to me that that is a very substantial departure from the previous practice in regard to the Exchange Account, and I think that the Public Accounts Committee, representing the House of Commons in these matters, will not be put into an entirely fair position when it merely has received a formal certificate of that sort without the power to examine further into the grounds on which the certificate is being granted. It seems to me that, on the ground of precedent, as applied to the Exchange Account, which is now being brought to an end, we are entitled to ask that at least as great power shall be contiued to the Public Accounts Committee as has been granted to it in respect of the Exchange Account hitherto. The point I wish to make is the one which was referred to by the hon. and gallant Gentleman opposite.

Mr. ALBERY

With reference to the Exchange Account, was the actual financial state of the account made available? It would be interesting to know that.

Mr. JONES

It was audited by the Auditor-General, and, on the 6th May, 1926, a series of questions were put to the Auditor-General as to the state of the fund, the rate of interest, whether it was on deposit, and so on—

Sir A. M. SAMUEL

Is it not a fact that the Auditor-General put a paragraph into the earlier part of the Appropriation Account giving the details of the Exchange?

Mr. JONES

Yes, that is quite true, but I wanted to observe the traditions of the House in not referring to this year's account. In this year's account there is a paragraph giving details of the Exchange Account. In relation to the Account which we are now discussing no such paragraph will be possible. The only thing that the House will obtain is a bald certificate: "I certify that this Account has been conducted in accordance with the terms of the Act under which it was set up." That is a very substantial reversion from the small measure of control that we now have.

It is urged by hon. Members, and I appreciate the point, that there ought not to be from time to time a detailed disclosure concerning the operations of the fund. So far I should agree. But, after all, as has been rightly pointed out by my hon. and gallant Friend the Member for Gainsborough, the Public Accounts Committee will not, unless in exceptional circumstances, on the special appeal of the Auditor-General, be called upon to review the state of this fund until about nine months after the end of the financial year, and, surely, no grave harm would be done if, nine months after the end of the financial year, a disclosure were made as to the state of the fund nine months before. Surely, for the sake of safeguarding the right of the House of Commons to control a vast sum of money such as this, it is in the highest degree essential that the greatest possible freedom should be given to the Auditor-General to give as full a report as he can. It seems to me that on these two grounds there is an overwhelming case in favour of the Amendment of my right hon. Friend or that of my hon. and gallant Friend opposite, whichever seems to the Committee to be the more desirable. I beg that, in the interests of the control by the House of Commons of its own financial operations, either this Amendment or some similar Amendment may be accepted to-night by the Government.

Sir A. M. SAMUEL

I should like to add my voice, as a former Chairman of the Public Accounts Committee, to the observations which have just fallen from the lips of the present Chairman. What need is there to conceal anything in this matter? What need is there to fear that anything disclosed in these accounts would hurt the public weal? Nothing that can be disclosed in these accounts can be disclosed earlier than a year or 18 months after date. We had the power to look into the Dollar Exchange Account. This is a much more speculative undertaking, and £150,000,000 is a tremendous amount —larger than the whole Budget of the early years of this century. We might be faced with an enormous loss, or we might make a gain, but, when all the conditions of the fund have been disclosed, there is nothing that would help our enemies. Alter all, it is no use a public department, or a bank, or the keenest business men, thinking that they are going to do anything which will deceive the keenest brains of the whole world that are operating in foreign exchange. They know very well what is going on, whether we tell them or not.

I would press my right hon. and gallant Friend the Financial Secretary to make this concession. I do not specify how it should be done, but I think we should put this account into the ordinary curriculum of the public accounts procedure. If possible, let us see a trading account, like we did of every account of a similar nature. I do not know whether the Financial Secretary has ever been a member of the Public Accounts Committee. If he were to attend, he would find that, when we look through the accounts, we are really exhuming the dead and forgotten. There is nothing that we look at which, if disclosed to-day, would have the slightest effect of any kind. I beg him, therefore, to think over the matter before the Report stage and see if he cannot meet us in some way, so that we not only retain the old traditional control over expenditure through the Public Accounts Committee, but from time to time give Members of the House an opportunity of seeing whether the policy implicit in the Exchange Account is the right one.

Mr. HOROBIN

It seems to me that the Committee is attaching altogether excessive importance to the Amendment and losing sight of the real matter of importance. I was one of those who earnestly asked the Financial Secretary to the Treasury and the President of the Board of Trade if they would not consider periodical statements, and I was not able to appreciate the force of their arguments against it. These statements at very long intervals are liable to do more harm than good. Ultimately I am convinced that, if this fund is to continue, we shall have to come back to the ordinary, normal periodical statements. Every other central bank in the world gives those statements. I do not want to press the Financial Secretary now, but there is nothing that will strengthen the position of the country so much as disclosing our hand. Just as we gave the world a feeling of security when we were able to say that all exchange restrictions had gone, so when we are able to begin publishing these figures as an ordinary matter of routine the prestige and the real security of sterling will go up as nothing else could make it do. I earnestly hope the Government will give us an assurance that at as early a moment as possible they will set aside the secrecy which may be necessary now and give periodical routine returns of the state of the fund just as the Bank of England gives its weekly returns. Beyond this I think the Amendment is of very little importance.

Mr. ALBERY

I am sorry the hon. Member considers: this a matter of little importance. I have little fear that anything in the nature of window dressing operations will occur. My hon. Friend the Member for East Aberdeen (Mr. Boothby) said that to have an account of this kind without rendering periodical statements would be almost without precedent. I cannot imagine that there has ever been a case in which a large amount of public money has been dealt with and no periodical account has been rendered. I have never been able to understand, and I do not remember that any Minister has ever explained, the need for the secrecy that appears to be intended. The object of this whole Exchange Account is stabilisation. I cannot conceive anything less likely to assist stabilisation than secrecy, or anything more likely to assist stabilisation than open declaration of the action one has taken, not beforehand but directly afterwards. I cannot conceive any ill-effects which would result from the declaration of action which one had taken in a perfectly justifiable and good cause, and I do not remember that any Minister on the Front Bench has given a single example of any ill which would occur from that.

The Minister of Health referred to transactions in gold, and I must say he rather surprised me when he explained that in regard to the transaction of £3,000,000 in gold in the Issue Department of the Bank of England there would eventually be made an entry in the Exchange Equalisation Account equivalent to the difference between the value of the gold at parity and the present day exchange of sterling. That seems to me to raise a question which this Committee has not up to the present considered, and it leaves us rather in the dark as to what commitments can actually be undertaken on the basis of this £150,000,000. There is one other matter to which I would like to ask the Financial Secretary to the Treasury to refer when he replies. Can he give us some information as to what transactions will appear in the Issue Department of the Bank of England which are connected or indirectly connected with this Exchange Equalisation Account? It seems to me that most of these transactions will eventually find their way into the Issue Department of the Bank of England, and it will assist the Committee very much in coming to a decision on this Amendment if he can give us some information on that point.

Major ELLIOT

The difficulty, of course, in which the Committee find itself, and in which I find myself, is that an Exchange Equalisation Fund is a novel experiment on which the country is embarking. I said at the time that we were embarking on these proposals that we were going out on an uncharted sea, and it may be, of course, that we are facing it with an undue degree of caution. That is our business. We must apply the utmost caution in this matter lest injury is done to the public weal. It is said by my hon. Friend the Member for Gravesend (Mr. Albery) that he cannot conceive any injury that could be done to the public weal by the disclosure by the State of this Account. Let me remind him of what was said by the President of the Board of Trade when he made a statement upon the whole subject: I can say quite emphatically, however, that if we were to show in our account that there was a large holding of foreign currency in this country, and if at the same time there appeared to be a rising exchange, you would have speculators coining in at once to take advantage of a further rise. Exactly the opposite would happen in the reverse circumstances. The fluctuation would work both ways. We should be giving guidance to the speculator, and the honest trader would suffer in order that the speculator might flourish. I am sure my hon. Friends have no intention of that sort and have no desire to allow the markets to be used to the detriment of British industry and commerce."—[OFFICIAL REPORT, 27th April, 1932; col. 506, Vol. 265.]

Sir A. M. SAMUEL

May I ask how this will work? I did not understand from the right hon. Gentleman when he made that speech that the fund itself was going to be used for buying or selling exchange or gold. I thought it was to be used as a fund into which you put your losses or gains. A statement has been made to-day about gold. We are not going to buy that gold out of the fund, but we are going to put the value of the gold into the Issue Department of the Bank of England and debit the Exchange Fund with the difference. That is how I think it is going to work. If that is so, there would not be anything disclosed as to how much exchange was held or how much gold.

Major ELLIOT

Obviously, transactions taking place in the Issue Department of the Bank of England are transactions of an entirely different kind from transactions taking place under the Exchange Equalisation Fund. We are discussing at the moment primarily the Exchange Equalisation Account. I think that it is clear from the statements which have been made that in the Exchange Equalisation Account there may be considerable holdings.

Sir A. M. SAMUEL

That is not what the Minister of Health told us.

Major ELLIOT

I really think that there must be some misunderstanding between us; possibly it is on my side. It has been clearly stated time and again that the Exchange Equalisation Account may have to purchase considerable sums of securities laid down in the Act, and have to hold those securities. What we are discussing now is the conditions under which it shall purchase and hold those securities, and the Chairman of the Public Accounts Committee has put in a strong plea that there should be as full a disclosure as possible to the Auditor-General of the details of those transactions, although we agree that it should not be done immediately, so that the Public Accounts Committee can in fact review those transactions. The hon. Member for Central Southwark (Mr. Horobin) pointed out that what he had in mind was rather a weekly statement, because he feared that an annual statement might be more misleading than advantageous. What he wished to see was an accurate weekly statement of the strength or weakness of the Exchange Equalisation Account, believing that our position was so immensely strong that the disclosure there would help rather than hinder the credit prestige of this country.

11.0 p.m.

Observe the quandary in which we are at the present time. We desire that there should be the utmost disclosure of our public affairs in the face of the whole world. There is nothing to hide and nothing to conceal. But we are entering a new arena with which we are quite unfamiliar, and it is a state of affairs in which—and I am sure the Chairman of the Public Accounts Committee will himself agree—I am most unwilling to give pledges. I am most desirous of meeting the general opinion of those who have pressed it that as full information as possible should be given, but I am speaking in the absence of the Chancellor of the Exchequer who, alone, is primarily responsible for these grave matters. He should certainly be consulted before I could give any pledge whatever to the Committee. One pledge has been given. That was the pledge of my right hon. Friend the President of the Board of Trade. That pledge, to our mind, is fully met by the provisions in Sub-section (7). I am now pressed to go further and allow a report of some details of the operations in question. It may be that an internal of nine months after the conclusion of the year in which the operations took place will be found long enough for safety, but only experience can show, and nothing can be said at this stage. Let me ask my hon. Friend the Chairman of the Public Accounts Committee whether we are not discussing a rather hypothetical case. He has agreed that no disclosure should be asked for sooner than nine months.

Mr. BUCHANAN

Why?

Major ELLIOT

I am only quoting speeches which have been made.

Mr. BUCHANAN

Some of us do not want to make speeches.

Major ELLIOT

I shall come to the point made by the hon. Member for Gorbals (Mr. Buchanan). His point is rather that of the hon. Member for Central Southwark, that there should be weekly disclosures. That is a different point. There have been many statements in the Debate this evening suggesting that there should be disclosures of the kind that is given to the Public Accounts Committee. That is disclosure which is made from nine to 18 months after the transactions have taken place. It is clear therefore that before the expiration of nine or 18 months we shall be dealing with the next Finance Bill and again legislating upon this subject, when it will be possible to legislate with experience. That is what I am pleading for. There will be the experience of nine months behind us. Therefore, we are not withdrawing anything from the purview of the House, because the Committee has not asked for the disclosure of anything except information nine or 18 months subsequent to the transactions. Before that time is up the new Finance Bill, which it is not possible to postpone, will have been brought in and the necessary legislation will have been introduced.

Captain CROOKSHANK

Can the right hon. Gentleman say what he is going to legislate about next year?

Major ELLIOT

The House will legislate about the finance and the national accounts of the year.

Captain CROOKSHANK

Not about this fund?

Major ELLIOT

I am talking about this fund.

Mr. BUCHANAN

There may be another £150,000,000 next year.

Major ELLIOT

The hon. and gallant Member for Gainsborough (Captain Crookshank) will admit that that Bill is the proper place for legislation, just as he is now asking us to put an Amendment into the Bill of this year. I am asking for experience. I am asking that the Amendment should not be pressed, and that if it is desirable to put in an Amendment it should be put into the Finance Bill of next year. By his own admission it will be nine or 18 months before any of these things can come up for review.

Captain CROOKSHANK

If there re going to be no disclosure, how shall we be any further on in the next Finance Bill than we are now?

Major ELLIOT

We shall be enormously further on next year than this year, because we shall have experience. We have not yet carried through a single transaction. We are dealing with a situation of which we have no experience, and which is to be under the direct control of the Chancellor of the Exchequer and the Treasury. Nine months hence the Chancellor of the Exchequer, the Treasury and the Cabinet will have had nine months' experience of the working of the fund. Everything will have been disclosed to them. It is absurd to suggest that we shall be no further on. We shall then be talking from experience, whereas we are now talking from theory. The hon. and gallant Member for Gainsborough shakes his head. He cannot deny that there is a difference between the two things.

Mr. ALBERY

This raises a point of very serious principle. There are obviously great difficulties. We do not know what the relationship will be between the Exchange Equalisation Account and the Issue Department of the Bank of England. Will the hon. and gallant Member meet us so far as to promise to consider this matter further between now and Report stage?

Colonel WEDGWOOD

May I add a word? We have had a report to-day of a transaction undertaken by this fund already. [HON. MEMBERS: "No!"] We have been told that the difference between sterling prices and parity prices of the £3,000,000 recently bought by the-Bank of England was going to be debited to this fund. That transaction has already taken place; and it seems to have come as a surprise. I do not know whether the Minister who made that statement was correct, but if he was it is all the more need for publicity and for more consideration between now and Re-port as to what the Government are going to do when the scheme is in operation.

Major ELLIOT

The right hon. and gallant Member makes a statement which is not in accordance with the facts and claims that the Government have misunderstood the scheme. I am entitled to ask whether it is not the right hon. and gallant Member who has misunderstood it. The transaction that has taken place has taken place on the existing fund, that is on the Dollar Exchange Fund. The new fund has not yet come into existence, and I hope that the right hon. and gallant Member will in this case take my assurance that it is he who has misunderstood the scheme.

Colonel WEDGWOOD

The answer was made while the Financial Secretary was out of the House by the right hon. Gentleman sitting beside him.

Major ELLIOT

These statements are not tried out by Ministers as a brilliant thought which has just occurred to them. These matters have been thoroughly discussed and gone into. The Minister of Health has not had an opportunity of discussing it with me, but I am perfectly certain that he made it clear to the Committee that the transaction was not connected with a fund which does not yet exist, but on the old fund which is still in existence. Let me return again to the Equalisation Account. The hon. Member for Gravesend (Mr. Albery) asks whether, as this is a matter of prime importance and as the Committee desires to have its opinion conveyed to the Chancellor of the. Exchequer, who naturally will desire to be acquainted with the Debates and the feeling of the Committee, I will undertake to discuss it fully with the Chancellor of the Exchequer before the Report stage. I will give him that undertaking, which I hope he will accept. Will that satisfy the Committee as a whole? I will give an undertaking that I will discuss the matter further with the Chancellor of the Exchequer and certainly convey to him the fact that in many parts of the Committee there is a desire for a further statement beyond that which the Clause provides shall be given by the Auditor-General. I can give no pledge that the Chancellor of the Exchequer will consent to such a further statement; that obviously is beyond my power, and I must point out the grave danger of giving pledges on a matter which is outside our experience and which only exists in theory. It is for that reason and only for that reason that we desire to reserve the information, and not because we wish to keep anything secret from the House. Our danger is that here we are playing against some of the keenest intellects of the world, and if we show all our cards and see none of theirs, there might be a grave loss of public money. It may be that we shall find a way round our difficulties. I am fully seized of the desire of the Committee to keep the utmost possible control over public funds, and I have undertaken to discuss the matter with the responsible Minister. But I give no pledge. I have pointed out the difficulties and danger of any possible disclosure, and I hope the Committee will allow the matter to be held over for the present.

Sir S. CRIPPS

I take it that the Financial Secretary includes in his promise the two Amendments dealing with the same subject which stand on the Paper in the name of Members on the Labour benches, and that those two Amendments also will be given consideration.

Major ELLIOT

Certainly.

Colonel WEDGWOOD

I think we have been met very handsomely by the Financial Secretary.

Mr. BUCHANAN

One thing the right hon. Gentleman has not yet explained, and that is why are these accounts not to be published at regular intervals? It is true that he has met the Amendment relating to eighteen months; it is true that he said "We will discuss that"; but he never gave any reasons why these accounts should not regularly be made public property, other than a reason which I wish to examine seriously. He referred to next year's Budget. Any Parliamentarian of experience, such as the hon. and gallant Member for Gainsborough (Captain Crookshank) knows that unless the Government propose to ask for another £150,000,000 next year this matter will not be raised next year. The question can come up next year only if some hon. Member moves a new Clause or something of the kind dealing with the subject. The present is, therefore, the only really effective time for raising the matter. The subject need not be mentioned at all in the next Budget, and if any Member tries to move a new Clause then it will be practically impossible to get it discussed or to force it on the Government. By that time the Chancellor of the Exchequer will have had nine months' experience of the working of the fund, but the back bencher will be in no better position than he is in now.

What is the other position taken by the right hon. and gallant Gentleman? He says that Parliament is entering into a great new adventure. Parliament has never before given a Government £150,000,000 to be dealt with as this fund is to be dealt with. The right hon. and gallant Gentleman says that, in these circumstances, Parliament ought to trust the Chancellor of the Exchequer. He admits that in this matter he will be dealing with some of the keenest minds in Europe or indeed in the world. He will be buying all kinds of securities. He may be buying dollars; the right hon. Gentleman the Member for Billhead (Sir R. Horne) suggests that he may be buying silver. At any rate there is no limit on the purposes to which this sum may be applied by the Treasury. To an extent, he will be, as the hon. Member for Bridgeton (Mr. Maxton) has said, entering into a gamble against speculators all over the world. They will be backing their brains against British brains. Now the argument which the right hon. and gallant Gentleman uses to-night and the argument which will be used again next year, is that if we produce these accounts the speculators in international finance will have a great advantage over us. They will know our accounts, but they will not produce their own accounts. That case will not alter at the end of the year. If it is strong now, it will be strong then. I confess to being simple upon these matters and I think most hon. Members would confess the same, but does anybody seriously affect to believe that if the Government go on the market and buy, say, £25,000,000 worth of dollars, the speculators will not know about it? Everybody will know and the gravest charge against this proposal is that once the Government enters the market, it will become known.

The Government is not an ordinary buyer. Government buying is different from individual buying, and has an importance which does not attach to individual buying, and the British Government has probably a greater importance in this respect than any other Government. Any speculator buying largely would affect the market, but Government buying to the same amount would affect the market even more. This knowledge is valuable to speculators. Somebody must act for the Government. The Chancellor of the Exchequer cannot act as buyer. He must appoint others to buy for him, and people in the Chancellor's office will know and the people who act for him will know, and, worst of all, these speculators will get to know. It is nonsense to come and tell us that, when you go into the market to buy, say, £20,000,000 worth of stocks, you can keep it secret from the keen speculators whom you are up against. The Government are amateurs at it, admittedly, and they are going into the market to compete with men who have been brought up to it. I spoke the other day to a highly respected hon. Member of this House who has been at this business for long years, and he told me that it takes years to know this business, yet here the Government are thinking they can keep it secret against those who are trained in the business.

The worst thing that I see is that you are going to breed the fellow who sells information, as they do on a racecourse. What will happen is that rumours will get about, some untrue, some true, some an admixture of truths and untruths, as to what the Government are going to do. You will breed a large number of people who are able to use semi-Government in- formation for private purposes. I am amazed at the right hon. and gallant Gentleman thinking the thing can be kept secret. Look at Cabinet meetings. Not one of them, in effect, can be kept absolutely secret. Things leak out and get to be known within a very short period of their happening, yet here is a question of international finance and a question of trusting men who are outsiders and not sworn to keep Cabinet secrets. To think you can keep these things secret is, to me, utter nonsense. They will not be kept secret. They will be the subject of gossip of all kinds, and the House of Commons will be left out entirely. I think the right hon. and gallant Gentleman is entering into an experiment, an adventure, and that the Government might want to be out of it very early. We might lose £50,000,000, or £100,000,000, or £150,000,000, and the House of Commons, when it is a question of using great sums of money like this, which may be used for other purposes, has a right at short intervals to check even its Chancellor of the Exchequer or its Cabinet and stop speculation with money that the country needs in other directions.

Colonel WEDGWOOD

I think the offer made by the right hon. and gallant Gentleman is one that we should accept, and raise the matter again on the Report stage, but I hope the right hon. and gallant Gentleman before the Report stage will consult with those of us who put the Amendment down to sec if we cannot get something more satisfactory.

Mr. MAXTON

Naturally the Committee will accept the assurances of the right hon. and gallant Gentleman, since it is all that they are going to get, but I would like to say, in supplement to what has been said by my hon. Friend the Member for Gorbals (Mr. Buchanan), that I never heard a more carefully guarded concession made by any Minister than the one made by the Financial Secretary to the Treasury. I never heard one that contained less, and I never saw either Opposition or Government revolters who could be bought off from opposition so cheaply as the right hon. and gallant Gentleman seems to have bought them off to-night.

Mr. ALBERY

The hon. Gentleman is mistaken. It is not a revolt.

Mr. MAXTON

The hon. Member knows that my command of English is not what it should be, and perhaps I did not express myself as I should. The right hon. and gallant Gentleman has promised that when the Chancellor of the Exchequer has recovered, he will discuss with Members whether the Auditor-General should not be asked to do a little more than he is asked to do in this Subsection. I want to reinforce what has been said by my hon. Friend the Member for Gorbals. I have said it on previous stages of these discussions, and I do not want to weary the Committee by reiterating it, but I want to keep my own position as clear as I can. I believe that in starting this fund, the Government are entering into a reckless gamble with their eyes shut because the right hon. and gallant Gentleman has said, "We are all in the dark; this is a new move; we do not know where we are going, and therefore we are unable to tell you where we are going." That is the right hon. and gallant Gentleman's reply. We are going into this reckless gamble, which may quite easily be a step that will precipitate a tremendous crash in this country. The hon. Member for Gorbals and myself take a different attitude towards that crash from what is generally held in this House. We know how the circumstances created in such a crash should be dealt with, but we do not want anyone in this country outside of the House of Commons to be able to say for a minute that we allowed this thing to go through without recognising very fully what the Government are doing, and what the possible consequences to the nation were.

Mr. SAMUEL SAMUEL

May I ask the Financial Secretary to inform the Committee whether it is the intention of the Government to do a regular exchange business, a legitimate exchange business, or are they going to speculate in different types of exchange?

Major ELLIOT

The Government will not be entering into the exchange business. They are bound by Sub-section (3) simply to invest in securities, etc., in such manner as they think best adapted for checking undue fluctuations in the exchange value of sterling. Obviously the Government will not be going into business as an exchange house on the terms in which that is usually understood.

Mr. SAMUEL

Will they speculate on the rise or fall in exchange?

Amendment negatived.

Mr. LANSBURY

I wish to ask the Leader of the House how far he intends to go to-night. In doing so, I would remind him that a considerable portion of this evening's discussion has been taken up by Members of his own side, discussing, I admit, important questions. I do not object to that, but I do not think we ought to be kept up very late because of the discussions that have taken place to-day. We ought not to have to sacrifice the discussion of important Amendments.

The LORD PRESIDENT of the COUNCIL (Mr. Baldwin)

I think we ought to get to the end of Clause 28 to-night—[HON. MEMBERS: "What!"]— and leave to-morrow for the new Clauses. We want to get the Bill to another place by a fixed date. Most of the important Amendments are out of the way by now, and, if the Committee devotes itself to its work, it might get to the end of Clause 28 at no unduly late hour.

Mr. LANSBURY rose

The CHAIRMAN

If there is to be a discussion on this point, the right hon. Gentleman will have to move to report Progress.

Mr. LANSBURY

I beg to move, "That the Chairman do report Progress and ask leave to sit again."

I think the right hon. Gentleman is hardly fair to the Committee, and certainly not fair to those of us on this side. There are one or two important Amendments which will take considerable time. Those who have taken part in the discussion to-night have been interested in a very important question of currency. We are very much interested in land values, and we are entitled to discuss it not in the small hours of the morning but in the early part of the day. The Parliamentary Secretary to the Treasury must agree that there has been no waste of time by any Members of the Opposition, and they are entitled to a little better treatment. If we are met fairly to-night, I think we can make arrangements so that the Government could get the Finance Bill within a reasonable time. [Interruption.] I do not know about to-morrow. I would point out to the Parliamentary Secretary that that depends very largely upon his own Members. I cannot speak for them. I am trying to stake out a night for the Opposition, because we have not unduly taken up time this evening. I think that we ought to be shown some consideration, and we might be allowed to adjourn at a reasonable hour.

Mr. BALDWIN

I am the last man to desire to drive the House, but at the same time the Government are anxious to get the Committee stage concluded to-morrow night. I appeal to the Committee and hope I may rely upon hon. Members on all sides to assist towards that end. There are a number of Amendments of interest to my party and several Amendments of interest to the Opposition, and I ask the Leader of the Opposition and Members of my own party to enable us to get the Committee stage through by to-morrow night. The Government are agreeable to report Progress after Clause 23 has been disposed of and to start with Clause 24 to-morrow afternoon.

Mr. LANSBURY

I beg to ask leave to withdraw my Motion.

Motion, by leave, withdrawn.

Motion made, and Question, "That the Clause stand part of the Bill," put, and agreed to.